Himax Technologies (HIMX) Tops Q1 EPS by 1c; Offers Confident Q2 Outlook

Himax Technologies (NASDAQ: HIMX) reported Q1 EPS of $0.08, $0.01 better than the analyst estimate of $0.07. Revenue for the quarter came in at $180.3 million versus the consensus estimate of $181.32 million.

GUIDANCE:

Himax Technologies sees Q2 2016 EPS of $0.09 - $0.11, versus the consensus of $0.07. Sees revenue up 7.5 to 12.5 percent sequentially, representing a 14.6 to 19.9 percent year-over-year growth

Business Updates

The Company provided an overview of the trends developing in the industry in its last earnings call, and illustrated how Himax could stand out as a unique beneficiary from them and keep its business resilient to the current macro headwinds. The Company is glad that it had a good start this year and that should be the beginning of a long term growth. The impressive momentum of the Company’s large panel driver ICs for TV application will continue to come from accelerating 4K TV penetration. Himax is a unique beneficiary of its Chinese customers’ continued panel capacity expansion at a time when Chinese TV makers are sourcing more panels locally and starting to make more export. Equally important, the Company finally saw smartphone driver IC order rebounds in China coming from end customers’ restocking and new model launches in the first quarter of 2016, backed by more 4G smartphone proliferation. Small revenue contribution from TDDI will start in the second quarter but Himax believes it will accelerate thereafter. Sales for automotive applications, where the Company has a leading market share, will continue to show strong growth as more and larger panels are going into vehicles. For non-driver products, 2016 will be the year for Himax to see a bigger revenue percentage generated by LCOS and WLO product lines as shipments to its major customers started to take off. The Company is also on track regarding tapping into new territories such as IoT and machine vision with its latest CIS and WLO product offerings as stated in the recent technology press releases. Other non-driver products such as timing controllers and ASIC services will also continue the growth momentum as they are adopted by panel manufacturers for many new product areas. Overall, Himax is seeing strong momentum across all major product lines and feel excited about the growth prospect of 2016, despite the uncertain economic environment.

Following a strong first quarter, though somewhat dented by the earthquake, large panel driver ICs should grow again by high single digit sequentially and more than 25% year-over-year, with China and 4K TV still the major growth engines. Himax expects its 4K TV to remain at high teens percentage of the Company’s total TV driver sales in the second quarter, with such strength mainly from Chinese panel makers focusing on high end models. For reasons detailed earlier, the Company expects sales from its Chinese panel customers to almost double year-over-year.

The other segment in driver business is ICs used in small and medium-sized panels for applications including smartphones, tablets and automotive. Second quarter smartphones sales look set to continue its growth by more than 20% sequentially as the outlook for end-market demand is more optimistic and China’s local mobile operators have started to offer subsidies on smartphone purchases. Himax’s end customers are aggressively launching new models, replenishing inventories in an effort to gaining market share. Since Himax is the early mover in the AMOLED driver IC technology, the Company has been collaborating with multiple panel customers across Korea, China and Japan for AMOLED product development and the Company is seeing more design-ins at these panel makers, reaffirming its technology leadership. Himax believes that AMOLED driver ICs will be one of the critical future growth engines of its small panel driver IC business, especially with quite a few new AMOLED fabs being built in China where the Company has the most comprehensive coverage.

Among driver ICs used in small and medium-sized panels, the best-performing category has been automotive in recent years. Himax anticipates Q2 revenue to grow more than 30% year-over-year. In this product segment, after two strong years, the Company still expects to see robust and sustainable growth throughout 2016 and beyond. Himax’s confidence comes from the fact that higher resolution and larger panels are gradually becoming mainstream for automotive applications. With numerous top automobile brands having been Himax’s indirect end customers, it is well positioned to take advantage of this fast growing market. However, driver ICs used in tablets, as previously indicated, remain weak in Q2, although the decline will likely slow down. Overall, the Company expects small and medium-sized driver IC segment in the second quarter to be up double digit sequentially.

For the past few years, non-driver business segment has been the Company’s most exciting growth segment and a differentiator for Himax. New product developments continue to evolve and gain traction, and the Company remains positive on the long-term growth prospect of its non-driver businesses.

The Company expects around 20% growth in its non-driver products for the second quarter, with non-driver representing the highest percentage of total revenues since the Company’s inception. Looking ahead, many of the Company’s non-driver products, including CMOS image sensor, timing controller, touch panel controller, power management IC, ASIC service, wafer level optics and LCOS microdisplay, are set to grow significantly in 2016 and the years ahead.

