K LASER — Interim / Quarterly Report 2021

Nov 17, 2021

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(2461) K Laser Technology Inc.

2021 Q3 & 9M

Investor Conference

2021/11

1

K Laser at a glance

Product sales mix

• Ticker: 2461 TT

• Founded in 1988

• 2020 Revenue: NT$5.4 bn (US$184 m)

• Market cap*: NT$3.8bn (US$135 m)

• Employee number **: 750+

• 9 manufacturing sites, 14 operation centers globally, and 1 advance R&D center in the US **

• As of Nov 15, 2021, closing price NT$22.95

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Hologram 63%
Optical Film &
37%
Projector
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Hologram sales mix

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Holographic
43%
paper
Holographic film 31%
Hot stamping
20%
foil & cold foil
Security label &
6%
others
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Note: Based on 9M21 consolidated revenue

• ** K Laser core business only (excl. Optivision & Insight Medical Solutions)

2

About K Laser

• We are the largest fully integrated holographic material supplier in the world, ranking No. 1 in Consumer Packaging and top 3 in Tobacco Security in China. The global market we target is over US$ 3 bn.

• With in-house design and origination capabilities, we are a total solution provider, offering a full range of products. One-stop shopping and co-design capabilities strengthen our relationship with customers.

• To gain market share in our core hologram business, we are committed to improve our new products and new processes, including the more economical Truly Seamless, and the security foils, AI authencation and soft emboss process, and also growing the contribution in the Consumer and food packaging market.

• We aim to streamline our non-core businesses and rationalize global operations to improve capital efficiency.

3

2021 Q3 and 9M Results

4

2021 Q3 Highlight

• Consolidated: Decreased 3.2% in 3Q21 versus 3Q20 to NT$1,458 mn

Revenue Gross Margin Operating Margin NI/EPS

• Core(note): Increased 11.0% in 3Q21 versus 3Q20 to NT$ 948mn

• Consolidated: Decreased 4.1% in 3Q21 versus 3Q20 to 20.1%

• Core: Increased 0.2% in 3Q21 versus 3Q20 to 27.6%

• Consolidated: Decreased 3.3% in 3Q21 versus 3Q20 to 2.8%

• Core: Increased 0.2% in 3Q21 versus 3Q20 to 7%

• •Net Income of NT$124mn, a 109.5% increased versus 3Q20.

• •EPS of NT$0.82, a 110.3% increased versus 3Q20.

note: K Laser core business only (excl. Optivision & Optoelectronics BU & Insight Medical Solutions)

5

2021 9M Highlight

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Revenue
Gross
Margin
Operating
Margin
NI/EPS
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• Consolidate: Increased 12.7% in 9M21 versus 9M20 to NT$4,470 mn

• Core(note): Increased 13.9% in 9M21 versus 9M20 to NT$2,831 mn

• Consolidated: Decreased 2.4% in 9M21 versus 9M20 to 20.6%

• Core: Decreased 1.6% in 9M21 versus 9M20 to 24.8%

• Consolidated: Increased 0.5% in 9M21 versus 9M20 to 5.1%

• Core: Increased 0.1% in 9M21 versus 9M20 to 6.9%

• •Net Income of NT$ 357mn, a 234.4% increased versus 9M20

• •EPS NT$ 2.37, a 238.6% increased versus 9M20

note: K Laser core business only (excl. Optivision & Optoelectronics BU & Insight Medical Solutions)

6

Hologram sales mix by customer industry

Tobacco & Alcohol Consumer Other

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18% 19% 21% 23% 23%
26%
26%
27% 25% 22%
26% 20%
56% 54% 54% 54% 55%
51%
2016 2017 2018 2019 2020 9M21
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Note: Other includes anti-counterfeit product, decorations, materials…etc

7

3Q21 Revenues

• Consolidated: Decreased 3.2% in 3Q21 versus 3Q20 to NT$1,458 mn

• Core: Increased 11% in 3Q21 versus 3Q20 to NT$948 mn

Consolidated

Core

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-3.2% YoY
+11% YoY
1,458
948
854
3Q21 3Q20 3Q21
Revenue NT$ million
Revenue NT$ million
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1,506
1,458
3Q20 3Q21
Revenue NT$ million
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9M21 Revenues

• Consolidate: Increased 12.7% in 9M21 versus 9M20 to NT$4,470 mn

• Core(note): Increased 13.9% in 9M21 versus 9M20 to NT$2,831 mn

Consolidated

Core

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+12.7% YoY
4,470
3,965
9M20 9M21
Revenue NT$ million
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+13.9% YoY
2,831
2,485
9M20 9M21
Revenue NT$ million
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3Q21 Gross Margin

• Consolidated: Decreased 4.1% in 3Q21 versus 3Q20 to 20.1% Core: Increased 0.3% in 3Q21 versus 3Q20 to 27.6%

Gross Margin

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Consolidated Core
% of Consolidated % of Core
27.3% 27.6%
24.2%
20.1%
364
293 261
233
3Q20 3Q21
Gross Margin NT$ mn
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TSL as % of Revenues

