Qisda Corp

TWSE:2352

Earnings Call Transcript 2024-Q1

[Peter Chen, executive]

Investors, good afternoon. Welcome to Qisda Corporation Investor Conference of 2024 First quarter results. This conference is chaired by Chairman, Peter Chen; and President, Han-Chou Huang; and our CFO, Chiu-Chin Hung. Co-chaired by GM of each business group, GM of Information Technology Business Group, Daniel Hsueh; GM of Commercial and Industrial Business Group, Yuchin Lin; GM of Medical Business Group, Harry Yang; GM of Business Solutions Business Group, Joshua [indiscernible]; GM of Networking and Communications Business Group, April Huang; and our CIO, Michael Huang.

This conference should take around 1 hour. Agenda as follows: our CFO, [ Jasmin ], will bring us the first quarter of 2024 financial results and business highlights. And our Chairman, Peter and our President, [ Joe ] will bring us business update and outlook, followed by each GM of Business Group to bring us a briefing about business performance. Later, we will enter a Q&A session. [Operator Instructions].

Before we begin, we want to remind you to pay attention to the safe harbor notice. As this conference contains forward-looking statements, which is subject to risk and uncertainty. Please spend some time to read through the safe harbor notice on Slide 4.

Next, let's invite [ Jasmin ], our CFO, to bring us the financial results for 2024 the first quarter and business highlights.

[Chiu-Chin Hung, executive]

Hello, investors. Good afternoon. I'm [ Jasmin ]. First, I will give you an introduction. Let's introduce Qisda Group.

Qisda is a global technology group with global presence, our major business locate information technology, medical, smart business solutions and networking communication. Until this year, we have 40-year history during the business operation, we have been dedicated in business operation, and we have also won ESG and best company to work for. We have won best company to work for, for 5 consecutive years and sustainability. And in 2024, we have won two awards of finance Asia. For global presence, our manufacturing sites located in Taiwan, China and Vietnam. Sales offices. We have more than 200 locations worldwide R&D center located in Taiwan and China, number of employees, more than 26,000 people. The revenue in 2023 reached TWD 23.6 billion.

Let's take a look at Business Group. IT is our original business. The first quarter revenue reached TWD 25.2 billion. The purple blocks are Qisda Group in recent year transformation results in high value-added business. In 2023, high value-added business group revenue reached TWD 20 billion to TWD 30 billion scope. Take the first quarter of this year, for example, medical accounted for TWD 5.9 billion, BSG TWD 7.4 billion; NCG TWD 5.2 billion.

Medical, we have two BenQ hospitals and medical management consulting services and equipment and consumable and analyzers. BSG, we have distributed IT, OT and OEM solution services. NCG accounted for entire business, 11% reached TWD 5.2 billion. Key investment, we have [ Noble ] Baby for distribution of thinking drug store distribution and rabbit tech low orbit satellites.

Let's take a look at the first quarter financial results. First quarter highlights. Gross margin was 16%, exceeding 16 % for 4 consecutive quarters. Revenue reached TWD 46.9 billion, down by 7% Y-o-Y. Mainly because of the revenue drop from NCG and BSG business group. However, IT original business group are on an upward trend, also Medical Business Group Net income attributable to Qisda was TWD 0.26 billion, down by TWD 70 million Y-o-Y. As we have mentioned, NCG AL the decrease lead to reduced contribution to Qisda. And hence, EPS was TWD 0.13, down by TWD 0.03 Y-o-Y.

Let's take a look at business group performance. IT original revenue was TWD 21.9 billion, Y-o-Y up by TWD 200 million, up by 1%. Display performance is slowly, slowly picking up since last year. The first quarter revenue grew TWD 1.1 billion, up by 7% Y-o-Y. Gross margin, OP income margin and OP income amount grew on a Y-o-Y basis. High value-added business group revenue was TWD 21.8 billion, down by TWD 4.2 billion Y-o-Y. We have mentioned BSG and are both decreasing medical on an upward trend. Gross margin and [indiscernible] income margin decreased on Y-o-Y. That is because we have submitted listing application in Hong Kong Exchange. So we have to bear the expense. Also the equipment and consumables and also new arrangement for manufacturing site.

