Presco Earnings Call: Q3 Revenue Expected to Grow Double Digits, but Component Price Surge and Weakening PC Demand Challenge Second-Half Profitability

Presco (4915-TW), a computer peripherals manufacturer, held its earnings call today. Senior Manager Tseng Ya-Lan stated that while third-quarter revenue is expected to achieve mid-double-digit sequential growth, driven by new acoustic projects and the release of AIoT demand, surging upstream component prices and weakening PC end-market demand in the second half are creating significant headwinds for profitability.

Tseng noted that Q3 revenue growth will primarily benefit from strong pull-in of consumer audio projects and the recovery of AIoT projects previously constrained by component shortages in Q2, leading to a visible surge in demand. However, due to substantial cost increases in materials such as PCBs, MLCCs, DRAM, and displays, gross margins in the second half will continue to face significant pressure.

She highlighted that the biggest uncertainty for second-half operations is the weakening PC end-market demand. Rising upstream material and cooling costs have led to product price hikes, which in turn are dampening end-user demand. Presco expects information product revenue in Q3 to decline slightly year-on-year, with a low single-digit sequential decrease.

CEO and CFO Hsiao Ying-I stated that the current wave of upstream material price hikes is widespread, with suppliers maintaining firm pricing. Since July, the company has initiated cost-pass-through negotiations with customers. However, many customers have limited price acceptance, choosing to观望 or delay orders, making full cost recovery difficult in the short term and placing heavy pressure on downstream manufacturers.

To mitigate the dual pressure of rising costs and limited cost pass-through, the company is continuously optimizing production scheduling and supply chain management, while strictly controlling operating expenses. The goal is to keep the expense ratio in Q3 below the same period last year, thereby reducing the impact of margin pressure on core profitability.

Looking at Presco's product lines, the smart lifestyle segment continues to contribute growth momentum, driven by new projects and strategic customer expansion. The Partybox series has performed particularly well, expanding its customer base from Europe and the U.S. into Asian markets. Although the projects were contracted before the anticipated surge in material costs, resulting in lower-than-expected margins, the company is focusing on long-term customer relationships and plans to deepen collaboration.

For automotive and smart mobility, Tseng analyzed that Q3 revenue is expected to grow at a mid-double-digit year-on-year rate, with professional audio and smart conferencing systems achieving high double-digit growth. With Q2 component shortages resolved, the AIoT segment's revenue share is expected to rise further from the previous quarter and last year's 31%, becoming a key pillar for operational improvement.

Regarding capital expenditure and capacity deployment, the company expects full-year capex to remain at NT$1.8 billion. The Thailand plant will receive NT$560 million, with its capacity share already reaching 30% and targeting 35% this year to diversify manufacturing risk and enhance production flexibility. The Hsin-Ju plant will receive NT$730 million, with maintenance spending around NT$550 million.

Hsiao explained that the company is actively building long-term growth drivers by transforming into edge computing, sensor fusion, and AI vision, and developing service and logistics robots. Approximately 100 robots are currently undergoing field testing, and strategic collaborations with major chipmakers like MediaTek are yielding results. These new businesses are currently classified under the broader AIoT segment but will be separated once they scale up.

Tseng stated that Presco will personally present its mid-to-long-term development strategy at the November earnings call, particularly on new initiatives in robotics and AI vision. The company is also participating for the second time in the Taipei International Industrial Automation Fair, showcasing delivery service robots and smart vision inspection solutions.