Good afternoon, everyone, and welcome to E Ink Q3 2025 earnings call. All participants are currently in a listen-only mode. After the presentation, we will open up the floor for a Q&A session. Today's conference is being recorded. The Webex replay will be available on the E Ink 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 Chen.
Good day, everyone. Before we start, I would like to share a few messages from the cover page this quarter. You guys can see that our customers, such as Amazon, Remarkable, Montblanc, Samsung, Sharp, and SUPHAR, basically deploy and utilize various E Ink products across different application scenarios. As you can see from the screen, from consumer electronics to retail environments and further to public infrastructure. More partners and applications are choosing to adopt color e-paper, demonstrating that its value in sustainability, energy efficiency, and versatile use cases continue to gain strong market recognition. I am going to talk more in my following presentations. Next page. Okay. Take a few seconds to look at the Safe Harbor statement. All right, next page. For the first three quarters, revenue reached TWD 29.1 billion, representing 29% year-over-year growth. Operating profit was nearly TWD 10 billion, basically TWD 9.99 billion.
Non-up amounted to TWD 1.4 billion. Net income came around TWD 9.39 billion with an EPS at TWD 8.17. Basically, the first three-quarter performance, sales revenue, gross profit, operating profit, and even net income basically all reached historical highs. For operating profit, I think, as I mentioned earlier, driven by sales growth in the past three quarters, basically operating profit increased up to nearly TWD 10 billion, with operating margin rising to 34.3%. Basically, we expand more innovative e-paper applications. We continue to invest in R&D and talent pools. We believe that research, development, and innovation are the key drivers of long-term growth and sustainable operations. As mentioned earlier, operating profit has reached historical highs. For the assets, total assets increased from TWD 89.5 billion Q3 last year to TWD 103.1 billion this year, representing year-over-year increase of TWD 13.6 billion. From a percentage perspective, 15% increase.
The company's total assets are basically already over NT 100 billion, with approximately 70% cash and financial assets. On cash flow, by Q3 this year, both cash and financial assets continue to increase, reaching a total of NT 68 billion, up by NT 8.6 billion compared with the end of last year. We continue to maintain strong profitability and healthy cash flow with ample capital resources. We continue to allocate funds appropriately in line with operational plans to support sustainable growth. Okay. Apart from the financial, I would like to share some market information. Basically, this quarter, we continue to deepen collaboration with partners across the e-paper ecosystems. In the e-reader and e-note segments, we worked with leading brands to launch new color and various size products, including Amazon Kindle, Books, Remarkable, iReader, and iFlytek, further expanding the penetration of e-paper applications.
I mean, at the same time, the leading brand, Montblanc, introduced its digital paper and digital pen series, inspired by its iconic writing instruments and paired with our E Ink e-paper display. Basically, this product delivers a refined and high-realistic writing experience, offering business professionals an elegant tool that combines both style and practical functionality for capturing ideas and creating content. Also, this quarter, we are introducing a broader range of large-format products designed to deliver exceptional performance across both indoor and outdoor applications. As you can see from the screen, top left, the company Ink Coaster, its product, a Fresco, basically that is a digital art form. It uses our Spectra 6 technology to bring electronic paper technology into home decor and artistic display. It enhances the aesthetic quality of interiors and allows the artwork on the walls to change with seasons and even moods.
The digital frame helps preserve your memories and creates a refined, art-inspiring digital living experiences. Also, from the top right, we partner with a Japanese IT solution provider, STELLALINK, to launch the J-Poster powered by, once again, our Spectra 6 color technology. This company, STELLALINK, has also adopted 31.5-inch Aiko Post signage. This is manufactured by our partner, AUO Display Plus, to expand Japan's e-paper signage market. Those solutions can be flexibly deployed in retail stores, transit hubs, campuses, museums, hotels, and other public spaces. If you look further down, bottom left, a leading innovator where it's located in the states, I think specifically in Boston, a company called SUPHAR launched a 75-inch full-color street kiosk. Basically, it was designed for smart cities, providing real-time information and wayfindings.
