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Himax(HIMX) - 2022 Q4 - Annual Report
HIMXHimax(HIMX)2023-04-05 16:00
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Revenue and Cost Analysis - The company's cost of revenues as a percentage of total revenues was 75.1% in 2020, 51.6% in 2021, and 59.5% in 2022[258] - In 2022, the cost of wafer fabrication accounted for 63.0% of Himax Taiwan's total manufacturing costs, while assembly and testing costs were 30.3%[258] - Full-year revenues for 2022 were 1.2billion,a22.31.2 billion, a 22.3% decline compared to 2021, primarily due to lockdowns in China, geopolitical tensions, and macroeconomic factors[271] - Revenues decreased by 22.3% to 1.20 billion in 2022 from 1.55billionin2021,drivenbyweakdemandacrossallsegmentsduetomacroeconomicfactors[297]−Large−sizedDisplayDriversrevenuesdecreasedby33.71.55 billion in 2021, driven by weak demand across all segments due to macroeconomic factors[297] - Large-sized Display Drivers revenues decreased by 33.7% to 264.0 million in 2022 from 397.9millionin2021[298]−SmallandMedium−sizedDisplayDriversrevenuesdecreasedby19.2397.9 million in 2021[298] - Small and Medium-sized Display Drivers revenues decreased by 19.2% to 778.9 million in 2022, while automotive segment sales grew over 50%[299] - Non-Driver Products revenues decreased by 14.7% to 158.4millionin2022,partiallyoffsetbyanincreaseinWiseEyesales[300]−Costofrevenuesdecreasedby10.6158.4 million in 2022, partially offset by an increase in WiseEye sales[300] - Cost of revenues decreased by 10.6% to 714.2 million in 2022, but as a percentage of revenues, it increased to 59.5% from 51.6% in 2021[301] - Driver IC segment revenues increased from 756.5millionin2020to756.5 million in 2020 to 1,361.4 million in 2021, but declined to 1,042.9millionin2022[308]−Non−DriverProductssegmentoperatinglossimprovedfrom1,042.9 million in 2022[308] - Non-Driver Products segment operating loss improved from (40.8) million in 2020 to (6.9)millionin2021,butworsenedto(6.9) million in 2021, but worsened to (17.7) million in 2022[308] Share-Based Compensation and Employee Benefits - The company recognized share-based compensation expenses of 4.8millionin2020,4.8 million in 2020, 23.8 million in 2021, and 20millionin2022[261]−Thecompany′sshare−basedcompensationexpensesincludeRSUgrants,withsignificantcashsettlementsin2021(20 million in 2022[261] - The company's share-based compensation expenses include RSU grants, with significant cash settlements in 2021 (23.2 million) and 2022 (17.5million)[264]−Thecompanygranted2,226,690unitsofstockoptionstoemployeesatanexercisepriceof17.5 million)[264] - The company granted 2,226,690 units of stock options to employees at an exercise price of 2.27 on September 30, 2019, with a vesting schedule of 50% after six months and 50% after one year[266] - In 2020, the company granted additional stock options totaling 163,500 units at various exercise prices, which were fully vested by October 1, 2020[266] - The company recognized 0.7millioninshare−basedcompensationexpensesrelatedtostockoptionsin2020[266]−Thecompanygrantedcashbonusestotaling0.7 million in share-based compensation expenses related to stock options in 2020[266] - The company granted cash bonuses totaling 47.7 million and 19.3milliontoemployees,with19.3 million to employees, with 1.6 million and 1.0millionimmediatelyvestedin2021and2022,respectively[267]−Share−basedcompensationexpensesrelatedtoRSUstotaled1.0 million immediately vested in 2021 and 2022, respectively[267] - Share-based compensation expenses related to RSUs totaled 20.0 million in 2022[282] - Aggregate cash compensation for executive officers in 2022 was approximately 1.7million,withshare−basedcompensationat1.7 million, with share-based compensation at 0.4 million[354] - Independent directors received aggregate cash compensation of approximately 150,000in2022,withnoshare−basedcompensation[354]−The2011Long−TermIncentivePlanwasextendedtoSeptember6,2025,allowingforcontinuedgrantofstockoptionsandrestrictedshareunits[368]−Companygranted2,226,690employeestockoptionsonSeptember30,2019,withanexercisepriceof150,000 