Financial Data and Key Metrics Changes - Q1 2025 revenue was $154 million, a 7% sequential decline and 12% lower than Q1 2024 [12] - Consolidated adjusted EBITDA was $13.8 million with a 9% margin, down from 13.7% in Q4 2024 but up from 7% in Q1 2024 [12] - Adjusted EBITDA margin increased by 208 basis points year-over-year despite a 125% decline in revenue and rig count [6] Business Line Data and Key Metrics Changes - Southwest segment revenue was $65.2 million, with adjusted EBITDA at its highest level since Q3 2023, reflecting a shift towards higher-margin product service lines [15][16] - Rockies segment revenue was $47.8 million, with adjusted EBITDA higher by 524% year-over-year despite a 13% decline in rig count [14] - Northeast Mid Con segment revenue was $41 million, with a sequential decrease of 18% primarily due to operational issues [16] Market Data and Key Metrics Changes - The Southwest represented 42% of Q1 revenue, up from 37% in Q4, while the Northeast Mid Con was 27%, down from 30% [9] - Drilling, completion, and production intervention services contributed approximately 20%, 51%, and 29% of Q1 revenue, respectively [9] Company Strategy and Development Direction - The company is focused on maintaining financial flexibility and navigating market volatility through operational discipline and improved balance sheet flexibility [21] - There is an emphasis on strategic M&A opportunities that align with growth and deleveraging goals, particularly in fragmented markets [24][52] - The company is optimistic about the US natural gas market and its implications for service providers, anticipating increased activity in gas-focused basins [23] Management Comments on Operating Environment and Future Outlook - Management noted that Q1 is typically the toughest quarter, but they delivered improved adjusted EBITDA and margin despite a lower rig count [5] - The macro environment remains volatile, influenced by OPEC+ production increases and US tariff policies, but there are signs of recovery in certain areas [6][21] - The company expects modest sequential revenue growth in Q2, driven by a recovery in the Rockies and the Northeast Mid Con [21][22] Other Important Information - The company ended Q1 with $58.1 million in liquidity, including $14.6 million in cash and $43.5 million available on its revolving credit facility [17] - CapEx for Q1 was $15 million gross, with expectations to reduce full-year CapEx estimates to $40 million to $50 million [19] - The company has implemented cost structure changes that are expected to continue benefiting operations throughout 2025 [13] Q&A Session Summary Question: About the Q2 guidance and recovery in the Rockies - Management acknowledged the uncertainty in providing a full-year guide and indicated that Q2 revenue is expected to increase low to mid single digits [28] Question: Impact of lower oil prices on operations - Management noted that smaller operators are more exposed to commodity price fluctuations and may delay projects, impacting revenue [32] Question: Flexibility of the PIK option and capital allocation - Management explained that the PIK option provides flexibility to manage cash flow, especially during uncertain market conditions [36][38] Question: Positioning for potential gas market improvements - Management confirmed that they are monitoring gas market trends and are well-positioned to relocate assets if necessary [44] Question: M&A opportunities and geographic strategy - Management stated that they are being opportunistic regarding M&A, focusing on deleveraging transactions rather than specific geographic areas [52]

Financial Data and Key Metrics Changes - Q1 2025 revenue was $154 million, a 7% sequential decline and 12% lower than Q1 2024 [12] - Consolidated adjusted EBITDA was $13.8 million with a 9% margin, down from 13.7% in Q4 2024 but up from 7% in Q1 2024 [12] - Adjusted EBITDA margin increased by 208 basis points year-over-year despite a 125% decline in revenue and rig count [6] Business Line Data and Key Metrics Changes - Southwest segment revenue was $65.2 million, with adjusted EBITDA at its highest level since Q3 2023, reflecting a 6% sequential increase [14][16] - Rockies segment revenue was $47.8 million, with adjusted EBITDA up 524% year-over-year despite a 13% decline in rig count [14] - Northeast Mid Con segment revenue was $41 million, with a sequential decrease of 18% primarily due to operational issues [16] Market Data and Key Metrics Changes - The Southwest represented 42% of Q1 revenue, up from 37% in Q4, while the Northeast Mid Con was 27%, down from 30% [9] - Drilling, completion, and production services contributed approximately 20%, 51%, and 29% of Q1 revenue, respectively [9] Company Strategy and Development Direction - The company is focused on cost controls and has implemented changes to its cost structure, expecting lower SG&A levels to continue [13] - KLX is developing a second-generation version of its Oracle SRT tool, which is gaining market acceptance [7] - The company is exploring strategic M&A opportunities to align with growth and