TSL% of Revenue Gross Margin-Core **

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31.7% 32.0% 32.1%
30.5% 30.7%
29.5%
19.0%
16.9%
15.3% 14.5%
13.2% 13.6%
2016 2017 2018 2019 2020 9M21
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• Incl. He Rui Laser

** Excl. He Rui Laser

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9M21 Gross Margin

• Consolidated: Decreased 2.4% in 9M 21 versus 9M 20 to 20.6%

• Core: Decreased 1.6% in 9M 21 versus 9M 20 to 24.8%

Gross Margin

TSL as % of Revenues

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Consolidated Core
% as Consolidated % as Core
26.4% 24.8%
23.0%
20.6%
912 923
745
669
9M20 9M21
Gross Margin NT$ mn
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• incl. He Rui Laser

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TSL% of Revenue Gross Margin-Core
31.7% 32.0% 32.1%
30.5% 30.7%
29.5%
19.0%
16.9%
15.3% 14.5%
13.2% 13.6%
2016 2017 2018 2019 2020 9M21
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** Excl. He Rui Laser

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3Q21 Operating Expenses

• Consolidated: Decreased 0.8% in 3Q21 versus 3Q20 to 17.3%

• Core: Increased 0.1% in 3Q21 versus 3Q20 to 20.6%

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Consolidated
Core
Op. Exp. Op. Exp. % Op. Exp. Op. Exp. %
18.1%
17.3% 20.5% 20.6%
272
252
195
175
3Q20 3Q21 3Q20 3Q21
NT$ mn NT$ mn
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12

9M21 Operating Expenses

• Consolidated: Decreased 2.8% in 9M 21 versus 9M 20 to 15.6%

• Core: Decreased 0.7% in 9M 21 versus 9M 20 to 19.4%

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Consolidated
Core
Op. Exp. Op. Exp. % Op. Exp. Op. Exp. %Op. Exp. %
18.4%
20.1%
15.6% 19.4%
731
696 549
500
9M20 9M21 9M20 9M21
NT$ mn NT$ mn
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13

3Q21 Operating Income

• Consolidated: Decreased 3.3% in 3Q21 versus 3Q20 to 2.8%

• Core: Increased 0.2% in 3Q21 versus 3Q20 to 7.0%

Consolidated

Core

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Ope. Inc. Ope. Inc. %
Ope. Inc. Ope. Inc. %
6.1%
6.8% 7.0%
2.8%
92
66
58
41
3Q20 3Q21
3Q20 3Q21
NT$ mn NT$ mn
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14

9M21 Operating Income

• Consolidated: Increased 0.5% in 9M21 versus 9M20 to 5.1%

• Core: Increased 0.1% in 9M 21 versus 9M 20 to 6.9%

Consolidated

Core

Ope. Inc. Ope. Inc. %

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Ope. Inc. Ope. Inc. %
Ope. Inc. Ope. Inc. %
4.6% 5.1%
6.8% 6.9%
227
181 196
169
9M20 9M21 9M21 9M20
NT$ mn NT$ mn
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15

3Q21 Net Income & EPS

•Net Income of NT$124mn, a 109.5% increased versus 3Q20.

•EPS of NT$0.82, a 110.3% increased versus 3Q20.

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EPS
Net Income
+109.5% YoY
+110.3% YoY
124
0.82
59
0.39
3Q20 3Q21 3Q20 3Q21
NT$ mn
EPS NT$
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16

9M21 Net Income & EPS

• •Net Income of NT$ 357mn, a 234.4% increased versus 9M20

• •EPS NT$ 2.37, a 238.6% increased versus 9M20

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Net Income EPS
+234.4% YoY +238.6% YoY
357
2.37
107
0.7
9M20 9M21 9M20 9M21
NT$ mn
EPS NT$
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Q&A

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Appendix

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TSL – What is it?

Truly Seamless (TSL)

Traditional

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TSL can solve the issues - end products with seams or inconsistent patterns

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TSL – Benefits

Minimized disturbance to production

Less limitations on specification

Traditional

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Truly Seamless (TSL)

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Customers

• Higher yield rate

• Higher production rate

• Lower inventory level

• Lower material and labor costs

K Laser

• Production speed/capacity improves significantly

• Higher yield rate

• • Cost-saving for Holographic Film by double digits

• Higher gross margin (apple-to-apple)

• • New market opportunities

21

K Laser Foils

Not only for general decorative purposes, it also has various explicit or implicit anti-counterfeiting designs. Conform to the trend of the world's anti-counterfeiting industry, the Security Technology which can be used to quickly identify authenticity with tools, is also added.

22

EU require tax bar on all the cigarette boxes should contain anti-counterfeiting solution for identifying authenticity with tools since May 2019. Government bids in several countries also include Security Technology .

23

AI Security

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With Smartphones and AI security app, hologram labels can be verified their genuineness easily and quickly. The use of AI technology will not only enhance the security of K Laser hologram products but help us make differentiation with our competitors 'products.

