OREANDA-NEWS. Himax Technologies, Inc., a leading supplier and fabless manufacturer of display drivers and other semiconductor products, announced its financial results for the second quarter ended June 30, 2016.

SUMMARY FINANCIALS

Second Quarter 2016 Results Compared to Second  Quarter 2015 Results (USD in millions) (unaudited)
  Q2 2016 Q2 2015 CHANGE
Net Revenue $201.1 million $169.2 million     +18.8 %  
Gross Profit $52.5 million $40.3 million     +30.2 %  
Gross Margin    26.1 %    23.8 %     +2.3 %  
GAAP Net Income Attributable to Shareholders $19.8 million $8.8 million     +124.0 %  
Non-GAAP Net Income Attributable to Shareholders $20.2 million (1) $9.3 million (2)     +115.7 %  
GAAP EPS (Per Diluted ADS, USD) $ 0.115    $ 0.051        +123.8 %  
Non-GAAP EPS (Per Diluted ADS, USD) $0.117 (1) $0.054 (2)     +115.5 %  
 

(1) Non-GAAP Net income attributable to common shareholders and EPS excludes $0.2 million of share-based compensation expenses, net of tax and $0.2 million non-cash acquisition related charge, net of tax.
(2) Non-GAAP Net income attributable to common shareholders and EPS excludes $0.4 million of share-based compensation expenses, net of tax and $0.1 million non-cash acquisition related charge, net of tax

 
Second Quarter 2016 Results Compared to First Quarter 2016 Results (USD in millions) (unaudited)
  Q2 2016 Q1 2016 CHANGE
Net Revenue $201.1 million $180.3 million     +11.5 %
Gross Profit $52.5 million $47.2 million     +11.2 %
Gross Margin    26.1 %    26.2 %     -0.1 %
GAAP Net Income Attributable to Shareholders $19.8 million $13.1 million     +51.2 %
Non-GAAP Net Income Attributable to Shareholders $20.2 million (1) $13.5 million (2)     +49.8 %
GAAP EPS (Per Diluted ADS, USD) $ 0.115    $ 0.076        +51.2 %
Non-GAAP EPS (Per Diluted ADS, USD) $0.117 (1) $0.078 (2)     +49.7 %
     

(1) Non-GAAP Net income attributable to common shareholders and EPS excludes $0.2 million of share-based compensation expenses, net of tax and $0.2 million non-cash acquisition related charge, net of tax.
(2) Non-GAAP Net income attributable to common shareholders and EPS excludes $0.2 million of share-based compensation expenses, net of tax and $0.2 million non-cash acquisition related charge, net of tax.

"We are pleased to report that we achieved both top and bottom line growth during the quarter as preannounced on July 5th. Our 2016 second quarter revenue was $201.1 million. Gross margin for the quarter was 26.1%. Second quarter GAAP earnings per diluted ADS came in at 11.5 cents. Both our 2016 second quarter revenues and gross margin reached the high end of our guidance while EPS exceeded our guidance provided in May,” began Mr. Jordan Wu, President and Chief Executive Officer of Himax. “The sequential revenue growth was due mostly to strong sales in small and medium-sized driver IC business from our Chinese smartphone customers. Accelerating AR/VR related business from LCOS and WLO shipments to our leading US customer also contributed to the second quarter growth.”

Mr. Wu concluded: “We are very encouraged to experience the continuous growth in both our driver and non-driver business segments as we have started to benefit from new business opportunities not enjoyed by many of our competitors. Notably, we saw increased market share of our large panel driver ICs, shipment increases from our small and medium-sized driver IC customers and the phenomenal performance of AR/VR related products which increased by several folds. Two of the key achievements of our smartphone driver IC business are the shipments of our OLED driver IC design and the successful launch of our TDDI (Touch and Display Driver Integration) products. Both products were actively sought after by mobile device makers, module houses, and panel makers. Lastly, the staggering success of Pok?mon Go highlights the most revolutionary technologies in our LCOS and WLO product line and AR/VR, their key applications. Some of the world’s largest and most impactful technology companies have continued to work closely with us on their AR/VR devices using our LCOS, WLO and/or driver IC solutions. Some of them have announced the launch of their products in 2016. We have just kick-started our expansion plan for next generation LCOS and WLO product lines backed upon our customers' demands and feedbacks. The next generation expansion will substantially enlarge our existing capacity and lift our technology to another level, thereby further strengthening our leadership position in the AR sector worldwide. We expect the expansion project will enjoy a phenomenal return on investment in the years to come. In summary, we are seeing strong momentum across all our major product lines and feel excited about the growth prospect of 2016 and beyond.”

Second Quarter 2016 Revenue Breakdown by Product Line (USD in millions) (unaudited) 

  Q2 2016   %     Q2 2015   %   % Change  
Display drivers for large-sized panels $ 67.5       33.6 %   $ 54.3       32.1 %     +24.4 %  
Display drivers for small/medium-sized panels $ 90.6       45.0 %   $ 82.8       48.9 %     +9.4 %  
Non-driver products $ 43.0       21.4 %   $ 32.1       19.0 %     +33.6 %  
Total $ 201.1       100.0 %   $ 169.2       100.0 %     +18.8 %  
                     
  Q2 2016   %   Q1 2016   %   % Change  
Display drivers for large-sized panels $ 67.5       33.6 %   $ 65.7       36.4 %     +2.8 %  
Display drivers for small/medium-sized panels $ 90.6       45.0 %   $ 79.4       44.1 %     +14.0 %  
Non-driver products $ 43.0       21.4 %   $ 35.2       19.5 %     +22.1 %  
Total $ 201.1       100.0 %   $ 180.3       100.0 %     +11.5 %  

The second quarter revenue of $201.1 million represented an 11.5% sequential increase and an 18.8% increase year-over-year. Revenue from large panel display drivers was $67.5 million, up 2.8% sequentially, and up 24.4% from a year ago. Large panel driver ICs accounted for 33.6% of the Company’s total revenues for the second quarter, compared to 36.4% in the last quarter and 32.1% a year ago. As opposed to original guidance of high-single-digit sequential growth, the Company’s large panel driver business grew just low-single-digit due to a certain customer’s short-noticed adjustment of production plan for its monitor products. Without the last minute change, the Company could have achieved high-single-digit sequential growth that it guided. Despite the lower than expected sales mentioned above, the Company’s large panel products actually enjoyed close to 25% year-over-year growth mainly thanks to strong demands from Chinese panel customers with 4K TV still the major growth engine. In China, the Company’s driver IC business for large panel almost doubled year-over-year during the quarter. In comparison, worldwide large-size TFT-LCD panel shipments declined around 3% in the same period, according to market research firm IHS. It is especially worth highlighting that Himax’s engineering collaboration and design-in activities with large panel customers across China, Taiwan and Korea all remain robust and the Company expects these trends to continue throughout the year. 

Revenue for small and medium-sized drivers came in at $90.6 million, up 14.0% sequentially and up 9.4% from the same period last year. Driver ICs for small and medium-sized applications accounted for 45.0% of total sales for the second quarter, as compared to 44.1% in the previous quarter and 48.9% a year ago. Sales into smartphones were especially robust, up more than 30% sequentially and close to 25% year-over-year. Himax has the most comprehensive coverage of leading Chinese smartphone names and their growing market share has led to the Company’s good result this quarter. Additionally, driver ICs for tablets also resumed growth following several quarters of decline, thanks to new product launches from several leading brand customers in the US and Korea. 

Revenues from non-driver businesses were $43.0 million, up 22.1% sequentially and up 33.6% from the same period last year. Non-driver products accounted for 21.4% of total revenues, as compared to 19.5% in the previous quarter and 19.0% a year ago. The sequential growth was driven mainly by the LCOS and WLO shipments for AR applications. Other product lines such as touch panel controller, power IC, ASIC and NRE incomes also enjoyed sequential growth. The performance of LCOS and WLO was phenomenal, increasing several folds year-over-year as the Company’s major customer started producing its AR product. The growth was, however, partially offset by the decline of programmable gamma OP and CMOS image sensors.

GAAP gross margin for the second quarter was 26.1%, around flat from the previous quarter and up 230 basis points from the same period last year. The Company has been able to maintain a relatively strong margin mainly thanks to a more favorable product mix in small and medium-sized driver ICs and higher engineering fees from AR/VR new project engagements. Gross margin expansion was also a testament to Himax’s cost reduction measures. Gross margin improvement remains one of the Company’s business focuses. 

Second quarter GAAP operating expenses were $30.6 million, down 4.4% from the preceding quarter and little changed from a year ago. GAAP operating margin for the second quarter of 2016 improved to 10.9% from 5.2% for the same period last year and 8.4% a quarter ago. GAAP operating income for the second quarter of 2016 increased 44.3% sequentially and 146.8% year-over-year.

Reported GAAP net income for the second quarter was $19.8 million, or 11.5 cents per diluted ADS, compared to $13.1 million, or 7.6 cents per diluted ADS, in the previous quarter and $8.8 million, or 5.1 cents per diluted ADS, a year ago. GAAP net income increased 51.2% quarter-over-quarter and 124.0% year-over-year, respectively. GAAP EPS exceeded the Company’s 8.5 to 10.5 cents guided range.

The sequential and year-over-year profit increase was a combination of higher revenue and much improved gross margin, together with lower operating expenses.

Second quarter non-GAAP net income, which excludes the share-based compensation and acquisition-related charges, was $20.2 million, or 11.7 cents per diluted ADS, compared to $13.5 million last quarter and $9.3 million the same period last year.

Balance Sheet and Cash Flow

Himax had $179.3 million of cash, cash equivalents and marketable securities as of the end of June 2016, compared to $164.5 million at the same time last year and $168.0 million a quarter ago. On top of the above cash position, restricted cash was $138.0 million at the end of the quarter, a decrease of $42.5 million from the preceding quarter. The restricted cash is mainly used to guarantee the company’s short-term loan for the same amount. Himax continues to maintain a very strong balance sheet and remains a debt-free company.

Inventories as of June 30, 2016 were $186.7 million, little changed sequentially and year over year. Accounts receivable at the end of June 2016 were $187.9 million as compared to $182.3 million a year ago and $173.0 million last quarter. DSO was 90 days at the end of June 2016, as compared to 95 days a year ago and 87 days at end of the last quarter. 

Net cash inflow from operating activities for the second quarter was $13.1 million as compared to an outflow of $13.8 million for the same period last year and an inflow of $21.5 million last quarter.

Capital expenditures were $1.7 million in the second quarter of 2016 versus $2.0 million a year ago and $2.2 million last quarter. The capital expenditure in the second quarter consisted mainly of purchases of R&D related equipment.

Fiscal Year 2015 Dividend Declaration

During the second quarter, the Company declared an annual cash dividend of 13 cents per ADS, totaling $22.3 million, which was paid out in early August. Himax’s dividend is determined primarily by the prior year’s profitability. The Company’s decision to pay out 89.0% of last year’s net profit demonstrates the Company’s continued support for its shareholder base and strong confidence in the outlook for revenues and earnings growth in 2016 as well as its long-term growth prospect.

Share Buyback Update

As of June 30, 2016, Himax had 171.9 million ADS outstanding, unchanged from last quarter. On a fully diluted basis, the total ADS outstanding are 172.4 million.

2016 Investor Outreach and Conferences

Ms. Jackie Chang, CFO and Ms. Penny Lin, internal IR Manager, and Mr. John Mattio, Himax’s US-based IR, will maintain corporate access for shareholders and attend future investor conferences in the U.S. and Asia. If you are interested in speaking with the management, please contact Himax’s US or Taiwan-based investor relations contact at the numbers below.