deleveraging goals, despite market challenges [24] Management Comments on Operating Environment and Future Outlook - Management noted the macro environment remains volatile due to OPEC+ production increases and tariff policies impacting commodity prices [6] - For Q2 2025, the company anticipates modest revenue growth and margin expansion, particularly in the Southwest segment [21] - The company remains optimistic about the US natural gas market and its implications for service providers [22] Other Important Information - The company ended Q1 with $58.1 million in liquidity, including $14.6 million in cash and $43.5 million available on its revolving credit facility [17] - CapEx for Q1 was $15 million gross, with expectations to reduce full-year CapEx estimates to $40 million to $50 million [19] Q&A Session Summary Question: About the Q2 guidance and recovery in the Rockies - Management indicated that while the guidance may seem conservative, it is based on current forecasts and the unpredictable nature of the market [28] Question: Impact of lower oil prices on rig count - Management noted that smaller operators are more sensitive to commodity prices and may delay projects, impacting overall activity [32] Question: Flexibility of the PIK option and capital allocation - Management explained that the PIK option provides flexibility to manage cash flow, especially during uncertain market conditions [36] Question: Positioning for gas plays and asset relocation - Management confirmed that they are well-positioned for gas plays and can relocate assets if necessary [42] Question: M&A opportunities and geographic strategy - Management stated that they are being opportunistic regarding M&A and are not geographically focused, but rather looking for deleveraging opportunities [52]

Financial Data and Key Metrics Changes - The company reported first quarter net revenue of $35.7 million, down from $47.9 million in the prior year, reflecting the impact of 19 fewer retail locations [14][15] - Gross profit margin improved to 27.2%, up from 25.8% year over year, indicating a stronger product mix and improved procurement execution [10][16] - The net loss for the first quarter was $9.4 million, or negative $0.16 per share, compared to a net loss of $8.8 million, or negative $0.14 per share, in the same period last year [18] Business Line Data and Key Metrics Changes - Net sales in the cultivation and gardening segment were $30.9 million, down from $43.1 million year over year [15] - Proprietary brand sales accounted for 32% of cultivation and gardening sales, up from 22.6% in the prior year, reflecting increased brand penetration [9][16] - The storage solutions segment remained flat year over year at $4.8 million in revenue, facing some margin pressure [11][16] Market Data and Key Metrics Changes - The company experienced softness in durables and consumable demand due to regulatory and tariff concerns, particularly noted in March [6][12] - The company anticipates revenue in excess of $40 million for the second quarter, while withdrawing full-year guidance due to macroeconomic uncertainties [13][19] Company Strategy and Development Direction - The company is transitioning from a legacy retail model to a more agile fulfillment-centric model, repurposing former stores into regional fulfillment centers [7][10] - The launch of the GrowGen Pro portal aims to migrate commercial transactions from brick-and-mortar stores to a digital platform, enhancing operational efficiencies [9][10] - The focus is on transforming GrowGen into a high-margin product-centric commercial business powered by a digital platform and a simplified physical footprint [14] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing macroeconomic challenges and tariff-related uncertainties impacting consumer behavior and demand [12][19] - The company remains committed to achieving profitability and is focused on expanding margins, controlling costs, and exploring growth opportunities [20][21] Other Important Information - The company ended the quarter with $52.6 million in total liquidity and no debt, providing flexibility for operations and potential acquisitions [11][19] - The company is actively managing costs and pricing strategies to protect margins in the storage solutions segment while diversifying product offerings [11][12] Q&A Session Summary Question: Insights on tariffs and proprietary products - Less than 10% of proprietary brands come from China, with products sourced from India and Mexico [25][26] Question: Potential for store closures - Store closures will likely be spread out, with half coinciding with lease expirations [30][31] Question: Incremental distribution opportunities for proprietary brands - The company is exploring distribution outside the U.S. and working with large stores for distribution [36][38] Question: Positioning proprietary brands amid cannabis challenges - The company has a strong commercial team conducting extensive trials to encourage product adoption [40][41] Question: Consumer pressures and macro environment impact - There is significant weakness in the cannabis industry, particularly affecting durable goods, while consumables remain strong [50][51] Question: Capital position and acquisitions - The company maintains a strong cash position and is actively looking for acquisitions that are accretive to shareholders [57][58]