in 2022, with no share-based compensation[354] - The 2011 Long-Term Incentive Plan was extended to September 6, 2025, allowing for continued grant of stock options and restricted share units[368] - Company granted 2,226,690 employee stock options on September 30, 2019, with an exercise price of 2.27 per option and a vesting schedule of 50% after six months and 50% after one year[373] - Company granted 580,235 RSUs on September 29, 2017, with 96.91% vested immediately and settled by 6.1millionincash,andtheremaindervestingequallyoverthreeyears[376]−Companygranted676,273RSUsonSeptember26,2018,with97.156.1 million in cash, and the remainder vesting equally over three years[376] - Company granted 676,273 RSUs on September 26, 2018, with 97.15% vested immediately and settled by 3.8 million in cash, and the remainder vesting equally over three years[377] - Company granted 1,402,714 RSUs on September 28, 2020, with 98.68% vested immediately and settled by 4.8millionincash,andtheremaindervestingequallyoverthreeyears[377]−Companygranted2,604,545RSUsonSeptember28,2021,with85.634.8 million in cash, and the remainder vesting equally over three years[377] - Company granted 2,604,545 RSUs on September 28, 2021, with 85.63% vested immediately and settled by 23.2 million in cash, and the remainder vesting equally over three years[378] - Company granted 3,987,509 RSUs on September 28, 2022, with 86.41% vested immediately and settled by 17.5millionincash,andtheremaindervestingequallyoverthreeyears[378]ResearchandDevelopment−Researchanddevelopmentexpensesasapercentageofrevenueswere14.617.5 million in cash, and the remainder vesting equally over three years[378] Research and Development - Research and development expenses as a percentage of revenues were 14.6% in 2022, up from 9.8% in 2021[279] - Research and development expenses increased by 16.0% to 175.6 million in 2022, driven by higher RSU compensation and salary expenses[302] - Research and development expenses increased from 122.3millionin2020to122.3 million in 2020 to 175.6 million in 2022, representing 14.6% of revenues in 2022[320] - Capital expenditures increased from 5.8millionin2020to5.8 million in 2020 to 11.8 million in 2022, mainly for design tools and R&D equipment[318] - Research and development employees constitute the largest functional group, with 1,453 employees as of December 31, 2022[366] Product and Market Performance - The majority of the company's revenues in 2022 were derived from sales of display drivers incorporated into TFT-LCD panels[249] - The company's average selling prices are affected by factors such as manufacturing costs, product life cycle, competition, and customer bargaining power[251] - The company's unit shipments depend on customers' panel shipments and the capacity obtained from foundry, assembly, and testing houses[252] - The company's non-driver products have higher gross margins and growth potential compared to driver products, with expectations of improved overall profit margins[254] - The company's design wins are influenced by panel manufacturers introducing new models, establishing new fabs, and replacing existing display driver companies[255] - Display drivers for large-sized applications accounted for 22.0% of 2022 revenues, while small and medium-sized applications accounted for 64.8%[273] - Customer A and its affiliates accounted for 32.3% of 2022 revenues, while Customer C accounted for 9.4%[275] - Automotive TDDI sales grew over 110% in 2021 and over 50% in 2022, with strong growth expected to continue in 2023[325] - The company has been awarded more than 200 automotive TDDI projects, with only a small portion currently in mass production[325] - Smartphone AMOLED solution is set to start mass production from the second half of 2023[326] - AMOLED driver IC for tablets commenced mass production in Q1 2022, with both AMOLED driver and Tcon solutions provided for a leading global tablet customer[327] - Flexible AMOLED driver and Tcon for automotive display ramped up for a flagship EV model in Q1 2022, with increasing awarded projects from global car