Those general cost hence, gross margin and op income margin decrease. BSG impacted by reduced need and overseas inventory adjustment. Hence, gross margin, the OP income margin decreased on a Y-o-Y basis in NCG impacted by inventory adjustment on client side. Gross margin remained the same. Open income amount decreased due to the revenue scope decrease, IT HVA -- because of the accounting treatment of [indiscernible] changed to equity [indiscernible] from consolidated subsidiary. So the revenue decreased simultaneously. BenQ [indiscernible] Holding [indiscernible] Corporation, BBHC, which refer to the two hospitals. We have submitted the listing application to member of the Stock Exchange of Hong Kong Limited on April 3.

And we have won Finance Asia two awards. One is best technology company, Bronze Medal and Best Investor Relations, Taiwan Silver Metal.

Consolidated statement of comprehensive income of the first quarter. Revenue in the first quarter, TWD 46.9 billion compared to last year, down by TWD 3.5 billion, down by 7%, group margin, 16% operating income, TWD 0.927 billion, open income margin down by 0.7 percentage points. This is because of the revenue scope decrease. Expense also decreased but the scope is smaller than the revenue drop. Net non-OP income remained the same net income, TWD 0.395 billion net income attributable to Qisda TWD 0.257 billion, EPS TWD 0.13 on a Y-o-Y basis, down by TWD 0.03 compared to 2023 fourth quarter due to the effect of Lunar New Year. The first quarter performance would be worse than the fourth quarter last year.

On Q-o-Q basis, down by TWD 3.7 billion, down by 7%. However, operating income on a Q-o-Q basis is on an upward trend. This is due to the decrease of expense. Hence, operating income up by TWD 60 million. Net non-OP income due to the fourth quarter enjoyed non-OP income which does not happen in the fourth quarter. So the performance was down by TWD 0.12 billion, EPS down by TWD 0.09 on a Q-o-Q basis.

Let's take a look at consolidated balance sheet highlights. Total assets in the first quarter, TWD 195.1 billion. Total liability accounted for 68% equal to TWD 63.2 billion, book value per share, TWD 19.55 on Q-o-Q and Y-o-Y basis, we can see that inventory level TWD 36.6 billion. On Q-o-Q and Y-o-Y basis continued to decrease as to cash and equivalent. In the first quarter cash level, up by TWD 4.2 billion. Financial debt, up by more than TWD 7 billion. This is due to the capital adjustment and arrangement.

Let's take a look at financial ratios. Let's focus on the cash conversion cycle. From the fourth quarter, 97 days down to the first quarter 93 days, slightly decreased by 4 days compared to the same period last year, down by 11 days. We can see the day spend is reducing.

Let's take a look at financial trend, quarterly trend. First, revenue. As we have mentioned, the first quarter would be a struggling quarter for us. Revenue reached TWD 46.9 billion. Gross margin has reached more than 16% for 4 consecutive quarters. Open income margin has decreased for 2 consecutive quarters. That is because of the revenue scope drop.

Okay. Let's take a look at financial trends, first quarter on Y-o-Y basis. As a matter of fact, the first quarter gross margin compared to last year is on an upward trend. Other details, please refer to the content on this slide. Let's take a look at business group revenue trend. First, medical. The first quarter revenue, TWD 5.9 billion compared to last year's same period, TWD 5.7 billion is on an upward trend compared to the fourth quarter because hospital usually is off during Chinese New Year so the revenue will be lower than the fourth quarter. BSG, the first quarter, TWD 7.4 billion, as we have stated, it is impacted by the inventory adjustment. And CG, also a similar situation, inventory adjustment. For IT original business, this is our original business.

Last year, fourth quarter the revenue is gradually picking up. The first quarter of this year compared to last year, the same period is also on an upward trend. We can see the IT business is slowly picking up. So in the future, we expect to see a better performance quarter-by-quarter.