It operates with 100% solar power, requiring no electrical work, which effectively reduces installation and operating costs while creating new opportunities for sustainable transformation in the outdoor advertising market. From very bottom center and right, additionally, e-paper signage has been introduced to streets and even inside highway buses in Japan. From the screen, you can see allowing passengers to access real-time local tourism information and enhancing the writing experience. E-paper features eye comfort, wider viewing angles, and low power consumption, enabling stable operation even in environments with limited power supply, making it energy-saving and environmentally friendly. All right, next page. We basically remain committed to ongoing investment in sustainability. Of course, ESG development has once again been recognized with several distinguished ESG and sustainability awards in Taiwan. We are pleased to share the latest achievements.
The first example is this year, we ranked fifth place among large manufacturing enterprises and were also selected for the Commonwealth Talent Sustainability Award. Commonwealth basically is a leading magazine locally in Taiwan. Also, another two awards. The first one is Taiwan Sustainability Action Awards, TSAA. Another one, Asia-Pacific Sustainability Action Awards, APSAA. We received five honors in total, including three gold awards, one silver, and one bronze. Last but not least, for the third consecutive year, we have been ranked among top 100 foreign investor picks in Taiwan, placing fourth this year. Basically, that demonstrates strong market confidence in our balanced progress toward both profitability and sustainability. Because under E Ink, when we conduct the ESG activities, two pillars, profitability and sustainability, we believe both of them are equally important. Okay.
We previously mentioned we work with Hsinchu City government and introducing low-carbon, energy-efficient outdoor e-paper display installed in a place called Xiangshan Wetlands. That is where it is located locally in Hsinchu City in Taiwan. We have further expanded e-paper applications into the Xiangshan Marine Conservation Education Center. Full-color e-paper signage is now used to present information about surrounding marine environment and ecological habitats, enhancing local education and visitor guidance. Also, the signage application has been extended to the exhibition of important cultural relics in Yangmingshan, where e-paper is used basically in the museum and also serves as information and educational medium accompanying the artifacts. In the fields of application and culture, we work very hard and aim to continue leveraging our low-power, low-carbon, environmentally friendly display technology to create a broader positive impact while further expanding E Ink's contribution to society.
Last but not least, I think I mentioned this before. I think since last year, we have been collaborating with MIT, the academic institution, not made in Taiwan, Massachusetts Institute of Technology, MIT, through its innovation acceleration platform. It's called MIT Solve Program. It was established in 2016. This program focuses on the question of how technology can address the world's most pressing challenge. Each year, through an open global selection, Solve selects innovative solutions in education, climate, health, and sustainability. Basically, those selected teams receive funding as well as opportunities for mentorship, corporate partnerships, and internationally, I mean, international collaboration as well. Solve is MIT's initiative to bring together problem solvers to tackle the world's most pressing problems through open innovation and partnership.
As part of this collaboration, we established the E Ink Innovation Award within this program to encourage global teams to leverage e-paper technology in creating solutions that generate positive impact across education, like what I mentioned, the environment, energy, and healthcare. Basically, this marks the first time we have brought e-paper onto a global social innovation stage, observing how creators from diverse fields reinterpret the potential of our technology. Once again, we selected four winning teams from over 100 submissions addressing issues like what I mentioned, such as improving education, accessible healthcare, living environments. These projects not only reflect e-paper's origins at MIT, but also embody our commitment to giving back to society. Through this innovation, I mean, innovative cases, we once again see the possibilities of e-paper, not just merely as a display technology, but also a medium capable of expanding social value and impact. Okay.
Basically, that is my sharing on this quarter. We can 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 just finished our Mandarin session at Earning Conference an hour ago. Maybe I can share some of the Q&A that we conducted previously. I think our Chairman gave some guidances over Q1 next year and basically very general guidance for 2026. I think we received a lot of inquiries about the October sales revenue. They have a concern: how are we going to see the Q1 sales revenue next year? Basically, our guidance is our Q1 next year will be better than the Q1 this year. Not to worry too much, it will still be lower than the Q4 this year. That is the first thing I would like to share. Through the capacity expansion, I think for the H5, which means the fifth larger production line in Hsinchu, that is why we call it H5.
