Our work in innovative material continues to deliver results. Together with the cutting-edge Japanese fashion brand, ANREALAGE, we presented its spring and summer 2027 collection at Paris Fashion Week, featuring six color-changing outfits made with E Ink Prism 3 technology. Each outfit uses about 1,000 to 2,000 e-paper pieces, with programmed control of the color and pattern on the surface change dynamically, showing what becomes possible when technology meets fashion.
At previous earning call, we introduced E Ink Prism for car exteriors and interiors, such as BMW, the partner we have been working with. The collaboration with ANREALAGE takes ePaper future into high-end fashion and shows its potential to move beyond traditional displays into smart surfaces and new material. Let me walk you through our results for this quarter. Before we start, let's take a few minutes to read safe harbor statement. All right, next page.
Let me begin with an overview of our operating performance in the third quarter this year. Revenue for first three quarters reached TWD 28.8 billion, approximately down 1% year-over-year. Operating profit was TWD 9 billion, with an operating margin of 31.3%. Net profit totaled TWD 9.17 billion, and EPS were TWD 7.94. Despite headwinds from CE business, this was the second-highest level on record.
Next page. Moving on to this slide, we can see the trend in operating profit. Operating profit for first three quarter was TWD 9 billion, as mentioned earlier, with an operating margin of 31.3%. Once again, despite the headwind from CE business, this was the second-highest level on record. We continue to invest in R&D and talent to explore new applications and meet market demands. Innovation remains the key driver of our growth and long-term success. All right, next page.
On the asset side, total assets surpassed TWD 100 billion in fourth quarter last year already, and reached a record TWD 127.4 billion in third quarter of this year, and up TWD 24.3 billion, or 24% year-over-year. Continued profitability and operating cash inflows, along with prudent allocation to financial investments, grew both our cash flow and financial assets. Property, PPE, basically our fixed assets, increased as we expanded operations and production capacity. This strong balance sheet gives us ample capacity to fund expansion and long-term growth investment. Turning to this slide, shareholders' equity. Equity grew from TWD 40.9 billion in the third quarter of 2022, and to TWD 82.3 billion in third quarter this year, doubling in four years. Of course, NAV per share also doubled from TWD 35.9 to TWD 71.3, driven mainly by accumulated operating profit and investment gains.
The stronger equity base allows us to invest in the next wave of disruptive technologies, including NewCopper's conductive copper ink and Soofa's ePaper out-of-home media and Taiflex AI server materials. We will continue to invest to create long-term value for our shareholders. On the cash flow side, cash and financial assets continue to increase through the third quarter, reaching approximately TWD 86.5 billion. This is an increase up to around TWD 16.1 billion from TWD 70.4 billion at end of last year. Supported by our solid profitability and strong cash flow, while paying cash dividends, we continue to invest in CapEx and allocate our financial resources appropriately to support growing market demand. Turning to this slide, we are seeing a structural transformation in smart retail, a move from electronic shelf label to in-store retail media.
I mean, initially in the first phase, retailers adopted ESLs to improve operational efficiency using automated price changes to address labor shortage and reduce pricing errors. As the infrastructure rolls out globally, the next major opportunity is retail media. More than 80% of retail transactions still take place in physical stores, and the shelf edge is the last mile that shapes shoppers' purchase decisions.
By deploying a mid to large size E Ink full-color ePaper signage on shelves and even in aisles, we help traditional store become monetization platforms. Basically, ePaper requires no complex wiring, consume ultra-low power, and offer a sharp, glare-free, paper-like image that does not distract shoppers. Brands can deliver targeted promotions and cross-category ads in real time. For E Ink, this means we are no longer selling retailers just a cost-saving tool, but a display platform that generates advertising revenue.
Retail is no longer just selling products, we believe. It's winning attention, scaling up display sizes and ePaper area. ePaper is the best medium to turning in-store attention into business value. This quarter, we continued collaborating with partners across industries to push the boundary of ePaper. As you can see from the screen, from e-readers, PC secondary monitors, and smart retail to public transit signage and fashion materials, as I mentioned earlier, ePaper has expanded into diverse living and working scenarios. This page, I would like to share with you one important message. As you may have seen from our recent public announcements, in addition to the land we previously acquired in Guanyin, where a new facility is currently under construction, we have also acquired an existing factory building and underlying land from Chung Hwa Pulp.
