Hi, good afternoon everyone, and thank you for joining us today for Yageo's fourth-quarter result webcast. Yageo is the world's largest supplier of chip resistors and tantalum capacitors, as well as a top-three supplier for MLCCs and inductors.

My name is Howard Kao, and I'm the coverage analyst here at Morgan Stanley. We are very honored to have Mr.

David Wang, CEO; Mr. Eddie Chen, Co-COO; Mr.

Claudio Lollini, Co-COO; and Mr. Gavin Zhong, CFO of Yageo, here with us today.

Congratulations, Eddie and Claudio, on your promotion. We look forward to your thoughts and insights and commentary on your company as well as the market.

First, Yageo's management team will first walk us through fourth-quarter results and also provide some forward-looking commentary, and after that we will open it up for questions. As a reminder, at any time during the webcast, you can send in your questions in the text box on your screen.

Now I would like to turn it over to Yageo's management team for comments. Thank you.

Thank you, Howard. My name is Gavin Zhong.

I'm stepping into Eddie's previous post as the CFO. Welcome everybody to our earnings conference today.

Let's move on to the next slide so we can walk you through our financial result. I would like to start off by saying we actually delivered historical high revenue in both Q4 and 2025 full year.

At the same time, because of a favorable product mix, also cost efficiencies, and OpEx discipline, we also see increase in our profitabilities. If you look at the figures on the left, in last quarter 2025, we delivered a NT$36 billion revenue, almost 9% higher than the quarter before, and 20% higher than same period last year.

Very solid result. On the gross margin side, we generated 37.3% gross margin in the quarter, 1.1 percentage point better than the quarter before, and 4.1 percentage point better than last year.

On the operating margin side, 24.3%, again very solid result, 1.4 and 6.4 percentage points better than last quarter and also same period last year. EBITDA margin 30.6%, higher than 30% mark, 0.9% percentage point better than the quarter before, and also almost 6 percentage point better than last year.

Net income on the dollar value, we delivered a $6.8 billion net income, 6.2% better than the quarter before, and 82% better than same period last year. Similar growth you can see on the EPS, we generated $3.29 per share of earnings in the last quarter of 2025.

Very solid result, very strong profitability at the same time. Let's move on to 2025 full-year result.

Similar momentum we can see on the full-year result. Again, historical high revenue have been achieved in 2025.

Also the other thing I'd like to highlight, if you look at the last four quarters, each individual quarter we generated higher revenue and also better gross margin than the quarter before. This shows strong momentums that we're seeing on the business side, and also very strong momentums on the profitability side.

On the figure side, net revenue for the whole year was NT$133 billion, 9.3% better than the year before. Gross margin was 36.2%, 1.8 percentage point better than 2024.

Operating margin was 22.4%, 3.2 percentage point better than 2024. EBITDA margin 29.2%, 2.4 percentage better than 2024.

Net income dollar amount was almost NT$24 billion, 22% better than 2024 result. That's also showing the EPS, $11.5 per share, very strong performance, and that shows a 21% growth year over year.

All this attribute, again, very strong business momentum, and we have a very disciplined OpEx and strong cost efficiency we have generated in the company. All this are attributed to strong financial result in 2025.

Let's move on to the sales breakdown. A few things I'd like to highlight.

One is that we successfully acquired Shibaura last quarter 2025, we included about two months of Shibaura's result in our figures here. Of course, that has an impact on the sales breakdown by product, by region, by segment.

Part of the changes quarter over quarter is because of this inclusive of Shibaura. One thing I'd like to also highlight, we see a growing demand from AI-related applications.

In quarter four, AI I think accounted about 13% of total revenue already in the last quarter. Actually, we see growth across the board, all the sectors, all the products.

This is attributed to our one-stop solution strategy that we have been focusing on. On the product side, you can see sensor percentage has increased.

This is largely due to the Shibaura inclusion. On the segment side, we see AI-related demand contribute to our total sales by 13% as I mentioned already.

We see strong growth in automotive and consumer and industrial as well. Moving on to the region breakdown.

Again, AI-related demands are clearly showing in rest of Asia, Taiwan, Japan, also benefited from Shibaura, and also US. This is clear showing by the region breakdown.

We also see Europe is actually doing better than the last 12 months. As you can recall, last 24 months, probably European economic has been stagnant, but we see very positive momentum this year.