Let's take a look at financial highlights by business group. In general, on a Y-o-Y basis, gross margin remained the same with one exception. Others, which is banking material polarizer slightly decreased on a Q-o-Q basis, except for was impacted on a downward trend. Others gross margin remains the same.

For revenue breakdown by business, please refer to the detail on Slide 17. This slide, Qisda group company's results for the first quarter compared to the same period last year, we have been suffering. However, some subsidiaries delivered good performance, such as Concormed and DIVA in medical business group reached highest in the same period in past years. Also partner under BSG after [indiscernible] 4 & 1 begin to bring synergy and the outcome of past effort, which also hit highest in the same period in 2 years. Other performance in the first quarter are slightly decreasing compared to the same period last year.

Next, let's welcome Chairman Peter to bring the business update of the first quarter and the second quarter outlook.

[Peter Chen, executive]

Hello, investors and friends from Present Media. How fast we have entered the first quarter of 2024 Investor Conference. As stated in previous investor conference, we have seen clear trough of business operation in the first quarter. And we're sorry, as expected, we can see that this year revenue and profitability compared to the first quarter last year. were on a slight downward trend, revenue down by last year, TWD 50.4 billion. down to this year, TWD 46.9 billion, EPS down from TWD 0.16 to this year TWD 0.13. This is foreseeable, this is economic trough. Therefore, we have reported this trend in our previous investor conference.

However, we can see that this trough is clear in the first quarter, and we hope in the future quarter by quarter, we can see the growth. In last year's investor conference, we have also delivered this anticipation. We wish to grow quarter-by-quarter. Unfortunately, in the second half year of last -- second half of last year, the revival strength was not enough. Also, the inventory adjustment impact, which lead to NCG Business Group suffering. Also industrial computing and AI-related application also began to suffer in the second half of last year. As to product portfolio, business group portfolio, since the second half of last year to the first quarter of this year, you can see the trough in business operation.

Starting from the second quarter this year until the second half of this year, we can foresee a better performance. The second half of this year trend has yet to be clear, as we stated in previous investor conference, as for now, we can see a much more clear trend. Some concerns remain industrial computer and AT and networking related issue should slowly pick up in the second and third quarter. And we have also stated the IT business performance has picked up since last year fourth quarter, and we have seen order to be placed.

Later, GM of each business group would provide more detail regarding the first quarter performance and outlook of the second quarter. I believe we can see the trend of growth quarter-by-quarter. I have faith to see such trend. And also looking forward to see the better performance. to reach the milestone we have set for ourselves in the past. So this is a big picture outlook on my end. And I've also seen many questions being submitted. And later, we will also answer them one by one.

Next, I will hand over a microphone to our President, and GM of each business group to bring us more detailed information regarding each business group analysis. Okay. Let's welcome Joe.

[Joe Huang, executive]

Hello, investors and friends from present media. Good afternoon. I am President, [ Joe ] Huang. The second quarter outlook of 2024. The overall situation, our Chairman has bring us detail will not further elaborate.

Second quarter has always been the weak season for IT industry. However, commercial industry, we haven't seen a comeback industrial computer and networking are both under inventory adjustment. Under the circumstances, the second quarter goal of Qisda should be preparing for the second half. High value-added business group medical, hospital operations remain optimistic, and we have applied listing application to Hong Kong Exchange and also continue to expand overseas distribution for BSG. Our team actively participate in international exhibition to connect customers with business partners and explore new business opportunity. NCG accelerated development opportunity in emerging markets. Later, we will bring more details.

As to display market performance, it has been a transitional slow season in the second quarter, the demand remained to be conservative. But we have contributed in product portfolio and we can see a pickup in the further quarters. Other than each business group distribution. We want to focus on lean and focus continuously optimize the organization and investment in businesses. And we will update you if there's any news. The first quarter, Meta Ag increased shareholding percentage of grandis to include it in our balance sheet, and Grandes focused on digital customer services. It is an important part of BSG. It is officially our subsidiary.