Financial Data and Key Metrics Changes - The company reported a 16.5% increase in adjusted EBITDA despite headwinds, with the first quarter typically being the lightest volume quarter of the year [16][30] - Average visits per clinic per day reached a record high of 31.4, with a strong finish in March at 33.2 visits per clinic per day [6][31] - The net rate for the first quarter was $105.66, an increase of $2.29 per visit compared to the previous year, despite a 2.9% Medicare rate cut [32][34] Business Line Data and Key Metrics Changes - Physical therapy revenues increased by 16.4% year-over-year to $156.4 million, driven by higher net rates and acquisitions [35] - The injury prevention (IIP) segment saw a revenue increase of 28.8% year-over-year, with gross profit up 13.1% [38] - The physical therapy margin was reported at 16.3%, down from 17.9% in the previous year, but above 20% in March [37] Market Data and Key Metrics Changes - Workers' compensation as a percentage of revenue increased from 10% in the first quarter of last year to 10.9% this year, the highest since 2020 [34] - The company lost approximately 26,000 visits due to weather impacts in the first quarter, with significant losses in January and February [31][48] Company Strategy and Development Direction - The company is focused on increasing reimbursement rates through contract negotiations and expanding its workers' compensation business [33] - There is an emphasis on acquisitions, with the Metro acquisition contributing significantly to revenue growth [35][21] - The company is exploring home care capabilities, which are seen as a growth opportunity due to patient demand and flexibility for clinicians [110][116] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand and the potential for recovery following weather-related disruptions [48] - The company is preparing for potential economic downturns, citing past experiences and a strong demand outlook [52][54] - Management is hopeful about updating guidance in the coming months as performance improves [27] Other Important Information - The company has a favorable debt position with $129.4 million in term loan debt at a rate of 4.7% and a $175 million revolving credit facility with only $28 million drawn [40] - The corporate office costs were 8.8% of net revenue, down from 9% in the previous year [38] Q&A Session Summary Question: What was the guiding volume inside the negative mature clinic revenue? - Management indicated that weather had a significant impact on mature clinic revenue, particularly in established markets like Nashville and Texas [47][50] Question: How has the business performed during past economic downturns? - Management noted that during the 2008-2009 recession, the company continued to grow and acquire facilities despite some negative impacts on same-store volume [52][54] Question: What are the drivers of IIP outperformance? - The IIP segment's growth is attributed to effective injury prevention strategies that reduce reported injuries and improve employee satisfaction [62][66] Question: What is the outlook for staffing during a potential recession? - Management stated that staffing availability could improve during a recession, but it is difficult to predict [56][57] Question: Can you provide more details on the commercial rate increases? - Commercial rates increased by over 3%, with workers' compensation rates also showing strong growth [88] Question: What are the expectations for same-store volume growth? - Management expects to see growth in same-store volume for the year, particularly after overcoming weather-related challenges [92] Question: What initiatives are in place to trim excess costs? - The company is actively reviewing its top partnerships to identify areas for improvement and cost control [101]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $339.9 million, a modest increase of 0.7% compared to $337.7 million in the previous year [16] - Adjusted EBITDA decreased to $117.3 million from $122.8 million, with same store sales declining by 5.6% [16][19] - Same store sales acted as a $19 million headwind to the bottom line, despite improvements in payroll and cost reductions [16][17] Business Line Data and Key Metrics Changes - Retail business remained steady, league operations experienced low single-digit growth, while the events business faced high single-digit decline [16] - Comparable food sales rose by 1%, with total food sales up 8% year over year, indicating a positive consumer response to food initiatives [13][60] - The league business is described as sticky, high frequency, and loyal, continuing a multi-year growth trajectory [8][12] Market Data and Key Metrics Changes - California, accounting for 21% of total sales, contributed nearly 50% of the same store sales decline, primarily due to softness in