HIMAX TECHNOLOGIES, INC. - Net revenue decreased 2.1% sequentially to $165.6 million, exceeding guidance.
- Gross margin for the quarter came in at 21.8%, a sequential decrease of 200 bpts.
- Large-sized panel driver sales represented 30.5% of total revenue in Q3 2015, while small and medium-sized panel driver sales represented 50.9% of total revenue, and non-driver sales represented 18.6% of total revenue.
- Q3 2015 GAAP net loss came in at $2.3 million or 1.4 cents versus GAAP net income of $8.8 million, or 5.1 cents in Q2 2015; Q3 2015 Non-GAAP net income decreased to $1.7 million or 1.0 cent versus $9.3 million or 5.4 cents in Q2 2015.
- Company remains positive on its long term business outlook.
Third Quarter 2015 Results Compared to Third Quarter 2014 Results (USD in millions) (unaudited) | |||
Q3 2015 | Q3 2014 | CHANGE | |
Net Revenue | $165.6 million | $222.3 million | -25.5% |
Gross Profit | $36.1 million | $54.4 million | -33.7% |
Gross Margin | 21.8% | 24.5% | -2.7% |
GAAP Net Income (Loss) Attributable to Shareholders | $(2.3) million | $11.1 million | -120.9% |
Non-GAAP Net Income Attributable to Shareholders | $1.7 million (1) | $19.1 million (2) | -91.2% |
GAAP EPS (Per Diluted ADS, USD) | $(0.014) | $0.065 | -120.9% |
Non-GAAP EPS (Per Diluted ADS, USD) | $0.010 (1) | $0.111 (2) | -91.2% |
Non-GAAP Net income attributable to common shareholders and EPS excludes $3.9 million of share-based compensation expenses, net of tax and $0.1 million non-cash acquisition related charge, net of tax.
Non-GAAP Net income attributable to common shareholders and EPS excludes $7.9 million of share-based compensation expenses, net of tax
and $0.1 million non-cash acquisition related charges, net of tax.
Third Quarter 2015 Results Compared to Second Quarter 2015 Results (USD in millions) (unaudited) | |||
Q3 2015 | Q2 2015 | CHANGE | |
Net Revenue | $165.6 million | $169.2 million | -2.1% |
Gross Profit | $36.1 million | $40.3 million | -10.5% |
Gross Margin | 21.8% | 23.8% | -2.0% |
GAAP Net Income (Loss) Attributable to Shareholders | $(2.3) million | $8.8 million | -126.4% |
Non-GAAP Net Income Attributable to Shareholders | $1.7 million (1) | $9.3 million (2) | -82.0% |
GAAP EPS (Per Diluted ADS, USD) | $(0.014) | $0.051 | -126.4% |
Non-GAAP EPS (Per Diluted ADS, USD) | $0.010 (1) | $0.054 (2) | -82.0% |
Non-GAAP Net income attributable to common shareholders and EPS excludes $3.9 million of share-based compensation expenses, net of tax and $0.1 million non-cash acquisition related charges, net of tax.
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 charges, net of tax.
'Our 2015 third quarter revenue exceeded guidance, gross margin, GAAP and non-GAAP earnings per diluted ADS all met at the low end of our guidance for the quarter,' stated Mr. Jordan Wu, President and Chief Executive Officer of Himax. 'During our second quarter earnings call, we stayed conservative given economic instability continued to add uncertainty to consumer electronics demands. As a consequence, we anticipated gross margin to be under pressure as panel prices has softened.'
Mr. Wu concluded: 'Areas of sales that exceeded guidance is aligned to our continued success in gaining market share in China, and rush orders that emerged in later part of the quarter. While still maneuvering carefully in a market with low visibility, we remain optimistic about our active and ongoing design-in activities with leading customers in both driver IC and non-driver products. Moreover, our confidence in our LCOS and WLO product offerings for the AR market never waned with current and prospective design clients which include brand leading US and global companies.'
Q3 2015 | % | Q3 2014 | % | % Change | |
Display drivers for large-sized panels | $50.5 | 30.5% | $61.2 | 27.5% | -17.5% |
Display drivers for small/medium-sized panels | $84.3 | 50.9% | $113.3 | 51.0% | -25.6% |
Non-driver products | $30.8 | 18.6% | $47.8 | 21.5% | -35.6% |
Total | $165.6 | 100.0% | $222.3 | 100.0% | -25.5% |
Q3 2015 | % | Q2 2015 | % | % Change | |
Display drivers for large-sized panels | $50.5 | 30.5% | $54.3 | 32.1% | -6.9% |
Display drivers for small/medium-sized panels | $84.3 | 50.9% | $82.8 | 48.9% | +1.8% |
Non-driver products | $30.8 | 18.6% | $32.1 | 19.0% | -4.2% |
Total | $165.6 | 100.0% | $169.2 | 100.0% | -2.1% |
Himax's third quarter revenue was $165.6 million, higher than the guided $154.0 to $160.7 million. Overall, driver IC sales came in better than guidance across all applications during the quarter. The gap between guidance and actual shipments mainly came from rush orders toward the quarter end. Revenue from large panel display drivers was $50.5 million, a decrease of 6.9% sequentially, and down 17.5% from the third quarter of 2014. Large panel driver IC accounted for 30.5% of total revenues for the third quarter, compared to 32.1% in the last quarter and 27.5% a year ago. Although the overall large panel revenue decreased year-over-year, Himax's driver IC business for TVs outperformed the market, growing more than 25% during the first three quarters versus the market growth of around 11%. This was due to market share gains in the Chinese panel manufacturer market and increasing 4K TV panel builds in China. The overall weakness in the Company's combined large panel DDIC segment was a result of decreasing demand from monitor and NB sectors.
