The earnings call covered Q2 2026 financials, noted forward-looking statements risks, and provided Q3 outlook, emphasizing internal financial review and adherence to IFRS accounting standards.

Despite challenges from AI demand affecting non-AI applications, the company exceeded Q2 revenue guidance, achieving a 14.2% sequential increase to $227.4 million, mainly due to robust automotive IC sales. Gross margin improved to 33.1%, surpassing expectations, and earnings per share reached 11.4%, also exceeding forecasts. Automotive and display driver IC sales, particularly in larger and smaller segments, showed growth, with the automotive business contributing over 50% of total revenue. Tablet IC sales also increased, reflecting a mix of order model and early demand pulling amid rising memory prices.

Smartphone IC sales showed sequential decrease post-OLED launch, maintaining a significant market share. Q2 non-fiber sales surged 17.7%, and automotive technology contributed over 10% to total sales, forecasting robust growth. Operating expenses rose slightly but remained manageable.

The company reported a significant year-over-year increase in operating income and tax profit, driven by higher revenues and gross margins. Strategic investment in urban businesses with long-term growth potential was emphasized. Cash flow management was highlighted, including deferred tax payments and anticipated cash decreases due to dividend and employee bonus distributions.

Inventory levels increased to $151.5 million, reflecting a strategic build-up amidst industry supply tightening. Receivables grew to $220.3 million, with CSO days at 93. Capital expenditure for R&D in IC-defined business was $4.3 million, marking a rise from previous quarters. Outstanding loans stood at $174.4 million as of June 13, 2026.

Announcement of proposed equity method investment divestiture with expected profit, Q3 2026 revenue and profit guidance, and details on annual employee bonuses impacting operating expenses.

Semiconductor shortages and rising costs impact production capacity, prompting price adjustments. Despite these challenges, the company remains optimistic about automotive display market growth, driven by smart vehicle trends and regulatory safety initiatives. Strategies include leveraging global supply chains and advancing display technologies.

The dialogue highlights the adoption of advanced display technologies, such as OLED and VA, in the automotive industry, emphasizing their role in enhancing driver safety and efficiency. It also discusses the integration of AI and micro display technologies in smart glasses, showcasing their potential in delivering personalized user experiences and expanding market opportunities. The supplier's comprehensive technology portfolio and strategic growth areas, including smart glasses and AI, are poised to significantly contribute to future growth, diversifying revenue and strengthening competitive positioning.

Achieving readiness and improving yields are key focuses, with advancements in customized designs and standardized technology platforms supporting diverse customer needs. The timeline for development and pricing aligns with growing demand, emphasizing stable production capabilities and enhanced customer engagement.

The dialogue outlines the progress in engineering production of K1 product and 6.4C bats, anticipating significant shipment growth and market contributions starting from 2037. It highlights advancements in optical solutions and energy efficiency, alongside a forecast of declining sales in certain sectors offset by increases in others. The discussion also touches on favorable industry trends accelerating the shift towards premium products, positioning Pax to capitalize on these trends with a comprehensive display solution portfolio.

The Q3 sales in the small and medium size IT business, particularly in automotive displays, are forecasted to grow significantly. This growth is attributed to increased customer demand, mass production of CTI projects, and the adoption of sophisticated automotive displays. The industry's shift towards standardization, along with the growing number of customers adopting LED and LCD solutions, is creating opportunities for companies. Collaborations with OLED panel makers in Korea and China, and a comprehensive portfolio of customized solutions, are translating into numerous development projects, laying a solid foundation for future growth in premium automotive displays.

The dialogue highlights advancements in technology across automotive, IT, and smart display sectors, emphasizing cost-effective and highly integrated solutions. It discusses the expansion of applications in diverse fields, increased revenue expectations from smartphone sales, and the growth of automotive C business. Notably, the T 2000 T's integration into next-generation platforms signifies a breakthrough in dynamic display performance, accelerating transitions to dynamic applications in various industries.

The dialogue highlights advancements in low-power AI sensor technology, emphasizing battery efficiency, enhanced device capabilities, and expanded market applications. Notable achievements include GDPR compliance, successful verification by a leading certification body, and growing interest from global brands in smart glasses and IoT devices. The focus is on continuous innovation to address power and size constraints, enabling broader adoption across various sectors.

Instructions on how to ask questions during a Q&A session, including using the telephone keypad to join the queue, cancel a question, and the option to submit questions through a webcast interface.

The dialogue discusses the company's positive outlook for the automotive business in 2027, emphasizing robust sales growth, improved gross margins, and significant CPO revenue contribution. Non-driver area sales are expected to outgrow driver areas, driven by increased display content per vehicle and technological advancements. The company anticipates challenges in managing supply chain tightness but remains confident in its market position and design wins, particularly in high-value display segments and OLED technology integration.

Discussion revolves around the positive financial impact of early shipments, emphasizing the importance of validating the product with customers before mass production. The company is concentrating on its core product, designed for higher bandwidth, aiming to innovate and meet the market's potential demands, while maintaining close collaboration with top customers to ensure successful mass production.

The dialogue highlights IMAX's focus on developing and maturing its unique technology over competition, emphasizing successful production and customer satisfaction as key to market success, amidst a large market opportunity that accommodates multiple players.

The dialogue focuses on identifying and addressing the key bottlenecks in the mass production process for CPO, emphasizing the need for a comprehensive ecosystem approach. It highlights the importance of validating technology and solutions across the supply chain, from engineering to final product assembly, ensuring high value and efficiency. The discussion underscores the complexity of the task and the goal of not becoming a bottleneck oneself, aiming for seamless integration and innovation in the manufacturing process by the end of the year.

The dialogue highlights significant interest and design projects in the smart glasses sector, particularly from major hardware companies viewing smart glasses as crucial for AI data collection. However, concrete revenue forecasts are uncertain due to the nascent stage of the market and the lack of definitive feedback from end customers regarding their needs and volumes for upcoming years. The speaker anticipates clearer quantifiable data in the next two quarters, indicating a cautious optimism about the sector's growth potential.

The host expresses gratitude and formally ends the second quarter 2026 earnings conference, instructing participants to disconnect.