Basically, we believe it will highly contribute to the capacity definitely next year because it has been gradually ramping up from this quarter. We believe in the following two to three years, every year, we're going to achieve record highs in terms of the sales revenue, operating profit, and net income. Following by H5, H6, the sixth larger e-paper production line basically is under planning. We believe very likely to be moving by the end of next year. What I'm trying to say is with the contribution of these two larger e-paper production lines, we do have enough capacity to support potentially the increasing demand. I think recently, we also made a public announcement about our Guanyin plant. Guanyin basically is the name of places where it's not far from our Hsinchu office.
The board just passed the plan where we are going to build a new building in Guanyin. Apart from that plan, we also leased an old building for future use. To sum up, basically, we have a plan. We purchased land in Guanyin, and we are going to build a new building for the production line. We also leased the old building where we can take advantage of the old building and, of course, put some equipment there and start having more capacity. From that perspective, we do have a solid plan for the capacity expansions. Okay. That is my quick recap about our Mandarin session earning course. I do see some inquiries. All right. We are going to take the questions.
Okay. Now we will take the first question from Adam Miller from Comcast.
Hi, Adam Miller.
Hi. Hi, Lloyd Chen. Hi. How are you?
Yeah, I'm good.
Thanks. Just quickly on what you said, because October was weak and people started getting worried about inventory in the system, etc., what are you seeing from an inventory perspective? Was October really a surprise for you? Was it because of holidays, because of some external factors, or was it customers cutting?
Right. Actually, it was not a surprise to us because I think in our last quarter conference, the guidance we gave is Q2 will be the peak of—sorry, Q2 basically peak. Q3, in terms of the sales revenue, slightly lower than Q2. Q4 basically is the lowest. Why? Basically, I think in the first three quarters, we did have some pull-in. That caused the relatively lower Q4. Also, from CE perspective, they definitely prepared the inventory before Christmas for the holiday season. You can imagine from that perspective, Q4 would have been relatively lower. Also, for the ESL, even though we do see a very intact demand and strong demand, the thing is they would not spend too much effort for the new tech during Christmas because they try to get things stable.
From that perspective, that can explain the relatively weaker Q4. I think basically it is in line with the guidance we provided previously. Yeah. Once again, I think this year, we believe we already—we strongly believe we can hit the target we set previously. Basically, it is better than last year. We believe the whole year we can achieve the historical high in terms of the sales revenue and operating profit and net income. We also believe the following two to three years, we can achieve the same thing. Yeah.
Right. Right. So basically, it's roughly in line with your internal expectations, you would say?
Correct.
Nothing too surprising, right? Okay.
Correct. Yeah.
I guess the thing because I think we saw an inventory correction in ESL about 18 months to one year ago, right? I guess that's what people are a bit worried about. Are we facing this again? What are your clients saying? Especially on the ESL side of things, are they saying that they ordered too much, they need to cut? Basically, what I'm asking is, are we going to see a sort of end 2023, mid 2024 kind of inventory digestion phase?
Right. Right. Yeah. Adam Miller, that's a good question. I think one year ago, we did face inventory correction issues, but that was basically caused by the three-color, four-color transitional change. That issue is already gone. There is no such issue now. Not to worry about the inventory issue from that perspective. According to the market feedback from our end customer, which is retailer or even our SI system integrators, all the feedback about the e-paper tech, they stay very confident and positive. I think in the U.S., we just started one of the leading retailers. They are using us, our tech, which is Walmart. We believe the rest of the retailers there started the trial. Most of them, I think so far, they stay very positive. We basically stay confident about it in the U.S.A. market.
Also, I think during our Mandarin session, our Chairman also talked about, I mean, European, even European sort of like a more matured in terms of the ESL, but U.K. going to be started very, very soon, the top-tier retailers there. We believe we're going to have some good news from there. We remain very positive and confident about the ESL market. Yeah.
Okay. So you're not worried about inventory then?
Right. Correct.
Right. Can I squeeze another question? I have no idea how many people are in the queue, but do I have time for another one on consumer electronics?
Yes. Yes. Yeah. One or two should be fine. I do see two to three people. It's okay. Yeah.
Just a quick one on consumer electronics, right? Because if I zoom out and I look at the history of E Ink, right, in consumer electronics, before e-reader, e-color, before the color e-reader took off, basically, it was a steady business, right? It was a steady business making TWD 11 billion, TWD 12 billion of annual revenue. And it was sort of the level where every year it was, right, around this level, TWD 10 billion to TWD 12 billion, so to speak, right? Very stable. In 2024, there was the launch of the color e-reader, and there was a surge in revenue, right, in 2024. This sort of level of TWD 11 billion, TWD 12 billion went to TWD 19 billion, right, in one go.
