STARK — Investor Presentation 2020

May 14, 2020

Stark Technology Inc.(2480)
2020Q1 Investor Conference

Notes:

Safe Harbor Notice

There are variety of factors which may influence statements or contents been drafted within this presentation, therefore we strongly recommend audience to refer to the information published on MOPS website in case any adjustment has been made.

STI General Information

Founded in 1993, public traded in 2001
500+ Employees
The largest domestic system integrator in Taiwan
One of Taiwan’s top 500 service enterprises company.
Rated as Taiwan’s top 6% - 20% company over the 6th Corporate Governance Evaluation
Dedication to service and maintain 1,600+ majority of the 2,000+ company enterprise business
Providing more than 40 products & solutions to service our customers
Our vision is to assist our customers to become a Information Service Provider

STI Service Network

Sales Operation – by Industries

Sales BU	Industry / Product / Region
BU1	IBM products, High-tech industries, E-commerce, Finance, and Automobiles, the main area in Hsinchu and middle Taiwan.
BU2	High-tech manufacturing, Defense, Military, and Traditional production, Education, the main area in Hsinchu、Taoyuan and South Taiwan
BU6	Finance, insurance, telecommunications, small and medium enterprises, manufacturing in Taipei
	The public sector including government, medical care, and education.
	The main area in Taipei and East Taiwan
BU8	Private telecommunications, film and television media, energy, water and electricity, the main area in Taipei
BU9	Chunghwa Telecom

We’ve been worked and working on:

Cloud Services & Data Analytics
Infrastructure

internet

Enterprise/PC

Home/PC
SmartTV

Enterprises
Factories

Security Cloud

Big Data &
Computing
Cloud
Cable

Medical
Cloud
Broadband
Enterprise Apps
Data Integration
Deep Learning
Analytics

Mobile APP
Buyers, Sponsors
4G/5G

FSI Cloud
(Fintech, Blockchain)

WiFi
IoT
Factory
Automation
Industry 4.0

Smart Mobile
LoRa

NB-IoT
Developers, Content Providers, Consumers
IoT Devices
Inter-connect : Telecomm、Broadband/Cable、Internet
Multi-Screens : PC、NB/Pad、Smartphone、SmartTV

Information Technologies

Consulting
Design
Deployment
Integration
Portal Personalization Content Mgmt Single sign-on
Enterprise Apps
ERP,CRM,SCM
MES, PLM
OSS, VAS
Probe/CEM
eCommerce
High Freq. Trade by Trade
AML
Vertical Apps.
Professional
Services

IoT
(Environmental Monitoring)

MFG
Telco
FSI
Gov’t
Travel
Medical
EAI@SOA Middleware Data Integration@BI
Data Mgmt.
Security
System & Platform Resource Mgmt (CPU/GPU/VM/Container/Bare Metal)
Networking Platform　Load Balancing　Network Mgmt

AI(Machine、Deep Learning)

Data Science

Training

Modeling

Inference

Who? : End users

Who? : Auto ML
. Rapid ML/DL modeling,
. Manpower constraint
Who? : AI Engineer
. Process customization
. ML/DL inference deployment

STI : ML, DL computing hardware/software framework integration
3rd party alliance : Industrial domain consultant, Semi-auto. Tool vendor

AI Solution Consultant
Stack holder lead project
End-to-end solution planning
DL@GPU
Tech. staff training

Auto ML
IT lead project
Manpower constraint
Time to deployment
min. data input, max.
Workload@CPU or @GPU

Security Cloud Service model

Strategic alliance
Public Cloud
(AWS,Azure,GCP)
Service offering
Internet
System inter-connect

Security Service Vendor
HQ office

Branch office

Security Cloud Service

Security
Intelligence Vendor

SmartMoble@Employee

Secure connection, management, threat analysis & report services
Cyber Threat Intelligence analysis & detection services
Secure access authentication, authorization & apps. Platform services

Secure AIoT inter-connect platform
EAR app platform

Access Authentication
Open API
Biz. partner
RESTful API

e.g.：
Access Authorization
Management
Secure Medical Apps access
Customers
Secure payment service
.
.

Notes:

Managed Security Service Provider(MSSP)

Global CTI Platform
Identity mgmt.@Cloud

STI
Security Services

VA@Cloud
Security Gears Deployment
& Fine tuning
On-Premise
Security Services
API Security@Cloud

Notes:

Tel-Communication Technologies (5G)

IP Core
Network

Small
Cell
OTN/Metro OTN
(5G Back-Haul)

Small Cell
Gateway

SD-WAN
(Software-Defined WAN)
(5G IP Core)

CWDM/NG-PON
(5G Front-Haul)

Notes:

Products & Solutions

Info. Security
Software Development Tools
Resource MGMT.

Data MGMT.

Data Comm.
Open Systems

Telcomm.