makers and EV vendors[327] - AMOLED display drivers for smartphone, TV, and notebook applications expected to contribute small sales from H2 2023, with significant shipment growth starting 2024[327] - Local dimming Tcon products supporting 240 Hz frame rate and 8K resolution began mass production in Q2 2022, with robust growth expected from 2023[329] - WLO technology shipments increased significantly in 2018 due to large-scale adoption by a leading AR device customer, with volume production expected to start mid-2023[330] - WiseEye AI solution saw meaningful shipments in 2022 for Dell's notebook and other AI applications, with more design-wins and volume shipments anticipated from 2023[331] - Next-generation WE2 AI processor debuted at CES 2023, offering over 50 times power efficiency compared to WE1, with mass production expected to start in 2023[332] - 3D decoder IC certified by leading Chinese electronic payment standard, with meaningful volume shipments in 2022 and increasing adoption in AR/VR applications[333] - CMOS image sensor business expanded with ultralow power Always-On CMOS image sensor targeting AI applications, receiving global customer feedback and design adoptions[334] - LCoS technology continues to focus on AR goggle devices and AR HUD for automotive, with state-of-the-art products demonstrated by industry-leading customers[335] Financial Position and Cash Flow - Total cash and cash equivalents decreased from 336.0millionattheendof2021to336.0 million at the end of 2021 to 221.6 million at the end of 2022[311] - Net cash provided by operating activities decreased significantly from 388.3millionin2021to388.3 million in 2021 to 82.9 million in 2022[313] - The company has contractual purchase obligations totaling 2,088millionasofDecember31,2022,with2,088 million as of December 31, 2022, with 625 million expected to be paid within the next 12 months[317] - The company paid a cash dividend of 217.9million,or217.9 million, or 1.25 per ADS, on July 12, 2022[399] - Himax Taiwan is permitted to distribute dividends after allowances for taxes, prior years' deficits, legal reserve, special reserve, and preferred share dividends[400] - The company's sales and cost of revenues in 2022 were over 99% denominated in U.S. dollars, with 61% of operating expenses in NT dollars[429] - As of December 31, 2022, the company had no outstanding foreign currency exchange contracts[430] - The company received 0.6millionnettingof300.6 million netting of 30% withholding tax from the depositary relating to the ADR program in 2022[434] Corporate Governance and Board Structure - The company's board of directors consists of 5 members, all of whom are male, with no diverse members as per Nasdaq Rule 5605(f)(2)(B)[352][353] - The audit committee oversees accounting, financial reporting, and internal controls, and is composed of independent directors[358] - The compensation committee reviews and approves compensation structures for directors and executive officers, with no executive present during their own compensation deliberations[359][361] - The nominating and corporate governance committee identifies qualified board candidates and ensures compliance with corporate governance standards[362] - The company's board diversity matrix indicates no female, non-binary, or LGBTQ+ directors as of March 31, 2023[353] - The audit of the company's consolidated financial statements for the years ended December 31, 2021 and 2022 resulted in an unqualified opinion[442] - The company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements[443] - The audit of internal control over financial reporting included assessing risks, testing controls, and evaluating their design and operating effectiveness[443] - Internal control over financial reporting has inherent limitations and may not prevent or detect all misstatements[443] - Projections of control effectiveness to future periods are subject to risks of inadequacy due to changing conditions or deteriorating compliance[443] - The audit was conducted in accordance with PCAOB standards and provided a reasonable basis for the opinion[443] - The company's management is responsible for maintaining effective internal control over financial reporting[443] - The audit report was issued by KPMG on April 6, 2023[444] Shareholder and Ownership Information - As of March 31, 2023, 348,833,050 shares were outstanding, with 212,779,660 shares in the form of ADSs registered under JPMorgan Chase Bank, N.A.