Their absolute revenue contribution is actually increasing quarter by quarter. This is a great momentum for us.

On the channel side, Shibaura has helped to increase OEM percentage, because majority of their business are direct sales to the customer. On the free cash flow side, as you can see, we generated NT$8.6 billion free cash in last quarter, 27% higher than quarter three.

Again, we demonstrated ourselves with a very strong cash generation capabilities. On the net debt and EBITDA ratio, we ended up with 59%, higher than Q3.

This is because we actually leverage with external fundings to finance our acquisition of Shibaura. Again, our balance sheet is very healthy.

We believe we will continue that momentum going forward. With that, I will pass on to David to give some colors about the outlook of the company.

Thank you, Gavin, and thank you, Howard. From the last quarter, Q4 2025, basically you see that all the financial performance, actually they are slightly better than our guidance.

I have nothing to add there. Now for 2020- 2026 Q1, although traditionally in Q1 because of the Chinese Lunar New Year impact, usually the activity in this quarter will be a little bit lower, but we still guide in net sales, gross margin, and operating margin will be slightly better than last quarter.

There are two reasons. First reason is that still in the market we still see the very positive momentum.

Secondly, internally we still see that our B/B ratio is higher than one. Because of these two reasons, we are still confident that in the Q1 all the financial performance will be slightly better than last quarter.

In terms of the utilization, because of the higher B/B ratio, we planned to increase our utilization. Also because of the Chinese New Year and with the lower production activity, that will be offset our plan.

Basically in Q1, we see that our utilization will be 3% to 5% higher than last quarter. This is a very brief guidance that I want to deliver to the audience.

Thank you, Howard. I think we can open for the questions.

Thank you, David and Gavin. As a reminder again, please send your questions onto the text box on your screen, and we will get to them shortly.

While we wait for questions to come in, maybe a first question from me. In terms of your Q1 guidance and utilization rate guidance that it will be up 3% to 5% quarter on quarter, any initial color on what you expect for Q2?

Will this higher utilization rate continue to sustain into the second quarter as well?

Certainly that depends on very much the business outlook. If we still maintain this positive B/B ratio, I think gradually we will still increase our utilization.

Got it. Thank you.

Just on the increased utilization rate, aside from AI, is there any other product segments or product or technology that you can talk about that is driving the higher utilization rate?

Howard, this is Claudio. I can add some color to this question.

Certainly AI has been the segment that has been leading the growth, as you noted. Not only AI.

Kevin already alluded to industrial showing signs of recovery, in particular from Europe, as well as the rest of the computing and enterprise business is very healthy. I would say that telecom as well is showing good momentum, and to a lesser extent our medical, military, and aerospace segment as well.

Behind AI, but all with very good book-to-bill.

Got it. Thank you.

Just last one for me. Are you seeing any signs—again, I think we asked this last quarter, but we are seeing rising input costs, especially with memory and other components.

Are you seeing any signs or are you in any discussions with your customers that potentially there could be a slowdown in the foreseeable future, especially for consumer electronics like PCs and smartphones?

We see, as a segment, overall, PC, smartphone being not as strong as the AI and the rest of the computing. This is correct.

Beside that, we don't see anything that point to a significant slowdown, and we are aware of the memory situation in the market, but we don't see that necessarily impacting our own business so far.

Got it. Thank you.

Sorry, give me one second. I guess first question from the audience is in terms of kind of pricing, I think this question has been asked for a couple quarters now, but is there any plans for the company to adjust pricing for any of your product segments throughout this year?

I believe we have communicated already that certain product lines will have a price adjustment. This is to reflect mostly two dynamics.

One is purely based on market demand and availability of the product. Then the second fold is to reflect some of the cost increase that we see on the raw material side.

As you are very well aware, certain precious metal experienced significant cost increase in the last few weeks. This has been communicated already.

We've been discussing with our partner and customers. We basically follow contracts, and will be implemented gradually, and the effect will be seen gradually over the year.

We continue to monitor the rest for all the other product lines. At the moment, nothing to add to what was already announced, but we continue to monitor this daily.

I see. I'm not sure if my understanding is correct, but I think if I recall correctly, some of the pricing adjustments started to happen starting from Q4.

