Himax(HIMX) - 2024 Q2 - Earnings Call Transcript

Financial Performance - Q2 2024 revenues reached $239.6 million, a sequential increase of 15.5%, exceeding the guidance range of 8% to 13% [7] - Gross margin improved to 32%, up from 29.3% in the previous quarter and 21.7% year-over-year, aligning with guidance of 31.5% to 33.5% [7][8] - Profit per diluted ADS was 16.9 cents, at the top end of the guidance range of$ 0.13 to $0.17 [8][13] - Operating income was$ 29.3 million, or 12.2% of sales, compared to a loss of 0.9% of sales in the same period last year [12] Business Line Performance - Revenue from large display drivers was $39 million, a sequential increase of 24.7%, driven by customer restocking in TV and monitor ICs [8][9] - Small and medium-sized display driver revenue reached$ 158.8 million, marking a sequential increase of 10.1% due to stronger sales in TDDI products [9][10] - Automotive driver sales increased by high-teens sequentially and over 50% year-over-year, despite expectations of weakening electric vehicle demand [9][10] - Non-driver business revenues reached $41.8 million, up 30.6% from the previous quarter, driven by Tcon product orders [11] Market Performance - Automotive IC business accounted for over 47% of total revenues in Q2, significantly higher than peers [22] - Sales in the Chinese automotive market showed weakness, impacting overall demand for ICs [20][21] - The U.S. and European automotive markets remained stable, contrasting with the fluctuations in China [21] Company Strategy and Industry Competition - The company is focusing on long-term innovation in automotive products, with a commitment to expanding into the automotive OLED panel market [22][23] - Strategic investments in FOCI and Obsidian Sensors aim to enhance product offerings and market reach in high-speed computing and thermal imaging [24][25] - The company is positioned to benefit from the growing demand for advanced automotive displays and is actively collaborating with major panel manufacturers [22][23] Management Commentary on Operating Environment and Future Outlook - Management expressed cautious optimism for Q4, despite recent global financial turmoil impacting consumer confidence [54] - The automotive display market is expected to continue growing, driven by technological advancements and increasing display sophistication [22] - The company anticipates a decline in Q3 revenues due to customer destocking measures, particularly in the Chinese market [20][29] Other Important Information - Operating expenses decreased by 6.7% sequentially and 11.1% year-over-year, reflecting strict budget controls [12] - Cash balance at the end of Q2 was$ 253.8 million, down from $277.4 million in the previous quarter, primarily due to customer refunds and strategic investments [14][15] - The company expects a decline in cash and equivalents in Q3 due to dividend payments and employee bonuses [15][18] Q&A Session Summary Question: Concerns about the automotive business and inventory adjustments - Management acknowledged the recent weakness in the Chinese market and the impact of inventory destocking on sales forecasts [52][54] Question: Timeline for CPO products and long-term confidence - Management indicated that mass production for CPO products is targeted for next year, with early results expected by the end of this year [57][58]