For future trend, we will accelerate the investment in Vietnam. We foresee a huge change, especially at the end of this year, there is uncertainty based on the American presidency election. So we will enhance our yield in Vietnam. This is the outlook of the second quarter.

Next, we will welcome GM of each business group to give us the performance of the first quarter and briefing for the second quarter outlook. Let's welcome Daniel.

[Daniel Hsueh, executive]

Hello. I am GM of IT Business Group, Daniel. I'll bring the highlight of the first quarter. Global display market sales performance remains flattish. We haven't seen strong recovery in the market. Overall sales amount should slightly grew 5% compared to the same period last year. However, Qisda display cells amount grew more than 15% compared to the same period last year.

As to the second quarter outlook, second quarter is traditionally the slow season global demand for display remain conservative. To pursue the growth as last year's same period, we will need to rely on economic rejuvenation. However, Qisda display cells of amount is expected to enjoy better performance compared to the first quarter of the same period last year.

Next let's have GM of BSG. [ Joshua ] [indiscernible].

[Unknown Executive]

Hello, investors and friends from Press Media, I am GM of BSG, [ Joshua ] [indiscernible]. The first quarter of 2024 highlight. BSG focused on three smart applications.

First, enterprise more IT as AI application and ESG continue to be discussed, we collaborate with software and cloud and increased sales in corruptive software and application.

The second part, enterprise OT, smart OT operation tech industrial computer market has yet to recover, and we expect to see the comeback in the second half. We will actively prepare material for long delivery period for the better economic situation.

Cybersecurity overall delivery in the first quarter remained conservative, but we can see American clients have exhausted their inventory and begin to put more urgent orders. cybersecurity server continue to mass-produce and we anticipate the contribution to grow in the second half.

For smart manufacturing, we can see a reviving trend in Taiwan market slowly alleviating in China market as the global economy remain unclear. Energy-related construction project were mostly delayed.

And the third part, Smart Retail, OMO online and offline virtual and physical integration partner has delivered great performance. However, suffer from inflation in European and American market, the comeback situation is slower. Asia Pacific market and Southeast Asia and Japan market are gradually alleviating. And we will continue to follow the demand of end user clients and provide solutions.

For the second quarter, we focus on six major infrastructure edge to cloud integration, cybersecurity, AI computing, green energy, smart automation and smart transportation remain elastic demand perspective. And in the second quarter, we will accelerate BSG Crafts enterprise collaboration and operation to love verge need in each DST in each company and generate energic effect. Thank you.

Next, we will have GMO CIG, Yuchin Lin.

[Yuchin Lin, executive]

Hello, everyone. I am GMF CIG, Yuchin Lin. Next, I will give you the highlight of the first quarter and outlook of the second quarter. In the first quarter, in projector performance, we have seen in January and February, client remained conservative and place a short order and rush order. And in March, we can see a strong comeback. As to industrial and commercial field, after a few quarters, they have underwent inventory adjustment. They have reached a fairly low inventory level. Customer and automotive field has come back to its demand momentum, we enjoyed 1-digit growth on Y-o-Y basis and 2-digit growth on Q-on-Q basis as to the outlook of the second quarter for projector. In March this year, our client mindset has changed from conservative to having better faith in March. They have placed quarters for the entire second quarter requirement, we anticipate a 2-digit growth in the second quarter.

And we also continue to collaborate with our clients hoping to win the tender, and we wish to ship at the end of the second quarter. As to new massive produced devices for industrial and commercial field. In the past, we have put effort in research and development and design, MS produced for our clients. And those models have been shipped and well received in the market. and amount of order also grows, we anticipate a 2-digit growth on a Q-o-Q basis. As to automotive field, the demand momentum we wish to maintain also at the end of this year, we anticipate two new model, and our client has offered their forecast until the end of 2025.

The entire second quarter, we have also increased our expense for expanding manufacturing for new device and testing equipment. Thank you.

Next, let's have GM of Medical Business Group, Harry Yang.