Is it fair to say that the margin improvements that we saw in Q4 that was largely driven by better scale and better utilization rate and not really an impact from higher ASPs? There could be more margin improvements to come in Q1 and Q2 as we start to see those higher ASPs being reflected to your revenues?

Correct.

Got it. Just coming back to utilization rates, the 3% to 5% increase David that you guided to in Q1, is that across the board for premium and standard, or is that just purely for premium?

If you could, second part of the question is, can you guide what is the utilization rate for premium and standard respectively for us as well?

Last quarter, for the standard, utilization was 70%, 7-0. For the premium was 80%.

Now both category we will increase, certainly by different product, average between 3% to 5%. This increase is not only for premium, also for standard.

Got it. Thank you.

At what kind of utilization rate do you need to be at before you decide to invest in a new capacity?

Usually when the overall utilization is above 90%, then basically we are preparing for the capacity increase. The first step is usually we will do the debottleneck, and also then we will prepare the new equipment purchasing.

Got it. Is it fair to say that currently there's still empty space within some of the buildings for very quick capacity expansion?

The second part of the question is, in terms of a brand new production site, including building construction, normally how long would that take?

That that depends. The building construction can take maybe

year

Year or year and a half. For the planning, I think we we don't worry that much.

For for example, very popular item, tantalum, with now with IC, we have enough capacity. The building has been constructed one or two years ago.

For MLCC, this is also a very hot item, everyone knows that we have YH3 and implemented about two years ago, we have enough space and enough capacity.

Got it. Thank you.

Just because you mentioned tantalum, I know that a lot of that is used in AI. Is there any details you can share with us on how many tantalum capacitors are used per AI server?

Is that amount going to increase over the next couple of generations of AI servers?

It varies greatly, Howard, but the use has definitely gone up. If I look at the typical customer of tantalum a year ago, that would have been not in the server industry, actually would have been more in the laptop, solid-state drive, and to a lesser extent, perhaps EV and automotive.

Over the last 12 months, really we've seen a dramatic growth of the usage of tantalum in the server segment driven by AI. We don't really track PCs count because of the different design that are out there, but we do see an overall trend that goes hand-in-hand with the fact that these servers need to increase their computational ability and the computing power.

The usage of tantalum allow designers to do that and to save space in the rack or in the board. We think that is a secular trend that is here to stay and will not be replaced by a different technology.

Got it. On your tantalum business, are you able to share with us what percentage of this business today goes into AI versus PCs?

As

overall as a company, we share that our AI percentage has grew steadily and is now around 14%. When you break it down by product, definitely the tantalum portion that goes into AI is more than double that amount, it's well above 30% of the overall tantalum.

Got it. That's very helpful.

Thank you. I just want to touch on one of your comments that you mentioned that within the AI space, tantalum might not be replaceable.

I think one of the questions we've been getting a lot from investors is, I guess there are some chatters from the supply chain that potentially there could be some replacement of using MLCCs to replace what was previously tantalum capacitors. I'm not sure why that is.

I guess is there any other color that you can provide on why you think that will not happen, why will tantalum not be replaced by MLCCs?

Sure thing. When you approach any design on any board, the capacitor dielectric that typically is chosen first, it tends to be an MLCC one given the fact that is widely popular, available, and fairly cheap compared to other choices.

Tantalum becomes then, in particular tantalum polymer, becomes then a necessity because of the limited space that the designer might have in the board, and then the requirement that that designer has to meet in terms of efficiency and power of that board. There will always be a trend of usage of MLCC wherever possible, and in some case replacing tantalum in certain position as the board gets optimized.

As long as the computational power that is required from the board continue to increase, and as long as the physical space available on the board continue to be limited, then there will be usage for tantalum polymer. We've seen this trend over and over in other applications like laptop, or a great example is solid-state drive, where by definition space is the number one factor that poses challenges to the designer, and that's why tantalum polymer is utilized there.

When you think about the EV market, which is essentially a supercomputer on four wheels, the need of computational power is extremely high, and therefore the adoption of tantalum polymer over the last 5, 8 years has been very strong. Now for the AI servers, that need of high computational power is driving a lot of usage for MLCC in high capacitance value, this is a very well-known trend in the industry, as well as tantalum polymer.