I'm not trying to guess next quarter or next two quarters, but say in the next three- five years, do you see this sort of jump as sustainable as in the new normal is closer to this TWD dollars 19 billion, or we're going to go back gradually to previously steady state of TWD dollars 11-12 billion? How do you think the market has shifted from your perspective?
Right. Adam Miller, I think one of our strategies for the CE market is to use our color technology to trigger further growth. Basically, after we launch our color technology, we do see that happening now. Once again, we remain positive and confident about the growth. Coming back to your question, how big the jump is going to be, I think we still need some time to observe, especially given the macro uncertainty there. The thing is, even though there are a lot of moving parts on the macro, for the targeted customers or targeted audience under the CE business, if they like to read, if they like to write digitally, even if the macro situation is not that good, they would still consider making such an investment.
What I'm trying to say is, from that perspective, even though there's a lot of moving parts on the macro, we still believe we have enough driver from those targeted group of customers out there.
Right. So you're not expecting last year's number to fall off a cliff or something like that?
We don't think so. Whether we can just beat it, I think we need a bit of time to observe. Definitely, I'm expecting the growth year over year. Yeah.
Okay. Sounds good. Okay. I'll go back in the queue. Thank you, Lloyd Chen.
All right. Thank you, Adam Miller.
Now we will take the next question from [Kyron] from Fiera.
Hi.
Thank you. Thank you. This is actually Ian Simmons from Fiera. Thanks for the time.
All right.
On the capacity additions, H5 and H6, in percentage terms, how much do they add to the existing four lines? Is it as simple as just 50%, or are they actually larger plants?
Let me explain one- by- one. H5, basically, it's in our capacity already. In terms of the capacity, I think that is 1.5x or 2x than the rest of four lines. Basically, 1.5x or 2x compared with the rest of four individual lines. For H6, basically, it's still under planning. Most likely, the timeline could be end of next year or early the year after, 2027. The capacity basically will be higher than H5. To what extent, I think we are still under planning. That's sort of the color I can add to you for H5 and H6. On top of that, the Guanyin new factory. The plan is after we purchase the land, we definitely need some time for the construction. The building basically will be ready around 2029 or early—I'm sorry, 2028 or early 2029.
At the same time, we're going to figure out the size of the equipment we are going to put. The production line, the e-paper production line in Guanyin factory, basically, that will be bigger than the H6. Given those information I just provided, you can see our confidence toward the capacity expansion. If we are not very confident about the future demand, we dare not to do such investment. Okay?
Just to check the timeline for H6, you said potentially end of 2026. That would be to start construction or to actually come online with production?
H6 will be located in our existing Hsinchu buildings. So basically, what we need to do is just place the order and have it shipped and have it installed. There is no need to build a new building for that. The building is ready to go. What we need to do is just decide the size of it and then place the order and get it ready. The possible timeline would be, I think, end of next year or early the year after, 2027. Yeah. Late 2026 or early 2027. Yeah. We can have it installed. It may take one or two quarters to ramp up. That is sort of the timeline going to be.
Understood. All of this expansion, as you say, indicates a lot of confidence on the future demand. What firm visibility do you have, say, for H5 and H6? Do you already have customers placing orders 12 months or 24 months out, or is this a much shorter lead time?
Let me put it this way. Once again, for H5 and H6, basically, we are using the larger size of the equipment, which means on the one hand, they will be designed for the large format display. On the other, if we do not use it for the large format display, we can also use it for the CE and ESL. Basically, strategically, that adds operational efficiency in terms of the unit cost. What I am trying to say is, of course, we have not received 100% the customer orders, but we are confident, and we believe the demand in the long run is intact. What we can do is we can concentrate on H5 and H6 and have it loaded first because it is going to bring down our unit cost from that perspective.
Yeah. I did not realize five and six would both be focused on large format. That suggests huge growth in the large format display and maybe a little bit lower outlook for H5.
