Earnings Recap: Himax Technologies, Inc. (NASDAQ: HIMX)

On Monday, Shares of Himax Technologies, Inc. (NASDAQ: HIMX) lost -0.92% to $6.46. The stock opened its trade at $6.45 and after floating in a price range of $6.41 to $6.54; the stock grabbed the investor’s attention and traded 1,768,952 shares as compared to its average daily volume of 2.08M shares. The stock’s institutional ownership stands at 32.80%.

Himax Technologies, Inc. (HIMX), a leading supplier and fabless manufacturer of display drivers and other semiconductor products, declared its financial results for the first quarter ended March 31, 2018.

First Quarter 2018 Financial Results:

The first quarter revenues of $162.90M represented a decrease of 10.1% sequentially and a boost of 4.9% year-over-year. Gross margin was 22.5%, 50 basis points higher than guidance, but down 210 basis points sequentially. IFRS loss per diluted ADS was 1.6 cents, better than the guidance range of 2.0 to 3.0 cents.

Revenue from large display drivers was $59.30M, up 1.6% sequentially and up 0.1% year-over-year. Large panel driver ICs accounted for 36.4% of Himax’s total revenues for the first quarter, contrast to 32.3% in the fourth quarter of 2017 and 38.2% a year ago. The first quarter is traditionally the bottom of the year because it has fewer working days because of Chinese New Year. Against seasonality, the Company’s large panel driver business grew low-single-digit sequentially, driven by increasing 4K TV penetration and Chinese panel customers’ ramping of new LCD fabs.

Revenue for small and medium-sized display drivers came in at $71.70M, down 11.8% sequentially and up 7.6% year-over-year, because of seasonality and the overall weak smartphone market. The product segment accounted for 44.0% of total sales for the first quarter, as contrast to 44.9% in the fourth quarter of 2017 and 42.9% a year ago. Sales into smartphones were down 23.0% sequentially and declined 5.4% year-over-year. The Company’s TDDI shipment in Q1 was still hindered by customers’ high inventory despite its numerous design-wins for HD+ and FHD+ projects with top tier customers. However, Himax anticipates the shipment of its TDDI chips to accelerate starting the second quarter, but the volume would be somewhat offset by foundry capacity constraint that the industry is facing right now.

Small and medium-sized driver IC sales for automotive application recorded another historical quarter. Revenue, against seasonality, went up 1% sequentially and close to 40% year-over-year. The quarterly revenue is now close to $25.0M, reaching almost 20% of the total driver IC revenues. Driver IC sales for tablets were down 9.2% sequentially but up 2.4% year-over-year because of weak overall market demand in this product segment.

Revenues from non-driver businesses were $31.90M, down 23.2% sequentially but up 8.5% as compared to last year. Non-driver products accounted for 19.6% of total revenues, as contrast to 22.8% in the last quarter and 18.9% a year ago. The sequential decline was mainly because of lower than expected WLO shipment, offset by higher NRE income. The year-over-year increase was driven mainly by the WLO product shipment to a leading customer and, to a lesser extent, rising sales of timing controllers, CMOS image sensors and NRE income. Himax anticipates WLO shipment to increase in the second quarter and rebound strongly in the second half.

IFRS operating expenses were $39.80M in the first quarter, down 1.1% from the preceding quarter but up 16.1% from a year ago. The noteworthy year-over-year increase was mainly the result of rising R&D expenses in the areas of 3D sensing, WLO, TDDI, and high-end TV as well as annual merit increase. In addition, NT dollar appreciation against the US dollar caused the company’s salary expense to increase around $1.20M as Himax pays the bulk of its employee salaries in NT dollars.

First quarter non-IFRS operating loss was $2.90M or -1.8% of sales, down from 1.3% for the same period last year and down from 2.6% a quarter ago. The sequential decline was a result of lower sales and lower gross margin and the year-over-year decrease was caused by lower gross margin and higher expenses.

IFRS loss for the first quarter was $2.80M, or 1.6 cents per diluted ADS, contrast to profit of $23.50M, or 13.6 cents per diluted ADS, in the previous quarter and profit of $1.20M, or 0.7 cents per diluted ADS, a year ago. The sequential decline was a result of lower sales and lower gross margin. An investment gain of $20.70M in the last quarter for disposal of a direct investment in September 2017 also caused the first quarter profit to decline. The year-over-year decrease was caused by higher expenses.

First quarter non-IFRS loss was $2.60M, or 1.5 cents per diluted ADS, contrast to non-IFRS profit of $23.80M, or 13.8 cents per diluted ADS last quarter and non-IFRS profit of $1.60M, or 1.0 cent in the same period last year.

Balance Sheet and Cash Flow:

Himax had $151.90M of cash, cash equivalents and other financial assets as of the end of March 2018, contrast to $199.50M at the same time last year and $148.90M a quarter ago. On top of the above cash position, restricted cash was $147.00M at the end of the quarter, unchanged from $147.00M in the preceding quarter and up from $107.40M a year ago. The restricted cash is mainly used to guarantee the Company’s short-term borrowings for the same amount. Himax continues to maintain a very strong balance sheet and remain a debt-free company.

Himax’s inventories as of March 31, 2018 were $148.00M, down from $148.30M a year ago and up from $135.20M a quarter ago. Accounts receivable at the end of March 2018 were $166.60M as contrast to $169.10M a year ago and $188.80M last quarter. DSO was 92 days at the end of March 2018, as contrast to 98 days a year ago and 101 days at end of the last quarter.

Net cash inflow from operating activities for the first quarter was $2.30M as contrast to an inflow of $5.50M for the same period last year and an inflow of $8.30M for the last quarter. The decrease in operating cash flow is mainly because of lower net profit.

Capital expenditures were $18.60M in the first quarter of 2018 as compared to $2.00M a year ago and $15.50M in the last quarter. The first quarter’s capital expenditure consisted mainly of ongoing payments for the new building’s construction, WLO capacity expansion and installation of active alignment equipment to support Himax’s 3D sensing business. Other CAPEX, mainly for the investment of design tools and R&D related equipment for its traditional IC design business, is around $1.0M during the quarter.

Share Buyback Update:

As of March 31, 2018, Himax had 172.10M ADS outstanding, unchanged from last quarter. On a fully diluted basis, the total ADS outstanding are 172.50M.

HIMX has a market value of $1.14B while its EPS was booked as $0.12 in the last 12 months. The stock has 177.17M shares outstanding. In the profitability analysis, the company has gross profit margin of 24.20% while net profit margin was 3.40%. Beta value of the company was -0.24; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 2.80.

Bobbie Collins

Bobbie Collins gives us an insight into the most recent news hitting the Technology Sector in Wall Street. He has been an independent financial adviser for over 10 years in the city and in recent years turned his experience in finance and passion for journalism into a full time role. He performs analysis of Companies and publicizes valuable information for shareholder community. Collins is an accomplished journalist who has a passion for travel. His desire to see the world has taken him to countries around the world and given him the opportunity to report for some of the top news organizations.