Some replacement might surely happen over time, but I believe that both technologies will have a bright future to meet that requirement of power compared to limited space at disposal for the designer.

I see. Is there any risk of metal supply for tantalum capacitor that we are aware of, or should worry about?

No. As Yageo acquired KEMET in 2020, and before that KEMET acquired NEC TOKIN.

The combination of these create a very long-lasting knowledge of the tantalum business, polymer in particular. It comes with a large investment in the vertical supply chain that KEMET itself did probably about 20 years ago.

That investment was really done to secure supply and provide predictability and stability to the overall supply chain downstreams to our customers and our partners. In fact, after that, you haven't experienced anymore some of those hikes that the tantalum cost experienced during the year 2000.

Thanks to that investment, we were able to really improve the overall industry and make tantalum polymer a great choice for design engineers. Till today, we are very happy with the way we source material.

We feel very well-positioned to continue to be the leader in this market, and we don't see, aside from the natural cost increase or changes that the market has on precious metals, we don't see any reason to be concerned on supply.

Got it. Thank you.

Very helpful. Just last one on tantalum is if I remember correctly, you guys have more than 50% supply share globally.

Is there any increased competition or new suppliers coming into this space that could disrupt that kind of dominant market share?

You're correct on tantalum polymer. No, there has been a certain number of suppliers that they operate successfully within this space, and it is not very easy for a completely new actor to establish itself.

There is a lot of chemistry involved in the process. There is a lot of capital that is needed to get into this business, and so for a brand new actor to suddenly pop up and start claiming large share of the market is a complicated process.

I would say that relative share has been also quite stable over time, with Yageo, KEMET, TOKIN combination being able to expand marginally our share over time, and we don't see anything out there that suggests that this is going to change anytime soon.

Got it. Thank you.

Sorry, I lied. Last one on on on tantalum.

Is is is tantalum still the the best profit in terms of margin percentage, is tantalum still the highest within all of your product portfolio?

One of the highest.

One of the highest. Yeah.

It's safe.

One of the highest. Got it.

Thank you. As we continue to see the demand for this business continue to grow, I think it's fair to say that that mix will help drive margin expansion.

Hopefully so. I would also like to remind you and the audience that taking care of tantalum business requires high CapEx, especially for us that we are a market leader.

We have a duty to make sure that we can serve the market both from a technological point of view and from a capacity point of view. A lot of the margin that you mentioned is reinvested in the business, in making sure that the R&D continue to get funded in order to come up with solutions that can help improve the volumetric efficiency of the tantalum capacitor and to make sure that we have enough capacity installed for the demand that especially in the last few quarters has seen a lot of increase.

Got it. Thank you.

Can we circle back to B/B ratio? I think the earlier comment was that it continues to be above one.

Are you able to give any breakdown of what that looks like for AI versus non-AI?

Broadly, I would say AI B/B ratio stronger, perhaps around 1.2, 1.3 depending on the particular customer, followed by industrial, computing and enterprise, and telecom, also very strong, but slightly lower than that.

Got it. There are no end segments where B/B ratio is below one today from what you're seeing?

[unclear]

Sorry, was that a no?

That was no, yeah.

Okay. Got it.

Thank you so much. In terms of automotive and industrials, I think you mentioned that you're seeing, especially for industrial, some strong signs of recovery in Europe.

What about for automotive? In terms of this, just looking at particularly these two end segments, which one do you think will be stronger throughout the rest of the year?

From the outlook we see today, industrial. For the automotive, from the European customer base point of view, automotive is still lagging behind.

Some improvement, but industrial is definitely showing a stronger momentum. To be fair, has shown stronger momentum throughout 2025, and we believe will continue in 2026.

Got it. Thank you.

There's a question here on your thoughts of MLCCs replacing V-Cap?

Replacing Which technology, Howard?

MLCCs replacing V-Cap?

I don't believe we've seen enough of this to give a competent comment.

Got it. No problem.

Then in terms of inventory levels, I think used to be Eddie that provided this. Maybe Gavin, could you walk us through what the inventory levels look like as of the end of Q4 in terms of turnover days?

Turnover days was around 120 days, quite stable, definitely sufficient to support our business growth in the coming months.

Got it. On CapEx, is there any guidance on what CapEx could look like this year?