STI Professional Service
Nokia Networks

Notes:

Balance Sheet Overview (Consolidated)

Units:NT$ thousand
| | 2020/3/31 | | 2019/12/31 | | 2019/3/31 | |
| --- | --- | --- | --- | --- | --- | --- |
| Item | AMT | % | AMT | % | AMT | % |
| Cash and cash equivalents | 1,534,311 | 30% | 1,567,177 | 30% | 1,215,207 | 26% |
| Accounts receivable(including contract assets) | 817,203 | 16% | 874,148 | 17% | 747,825 | 15% |
| Inventories | 1,454,592 | 29% | 1,470,524 | 29% | 1,544,287 | 33% |
| Property,Plant and equipment | 450,891 | 9% | 452,727 | 9% | 459,250 | 10% |
| Total Assets | 5,064,187 | 100% | 5,113,720 | 100% | 4,734,654 | 100% |
| Current Liabilities | 2,505,671 | 50% | 2,211,857 | 43% | 1,823,041 | 38% |
| Equity | 2,453,721 | 48% | 2,797,728 | 55% | 2,809,772 | 59% |
Source: Market Observation Post System

Income Statements Overview (Consolidated)

Units: NT$ thousand
| | 2020 Jan.-Mar. | | 2019 Jan.-Mar. | | |
| --- | --- | --- | --- | --- | --- |
| Item | AMT | % | AMT | % | YOY |
| Revenues | 1,307,761 | 100% | 1,392,630 | 100% | -6.1% |
| Gross profit | 332,841 | 26% | 360,821 | 26% | -7.8% |
| Operating expense | 177,141 | 14% | 204,896 | 15% | -13.5% |
| Operating income | 155,700 | 12% | 155,925 | 11% | -0.1% |
| Other income | 10,885 | 1% | 7,230 | 1% | 50.6% |
| Pre-tax income | 166,585 | 13% | 163,155 | 12% | 2.1% |
| Net income | 130,140 | 10% | 122,676 | 9% | 6.1% |
| EPS(NT$) | 1.22 | | 1.15 | | 6.1% |
Source: Market Observation Post System
Note:China subsidiary’s revenue of consolidated: 2020Q1 5.23%;Year 2018 12.22%

Notes:

Comparison of Consolidated Income

Units: NT$ thousand
QoQ Comparison of 2020Q1
YoY Comparison of 2020Q1
| | 2020Q1 | 2019Q4 | QoQ |
| --- | --- | --- | --- |
| Revenues | 1,307,761 | 1,583,331 | -17.4% |
| Gross profit | 332,841 | 395,269 | -15.8% |
| Gross profit% | 26% | 25% | 4.1% |
| Operating income | 155,700 | 147,982 | 5.2% |
| Pre-tax income | 166,585 | 155,022 | 7.5% |
| Net income | 130,140 | 122,843 | 5.9% |
| EPS | 1.22 | 1.16 | 5.2% |
| | 2020Q1 | 2019Q1 | YoY |
| --- | --- | --- | --- |
| Revenues | 1,307,761 | 1,392,630 | -6.1% |
| Gross profit | 332,841 | 360,821 | -7.8% |
| Gross profit% | 26% | 26% | 0.3% |
| Operating income | 155,700 | 155,925 | -0.1% |
| Pre-tax income | 166,585 | 163,155 | 2.1% |
| Net income | 130,140 | 122,676 | 6.1% |
| EPS | 1.22 | 1.15 | 6.1% |

Sales Revenue & Net Income

Chart: Sales Revenue

Category	2020Q1	2019	2018
Sales Revenue	1307761.0	5521432.0	4648442.0

Chart: Net Income

Category	2020Q1	2019	2018
Net Income	130140.0	446501.0	404220.0

EPS & Capital

Chart: EPS

Category	2020Q1	2019	2018
EPS	1.22	4.2	3.8

Chart: Capital

Category	2020Q1	2019	2018
Capital	1063603.0	1063603.0	1063603.0
---	---	---	---
ROE	4.96	16.42	15.64

2020Q1 Sales Revenues by Type

Chart

Category

Chart

Category	%
Consulting/Maintenance	0.2926710853857078
Enterprise Network	0.242633189476387
Storage	0.15676326715683792
System Platform & Application Server	0.13283640734153482
Application Software	0.11214461443834053
Peripheral	0.0480615480928428
PC	0.012529035079098434
Other	0.0023608530292507438
Project	0.0

