Himax Technologies (NASDAQ: HIMX) reported Q4 EPS of $0.01, $0.03 better than the analyst estimate of ($0.02). Revenue for the quarter came in at $174.9 million versus the consensus estimate of $166.17 million.

• Q4 revenue increased 6.5% sequentially to $174.9M, exceeding the guidance of around flat sequentially
• Product sales: large driver ICs, 33.1% of revenue, up 15.6% QoQ; small and medium-sized driver ICs, 46.4% of revenue, up 5.1% QoQ; non-driver products, 20.5% of revenue, down 3.0% QoQ
• Q4 IFRS gross margin was 20.6%, up 110 bps sequentially, exceeding the guidance of a slight increase from the third quarter’s 19.5%
• Q4 IFRS profit was $1.0M, or 0.6 cents per diluted ADS, exceeding the guidance of a loss of around 3.0 to 4.5 cents per diluted ADS. It is better than loss of $7.2M, or 4.2 cents per diluted ADS in Q3 2019. The better-than-expected earnings include a revaluation gain of $3.8M, or 2.2 cents per diluted ADS, from the Company’s investment made in an AI startup during November 2017
• Q4 non-IFRS profit was $1.5M, or 0.9 cents per diluted ADS, exceeding the guidance of loss of around 2.7 to 4.2 cents per diluted ADS. It is better than loss of $6.9M, or 4.0 cents per diluted ADS in Q3 2019. Likewise, the non-IFRS earnings included the revaluation gain
• FY 2019 revenue declined 7.2% YoY to $671.8M and gross margin was 20.5%. FY 2019 IFRS loss was 7.9 cents per diluted ADS; non-IFRS loss was 7.0 cents per diluted ADS. EPS included a revaluation gain on investment of 2.2 cents
• Company sees strength across all major product lines for the first quarter. Expect a sequential increase in Q1 with an acceleration in Q2 and throughout the rest of 2020, despite the coronavirus impact
• Expects large display driver ICs in Q1 to benefit from panel customers’ inventory replenishment, the fulfillment of rush orders, recovery of large panel prices, a tightening of foundry capacity and the market share gains of key panel customers in China as a result of Korean panel makers’ fab restructuring. Expect growth to continue through 2020
• Smartphone TDDI product roadmap, new end customer design-wins and a foundry capacity advantage. Company is well positioned to gain significant market share in 2020
• Expects automotive and tablet segments to deliver strong growth in 2020
• Expects tablet business to be a major growth area for Himax during 2020. Expect a significant shipment of tablet TDDI in Q1. The strong momentum will accelerate into Q2 and throughout 2020; In-cell TDDI is quickly becoming mainstream for tablets. Company is the primary or sole source partner for all non-iOS tablet in-cell TDDI solutions
• Expects Q1 2020 WLO shipment to double compared to same period last year based on the anchor customer’s demand forecast; though Q1 volume is expected to decrease slightly on a sequential basis
• Company is collaborating with an industry leading 3D ToF camera vendor to develop a new and advanced ToF solution, targeting Android smartphones. Providing WLO spot projector for their reference design which will be ready for leading Android smartphone makers’ evaluation as soon as Q1 2020
• Company has deliberately widened and reduced the low end of the first quarter’s guidance to reflect the potential risk associated with the coronavirus outbreak. Notwithstanding the uncertainty arisen from the coronavirus, the Company is very confident of its business growth across the board in 2020

“We pre-announced preliminary key financial results for the fourth quarter on January 7, 2020 as the revenues, gross margin and EPS of the quarter all exceeded our guidance issued on November 7, 2019. Revenues and gross margin were in line with the pre-announced results while EPS were at the high end of the range. When we hosted our third quarter earnings call this past November, we were facing trends in the marketplace that created headwinds for us. Specifically, at that time our performance and forecast reflected challenges we faced in our smartphone TDDI business. This was exacerbated by an oversupply of panel capacity in the LCD industry that negatively impacted our display driver IC sales and margin. As a result, our overall sales and outlook were weak. Since that time, we have started to see major turnaround in literally all aspects of our businesses,” said Mr. Jordan Wu, President and Chief Executive Officer of Himax.

“Looking at the overall company, historically, the first quarter has seasonally been the lowest quarter of the fiscal year, often down by over 10% on a sequential basis. At this time, we expect to deliver a sequential sales increase in the first quarter. The strength we are seeing in Q1 is expected to extend into Q2 and throughout 2020, despite the coronavirus impact. Notwithstanding the uncertainty arisen from the coronavirus, we are confident that we will see decent growth across the board for all our major product categories in 2020. Our large display driver IC business is benefiting from numerous factors - customers revamping inventory levels, the fulfillment of rush orders, recovery of large panel prices, a tightening of foundry capacity and the market share gains of China, our key customer base, who are gaining as a result of fab restructuring that is occurring in Korea.”

“Our smartphone TDDI business is also expected to deliver strong growth in 2020 despite the impact of the coronavirus. Our smartphone TDDI product roadmap, new end customer design-wins and a foundry capacity advantage all position us well to gain significant market share as we move through 2020. In addition, we expect our other TDDI applications to deliver strong growth in 2020 as well. Specifically, the tablet business is expected to be a major growth area for Himax starting Q1, throughout 2020 and beyond. This is being driven by in-cell TDDI for tablets that is becoming the mainstream technology being rapidly adopted by all major end customers. Given the fact that Himax is the primary partner for non-iOS tablet TDDI solutions, we are well positioned to benefit from this trend.”

“On the non-driver side, starting from WLO, based on our anchor customer’s shipment forecast, we expect very strong Q1 with shipment volume to double from the same period last year, although the volume is expected to decrease slightly on a sequential basis to reflect seasonality. Additionally, we continue to make great progress across our broader non-driver portfolio including 3D sensing, the ultra-low power smart sensing solutions, the CMOS image sensor and our LCOS technology. The adoption of new technologies is expected to drive growth in the second half of 2020 and become significant source of long-term growth opportunities for Himax,” added Mr. Jordan Wu.

“We continue to execute on our strategic plans that have positioned Himax to be uniquely able to take advantage of many opportunities that we see are arising in the marketplace,” concluded Mr. Jordan Wu.

Q1 2020 Outlook

When Himax hosted its third quarter earnings call this past November, the Company was facing trends in the marketplace that created headwinds for the Company. Specifically, at that time the Company’s performance and forecast reflected challenges Himax faced in its smartphone TDDI business. This was exacerbated by an oversupply of capacity in the LCD industry that negatively impacted its display driver IC sales and margin. As a result, the Company’s overall sales and outlook were weak. Since that time, the Company has started to see major turnaround in literally all aspects of its businesses and is seeing strength across all major product lines for the first quarter. The strength the Company is seeing in Q1 is expected to accelerate into Q2 and throughout the rest of 2020.

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