[Harry Yang, executive]

Hello, investors and friends from present Media. Good afternoon. I am GM of Medical Business Group, Harry Yang. I want to bring the overall medical performance in the first quarter.

The first quarter compared to the same period last year grew 3% other than optimistic hospital performance and our listing progress. Our other production line also has been performing greatly. First, medical devices continue with the fourth quarter performance we manufactured in India. And this year, we have been manufactured in Tomi Island in China. This would greatly contribute to the centralized ProSecure in China. And this is our overseas distribution. Second, dialysis products after 1 year preparation, we have entered the second round of centralized procurement in China, negotiating quantity in the agreement. Other than the artificial kidney manufactured in Shanghai, also include product manufactured in Taiwan, and we anticipate the shipment in the second quarter. Other than China, we also distribute in other countries. Third, in the first quarter, we have put effort into strategic investment. We invested 100% in [ nisan ] caring through Golden Spirit. [ Nisan ] Caring is famous for disinfection products. Through this integration, we can integrate the product, manufacturing and channel. I think this would bring great contribution to the overall synergy. And the fourth, dining drug store has been listed on Taipei Exchange on March 8, and we hope through this action to continue to distribute pharmaceutical channels through rapid store deployment and seek a strategic collaboration.

As to the second quarter, we wish to continue the overall synergy to enhance the synergy we anticipate to see more partner to join us in the second quarter. Starting from the second quarter until the end of this year, we are optimistic about the medical business group performance. Thank you.

Next, we will have April Huang, GM of NCG.

[April Huang, executive]

Hello, investors, I am GM of NCG, April. Since Second half of last year, we have been through inventory adjustment in the first quarter. We haven't seen come back. Last year first quarter, Alpha network has reached the highest in single quarter performance. So we can see a huge drop on a Y-o-Y basis, 34%.

As to yield, since last year, we have been optimizing the yield adjustment. So the gross margin has improved 1.7%. The scope is minor. So the revenue, overall revenue still decreased on a Y-o-Y basis. However, IDT revenue and profitability grew and EPS also reached highest in the past years.

And in the second quarter, I anticipate inventory level to continue to undergo adjustment. I foresee fastest we can see a return in the fourth quarter. I should be more evident in 2025. And we have been deploying new arrangement and adjustment and we want to optimize our yield for new distribution for new product distribution, for example, we have been talking about doses 4.0. In new markets such as Southeast Asia market and India market for these aspects, we could foresee the contribution fastest in this year fourth quarter, and these will be our future growth momentum.

[Joe Huang, executive]

Okay. So we have all business group brought us the detail of their performance, let's enter the Q&A session.

We have delivered the first quarter of 2024 operation results and the second quarter outlook. Let's enter Q&A session.

[Peter Chen, executive]

Okay. This is Peter investors and friends from present media. Let's enter Q&A session.

I have been -- some most questions are AI and ALT related. For this aspect, I will partially answer the question, and I will also have our new GM as to bring more detailed reply. And also, the nonoperating loss and also the progress of listing of BHC and our capital plan. These are financial aspects. Should we have CFO to bring us some perspective.

[Chiu-Chin Hung, executive]

Hello, investors, I'm [ Jasmin ]. The major nonoperating loss, it is inevitable for operating growth and requirement. These are the loans that we beared from the bank. These are for interest. So mainly the loss is because of the interest.

And second, for the listing progress of BenQ Hospital, the IPO progress and the features of BenQ Hospital. I want to briefly introduce on April 3, we began to see has submitted application to Hong Kong Exchange for listing. Now we are waiting for exchange inquiry. And we will answer some questions in the process. And we don't know how long would it take. Once we have any update, we will announce the information for investors to know. So we have submitted the application documents on April 3. You can also go to Hong Kong Exchange News website to download the document. We have -- there are Chinese version and English version of BenQ hospital introduction. There are more than -- there are hundreds of pages you can refer to. And I want to briefly introduce BenQ Hospital.