First onto the touch panel controller product line. Himax expects on-cell to emerge as the new mainstream touch technology in 2016. The Company’s on-cell sales started to accelerate in late first quarter with shipments to Chinese and Japanese smartphone makers and it expects the momentum to be carried into the second quarter. Himax has also launched force touch products, a new feature to the touch panel, and already secured design-wins from leading smartphone makers for their 2016 models. Furthermore, Himax is one of the pioneers in offering TDDI solutions for the state-of-art in-cell panels, and is in partnerships with essentially all of the panel manufacturers in pure in-cell touch for joint technological development. As announced on April 19th, the Company started mass production and volume shipment for a leading Chinese smartphone customer. Himax is seeing the use of in-cell display with TDDI rapidly becoming the preferred choice for end product customers’ new high end smartphone designs. The volume shipment record validates Himax’s leading pioneer position and confirms the industry’s trend towards pure in-cell panels. The Company anticipates several TDDI design-wins to enter mass production at additional Chinese and Korean smartphone customers and panel makers this year and expects meaningful contribution from TDDI in 2016 and beyond.

Moving on to Himax’s most exciting AR/VR related businesses. Over the last quarter, the level of excitement in the industry as well as capital markets reached a new high as numerous new AR/VR devices were launched with some of them even started making shipment. New applications and markets are advancing. Himax’s design engagements with current and new customers now cover leading companies in gaming, search, mobile, social media, military, automotive and consumer electronics industries; many of them have committed huge amounts of R&D and capital to capture the rapidly expanding future of this game changing product category. Having invested in related technologies for over 15 years, Himax is uniquely positioned as the provider of choice for microdisplay and related optics to enable AR, which is projected by many market research firms to be grabbing a lion’s share in the addressable market of AR/VR in the long term.

As some of the Company’s major customers have already started shipment, Himax saw phenomenal growth from LCOS and WLO product lines in the first quarter. And in the second quarter, revenues from LCOS and WLO are expected to triple again sequentially. Though the Company doesn’t expect big volume from the early generation products of its customers this year, it already sees positive top line and bottom line contribution from these two product areas this year. Himax is confident that LCOS and WLO will account for a significant portion of the Company’s business longer term. Over the past couple of months, Himax has been seeing constant additions of new or existing customers concurrently working on multiple future generation AR designs/devices using Himax’s LCOS and/or WLO for a variety of new applications. These applications range from various glass type AR devices to toys, industrial helmets and head-up displays for automotive. The Company currently has more than 30 customers using its LCOS and/or WLO for their AR devices and optical engine designs, with the vast majority of them in the U.S. When adopted, Himax’s LCOS and WLO typically represent two of the parts with the highest value in an AR product’s bill-of-materials. The models Himax is joint-developing with some of these largest, most recognized companies in the world for consumer market launches will advance the entire sector. Himax believes this is just the beginning of a long term growth story.

As for VR applications, the continuous efforts of Himax’s customers in introducing new products aiming for consumer market are encouraging. Analysts and market research firms are also excited about the technology. The Company has been developing customized chips with high refresh rate to perfect the performance of VR displays in the next generation OLED panels with two top-notch VR players. Himax has also engaged potential new customers on their VR initiatives and started to see certain VR customers showing interests in Himax’s AR related product offerings. This reaffirms the Company’s leading position in OLED driver IC technologies and also leverages the long-standing excellence of its timing controllers, power management ICs, and ASIC services. Himax expects mass production to start in late 2016 to early 2017.

It is also worth highlighting that the Company’s CMOS image sensor product line stabilized in the first quarter, rebounding from its trough in 2015. Looking into the second quarter, there will be mass production of several design wins for notebooks and increased shipments for multimedia applications. Himax briefly introduced its new smart sensor product lines to be used in new applications across smartphones, tablets, AR/VR devices, IoT and artificial intelligence in press releases and last earnings call. This includes the ultra-low-power QVGA CMOS image sensor and the Diffractive Optical Element (“DOE”) integrated WLO laser diode collimator to be paired with a Near Infrared (NIR) sensor. The Company believes the former is by far the lowest power CIS in the industry with similar resolution. It can therefore be applied in a constant state of operation, enabling “always on”, contextually aware, computer vision capabilities. Regarding DOE integrated WLO laser diode collimator with NIR sensor, Himax believes this is the most effective total solution for 3D sensing and detection in the smallest form factor. This breakthrough allows the solution to be easily integrated into next-generation consumer electronics. Currently, Himax is making good progress and has seen encouraging and increasing customer responses. Himax will report the developments in this new territory in due course.

For earnings history and earnings-related data on Himax Technologies (HIMX) click here.

You May Also Be Interested In

• Schlumberger (SLB) earnings in-line, revenue beats expectations
• BCB Bancorp (BCBP) Misses Q1 EPS by 2c
• American Express (AXP) down despite beating Q1 estimates on top and bottom lines