Applications

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Security Label

Hot Stamping Foil

Cold Foil

AI Authentication Operation

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Holographic labels
Phone with
AiSecure App
Immediate result
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Demo video
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Income Statement - Consolidated

NT$ Million	3Q21	3Q20		YoY (%)		9M21	9M20		YoY (%)
Sales Revenue	1,458	1,506		(3.2)		4,470	3,965		12.7
Gross Profit	293	364		(19.7)		923	912		1.1
OperatingExpenses	252	272		(7.5)		696	731		(4.8)
OperatingProfit	41	92		(55.5)		227	181		25.2
Income before Tax	118	96		23.0		431	157		174.4
Net Income to Parent	124	59		109.5		357	107		234.4
EPS(NT$)	0.82	0.39		110.3		2.37	0.70		238.6
Key financial ratio(%)
Gross Margin	20.1	24.2		(4.1)		20.6	23.0		(2.4)
Opex ratio	17.3	18.1				15.6	18.4
OperatingMargin	2.8	6.1				5.1	4.6
Net Margin	8.5	3.9				8.0	2.7

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Balance Sheet - Consolidated

NT$ Million	2021.09	2020.09		YoY (%)		2021.06		QoQ (%)
TOTAL ASSETS	**7,783 **	7,241		7.5		8,116		(4.1)
Cash	2,313	2,105		9.9		2,686		(13.9)
NR & AR	1,433	1,586		(9.6)		1,549		(7.5)
Inventory	1,149	938		22.5		1,087		5.7
Fixed Asset	1,128	1,104		2.3		1,143		(1.3)
TOTAL LIABILITIES	**3,814 **	3,928		(2.9)		4,125		(7.5)
Bank Loans	1,403	1,999		(29.8)		1,421		(1.3)
NP & AP	898	888		1.1		993		(9.6)
TOTAL EQUITY	**3,969 **	3,312		19.8		3,991		(0.5)
	3Q21	3Q20				2Q21
A/R turnover days	93	91				92
Inventoryturnover days	88	76				82
A/P turnover days	74	67				71
ROE(%)*	18.9	10.1				18.8
ROA(%)**	6.2	3.3				5.8
Debt Ratio(%)	49.0	54.3				50.8

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Income Statement -Core

NT$ Million	3Q21	3Q20		YoY (%)		9M21	9M20		YoY (%)
Sales Revenue	948	854		11.0		2,831	2,485		13.9
Gross Profit	261	233		12.0		745	669		11.3
OperatingExpenses	195	175		11.6		549	500		9.7
OperatingProfit	66	58		13.1		196	169		15.9
Income before Tax	158	80		97.2		458	162		182.3
Net Income to Parent	124	59		109.5		357	107		234.4
EPS(NT$)	0.82	0.39		110.3		2.37	0.70		238.6
Key financial ratio(%)
Gross Margin	27.6	27.3		0.2		24.8	26.4		(1.6)
Opex ratio	20.6	20.5				19.4	20.1
OperatingMargin	7.0	6.8				6.9	6.8
Net Margin	13.0	6.9				12.6	4.3

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Balance Sheet - Core

NT$ Million	2021.09	2020.09		YoY (%)		2021.06		QoQ (%)
TOTAL ASSETS	**6,221 **	5,894		5.5		6,341		(1.9)
Cash	1,365	1,721		(20.7)		1,603		(14.9)
NR & AR	832	745		11.7		838		(0.7)
Inventory	912	719		26.8		832		9.7
Fixed Asset	861	860		0.0		859		0.2
TOTAL LIABILITIES	**3,263 **	3,202		1.9		3,409		(4.3)
Bank Loans	1,174	1,740		(32.5)		1,174		-
NP & AP	763	604		26.4		802		(4.8)
TOTAL EQUITY	**2,958 **	2,692		9.9		2,932		0.9
Key financial metrics	3Q21	3Q20				2Q21
A/R turnover days	70	72				66
Inventoryturnover days	100	94				93
A/P turnover days	89	78				82
ROE(%)*	18.9	10.1				18.8
ROA(%)**	7.9	4.1				7.5
Debt Ratio(%)	52.5	54.3				53.8

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Dividend

	2017	2018	2019	2020		2021Q2
Net Income(NT$mn)	155	66	-120	144		233
Cash Dividend(NT$mn)	91	62	0	144		81
Dividendper Share(NT$)	0.56	0.41	0	0.96		0.54
Payout Ratio(%)	59%	94%	0%	100%		35%
Cash Yield(%)*	3.7%	2.1%	0.0%	4.6%		2.3%

*Cash yield is based on K Laser’s closing share price on the day before ex-dividend day NT$15.00 as of June 19, 2018 for 2017 yield NT$19.30 as of June 27, 2019 for 2018 yield No dividend for 2019 NT$20.75 as of May 28, 2021 for 2020 yield NT$23.30 as of September 3, 2021 for 2021Q2 yield

30

Thank You

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