Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Parade Technologies Ltd (ROCO:4966, Financial) reported a year-over-year revenue increase of 16.02% for Q2 2024.
- The company announced the successful shipping of the PS8830 USB4/Thunderbolt4 retimer in key OEM customer Copilot+ PCs.
- Parade Technologies Ltd (ROCO:4966) introduced the PS8778 USB4 Gen 3 by 2/Thunderbolt 4/DP 2.1 alt mode linear redriver, which supports up to 40 gigabits per second.
- The company provided a positive revenue guidance for Q3 2024, ranging between USD130 million to USD144 million.
- Parade Technologies Ltd (ROCO:4966) is seeing increased adoption of its high-speed PS parts, driven by the momentum in AI PCs.
Negative Points
- Sequential revenue for Q2 2024 decreased by 0.34%, indicating a slight decline in growth momentum.
- Gross profit for Q2 2024 decreased by 1.31% from the previous quarter.
- The company faces competition in the panel solutions market, particularly on the price side.
- Inventory levels remain high, with inventory days at around 150 days, which is above the company's target.
- The company is experiencing challenges in negotiating wafer cost reductions due to geopolitical factors and customer demands.
Q & A Highlights
Highlights from Parade Technologies Ltd (ROCO:4966) Q2 2024 Earnings Call
Q: Despite some noise in the PC market, our guidance seems solid for Q3. What is driving this momentum, and can we expect it to continue into Q4?
A: The momentum in Q3 is driven by high-speed PS parts and the introduction of AI PCs. Q4 is expected to be similar to Q3, with potential improvements depending on AI PC adoption and holiday season shopping. Overall, the second half of 2024 should be better than the first half.
Q: What is the outlook for the PC market this year and next year? Do you have any growth projections?
A: OEM customers indicate high single-digit growth for 2025. The adoption of AI PCs could trigger a new wave of upgrades, enhancing the overall market growth.
Q: Can you provide an update on USB4 penetration in Intel and non-Intel platforms?
A: USB4 adoption is increasing, with expectations for penetration rates to reach 60-70% next year. Many notebooks will feature two USB4 connectors, benefiting Parade due to our strong support for DP 2.1 and compliance with various standards.
Q: What is the status of USB4.2 retimer certification, and when can we expect shipments?
A: USB4.2 development is ongoing, with test chips already in our lab. We expect systems to market by late 2025, with broader adoption in 2026. USB4.2 will significantly enhance AI capabilities in notebooks.
Q: Can you share the product mix and revenue breakdown for Q1 and expectations for the coming quarters?
A: In the past quarter, DP accounted for 40%, high-speed parts for around 45%, and source drivers for below 15%. The high-speed segment may see a higher percentage due to increased USB4 retimer shipments.
Q: What factors impacted gross margin in Q1, and what can drive higher margins in the future?
A: Gross margin is influenced by product mix, competition in panel solutions, and inventory write-offs. High-speed products contribute positively, while panel solutions face price competition. We are negotiating wafer price reductions with foundries.
Q: What is the current inventory level, and what is a healthy level for Parade?
A: Inventory is currently around 115 days. We aim to reduce it to three months or slightly above by Q3 and Q4. We are negotiating with foundries to adjust long-term agreements to achieve this.
Q: What is the demand outlook for PCI Gen 5 retimer in data centers, and how is the progress towards the USD10 million target?
A: We are on track to meet the target, with PCI Gen 5 retimers in data centers, workstations, and storage. Customers are shifting towards redrivers due to power concerns, and we are developing PCI Gen 6 redrivers and retimers.
Q: What is the competitive landscape for USB4 retimers, and can Parade penetrate Intel's platform?
A: Outside of Intel, Parade is dominant. Intel may allow non-Thunderbolt USB4 retimers on their platform, potentially opening new opportunities for Parade.
Q: What are the future opportunities for high-speed interfaces in the automotive market, and what is the current sales contribution from automotive products?
A: Parade is successful in automotive converters, USB boxes, display solutions, and touch solutions. We are shipping reasonable volumes and expect further growth as more OEMs adopt our solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