Revenues for small and medium-sized drivers were $84.3 million, up 1.8% sequentially and down 25.6% from the same period last year. Driver ICs for small and medium-sized applications accounted for 50.9% of total sales for the third quarter, as compared to 48.9% in the previous quarter and 51.0% a year ago. During the quarter, geographically, revenues to Korean end customers grew sequentially while those to Chinese smartphone OEMs declined. On the other hand, the year-over-year decline was a continuous reflection of weak smartphone and tablet markets this year, worsened by key Korean customer strategically increasing the weight of AMOLED panels in their smartphone product portfolio which Himax hasn't been able to service yet.
Revenues from Himax's non-driver businesses were $30.8 million, down 4.2% sequentially and down 35.6% from the same period last year. Non-driver products accounted for 18.6% of total revenues, as compared to 19.0% in the previous quarter and 21.5% a year ago. CMOS image sensor business was the main factor behind the decline. CIS aside, Himax's non-driver products were down only slightly year over year due to a soft consumer electronics market. The Company's CMOS image sensors experienced a series of slow quarters this year even though it remains one of the market share leaders in notebook application. The reason for this is found in the weak demand of low end smartphones, the main target market for Himax's 2MP and 5MP sensors. At the same time, the Company wasn't able to ramp 8MP and 13MP at
the planned pace. Overall, during the first three quarters of this year, CMOS image sensors sales declined more than 50%.
GAAP gross margin for the third quarter of 2015 was 21.8%, a 200 basis points decrease from 23.8% in the previous quarter and down 270 basis points from 24.5% in the same period last year. As guided, the Company anticipated this result due to pricing pressure of DDIC products and lower NRE income. During the quarter, panel makers have become very cost sensitive, pressured by weakening demands and decreasing panel prices. The Company's gross margin demonstrated this consequence. Various costs-down measures have already been under way, yet cycle time difference between inventory build-up and actual product shipment hindered the benefit from emerging quick enough. The Company expects the driver IC pricing pressure to overhang for the next few quarters. However, Himax does anticipate increasing new development activities, largely in the areas of LCOS and WLO, which will result in additional NRE incomes to lift the Company's gross margin. More importantly, such development activities will eventually lead to mass production, enhancing the Company's gross margin even further in the long run.
Third quarter GAAP operating expenses were $38.5 million, up 22.6% from the previous quarter and down 7.8% from a year ago. The significant sequential increase was caused by the higher RSU expense in the third quarter which was considered in the Company's guidance. Himax managed to keep its year-to-date GAAP operating expenses flat year over year while it continued to pursue new business opportunities. As an annual practice, Himax rewards employees with annual bonus at the end of September each year which always leads to an increase in the third quarter GAAP operating expenses compared to the other quarters of the year. This year, the annual bonus compensation, including shares and cash payout, totaled $5.0 million, out of which $4.5 million was vested immediately and expensed in the third quarter of 2015. In comparison, the annual bonus compensation was much higher at $15.1 million last year, out of which $9.3 million was vested immediately.
Excluding the RSU charge, Himax's third quarter operating expenses were $34.0 million, up 8.3% from the previous quarter and up 4.6% from the same quarter 2014. Both increases were related to increased salary expenses caused by higher engineering headcount, annual salary raises, and continued project tape-outs. This is in line with the repeated indications the Company made before that despite ongoing expense control in response to macro uncertainty, it is still expanding in its LCOS and WLO businesses. The combined total headcount of the two areas is expected to be up by around 200 during 2015.
GAAP operating loss for the third quarter of 2015 was $2.5 million or -1.5% of sales, compared to operating income of
$8.9 million last quarter and $12.6 million the same period last year.
Reported GAAP net loss for the third quarter was $2.3 million, or 1.4 cents per diluted ADS, compared to GAAP net income of $8.8 million, or 5.1 cents per diluted ADS, in the previous quarter and GAAP net income of $11.1 million, or
6.5 cents per diluted ADS, for the same period last year. The sequential profit decline was caused by lowered revenue and gross margin, and higher operating expenses. Likewise, the year over year revenue and gross margin also declined
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