Together, these investments basically help us to adapt, establish a more comprehensive manufacturing base in Guanyin, supporting our future capacity expansion and long-term growth. E Ink basically building on its core strength to expand ePaper and grow beyond it. Firstly, we are extending our materials and manufacturing expertise to broaden ePaper applications and unlock new growth. Second, we are applying our core technologies to AI materials, developing PTFE copper clad laminates for AI high-speed transmission. Third, we are also joining forces with Taiflex, combining our complementary strength in materials and manufacturing to advance development and process validation.
Together, basically, those steps move us toward our vision of E Ink everywhere. For the ESG part, we remain committed to advancing sustainability with continued recognition from leading global and local ESG recognitions.
As you can see from this chart, our S&P Global Sustainability Assessment score has steadily improved from 61 in 2022 to 93 in 2026, reflecting our consistent progress. We have been recognized in top 1% of S&P Global Sustainability Yearbook for two consecutive years, along with CDP A ratings for climate change and water security. We believe sustainability is not just a responsibility, it is an integral part of our long-term competitiveness and value creation. Next, I would like to highlight several recent recognition of our sustainability achievements. We ranked fourth among large manufacturer in the CommonWealth Sustainability Awards. Also FTSE Russell recognized 100% of our revenue as green revenue. Also received two silver awards at Taiwan and Asia-Pacific Sustainability Action Awards for our ePaper project at the Taipei Fine Arts Museum and our eRead for the Future initiatives.
Going forward, we will continue to leveraging our ePaper technology and ecosystem partners to drive green transformation and create long-term value. Last but not least, let me close by highlighting E Ink long-term value proposition. Firstly, we have built a strong and profitable core ePaper business, supported by our global technology leadership and continued expansion into the new applications. I think I will talk about that previously. Our financial position is also equally strong.
At the end of third quarter, we had TWD 127.4 billion in total assets, and including TWD 86.5 billion in cash and financial assets. That is roughly 52% of our current market cap. Our debt ratio was only 34%. So those financial strength give us flexibility to invest in innovation, capacity, and long-term opportunities, while maintaining a disciplined approach to capital allocation. Beyond ePaper, we are quite selectively investing in disruptive technologies.
I also gave you examples previously that basically connect to our material and manufacturing capabilities. Our collaboration with Taiflex also creates potential opportunities in advanced material for AI infrastructure. At the same time, our sustained ESG efforts have earned recognition across global sustainability indices, increasing our visibility among long-term investors. Taken together, a resilience core, a strong balance sheet, and multiple growth opportunities, we believe our market valuation may not yet fully reflect strength of our core business, our strategic financial flexibility, and the long-term value of the emerging growth opportunities. Our focus remains on conveying these advantages into sustainable long-term shareholder values. Okay, so that is my sharing for this quarter. We can move to the Q&A session.
We will now begin the Q&A session. If you would like to ask a question, please click the raise hand icon on the sidebar. When it is your turn, please unmute yourself before speaking. Let us begin with our first question. We will have our first question from Derrick Yang from Morgan Stanley.
Hi, Derrick.
Hello, Lloyd. Can you hear me?
Yes, very well.
Thanks for taking my question. I would like to follow up on the one question during the Mandarin call, which is regarding the gross margin for the PTFE business. Because during the Mandarin call, I think Johnson mentioned that you're going to take the outsourcing order from Taiflex. I know if you look at your corporate average gross margin, it's pretty high, 50%-60% right now. I know overall PTFE gross margin could also be high, but that gross profit dollar will need to be shared by you and Taiflex, right? So my question is that if you look at the process that you provide to Taiflex, would you say that the gross margin out of that process will still be comparable to your current corporate gross margin level, which is 50%-60%?
Yeah, Derrick, this is a good question, but I may not have a good answer for you because PTFE basically is a new material. What we are focusing on is how to get it right and get it done, and that will be the first priority. How to allocate the profits under E Ink and Taiflex, especially, we are the related parties. We will figure out the best way to do the allocation. The market basically is full of potential, but how to allocate the profit going forward, I think, remain to be decided. But I think the first priority is to get product right and secure the business first.
Okay. Sure. Thank you. My second question is regarding your H6 production line.
Right.
