Himax Technologies (NASDAQ: HIMX) reported Q1 EPS of $0.01, $0.02 worse than the analyst estimate of $0.03. Revenue for the quarter came in at $155.2 million versus the consensus estimate of $162.1 million.

GUIDANCE:

Himax Technologies sees Q2 2017 EPS of ($0.01)-$0.00, versus the consensus of $0.05. Revenues to be down around 5.0% to flat sequentially, versus consensus of up sequentially.

“Our first quarter revenue, gross margin and GAAP earnings per diluted ADS all met our guidance previously issued on February 16th,” said Mr. Jordan Wu, President and Chief Executive Officer of Himax. “The decline in revenue was primarily a result of several factors that include fewer working days in China and Taiwan, decreased sales in large-sized driver IC business from the phase-out of certain customers’ old models, lower smartphone driver IC sales due to weak China market demand, customers’ continued inventory adjustment and increasing TDDI and AMOLED adoption causing the shrinking addressable market for pure TFT-LCD driver ICs for smartphone; and to a less extent, discontinuation of LCOS and WLO shipment to one of our leading AR device customers. Despite the temporary slowdown experienced in our driver IC business, we continue to work closely with our customers across China, Taiwan and Korea, of which the design-in activities all remain robust.”

Mr. Wu continued: “As we move through 2017, we are seeing ongoing weakness in China smartphone market and the temporary slowdown of our large-size driver IC business. In spite of the short-term headwind, we are positive on DDIC business outlook because of expected shipments for certain customers’ 4K TV models and TDDI products. Various areas of the non-driver IC businesses are also expected to contribute to the improvement of our overall financials from second half of the year. With respect to the non-driver business, particularly in the WLO and CMOS Image Sensor products of 3D scanning solutions, we believe it is one of the most significant new applications for the next generation smartphone. Himax is well recognized to be the front runner and world leader in this important technology. Our SLiMTM product line is the state of the art total solutions for 3D sensing and scanning based on structured light technology, of which we can also provide individual technologies separately to selected customers to accommodate their specific needs. We are seeing strong demand for 3D scanning products from multiple top name customers who are either collaborating with us or engaging us for advanced stage discussions. In light of the promising new business opportunities around the corner, we will continue to invest heavily in R&D and customer engineering regardless of the prevailing unfavorable business conditions. We are aware that this will hit our short-term bottom line, but we believe such investment is extremely important and will bring in very handsome return in the next few years. Our confidence on our strong growth prospects is also evidenced by the unprecedented heavy CAPEX plan for 2017. As announced previously, this year’s CAPEX will be significantly higher than usual. In the last earnings call, we reported the urgent addition of new WLO capacity to meet the near term demands of certain customers. We are pleased to report that the project is going smoothly as planned. Major ramp of the new WLO capacity is scheduled to start from the third quarter of 2017. With regards to AoSTM solutions, we believe our strategic investment in Emza announced in April will enable us to provide turn-key solution and transform AoS sensor to an information analytics device. On the LCOS product line, in addition to AR application, we are pleased to report that we are making great progress in developing high-end head-up-display for automotive applications. As excited as we are on the prospect of non-drive IC products and notwithstanding driver IC’s short term pressure, driver IC has been a core part of our business and will remain so in any foreseeable future. Our technology strength, total solution capability and long term customer relationships in driver IC business remain intact. Overall, we are committed to diversify our product portfolio and customer base with innovative technologies. We believe these will significantly increase shareholder value ultimately.”

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