the Los Angeles market and declines in corporate events [17][18] - Early sales of summer season passes were up over 200% year over year, indicating a shift in consumer preference towards local entertainment [10][48] Company Strategy and Development Direction - The company is focused on adjusting its cost structure to increase operating leverage while investing in growth through acquisitions and new builds [12][18] - A recent acquisition of Shipwreck Island for $30 million is expected to enhance the company's portfolio and long-term potential [18] - The company is committed to a disciplined approach to capital investments, prioritizing high-return remodels and rebranding initiatives [56][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a rebound in corporate events and overall business performance as macroeconomic conditions improve [9][24] - The sentiment among management is positive, with expectations for improved performance starting in the summer as they cycle past tougher comparisons [18][49] - Management highlighted the importance of proactive sales strategies and returning sales personnel to the office to enhance corporate engagement [45][75] Other Important Information - The company has maintained a strong liquidity position with $391 million in total liquidity and no borrowings on its revolver [19] - Capital expenditures year to date are down $40 million compared to last year, reflecting a focus on cost efficiency [19][90] Q&A Session Summary Question: Could you elaborate on walk-in versus corporate trends? - Management noted that corporate events have been significantly impacted by macroeconomic conditions, while other business segments have shown surprising strength [22][26] Question: What caused the negative same store sales? - The corporate business deteriorated in February and March, primarily due to external factors such as the California fires and broader economic uncertainty [39][40] Question: Why was guidance removed? - Management indicated that it was challenging to provide meaningful guidance due to the short-cycle nature of the business and external uncertainties [44][49] Question: How is the rebranding initiative performing? - The rebranding has led to increased foot traffic and consumer excitement, with plans to continue rebranding efforts [56][58] Question: What are the expectations for SG&A costs? - SG&A costs are expected to decrease, with a focus on maintaining flat or reduced costs while growing revenue [96][97]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $500.8 million, a 7.1% increase from $467.6 million in Q1 2024, representing an 8.9% growth rate on a revenue per day basis [8][12] - Adjusted EBITDA was $102.7 million, up 6.8% from $96.1 million in the same quarter last year, with a slight decrease in adjusted EBITDA margin from 20.6% to 20.5% [8][19] - Net income was $40.6 million, lower than the same quarter last year primarily due to increased interest expenses and transaction costs related to acquisitions [10][19] Business Line Data and Key Metrics Changes - Total patient visits per day increased 3.2% year over year to 50,900, with a 0.6% increase to 49,600 when excluding the Nova acquisition [5][12] - Workers' compensation revenue was $302.1 million, an 8% increase year over year, with visits per day up 2.4% [13] - Employer services revenue increased 6.2% to $160.1 million, with visits per day up 3.9%, marking a turnaround from previous declines [14][19] Market Data and Key Metrics Changes - The company reported strong growth in both workers' compensation and employer services, indicating a positive trend in visit volumes across all service lines [6][10] - The acquisition of Nova Medical Centers contributed positively to the company's performance, although it only accounted for one month of results in Q1 [4][10] Company Strategy and Development Direction - The company is focused on corporate development, having recently completed several acquisitions, including Nova and Physician Health Center, and is set to close the Pivot On-site acquisition [7][25] - The strategy includes expanding the on-site health clinics business, which is expected to double revenue in that segment and enhance overall service offerings [24][25] - The company aims to maintain a leverage ratio of approximately 3.5 times by the end of 2025 and is committed to deleveraging while focusing on organic growth initiatives [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current macroeconomic environment, noting no observed impact on visit volumes despite broader economic uncertainties [28][29] - The company is well-positioned to handle potential economic slowdowns, leveraging its history of managing costs effectively during downturns [31][32] - Future growth is anticipated from potential increases in manufacturing jobs due to reshoring efforts, which could drive visit growth at the company's centers [30][32] Other Important Information - The company declared a cash dividend of $0.0625 per share, payable on May 29, 2025 [22] - The company ended Q1 2025 with a total debt balance of $1.6 billion and a cash balance of $52 million, with a net leverage ratio of 3.9 times [21] Q&A Session Summary Question: Discussion on Employer Services volumes and turnaround - Management noted that the turnaround in employer services was aided by improved sales and marketing efforts, leading to increased optimism among employers [38][40] Question: Future growth with recent acquisitions - Management highlighted that the acquisitions enhance partnerships within the managed care ecosystem, driving additional volume and growth opportunities [42][44] Question: Workers' compensation performance and outlook - Management acknowledged that while organic growth was slightly slower than expected, they anticipate continued positive growth in the future [51][52] Question: Impact of inflation on rates - Management indicated that rates typically adjust in line with inflation, with historical patterns showing timely updates to fee schedules [58][60] Question: Cost of services performance and labor efficiencies - Management confirmed that labor efficiencies and revenue increases contributed to lower costs as a percentage of revenue, with ongoing investments in technology to enhance efficiency [62][64] Question: Guidance update and acquisition impacts - Management clarified that the updated guidance includes contributions from recent acquisitions, with expectations for continued strong performance [66][68]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $339.9 million, a modest increase of 0.7% compared to $337.7 million in the previous year [15] - Adjusted EBITDA decreased to $117.3 million from $122.8 million, reflecting a decline in same store sales by 5.6% [15][19] - Same store sales acted as a $19 million headwind to the bottom line, despite improvements in payroll and cost reductions [15][16] Business Line Data and Key Metrics Changes - Retail business remained steady, while league operations experienced low single-digit growth [15] - Events business faced high single-digit decline, primarily due to corporate event cancellations [15] - Comparable food sales rose by 1%, with total food sales up 8% year over year, indicating a positive response to revamped food initiatives [13][15] Market Data and Key Metrics Changes - California, accounting for 21% of total sales, contributed nearly 50% of the same store sales decline, primarily due to softness in the Los Angeles market [16] - Early sales of summer season passes were up over 200% year over year, indicating a shift in consumer preferences towards local entertainment [9][49] Company Strategy and Development Direction - The company is focused on adjusting its cost structure to increase operating leverage while investing in growth through acquisitions and new builds [10][18] - A recent acquisition of Shipwreck Island for $30 million is expected to enhance the company's portfolio and long-term potential [18] - The company plans to continue its rebranding initiatives, with 15 rebrands completed and a goal of 75 by the end of the year, which are expected to drive foot traffic and revenue [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a rebound in corporate events as macroeconomic conditions improve, expecting a turnaround by the third calendar quarter [25][50] - The company is proactively addressing challenges in the corporate events segment by returning salespeople to the office and enhancing customer engagement [76] - Management remains confident in the growth potential of water parks and family entertainment centers, anticipating significant revenue contributions during peak summer months [84][85] Other Important Information - The company has maintained a strong liquidity position with $391 million in total liquidity and no borrowings on its revolver [19] - Capital expenditures year to date are down $40 million compared to last year, reflecting a disciplined approach to spending [18][19] Q&A Session Summary Question: Could you elaborate on walk-in versus corporate trends? - Management noted that corporate events have been significantly impacted by macroeconomic conditions, with a notable decline in California, but they expect a rebound as conditions improve [24][25] Question: What are the areas of expense flexibility near term? - The company has reduced payroll and maintenance costs, with expectations for further benefits in upcoming quarters [32] Question: What caused the negative same store sales in Q3? - The corporate business deteriorated significantly in February and March, primarily due to external factors such as the California fires and broader economic uncertainty [40][41] Question: How is the company addressing SG&A costs? - Management indicated that SG&A costs were impacted by a non-cash charge but expect overall costs to decrease as they focus on efficiency [97][98] Question: What is the outlook for corporate events and tariffs? - Management believes the current downturn in corporate events is temporary and linked to broader economic concerns, including tariffs, but expects a return to normalcy in the near future [75][80]