We have two hospitals, Nanjing and Suzhou BenQ Hospital at teaching center level, and they are both large general hospitals. And we haven't acquired the number in 2023. As stated, it is the largest private for profit General Hospital Group in the East China region in 2022 and also ranked the first among all private for-profit general hospital group in mainly China. As to competitive strength, it is a pioneer and leader among private for-profit general hospital group in Mainland China with wide brand recognition and influence. And it is also a medical teaching research operation integrated private health care service platform, emphasizing both comprehensive health care services and medical specialties that keep attracting talent and generating business synergies because they own a higher starting point backed by our world-renowned controlling shareholder, which is Qisda as well as synergy with shareholder to safeguard our long-term growth. It is -- it has industry-leading operational capability and highly scalable and standardized management model that drives robust and stable profitability.

Most importantly, since we have Qisda shareholder it has high-quality services with profound humanistic care through upholding an internationally advanced health care philosophy and putting patients first, resulting in better patient experience. And since it is a General Hospital, we will keep emphasizing the comprehensive health care services and the strength in medical specialties. And it will also scale up operation of our existing hospital to expand service capabilities. And we will extend health care service platform through acquisitions. For the capital used in IPO, it is used to found an expansion and upgrade our existing hospitals because BenQ hospitals still own plenty of land to expand through the capital of IPO, we can expand our existing hospital scope and also prepare for the potential investment and mergers and acquisitions opportunities to Southeast Asia.

And based on our previous capability in Smart Hospital, we want to found the upgrade of our smart hospital plan, and you can download the financial report to note the detailed information of industry outlook, risk factor and major stockholder and financial reports.

[Peter Chen, executive]

Okay. Thank you, CFO. I remember in previous investor conference, I have also mentioned that BenQ Hospital operation other than focusing business in Taiwan, we also focus on overseas operation to build a healthy system, a further push to IPO after successfully listed, we will use this model to expand BenQ Hospital scope. Has the entry area for hospital is relatively high. It is the first stop for the up and middle and downstream of medical systems. The investment in this aspect should be a strong contribution to Qisda Group's revenue and profitability. Please looking forward to the performance of our hospital operation.

As to AI distribution arrangement, I will partially answer this question. And Later, I will have Data to answer in detail. First, I have seen question regarding why we have such change of the role of GM of BSG. This is because we want to enhance the performance of Solutions Group, our AIoT business group. We want to enhance the synergy of cross enterprise. We have distributed this aspect early on. We want to build an AIoT business group. And what does it mean? In short, it means smart solution.

That said, we want to combine AI and IoT. In artificial intelligence field in all kinds of fields, through software and solution, we want to bring intelligence into the field. To put it simply, it is smart hospital, smart school, Smart Store and smart factory and so forth. These are the hot topics that we have been pursued. And we want to deliver the effect in all fields. So from the market end, we begin to deploy. So in the past year, we have acquired 30 to 40 subsidiaries under BSG. We have DFI to focus on edge computing.

As to cloud, we have [indiscernible]. You can see the hot topic. Everyone is talking about server. We have a in putting up for in this aspect. We also have OT precise mechanism, advanced trail and bearing and so forth, a robot arm or portable robot. We have ACE pillar working on this aspect.

Then you might wonder what about software. Software is the sole. We have to utilize AI through software to put in practice. So we have Meta [indiscernible] to represent major global companies, including AI-related module and application. This is why in the past years, we have distributed in ART field. And all the companies should link together to pursue maximized synergy and to integrate AI into IoT in all fields to generate a maximized synergy, take Smart Hospital as example.

Some of you asked questions regarding what is the feature of our BenQ you hospital? The answer is simple. They are smart hospital. We welcome you, if you ever visit China. You can take a look at our BenQ hospital. During the 3-year co-build period, we have invested a lot of capital to transform the hospital into smart hospitals. I am very confident that the level of intelligence of our hospital is definitely outstanding among other hospitals. For the smart application in our hospital is very advanced. So this is the greatest feature for us to enter hospital industry, and we hope to bring this smart experience for physicians and patients and nurses to generate the maximized synergy. So I provide my own perspective as to our organizational change. And we also hope to generate output for the smart hospital module. We welcome other hospital to visit BenQ Hospital in China either by module or as a whole.

