• Revenue: $239.6 million, up 15.5% sequentially.
• Gross Margin: 32%, within guidance range of 31.5% to 33.5%.
• Profit per Diluted ADS: $0.169, at the top end of the guidance range of $0.13 to $0.17.
• Large Display Drivers Revenue: $39 million, a sequential increase of 24.7%.
• Small and Medium-Sized Display Driver Revenue: $158.8 million, up 10.1% sequentially.
• Non-Driver Sales: $41.8 million, up 30.6% from the previous quarter.
• Operating Expenses: $47.3 million, a decrease of 6.7% from the previous quarter.
• Operating Income: $29.3 million, or 12.2% of sales.
• After-Tax Profit: $29.6 million, or $0.169 per diluted ADS.
• Cash, Cash Equivalents, and Other Financial Assets: $253.8 million at the end of June 2024.
• Operating Cash Inflow: $26.9 million during the quarter.
• Inventories: $203.7 million as of June 30, 2024.
• Accounts Receivable: $242.4 million at the end of June 2024.
• Capital Expenditures: $4.6 million in the second quarter.

• Warning! GuruFocus has detected 6 Warning Sign with HIMX.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Himax Technologies Inc (NASDAQ:HIMX) reported Q2 revenues of $239.6 million, a 15.5% sequential increase, surpassing their guidance range.
• Gross margin improved to 32%, up from 29.3% in the previous quarter and 21.7% in the same period last year, driven by cost improvements and a favorable product mix.
• Automotive IC sales, including both DDIC and TDDI, increased by more than 50% year over year, with automotive business representing over 47% of total sales.
• Non-driver sales rose by 30.6% from the previous quarter, driven by a resurgence in orders for Tcon products for TV, monitor, automotive, and OLED tablet.
• Operating expenses decreased by 6.7% sequentially and 11.1% year over year, reflecting strict budget and expense controls amid macroeconomic challenges.

Negative Points

• Himax Technologies Inc (NASDAQ:HIMX) anticipates a 12% to 17% sequential revenue decline in Q3, reflecting conservative customer demand and inventory management.
• The automotive market in China experienced disappointing sales in Q2, leading to excessive inventories and reduced IC procurement in Q3.
• Cash balance decreased sequentially due to customer refunds and a strategic investment, with further declines expected due to dividend and bonus payments.
• Accounts receivable increased to $242.4 million, with DSO rising to 99 days, indicating slower collections.
• The company expects non-driver IC revenue to decline by high teens sequentially in Q3, reflecting ongoing weak demand in consumer electronics.

Q & A Highlights

Q: Can you elaborate on the current weakness in the automotive business and the impact of China's localization policy on IC procurement? A: Jordan Wu, President and CEO, explained that the weakness is primarily due to fluctuations in the Chinese market, where customers over-procured IC inventory in Q2 and are now de-stocking. The US and European markets remain stable. Regarding China's localization policy, Wu noted that while it aims to increase local IC supply, Himax's leading edge in automotive display ICs mitigates immediate threats from Chinese competition. He remains optimistic about the long-term outlook, expecting market share growth in new technologies like TDDI and OLED.

Q: What is the timeline for the CPO product, and how confident are you in ramping up this business? A: Wu stated that while specific timelines are confidential, the CPO product is moving towards mass production, with small results expected by the end of the year and a steady ramp-up next year. He expressed high confidence in the mid to long-term prospects, citing the growing demand for increased processing power due to generative AI and the advantages of replacing metal wires with fiber optics for data transmission.

Q: How does Himax plan to navigate the current challenging business environment in the automotive sector? A: Wu emphasized close collaboration with panel makers and Tier 1 suppliers to manage wafer starts and monitor customer demands. Despite current challenges, Himax remains committed to long-term innovation in automotive products, leveraging its leadership in automotive display ICs and expanding into the OLED panel market.

Q: What are the expectations for the large panel driver IC business in Q3? A: Wu anticipates a double-digit sequential revenue decrease for large display driver ICs due to subdued monitor and TV IC sales. However, notebook IC sales are expected to increase, driven by robust order replenishment. Himax is positioning itself to capitalize on rising demands for LCD displays with touch features and OLED displays in premium notebooks and AI PC markets.

Q: Can you provide an update on the WiseEye Ultralow Power AI Sensing solution? A: Wu highlighted the WiseEye technology's low power consumption, enabling AI functionalities in battery-powered devices. The collaboration with DESMAN for smart door locks and the introduction of the WiseEye PalmVein solution for biometric access are key developments. The PalmVein solution offers high security and power efficiency, with mass production set to begin by the end of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.