Dongke-KY Earnings Call: Q2 Operations Hit Bottom, Recovery Expected in Second Half; Q4 Performance to Shine with Seasonal Demand and New Products

Speaker manufacturer Dongke-KY (5225-TW) held an earnings call today (10th). Executive Director Zhang Dongyi stated that rising raw material prices have impacted the consumer market, causing the company's gross margin to drop to 11.6%—the lowest level this year. Additionally, one-time costs related to factory relocation have pressured profitability. However, with the traditional peak season in Q3 and the gradual shipment of new products such as AI speakers and party speakers, the company expects a significant recovery in operations during the second half, with Q4 performance anticipated to outperform last year.

Dongke-KY reported consolidated revenue of NT$2.676 billion for Q2 2026, a 5.2% year-on-year increase. However, due to surging prices of memory chips and printed circuit boards, quarterly net profit after tax was NT$296.3 million, with earnings per share (EPS) at NT$0.38. The gross margin of 11.6% marked the lowest point this year. Consolidated revenue for the first half totaled NT$4.999 billion, with EPS reaching NT$1.92.

Zhang Dongyi explained that higher operating expenses in the first half were primarily due to one-time costs such as third-party inspections and customer certifications following the relocation of its mainland China factory. He noted that expense ratios will return to normal levels in the second half. With many customer orders—both new and existing—scheduled for delivery in the second half, Q4 performance is expected to break the traditional seasonal downturn trend and show significant growth.

To improve cost structure, Zhang highlighted that Dongke-KY has signed long-term contracts with component suppliers and made advance payments. Starting from the end of Q2, the company has begun negotiating 1% to 3% price increases for new product models with customers. It is also actively collaborating with customers to verify and switch to memory suppliers based in mainland China. The company expects overall gross margins to gradually recover from the Q2 trough.

Regarding new product and customer expansion, in addition to core products like party speakers and soundbars, Dongke-KY has secured a new client that holds the top market share in North American TVs and a U.S.-based gaming headphone brand. The company has launched an AI-powered companion speaker equipped with a large language model and co-developed an exclusive automated indoor acoustic enhancement system technology with Nanyang Technological University in Singapore. These initiatives are expected to inject strong growth momentum into the company’s operations in the second half and beyond.