I would say we won't be shy away from investing, right, because there's opportunity. At the same time, as David and also Claudio mentioned, we have plenty of manufacturing sites globally we can leverage more.

That will be our first part. At the same time, I think we will basically continue our strategy to focus on where we can increase the efficiencies, invest in the R&D.

Again, I just want to highlight we're not going to be shy away from any investment in the future. Yeah.

Is it fair to say that we don't expect any new capacity expansion plans this year, it will mainly be for maintenance CapEx?

I think that'll be it. Basically, we don't see any huge expansion projects this year per se.

Then like David just alluded to, we still monitor the cost improvements, the debottlenecking, and whatnot. Those maintenance CapEx will continue to move on.

If anything, I think the CapEx level will be slightly flattish year over year, probably increase a little bit, but then pretty much maintain the same momentum.

Got it. Thank you.

How should we think about dividends this year?

We just had our board meeting today. I think it will be surely announced later this afternoon.

It will be NT$6 NT$6 per share, so that's kind of like 50% to 53% payout ratio, pretty comparable to last years.

Got it. Thank you.

Just going back to the earlier question, I think the investor wanted to clarify, MLCC replacing V-chip capacitor was his question.

As I said before, MLCC can provide a good solution as an alternative on many other dielectrics when it comes to capacitor. Typically the is the first dielectric that a design engineer tries to utilize.

Then, depending on the need and the requirement of the board, then he has to start choosing a different type of dielectrics to reach a certain voltage or certain performance or save space by choosing something that has a better volumetric efficiencies. We don't see enough of that to give a comprehensive comment on this trend.

I'm sure that it might happen in some design, but not to the extent that alerted us and give us enough to track it.

Got it. Thank you.

Can I just go back to my very earlier question where I asked about outlook on consumer electronics because of rising input costs? I think the comment or the answer that you guys gave was that you guys don't see any kind of slowdown, or any significant slowdown at least, in the foreseeable future.

Can I just follow up on this and ask if this is a result of potential share gains that you guys are seeing as some of your peers decide to focus more on higher-end MLCCs and so there are some share shifts going on for the consumer electronics space, or is there anything that you think we are missing in terms of this discrepancy where we think consumer electronics demand will slow down, but that's not something that you are seeing?

We see that segment not performing as strong as others. We have a wide customer base.

We play as much in the Western side of the customer base as in the East. We have an extensive distribution network.

We're not measuring or being aware of particular share gains, Howard, I would say that overall, if compared to an AI type of segment or computing or telecom, it's certainly weaker. What we don't see is a slowdown so significant to impact our performance.

I see. Got it.

Thank you. Just coming back on pricing, you mentioned there's been some pricing adjustments made to reflect higher metals prices, and I guess I'm not sure what happened historically, but for example, if metals prices fall in the future, do you also reflect that to your customer, or once it goes up, it never comes down?

I guess we don't really have a formula that works either way. There is no automatic formula that works in one direction when those metal prices go up, and to the same extent, there is no automatic formula that works on the other way when those prices go down.

It is a trend that we have to monitor and we have to see what is the impact on the cost in both direction depending on the trend, and then how the conversation goes with customers when it comes to contracts. We have contracts that are on spot buy or quarterly or yearly, and that is true also on the supply side.

It's a very fragmented and convoluted supply chain.

Got it. Thank you.

Very clear. On your opportunities around power supply or HVDC, is there anything you can share with us on what particular product that you guys have that will benefit from this trend?

A large portion of the portfolio, including our latest addition of temperature sensor. Temperature sensor now for Yageo is quite exciting because we can now offer to the market a complete solution when it comes to temperature sensing in both technologies, NTC and PT, and we can offer both the element of the temperature sensor, but more importantly, we can offer fully customized assembled solutions.

The acquisition of Shibaura in this regard has been a game-changer for us, because Shibaura has the number-one market share position for thermistors, and their expertise in assembly is quite strong. We can utilize that and leverage that also for the PT temperature sensor that Nexensos offers.

That is one clear example of something that we see can have a good play in the segment you just mentioned.

Got it. Thank you.

All of this would fall under computing?

Depends. It could be more like an industrial segment for us.

I see. Got it.

Thank you. In terms of OpEx, is there any guidance that you could share with us on any kind of target for OpEx ratio going forward?