Right. Yeah. We believe the TAM for signage will be bigger than the ESL. Yeah. Let me put it this way. I think most of the large format signage, they are still in paper-based. According to our analysis, only less than 10% converted to the digitalization. There is still a massive room to grow. That is why when we decide the further capacity expansion, we are going to choose the bigger size of the equipment because most of the leading OOH, out-of-home advertisement players, they want a solid, singular, large format display, not really sort of like a tiled one. If we do not do a large size of the equipment, of course, we can provide through a tiled display, but that is not their preference. That is one of the considerations to use the bigger size of the equipment, yeah, for the further capacity.
Thank you. I'll go back in the queue.
All right. Yeah. We received one online question. Hold on. Let me read it. It's about any new emerging technology in the market. Is it going to be a threat against us? So Ben, I do see your question. Retainer e-paper, basically, I sort of heard of it, but very vaguely. I may need to go back and check it. Since it does not serve my memory very well, I do not think it—I mean, I am sure it is a good technology, but I do not think it could be a threat against us. I mean, in general, the way we built our patent portfolio is from one layer to the other. By the way, we have more than 6,000 patents globally. We started from the fundamental e-paper chemistry. Then to another layer, we filed the patents, for example, for e-paper module and e-paper algorithm and even the device.
From different layers. Whoever wants to get into this industry, they tend to walk around and walk around. They eventually give up. On the one hand, we want to be the technology leadership because we have been investing a lot of money. Our total R&D cost against our sales revenue basically is around 15%. That is quite a lot from a technology company perspective. On the other, we invest in e-paper production, and we also want to be the cost leadership. We believe as long as we can be a technology leadership and cost leadership, I think whoever wants to step into this industry, it may be definitely not very easy for them to compete with us. Since from the technology perspective, we go quicker. From the cost perspective, we can go lower. I think we are quite competitive from these two categories.
We do notice one or two copycats in China. I think, firstly, you need to understand they claim they can manufacture e-paper, whether it is in the laboratory stage or the mass production stage. To be very, very honest with you, when we claim we can make colored e-paper, we did it like 15 years ago. We just started like one or two years ago. It has been a long journey. You need to be persistent. You also need to be financially strong. Once again, from the lab, I mean, from the pilot production, lab stage to the mass production is not that easy. Those one or two copycats in China, I hate to say this, potentially that could be some patent issue. I think inside China, we do not really get bothered to do anything.
Once we step out of China, we definitely are going to chase after them. That is how we build our portfolio and our strategy toward those potential competitors. Yeah. Okay.
Next question will come from Fraser from Harvard.
Hi, Fraser. Feel free to raise your questions.
Hi, Fraser. Please remember to unmute yourself on your device so we can hear you.
Hi. Can you hear me now?
Yes, very well.
Hello?
Hi, Fraser.
Great. Hi. Good to thank you very much for letting us join this conference call. I missed some earlier because I had some technology issues. Could you just talk a little bit more about the signage opportunity? Actually, can you talk a bit about where the scale of the business is now and how quickly it's growing and what's driving that growth? A little bit about how quickly it might grow into the future and where you see the strongest adoption going into the future as well.
Right. Right. Fraser, your voice is a bit breaking up. Yeah. I think I get your question. Can you hear me now?
Yeah. I mean, firstly, it's the scale of the signage now and how quickly it's growing and what's going to make it grow more.
Right. Okay. The signage business currently is still relatively lower. I would like to break it out into three main categories. The first one is retail signage. Basically, our strategy is to work with our existing ESL SI. I think currently, for example, one of the biggest retailers in the U.S.A., they are using our e-tech. They have the initiative to consider the e-paper retail signage. From that perspective, we do see the potential. One of the strategies is we work with our ESL SI to make that happen. That is the first part. The second one is the indoor signage. The strategy we are having now is to work with the branders such as Samsung, Sharp, AUO, even a company called TPV. TPV owns the brand Philips in the display categories.
For those branders, they do have the module capacity. They do have the capability to make the LCD signage already. One of the potential issues they are facing now is some of their customers want the green technology for the signage areas. They came to us. We tried to work out a solution. Apart from the LCD and e-paper signage solution should be the suitable solution from the end-end customers. Our strategy is to work with them. That is why when there is a public announcement out there, we set up the joint venture with AUO. We are going to co-create the signage business, especially in indoor first with those branders. Those branders I just mentioned. Let me just repeat: Samsung, Sharp, TPV, and AUO.
Last but not least, for the outdoor signage, especially the street furniture, the relatively large format display ranging from 60-inch to 80-inch. From that one, I think the driver from them is currently mostly they are using the paper signage, less than 10% being digitalized. The technology they are using is LCD and LED. I think currently there's a trend. Some of the major cities globally ban the LCD and LED because it produces a lot of pollution. There's a driver. They come to us. They discuss how to further leverage our green technology in the signage areas. A lot of positive technical discussion going on. Let me put it in this way. We do see the potential. I can be totally honest with you.
For next year, definitely, we are expecting a significant growth on the signage business because the base year basically is relatively lower. If you are talking about a huge, meaningful sales revenue contribution, I think it's still a while. We do see the potential. We believe the potential in the following two to three years and even going forward. Okay? I hope I answered your questions. Yeah.
Okay. At the moment, you don't break out the size of that revenue because it's such a small percentage of revenue?
Yeah. Correct. Yeah. I think still single digit. Yeah. Still single digit against our total sales revenue. Still single digit.
Okay. As it gets a little bit bigger, will you start to break it out so that we can see the growth in it? Because it could be quite exciting. I know it's a small number, but it could grow quite quickly over the next two or three years.
We believe so. Yeah. But I think if you are looking at the near terms, like next year, I think it would take slightly longer than one year. Yeah. If you are talking about two- three years, yeah, I think, yeah, it will be growing. Yeah. Definitely more.
What has it been growing at the last year or so? It hasn't accelerated yet.
I think what I can tell you is lower- single- digit to the higher- single- digit.
Growth rate?
Yes. No. Sales revenue percentage against our total sales revenue. Yeah. The growth rate, I think, more than yeah. It's quite high. Yeah. Definitely. Yeah. Higher teens. Yeah. If you are talking about the growth rate. Yeah.
High- teens or?
Yeah. High teens. Yeah.
Okay. Great. Thank you very much.
All right. No worries. Thank you.
Due to the time constraint, we will take one final question from Josie Fair from JP Morgan.
Hi, Josie Fair.
Hi, Josie Fair. Please remember to unmute yourself on your device.
Sorry. Can you hear me right now?
Yes, very well.
Yeah. Thank you for taking my question. My question is that you mentioned that signage TAM will be even larger than ESL, and this is very exciting. Just wondering, can you add any color on the growing pace? Any detail will be much appreciated. For example, do you have any targeted timeline, milestones, or a CAGR to share? Thank you very much.
Okay. As I mentioned earlier, three categories. The first one is retail signage. The second one is indoor. The very last one is outdoor. For the indoor signage, basically, it's happening now. Samsung, Sharp, TPV, Philips, they are launching their new product I also introduced previously. That's something happening now. We are collecting the market feedback from them. We stay positive. For retail signage, I think since the ESL, we basically regard ESL as organic growing business. As long as the retail signage, the ROI, payback is sensible to those retailers, we believe it will be growing quickly since the existing SI basically just leveraging their existing technology just at the bigger size onto their platform. If you are talking about the timeline, I think indoor basically is ongoing. We believe it will be growing more and more.
Retail signage, we are cooking it. We do see the potential. For outdoor signage, since it is a large format and they are expecting a singular large-size display, on the one hand, we rely on our H5 to manufacture it. On the other, since it is very new stuff, I believe there are still some technical issues there. Coming back to your question, confidence over the outdoor signage is there. If you are talking about how quick it is going to be, I think it still needs a while. I think retail signage, the indoor, is happening now.
Yeah. Thank you. If I may, just wondering, what kind of penetration are you seeing in the retail signage since ESL is happening very quickly? Are you having end customers or SIs already placing orders on those signage?
The penetration is still very, very low. The level of the trial is increasing. It's increasing now. A lot of trials, a lot of pilots. There's still no official rollout at this moment. A lot of trial, a lot of pilot at this moment. The penetration basically is still low.
Yeah. Thank you very much.
All right. Thank you.
Okay. This concludes our Q&A session. I will now turn the call over to Lloyd Chen for closing remarks.
All right. Thank you for your participation. See you next quarter. Thank you.
Thank you for your time. See you next quarter.