Chart: 2017

| Category |
|---|Revenue:1.3081billion

Comparison of Sales Revenues by Type

Chart

Category	Consulting/Maintenance	Enterprise Network	Storage	System Platform & Application Server	Application Software	Peripheral	PC	Other	Project
2020Q1	0.2926710853857078	0.242633189476387	0.15676326715683792	0.13283640734153482	0.11214461443834053	0.0480615480928428	0.012529035079098434	0.0023608530292507438	0.0
2019	0.31264127680008164	0.215682262624659	0.16764106588651811	0.13502862469759452	0.09223902672667275	0.054493525755202846	0.01974491446099236	0.0023266156108689056	0.00020268743740984538
2018	0.32203160333895237	0.21912419298261585	0.17104183093693914	0.13906495263493873	0.07785411570401791	0.05126591688248744	0.012735153208524622	0.004891441910981307	0.0019907924005426268

Compare Sales Revenues by Type

Chart

Category	2020Q1	2019Q1
Consulting/Maintenance	382743.891	385768.96
Enterprise Network	317306.272	363019.215
Storage	205008.919	223859.999
System Platform & Application Server	173718.3	197542.378
Application Software	146658.376	123063.484
Peripheral	62853.028	62849.035
PC	16384.986	32707.798
Other	3087.432	3819.22
Project	0.0	None
---	---	---
Product Sales	921,930	1,003,042
Consulting /Maintenance	382,744	385,769
Other	3,087	3,819
Total	1,307,761	1,392,630
Revenue:1.308billion
Revenue:1.393billion

2020Q1 Sales Revenues by Industry

Chart

Category

Chart

Category	2020Q1
Electronic related(Including Semiconductor)	0.403880525019606
Telecommunications	0.2011439920876761
Government education unit	0.11247425005814199
Financial insurance	0.10312214138560995
Transportation and traditional manufacturing	0.07509647374461395
Other	0.06552225531146245
Biomedical	0.03876036239288977

Comparison of Sales Revenues ?by Industry(Accumulated)

Chart

Category	Electronic related(Including Semiconductor)	Telecommunications	Government education unit	Financial insurance	Transportation and traditional manufacturing	Other	Biomedical
2020Q1	0.403880525019606	0.2011439920876761	0.11247425005814199	0.10312214138560995	0.07509647374461395	0.06552225531146245	0.03876036239288977
2019Q4	0.4322070762524577	0.17710817519959027	0.15007555622593396	0.07945524524980194	0.07168890124886278	0.057788437103969796	0.03167660871938346
2019Q1	0.443263392073698	0.2069527091316411	0.13387746368840917	0.057518054924680276	0.06623817875270493	0.050315134557096346	0.04183506687177022

Comparison of Sales Revenues ?by Region(Accumulated)

Chart

Category	Taiwan	China(Including HK)	Other
2020Q1	0.9298579261111037	0.05686689800288647	0.013275175886009844
2019	0.920777838601909	0.07032555618072604	0.008896605217365006
2019Q1	0.8633799208398405	0.12586593265830262	0.01075414650185689

Quarterly revenue status

Units:NT$ thousand

Chart

Category	Product	Service	Other	Revenues
2020Q1	921930.0	382744.0	3087.0	1307761.0
2019Q4	1076575.0	502992.0	3764.0	1583331.0
2019Q3	868255.0	471725.0	3966.0	1343946.0
2019Q2	833367.0	365742.0	2416.0	1201525.0
2019Q1	1003042.0	385769.0	3819.0	1392630.0
2018Q4	881525.0	416004.0	8489.0	1306018.0
2018Q3	642781.0	372925.0	3955.0	1019661.0
2018Q2	660818.0	352277.0	5838.0	1018933.0
2018Q1	934381.0	355739.0	13710.0	1303830.0
2017Q4	678985.0	362056.0	11918.0	1052959.0
2017Q3	801134.0	305272.0	9846.0	1116252.0
2017Q2	634558.0	306427.0	11079.0	952064.0

Shareholder’s Meeting Information?& Dividends Policy

※2020 Annual General Shareholder’s Meeting
Date ：May 28 (Thursday),2020 9:00AM
Place： No.282, Beida Rd. , Hsinchu City, Taiwan (R.O.C.) (The Third Credit Cooperative of Hsinchu on the 13th-floor conference center)
| ※Dividends in recent years | | | | | | Units:NT$ |
| --- | --- | --- | --- | --- | --- | --- |
| Year | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 |
| Amount | 4.45 | 3.42 | 2.62 | 2.1 | 2 | 2 |
| ※EPS in recent years | | | | | | Units:NT$ |
| --- | --- | --- | --- | --- | --- | --- |
| Year | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 |
| Amount | 4.2 | 3.8 | 2.56 | 2.25 | 2.02 | 2.01 |
| ※Payout ratio in recent years | | | | | | Units:% |
| --- | --- | --- | --- | --- | --- | --- |
| Year | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 |
| Ratio | 106.0% | 90.0% | 102.3% | 93.3% | 99.0% | 99.5% |
Note：Payout ratio in year 2019 due to the adjustment of IFRSs to shareholders’ equity which can be part of distribution

Q & A ?Thank you!!

Notes: