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Himax Technologies, Inc. Reports First Quarter 2016 Financial Results and Provides Second Quarter 2016 Guidance

Company Meets Q1 Revenue Guidance, Beats Gross Margin and EPS Guidance

Provides Q2 2016 Guidance Revenue to Increase 7.5 to 12.5% Sequentially, Gross Margin to be Around 26% and GAAP EPS to be 8.5 to 10.5 Cents

  • Net revenue for the quarter increased 1.3% sequentially to $180.3 million, meeting previously issued Company guidance. Net revenue was affected by the delayed shipments from the Tainan earthquake on February 6th, without it, the Company would have beat its revenue guidance.
  • Compared to the previous quarter, large-sized panel driver sales increased 5.8%, leading display growth. Small and medium-sized panel driver sales decreased 3.0%, slightly better than the original guidance. Non-driver sales increased 3.4%, led by strong sequential growth of AR/VR related business.
  • Gross margin for the quarter increased 330 bps to 26.2% from Q4 2015, exceeding Q1 2016 guidance of 25% and achieving historical high due to favorable product mix change.
  • Q1 2016 GAAP net income was $13.1 million, or 7.6 cents per diluted ADS, exceeding guidance of 5.5 to 7.5 cents. GAAP net income increased 113.5% from Q4 2015 and increased 4.2% from Q1 2015.
  • Company's Q2 2016 guidance highlights positive trends in market share gain, new product launches and AR/VR business opportunities for FY2016.

TAINAN, Taiwan, May 12, 2016 (GLOBE NEWSWIRE) -- Himax Technologies, Inc. (HIMX) (“Himax” or “Company”), a leading supplier and fabless manufacturer of display drivers and other semiconductor products, announced its financial results for the first quarter ended March 31, 2016.

SUMMARY FINANCIALS

First Quarter 2016 Results Compared to First Quarter 2015 Results (USD in millions) (unaudited)
Q1 2016Q1 2015CHANGE
Net Revenues$180.3 million$179.0 million+0.7%
Gross Profit$47.2 million$46.0 million+2.5%
Gross Margin26.2%25.7%+0.5%
GAAP Net Income Attributable to Shareholders$13.1 million$12.6 million+4.2%
Non-GAAP Net Income Attributable to Shareholders $13.5 million (1)$13.1 million (2)+2.9%
GAAP EPS (Per Diluted ADS, USD)$0.076$0.073+4.1%
Non-GAAP EPS (Per Diluted ADS, USD)$0.078 (1)$0.076 (2) +2.8%

(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.

First Quarter 2016 Results Compared to Fourth Quarter 2015 Results (USD in millions) (unaudited)
Q1 2016Q4 2015CHANGE
Net Revenue$180.3 million$178.0 million+1.3%
Gross Profit$47.2 million$40.7 million+15.8%
Gross Margin26.2%22.9%+3.3%
GAAP Net Income Attributable to Shareholders$13.1 million$6.1 million+113.5%
Non-GAAP Net Income Attributable to Shareholders$13.5 million (1)$6.5 million (2)+107.2%
GAAP EPS (Per Diluted ADS, USD)$0.076$0.036+113.4%
Non-GAAP EPS (Per Diluted ADS, USD)$0.078 (1)$0.038 (2)+107.1%

(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 delivered sequential revenue growth despite 9 less working days during the quarter. Our 2016 first quarter revenue was $180.3 million. Gross margin for the quarter was 26.2%, marking the highest gross margin since our inception due to favorable product mix. First quarter GAAP earnings per diluted ADS came in at 7.6 cents. Both our 2016 first quarter gross margin and EPS exceeded our guidance provided in February while revenues came in within our guided range. However, the earthquake that hit in Tainan on February 6th did cause some delayed shipments of large panel driver ICs to one of our major customers during the quarter. Without the earthquake, we could have been at the high end of, if not beat, our revenue guidance. We do not expect further negative impact from the earthquake as that customer’s facilities have recovered entering the second quarter,” began Mr. Jordan Wu, President and Chief Executive Officer of Himax. “The strong result was due mainly to China’s panel capacity expansion and in-sourcing of local TV set makers, coupled with our large panel driver IC share gains. We also benefited from stronger than expected small and medium-sized driver IC momentum due to more positive end demand in China, the addition of a new major smartphone customer since the fourth quarter of 2015, and new shipment of AMOLED driver ICs. On top of that, accelerating AR/VR related business and other non-driver products lifted the revenues of our non-driver product segment.”

Mr. Wu concluded: “We are very encouraged to experience 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. Our growth momentum stems from the successful implementation of a multi-year plan to diversify our products and customer base. Looking ahead, we expect these growth catalysts mentioned above to continue in 2016 and beyond, and we remain committed to our growth strategy.”

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

Display drivers for large-sized panels$65.736.4%$57.632.2%+14.1%
Display drivers for small/medium-sized panels$79.444.1%$87.048.6%-8.7%
Non-driver products$35.219.5%$34.419.2%+2.2%
Total$ 180.3100.0%$ 179.0100.0%+0.7%
Q1 2016%Q4 2015% % Change
Display drivers for large-sized panels$65.736.4%$62.134.9%+5.8%
Display drivers for small/medium-sized panels $79.444.1%$81.946.0%-3.0%
Non-driver products$35.219.5%$34.019.1%+3.4%
Total$ 180.3100.0%$ 178.0100.0%+1.3%

The first quarter revenue of $180.3 million represented a 1.3% sequential increase and a 0.7% increase from the same period last year. Revenue from large panel display drivers was $65.7 million, up 5.8% sequentially, and up 14.1% from a year ago. Large panel driver ICs accounted for 36.4% of the Company’s total revenues for the first quarter, compared to 34.9% in the last quarter and 32.2% a year ago. Without the earthquake mentioned earlier, Himax could have achieved double digit sequential growth it indicated earlier for this product line. Monitor demand continued to show strength for the past few quarters as UHD resolution models started to outgrow legacy models. TV remained the bright spot as in the last few quarters with 4K TV penetration doubled from the previous quarter. To sum up, if look only at China, driver IC business for TVs and large panel overall grew phenomenally both sequentially and year-over-year. In comparison, worldwide TV panel shipments actually declined over 10% during the same period compared to the previous quarter, according to market research firm IHS. The Company’s leading market share in China, coupled with rapid capacity ramping of Chinese panel customers and more in-sourcing from their local set maker customers, have led to this favorable result. It is especially worth highlighting that Himax’s engineering collaboration and design-in activities with Chinese panel customers remain robust despite the soft market sentiment.

Revenue for small and medium-sized drivers came in slightly better than guided at $79.4 million, down 3.0% sequentially and down 8.7% from the same period last year. Driver ICs for small and medium-sized applications accounted for 44.1% of total sales for the first quarter, as compared to 46.0% in the previous quarter and 48.6% a year ago. The main reason behind the year-over-year decline was the slowdown of business from the Company’s primary Korean end customer as they replaced much of the use of LCD displays, for which Himax was a major IC vendor, with AMOLED displays for their smartphone products. Himax only started the shipment of AMOLED driver IC in March 2016, thereby creating a gap in the small and medium sized business compared to the same period last year. Without this, the Company’s small and medium driver grew mid-teens versus the same period last year while smartphone driver ICs grew over 20%. Sequentially, first quarter sales for smartphones grew low single digit despite fewer working days around Chinese New Year. The positive momentum came from Himax’s Chinese smartphone customers, including a new first-tier player that was added at the end of the fourth quarter of 2015, launching new models and replenishing inventories. But again, the strength was offset by double digit sequential decline in tablets.

As in the last few years, the best-performing category among driver ICs used in small and medium-sized panels continued to be those used in automotive with Q1 revenue up 4% from the previous quarter. It grew double digit from the same period last year.

Revenues from non-driver businesses were $35.2 million, up 3.4% sequentially and up 2.2% from the same period last year. Non-driver products accounted for 19.5% of total revenues, as compared to 19.1% in the previous quarter and 19.2% a year ago. The sequential growth in the non-driver segment was mainly driven by AR/VR related businesses as LCOS and WLO revenues more than doubled during the quarter. Himax has been making shipments for multiple customers, including a major U.S. customer who has recently started shipping their new AR devices. Additionally, timing controller, ASIC service and CMOS image sensor product lines also enjoyed sequential growth due to mass production of new design wins. The year-over-year growth was also led by AR/VR related businesses and timing controllers, partially offset by the deceleration in out-cell touch controllers.

GAAP gross margin for the first quarter was 26.2%, a 330 basis points increase from 22.9% in the previous quarter and up 50 basis points from 25.7% in the same period last year, exceeding the original guidance of 25%. The margin improvement mainly came from better product mix in small and medium-sized driver ICs and non-driver product segments. Major contributors included the accelerating higher end FHD driver IC for smartphones and strong development fees from AR/VR related businesses, as well as improving gross margins for the CMOS image sensor and touch controller product lines. Gross margin expansion was also a testament to Himax cost reduction measures. Gross margin improvement remains one of the Company’s business focuses.

First quarter GAAP operating expenses were $32.0 million in the first quarter of 2016, down 0.4% from the previous quarter and up 5.3% from a year ago. First quarter operating expenses included a one-time donation of NT$10 million, or US$0.3 million, to the earthquake relief fund initiated by the Tainan Municipal Government. Operating expenses increased from the first quarter of 2015 due to higher expenses for additional headcount to support new AR/VR projects, annual salary increases, and increase in R&D expenses. Himax continues to streamline core business R&D activities and implement other expense control measures.

GAAP operating income for the first quarter of 2016 was $15.2 million or 8.4% of sales, up 76.3% sequentially and down 3.0% year-over-year.

Reported GAAP net income for the first quarter was $13.1 million, or 7.6 cents per diluted ADS, compared to GAAP net income of $6.1 million, or 3.6 cents per diluted ADS, in the previous quarter and GAAP net income of $12.6 million, or 7.3 cents per diluted ADS, for the same period last year. GAAP net income increased 113.5% from the previous quarter and increased 4.2% year-over-year. GAAP EPS exceeded the Company’s 5.5 to 7.5 cents guided range.

In the Company’s last earnings call, it has assumed a 20% income tax rate, calculated based on exchange rate of NTD 33.45 against the USD, the exchange rate at the beginning of February 2016. As it turned out, the NTD has appreciated against the USD since February. Himax has thus adjusted its income tax rate to 15%.

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

First quarter non-GAAP net income, which excludes the share-based compensation and acquisition-related charges, was $13.5 million, or 7.8 cents per diluted ADS, compared to $6.5...


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