Earnings Results under Review: Himax Technologies Inc. (NASDAQ: HIMX)

TAINAN, Taiwan, November 30, 2019 – Shares of Himax Technologies Inc. (NASDAQ: HIMX) showed the bullish trend with a higher momentum of 2.70% to $2.28. The company traded total volume of 864.343K shares as contrast to its average volume of 1.04M shares. The company has a market value of $377.00M and about 165.35M shares outstanding.

Himax Technologies, Inc. (HIMX) recorded net revenues of $169.30M, an increase of 3.7% sequentially and a decrease of 6.6% year-over-year. As expected, its smartphone segment recorded a significant sequential growth while automotive business declined amidst worldwide sluggish car sales. The TV sales were also hit by the falling panel prices caused by the display industry’s oversupply situation. Gross margin was 19.5%, down 310 basis points sequentially due to less favorable product mix. IFRS loss per diluted ADS was 3.0 cents, in line with the guidance range of 2.0 to 3.5 cents. Non-IFRS loss per diluted ADS was 2.8 cents, in line with the guidance range of 1.8 to 3.3 cents.

Revenue from large display drivers was $59.30M, down 15.3% sequentially, and down 2.2% year-over-year. Clouded by weak demand and oversupply, Himax’s panel customers have been over-stocked since last year. Its large panel driver ICs experienced lower shipments and pricing erosion in the second quarter as a result. Large panel driver ICs accounted for 35.0% of the Company’s total revenues for the second quarter, compared to 42.9% in the first quarter of 2019 and 33.4% a year ago.

Revenue for small and medium-sized display drivers came in at $81.70M, up 20.9% sequentially but down 8.5% year-over-year. The segment accounted for 48.3% of total sales for the second quarter, as compared to 41.4% in the first quarter of 2019 and 49.2% a year ago. The sequential revenue increase was mainly from smartphone and tablet sales. Both segments saw stronger shipments to a more diversified customer base in Q2. On year-over-year basis, sales for all small and medium-sized business segments declined except for smartphone TDDI.

Revenues from non-driver businesses were $28.30M, up 9.8% sequentially but down 10.1% from last year. Non-driver products accounted for 16.7% of total revenues, as compared to 15.7% in the first quarter of 2019 and 17.4% a year ago. The sequential increase was mainly due to higher timing controller and CMOS image sensor sales offset by lower WLO shipment. On a year-over-year basis, CMOS image sensor enjoyed some growth, while other major products, including WLO and timing controller, experienced decline.

IFRS operating expenses were $38.90M in the second quarter, down 3.4% from the preceding quarter and down 5.8% from a year ago.

Second quarter non-IFRS operating loss was $5.50M, or -3.2% of sales, versus non-IFRS operating income of $0.80M, or 0.5% of sales, for the same period last year and down from -1.8% a quarter ago.

IFRS loss for the second quarter was $5.20M, or 3.0 cents per diluted ADS, compared to loss of $2.30M, or 1.3 cents per diluted ADS, in the previous quarter and IFRS profit of $2.00M, or 1.2 cents per diluted ADS, a year ago.

Second quarter non-IFRS loss was $4.80M, or 2.8 cents per diluted ADS, compared to non-IFRS loss of $2.00M, or 1.1 cents per diluted ADS last quarter and non-IFRS profit of $2.30M, or 1.3 cents per diluted ADS the same period last year.

Balance Sheet and Cash Flow:

Himax had $122.40M of cash, cash equivalents and other financial assets as of the end of June 2019, compared to $126.70M at the same time last year and $108.20M a quarter ago. The cash position increased $14.10M from last quarter due primarily to increase unsecured borrowings of $37.0M, offset by capex of $5.70M and cash outflow of $17.70M from operations. On top of the cash position, restricted cash was $164.30M at the end of the quarter, the same as the preceding quarter and up from $147.00M a year ago. The restricted cash is mainly used to guarantee the secured short-term borrowing for the same amount. The Company had $77.0M unsecured short-term loan at the end of Q2 versus $40.0M a quarter ago. As reported in the last earnings call, further loan was made to finance the land payment.

Himax’s inventories as of June 30, 2019 were $188.50M, slightly down from $189.30M a quarter ago and up from $142.10M a year ago. Accounts receivable at the end of June 2019 were $176.20M, little changed from last quarter and a year ago. DSO was 96 days at the end of June 2019, as compared to 93 days a year ago and 97 days at end of the last quarter. As highlighted in the last earnings calls, in response to capacity shortage of foundry and certain packaging material, the Company had to keep the inventory level higher than usual last year. Given the prevailing uncertain market conditions and ease of foundry capacity, the Company has started to control its inventory level from the first quarter 2019. More sizeable reduction in inventory will be seen starting the third quarter.

Net cash outflow from operating activities for the second quarter was $17.70M as compared to an outflow of $2.80M for the same period last year and an outflow of $22.10M last quarter. The increased outflow year-over-year was mainly due to additional inventory buildup and lower profit.

Second quarter capital expenditures amounted to $5.70M, versus $17.70M a year ago and $6.30M last quarter. The investment in design tools and R&D related equipment for its traditional IC design business amounted to $1.70M in the quarter. The remaining $4.00M was for the ongoing payments for the new building’s construction and WLO capacity expansion. Third quarter capex is budgeted to be around $33.0M including the payment of $27.70M for the land purchase which was deferred from the second quarter. By the end of Q3 Himax will have concluded substantially all the capex payments for the new land, building and 3D sensing project with just $1.0M left to be made in the fourth quarter.

The Company offered net profit margin of -0.90% while its gross profit margin was 21.50%. ROE was recorded as -1.40% while beta factor was 0.21. The stock, as of recent close, has shown the weekly upbeat performance of 4.11% which was maintained at -33.53% in this year.

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