I think you mentioned during the Mandarin call and previous calls as well that the dimension for H6 will be larger than H5.
Correct.
If my memory serves me right, I think H5 is around 50% larger than H1 to H4. Right now, if we look at H6, how much bigger is it versus H5?
I think it depends how mature the production is going to be. I would say another 50% if everything goes very well, goes very matured, maybe 100% more. That is how I see it at this moment, ranging from 50%- 100% additionally in terms of the size compared with H5.
Okay. The dimension is not finalized yet?
Oh, it is finalized, but I think what I want to emphasize is, theoretically, it would be 50%-100%, but depends on the yield and how smooth the production efficiency is.
Okay.
If everything goes well, I think 100%.
Okay.
100% more.
My understanding is that if you just look at the physical dimension, it is 100% wider than H5.
I'm-
If we consider the yield, it could be the output, the actual output of the production line could be 50%-100% more. Is that the right way to understand that?
In terms of the dimension, I do not have the number whether it is going to be 1x more compared with the H5. But in terms of the output, I think you can see it in that.
Okay, so output 50%-100% more, but dimension not sure.
It is bigger, but I do not have the exact number yet on my mind.
Okay. Thank you.
Right.
All right. That's all my questions. Thank you, Lloyd.
All right. Thank you.
We will take the next question from Josie from JPMorgan.
Hi, Josie. Feel free to ask questions.
Sorry, Josie, we cannot see you on the line, so we will take next question from Kenny Chen from Nomura. Please go ahead.
Thanks. Hi, Lloyd.
Yes.
Thanks for taking my question again. Regarding the third quarter, I know it is passed, but just wondering if you have any views on the third quarter revenue sequentially change. I mean, the CE quarter-on-quarter grew a lot. Is there any surprise out there out of your expectation for the Q3 mix, and any reasons behind that?
Basically, third quarter, before the Christmas, basically, it is a peak for CE. If there is no memory issues, it could have been better. I mean, higher CE in third quarter compared with the second quarter, that basically is quite normal. I think in the Mandarin call, we already explained, material sales going forward is something we are aiming for. Even the module capacity, basically, we have a limited module capacity. I think going forward, as we grow, more and more material sales will be happening, which means our IoT business will grow more in terms of the total sales revenue.
I see. Thank you. Just another follow-up on the 2027 growth. I think Johnson commented that next year for ESL and large size should be another good year.
Yes.
Do you have any hint or any comments on how the growth rate would be like compared with this year? Is it accelerating or decelerating, or you will announce in three months? Just try to get a feeling about that.
Right. It is still a bit too early to be specific. In general, we believe next year will be better than this year, top line and bottom line. But to what extent, give us some time. We believe we can share more in the next earning conference.
Okay, great. Appreciate it. Final question is that, I think during the second quarter earnings call, three months ago, Johnson or Lloyd, you mentioned that you will be having some new excited and application. I assume that is not related to PTFE, but your organic business. Is that so? Is still the case right now, and will you announce anytime soon?
I didn't recall we said that.
Okay. So I assume that it should be what's mentioned by the Mandarin call that CE will be launching some more new generation products, probably. Is that so?
Let me recall. Yeah. Okay. I don't really quite remember. Yeah, sorry. Can you be more specific? What exactly is it? I'm sorry.
No worries. No worries. I think I'll be cutting. I've been expecting that. Yeah, if anything-
Right
it's positive. I will wait for next quarter's announcements or so. Thank you so much, Lloyd.
All right. Thank you.
We see Josie on the line, so we will take Josie's question.
Hi, Josie.
Yes. Can you hear me?
Yes.
Yes. Hi, Lloyd. Thank you for taking my question. My question is on the third quarter gross margin. Understand that this quarter we have higher mix in CE, so that is why unfavorable product mix actually takes some effect in the gross margin. But when we did the quick math, still think that maybe some, maybe raw material issue, cost inflation, or some other factors also hit the margin. Wondering if there is any factors outside product mix that you observe in this quarter. Anything will be very helpful. Thank you.
We believe product mix still the main factor to affect our gross profit margin. But once again, we are aiming to increase our sales revenue or gross profit dollar. We are not aiming for the short-term gross profit margin growth. As long as we see the demand from the CE, I mean, module sales or IoT material sales, we basically, we will do our best to grow the market.
I see. Is it possible to get a rough sense on within CE, how much is module sales and how much is material in this quarter, and maybe versus last quarter if we have the data?
For CE, still majority is module. Majority still module. For IoT, some of them module, but the majority still material sales.
I see. This trend, CE majority is module and IoT majority is material, has it changed a bit in third quarter or it is roughly always the same as this situation in both second and third quarter?
This year, let me put it this way. Last year, our CE sales revenue was higher than IoT. This year, our IoT sales revenue will be higher than CE sales revenue, which means our material sales basically is getting bigger and bigger. Because once again, our module capacity is basically as a constraint.
I see.
Do not get me wrong. As long as our module-based business, we will still work with our module partner in our ecosystem to work together to grow the module business. I am talking about, for example, CE or eventually for the signage.
I see. My last question is regarding maybe say, if we take a step back and look at the long-term growth trajectory of E Ink, we noticed that in recent years, E Ink did a lot of capacity expansion, and just wondering what kind of maybe say three to five years growth trajectory that you are seeing and why we are expanding quite actively now. Just want to get a sense of the rationale and also maybe some updates of the demand that you are seeing for the long term.
Right. We had a lesson learned during the COVID period. The ESL business was taken off, but we did not get the capacity ready beforehand. What we are doing now is prepare the capacity for the future, and in order to fulfill the bigger demand from both ESL business and signage business. We also believe through our color technology, our CE business will grow. But due to the memory issue, it would slow down a bit this year or even in the following year. But in the long run, we still believe through our color technology, we can trigger further growth of the CE. For those potential growth, we need to get our capacity ready, long run.
I see. Very clear. Very looking forward to that kind of growth. I will get back to the queue. Thank you.
All right. Thank you. We received a few questions online. Ben, you talked about the gross margin. Are we seeing increased competition given some core patents have now expired? More Chinese player coming into the market impacting your pricing power. Ben, basically every patent come with the shelf life, normally 5-10 years. But the way we file our patent basically is just like a wrapper. We include the old protection into the new patent. We do not really worry about the expiration of the old patent. Also, if whoever using our old patent to manufacture ePaper, the spec of it is basically it is very lower graded, and we believe it should not be able to fulfill the customer's demand. From that perspective, we do not really worry about that. Also, you want to get update on the gross margin and EBIT margin.
Basically, it is mainly caused by the product mix. Third quarter, despite the CE headwind, third quarter still the peak for CE business. The more we sell CE basically is a module-based business. The more we sell module, the less the gross profit margin is. But overall, we are still expecting growth, year-over-year growth this year. We also talked about that, the guidance we just gave. Last time, the guidance we gave is 10%-15%, but we slightly adjusted. What we are expecting now is about 9% year-over-year growth in TWD, because the function of currency in Taiwan is TWD. Jamie, basically, you asked a few questions about one question about the PTFE, the advanced material our invested company, Taiflex, is working on at this moment. The revenue contribution in percentage of the total sales revenue by 2030, we do not give the forward-looking information.
But I think our first priority is we will work with them how to get the product right and how to secure this business. I think that is our first priority. Once it has been secured, I think everything going to happening, yeah, very easily. For the CapEx expansion, where we are in the Hsinchu campus, after we finish the H6, we do not have the extra space for the production line. That is why we need a new factory in Guanyin. Going forward, if we need more production line, that will be happening in Guanyin. Currently, we are building the new factory. Once it has been completed, at the same time, we will also move in a new production line in it. Whether we will add more, of course, but it depends on how the business going to be.
[Sharma], for the IoT business, the year-over-year growth, it will be around the whole year, 25%-30% year-over-year growth. The Walmart business is still ongoing. Whether it already ended or when it will be ended, we cannot comment on behalf of the customer. But the thing is, Walmart just one of the biggest retailer in the U.S., but most of the top 10 retailers in the U.S., they already on board with the ESL solution. Okay? We work with our system integrators to see the best timing for the ESL rollout. 9% year-over-year growth is for the total sales revenue, not for CE. Basically, CE, we are not expect a year-over-year growth. It will be decline around 15%.
Okay. At this moment, we don't see any further questions on the line. We will end today's conference. Thank you for joining us today. This concludes our conference call.
Thank you very much, everyone.