Financial Data and Key Metrics Changes - The company reported enterprise revenues of $937 million, a 1% increase compared to the prior year, exceeding guidance which anticipated a decline of approximately 1.5% [5][25] - Adjusted gross margins improved to 57.8%, up 180 basis points year-over-year, while adjusted operating margins were 23.8%, exceeding guidance by over 200 basis points [6][27] - Adjusted diluted earnings per share were $3, nearly 20% above the high end of the guidance range [7][29] Business Line Data and Key Metrics Changes - Crocs brand revenues reached $762 million, a 4% increase year-over-year, driven by double-digit growth in international markets [6][26] - Hey Dude brand revenues were $176 million, down 10% year-over-year, but better than the anticipated decline of 14% to 16% [27] - Direct-to-consumer (DTC) sales for Hey Dude grew by 8%, indicating an acceleration from the previous quarter [27] Market Data and Key Metrics Changes - International revenue for Crocs increased by 12%, with China showing over 30% growth compared to the prior year [26][18] - North American revenue for Crocs was down 3% year-over-year, which was better than expected [26][19] - The company noted robust growth in Western Europe, particularly in France and Germany [26][19] Company Strategy and Development Direction - The company is focused on maintaining competitive advantages and adapting to a volatile macroeconomic environment, including managing sourcing and cost structures [8][12] - Strategic investments are being made to enhance brand relevance and expand product offerings beyond clogs, particularly in sandals [14][15] - The company is committed to a digitally led marketing strategy, leveraging social commerce and influencer partnerships to drive brand engagement [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the unpredictability of global trade policies and their potential impact on business operations, leading to the withdrawal of full-year guidance [10][30] - The company is proactively identifying cost savings of approximately $50 million for 2025 and managing inventory levels carefully [11][34] - Despite uncertainties, management remains confident in the company's ability to generate significant free cash flow and maintain profitability [12][29] Other Important Information - The company has a diversified sourcing mix, with 47% of products anticipated to come from Vietnam in 2025, and is actively adjusting sourcing strategies in response to tariff changes [9][10] - The company repurchased 607,000 shares during the quarter, maintaining a strong liquidity position with $166 million in cash and $679 million in borrowing capacity [29][30] Q&A Session Summary Question: Can you comment on the sustainability of gross margins? - Management indicated that gross margins are sustainable due to effective vendor negotiations, investments in logistics, and favorable customer mix [40][41] Question: What is the strategy regarding pricing in light of potential cost increases? - Management acknowledged pricing as a lever to mitigate costs, with a strategic approach to potential price increases across channels [43] Question: Can you provide insights on Q2 revenue guidance? - Management expressed satisfaction with April's performance but emphasized caution due to the unpredictable global trade environment [48][49] Question: How are you planning to mitigate the potential impact of tariffs? - Management outlined a diversified sourcing strategy and indicated that they would cancel orders if tariffs remain high, rather than incur losses [50][51] Question: What is the approach to marketing spend in 2025? - Management plans to maintain marketing investments to engage consumers, despite the uncertain environment [55] Question: How is the company managing wholesale versus DTC pricing? - Management stated that while DTC pricing can be adjusted, they prefer coordinated pricing changes across channels [89][90] Question: What are the drivers for international growth? - Management highlighted brand penetration as a key driver, with significant focus on markets like China and India [78][80]

Business Performance - In Q1 2025, the company achieved a revenue of 193.07 million yuan, a year-on-year increase of 66.06% [1] - Net profit attributable to shareholders reached 42.31 million yuan, up 92.94% year-on-year [1] - Net profit excluding non-recurring gains and losses was 37.16 million yuan, reflecting a 107.86% increase compared to the previous year [1] Market Expansion and Strategy - The company plans to enhance market channel construction, expand its product matrix, and improve operational capabilities in 2025 [1] - Focus on strengthening local marketing teams and optimizing channel management to boost global market influence and brand recognition [1][2] Profitability and Cost Control - The company aims to deepen its core business, integrate the supply chain, and upgrade technology to maintain or enhance profitability [3] - Cost control measures include strict budget execution, optimizing procurement processes, lean management, and incorporating cost control into performance assessments [4] Research and Development - R&D expenses for 