I think basically we are trying to maintain the same OpEx ratio as last year. That's our guidance.

Got it. Thank you, David.

Then in terms of satellite opportunities, maybe still a very small portion of your entire business, but can you talk about what you're seeing this space and what products that you provide can see good growth potential within the satellite segment?

Yes, and this is not a 2026 story, actually. The growth in particular commercial satellite has been a success story for us for a number of years already.

As you noted, it grows, but from a small base. It's not big enough for us to carve it out and track it separately, to be honest, but we see a large use of our resistors, MLCC, and again, our tantalum product in that segment, if I were to pick the main ones.

It's growing nicely.

Is there a specific requirement for any of the R-chips, MLCCs, or tantalum capacitors that goes into satellite, or does it also use similar specs as what is used for consumer electronics or AI servers?

Depends on the application, depends on where they are mounted. In some cases, there is a particular requirement.

Usually military grade is a good proxy of what can be asked by the manufacturer, and in other cases they could be an automotive grade, not because they go into an automotive device, but because that is an underlying set of tests that you have to pass. There are also examples of usage of a commercial grade.

It is really a combination of the three.

Is it fair, for those that are used on the ground, because I think there are some equipment that are on the ground, those are mostly commercial grade, whereas satellites that are being fired up into space, those are military grade?

That would be a fair approximation, yes.

Got it. Would these products be also carrying higher margins compared to average?

Not necessarily for the segment they serve. It would be a margin profile in line with the product specification itself, but not necessarily carry higher margin just because they end up in a satellite compared to other applications.

I see. It doesn't necessarily mean military-grade products are higher-spec compared to AI servers is the basic conclusion?

Sorry, Howard, come again?

Is the basic conclusion that military-grade products are not necessarily higher-spec versus something that's used in AI servers?

Different requirement. I would say that it follows a whole different set of tests.

Typically a military-graded product has higher number of tests and more stringent type of tests to be passed in order to get the military grade. An AI server doesn't necessarily require a military-graded product, no.

Got it. Can I just circle back to telecom?

You mentioned you also seen growth in telecom. Is this base stations or is this smartphones?

Infrastructures around base station, not base station itself, but the overall ecosystem and infrastructure that goes together with it.

I see. Is this related to just more rollout in some of the smaller countries, or is this related to AI data center deployments?

Quite a bit of AI, yeah.

It's related AI, okay. Got it.

In terms of high-end MLCC, there's a question here asking about your yield on high-end MLCCs and what is the particular utilization rate for high-end MLCCs? Is there any color that you can share with us here?

Typically we don't disclose the yield on particular products.

Got it. No problem.

I remember before you guys gave a breakdown of standard versus premium products. If I recall correctly, it was 25% standard and 75% premium.

Is there an updated breakdown of what that looks like today?

Similar. I think the premium percentage still increasing, but just a little bit.

Basically there's no big change there.

Got it. I want to just circle back to the medium-term forecast that you guys gave a while back.

Is there any updated medium-term forecast or guidance that you could share with us?

If you're talking about the $5 billion targets,

yes.

That's still there. Just don't know when to get there.

We're getting so close. It's getting closer.

Close, yeah.

There's also been some incremental acquisitions along the way that kind of helped. Just wondering if there's any new targets that we should wrap our heads around.

Yeah. Okay.

I think that's most of the questions that we have on the line. I think so.

Maybe we are getting close to the 1-hour mark anyway. Maybe we could end this webcast here.

Before we end, I'm not sure if, David, you have any closing remarks that you would want to share with us? At

first, thank you to everyone's participation and very interesting conversation today. If I see our last year, we are pretty happy with the quarter on quarter and also the year on year improvement.

For 2020- 2026, this is just beginning. Still we see very positive business momentum.

It is evidenced by the very positive B/B ratio. For the Yageo team, two very important missions.

First is that we'll try to catch all the business opportunity that we see in the market. We react very, very fast.

Secondly, that's our DNA, still very control all the cost, expense in a very efficient way. We hope that we can continue the positive trend in 2026.

Thank you.

Thank you, David, Eddie, Claudio, and Gavin for your time. Thank you everyone for joining us today for Yageo's fourth-quarter earnings webcast.

We will see you all next time. Thank you so much.

Thank you. Bye-bye.