You might know that we work with Market Tech to establish market top corporation. Joshua is also in the management team of market top in the solution aspect, they have strong performance. Whether in semiconductor industry or other industry, the overall solution, they deliver a strong capability and efforts. They enjoy great revenue and profitability, partially they put effort into medical field. Through market top. We hope to upgrade the smart hospital overall solution to find the best region to build smart hospital, whether it's in great China or Southeast Asia through market top combined with the channel of PSA we can deliver the output of our successful models. This is my reply regarding AI and smart hospital.

For the smart industry plan, what is the major outlook of AI? I would have Joshua to give you the reply to the question?

[Unknown Executive]

Thank you for paying attention to the development of AI and IoT topic. Chairman has bring detailed information. I will give some more information. We will integrate inner and outer resources to put effort into six industries such as sport school. We work with BenQ Corporation, smart hospital. We work with our medical business group, whether it's in AI or equipment for smart energy. We also work with related company and smart retail and other field application. Other than industry and field application, we also have three system aspect. First, information technology. It covered ESG-related topic. Second one, OT application technology using smart resolution to upgrade ALT application and to apply to edge server aspect, and we also provide industrial computer for edge. The third one is smart retail. OTO integration, this is a location aspect.

As to products, I have mentioned six major infrastructure, integration of cloud and edge, cybersecurity, AI computing, green energy, smart automation and smart transportation, which include a dashboard for e-cars and related application. So some of our investors pay great attention to this aspect. We have wholesome six industry distribution in three major applications. for overall plan and to emphasize on six major infrastructure. We hope through Qisda Group and domestic and overseas companies and to apply the integration of market top and market tech, all together, we can create a better future. Thank you.

Okay. Some of you also asked, other than Vietnam, do we have other manufacturing sites? Or do we have any plan in establishing overseas headquarter. And what is automotive product and what is the expense rate in 2024. Let's have Joe to answer this question.

[Joe Huang, executive]

According to other manufacturing site other than Vietnam. Currently, we have Taiwan, China and Vietnam as our major manufacturing sites other than these three places in America or European country, we have smaller scale processing or assembly plant. Based on our clients' needs other than these three major manufacturing sites will also do simple assembly services. If our clients deliver other requirements, we will also take into consideration and maybe expand in the future. And overseas headquarter. At the moment, we don't have such plan. However, some of you might ask what is emergency occurs. We don't have such plan at the moment. However, to ensure our capability to cope with such emergency, we have cloud solutions and so forth to make sure that we maintain operation under emergency. And what is automotive usage. We have many products. We have telecom module and CPU module and module assembly put in car to control all the application.

This is not the same as ADAS. This is a control center other than ADAS. And we also have monitoring module working in Japan. And we also apply optical technology, technology of projector to manufacture other new products because it is not yet into met production phase, so we cannot announce the progress. as to the expense rate in 2024, the overall expense should reduce compared to last year. The decrease of operating income is more than the decrease of expense. That's why the operating income performance is not good, but the expense will continue to decrease especially, we have the help of Vietnam manufacturing sites.

[Peter Chen, executive]

Okay. This is Peter. Due to limited time, I have reviewed all the questions. We have covered them all, and I want to sum up. We have seen the first quarter whether in revenue or profitability, we have met trout. And I believe that is clearly the drought, and we expect to have better performance in the second quarter. So we will accelerate future distribution to pass through the trough and rapidly recover to our usual performance or even surpass our milestone. This is the responsibility of us as a management team. We will speed up the whole process. on operational management and to alleviate the impact of inventory adjustment to come back to rapid growth.

Thank you very much for your support, we will persistently putting effort in bringing better performance.

So far, we have answered all the online questions. We have come to the end of today's investor conference. Thank you for participating. The first quarter of 2024 Investor Conference of Key staff Corporation. We will upload the audio file online later.

Thank you again for your participation. You may disconnect now.