2024 were 97.25 million yuan, a 2.24% increase year-on-year [4] - The company implemented a dual-track strategy of "technology iteration and innovation breakthroughs" in its product development [4] - Significant advancements include a leap in imaging precision from 8 million to 48 million pixels and the development of AI-enhanced technologies [5] Accounts Receivable Management - Measures to enhance collection efficiency include optimizing project selection, strengthening accounts receivable management, and linking sales team commissions to collections [6] - The company currently does not face significant bad debt risks [6] Organizational and Financial Health - The company has a robust organizational structure and talent management strategy to support long-term development [7] - Financially, the company is in a strong position with good cash flow [7] Future Growth and Acquisitions - The revenue growth target for the next three years is detailed in the company's incentive plan disclosed on August 29, 2024 [7] - The company is open to potential acquisitions to accelerate expansion, focusing on upstream and downstream product opportunities [7] Global Operations and Supply Chain - The company is steadily advancing its global layout as per its established plan [8] - To maintain high gross margins, the company will innovate products, optimize customer structure, and explore high-value markets [8] - Supply chain optimization will involve smart equipment upgrades and digital system integration [8]

Financial Performance - Sales revenue for Q1 2025 was $541 million, with a gross margin of 9.2%, both in line with guidance and showing a 17.6% increase year-over-year [5][8] - Operating expenses were $97.1 million, a 23.7% increase year-over-year, primarily due to increased engineering wafer costs [9] - Net loss for the period was $52.2 million, compared to a net loss of $25.3 million in Q1 2024 [10] - Basic earnings per share was $0.20, compared to $0.19 in Q1 2024 [10] Business Line Performance - Revenue from embedded non-volatile memory was $130.3 million, a 9.3% increase year-over-year, driven by demand for smart car IC and MCU products [12] - Revenue from analog and power management IC was $136.8 million, a 34.8% increase year-over-year, mainly due to increased demand for other power management IC products [12] - Revenue from power discrete was $162.8 million, a 13.5% increase year-over-year, driven by demand for superjunction and general MOSFET products [12] Market Performance - Revenue from China was $442.5 million, contributing 81.8% of total revenue, with a 21% increase year-over-year [11] - Revenue from North America was $56.4 million, a 22% increase year-over-year, driven by demand for power management IC products [11] - Revenue from Europe decreased by 30% year-over-year to $15.2 million, primarily due to decreased demand for IGBT and smart car IC products [11] Company Strategy and Industry Competition - The company plans to accelerate effective capacity expansion, enhance R&D capabilities, and manage supply chain disturbances while reducing costs and improving efficiency [6][7] - The competitive landscape remains challenging due to increased uncertainties in customer demand and procurement costs [6] Management Comments on Operating Environment and Future Outlook - Management noted that the recent tariff changes have not had a meaningful impact on the company, as 80% of customers are domestic design houses [20][22] - The company expects revenue for Q2 2025 to be in the range of $550 million to $570 million, with a projected gross margin of 7% to 9% [16] Other Important Information - Capital expenditures for Q1 2025 were $510.9 million, with significant investments in manufacturing [13] - Cash and cash equivalents decreased to $4.08 billion as of March 31, 2025, from $4.46 billion at the end of 2024 [14][15] Q&A Session Summary Question: Impact of new tariffs on customers - Management stated that the recent tariffs have not significantly impacted the company, as most products are consumed domestically in China [20][22] Question: Growth in analog and power management IC sales - Management highlighted that the growth in this area is driven by competitive offerings and increasing domestic demand, particularly in AI applications [26][28] Question: Outlook for selling prices and material costs - Management indicated that while pricing pressure exists for 8-inch wafers, 12-inch prices are gradually increasing, and they are managing tariff impacts by utilizing non-U.S. suppliers [36][39] Question: Capacity expansion and utilization rates - Management confirmed that capacity expansion is on track, with expectations to reach over 40,000 units per month by the end of the year [53][55] Question: Competition in power devices - Management acknowledged fierce competition but expressed confidence in their technology and scale to maintain a strong market presence [78][80] Question: Future gross margin expectations - Management anticipates that gross margins will improve over time as they ramp up new capacity and manage costs effectively [100][102]