[388] - Dr. Biing-Seng Wu beneficially owns 76,904,468 ordinary shares, representing 22.0% of the outstanding shares[392] - Whei-Lan Teng beneficially owns 22,868,370 ordinary shares, representing approximately 6.6% of the outstanding ordinary shares[393] - The company's ADSs are traded on the NASDAQ Global Select Market under the symbol "HIMX"[403] - The company's authorized share capital is 300,000,000 divided into 1,000,000,000 shares of nominal or par value of 0.3each[406]−AU.S.HolderofADSswillbetreatedastheowneroftheunderlyingordinarysharesforU.S.federalincometaxpurposes[416]TaxandRegulatoryEnvironment−Incometaxexpensedecreasedto0.3 each[406] - A U.S. Holder of ADSs will be treated as the owner of the underlying ordinary shares for U.S. federal income tax purposes[416] Tax and Regulatory Environment - Income tax expense decreased to 41.1 million in 2022, with an effective tax rate of 14.9%, down from 20.3% in 2021[305] - The ROC's Foreign Exchange Control Statute requires approval for any conversion exceeding 50millionannuallyforcompanies[409]−TheCaymanIslandsleviesnotaxesonprofits,income,gains,orappreciation,andthecompanyhasobtaineda20−yeartaxexemption[411]SupplyChainandManufacturing−Thecompany′ssupplychainmanagementfocusesonmaintainingcloserelationshipswithkeysemiconductormanufacturingserviceproviderstoensuretimelydeliveryandqualitystandards[259]−Inventorywrite−downsin2022wereapproximately50 million annually for companies[409] - The Cayman Islands levies no taxes on profits, income, gains, or appreciation, and the company has obtained a 20-year tax exemption[411] Supply Chain and Manufacturing - The company's supply chain management focuses on maintaining close relationships with key semiconductor manufacturing service providers to ensure timely delivery and quality standards[259] - Inventory write-downs in 2022 were approximately 22.2 million, included in cost of revenues[286] - Goodwill for Driver IC CGU and WLO CGU was 26.8millionand26.8 million and 1.3 million as of December 31, 2021 and 2022, respectively, with no impairment loss recognized in 2020, 2021, or 2022[289] - Undistributed earnings of subsidiaries totaled approximately 1.28billionasofDecember31,2022,withplanstoreinvesttheseearningsindefinitely[291]−ThecompanyappointedJPMorganChaseBank,N.A.asitsnewAmericandepositaryreceiptbankonJuly14,2017,withacontracttermoftenyears[435]EmployeeandWorkforceInformation−Totalnumberofemployeesincreasedfrom2,056in2020to2,181in2022,with1,453inresearchanddevelopment,285inengineeringandmanufacturing,309insalesandmarketing,and134ingeneralandadministrativeroles[364][366]−Researchanddevelopmentemployeesconstitutethelargestfunctionalgroup,with1,453employeesasofDecember31,2022[366]RelatedPartyTransactions−Companyprovidedaninterest−freeloanof1.28 billion as of December 31, 2022, with plans to reinvest these earnings indefinitely[291] - The company appointed JPMorgan Chase Bank, N.A. as its new American depositary receipt bank on July 14, 2017, with a contract term of ten years[435] Employee and Workforce Information - Total number of employees increased from 2,056 in 2020 to 2,181 in 2022, with 1,453 in research and development, 285 in engineering and manufacturing, 309 in sales and marketing, and 134 in general and administrative roles[364][366] - Research and development employees constitute the largest functional group, with 1,453 employees as of December 31, 2022[366] Related Party Transactions - Company provided an interest-free loan of 1.2 million to VST in both 2021 and 2022, with expectations of repayment in full during 2023[390] - Viewsil provided technical services for the company's research activities, with fees of 1.4millionin2020and2021,and1.4 million in 2020 and 2021, and 1.05 million in 2022[394]