Himax(HIMX)2022-11-10 17:59Financial Data and Key Metrics Changes - Third quarter net revenues were $213.6 million, a decrease of 31.7% sequentially but exceeded guidance of a decrease of around 35% to 39% [8] - Gross margin was 36.3%, down from 43.6% in the previous quarter, but within the guidance range of 35.5% to 37.5% [8][13] - Non-IFRS profit per diluted ADS was 17.0 cents, beating guidance of 11.6 cents to 15.6 cents, while IFRS profit per diluted ADS was 4.8 cents, exceeding guidance of 0.2 cents to 4.2 cents [8] Business Line Data and Key Metrics Changes - Revenue from large display drivers was $41.3 million, a decrease of 39.8% sequentially, accounting for 19.3% of total revenues [9] - Small and medium-sized display driver segment revenue was $141.4 million, a decline of 29.9% sequentially, contributing 66.2% of total sales [10][11] - Non-driver revenue was $30.9 million, down 26.9% from the previous quarter, with Tcon business representing more than 7% of total sales [12] Market Data and Key Metrics Changes - Automotive business represented over 35% of total sales, despite a double-digit decline sequentially due to inventory control measures [11] - AMOLED sales, including DDIC and Tcon, were up more than 45% sequentially, accounting for more than 8% of total sales [10] - E-paper business expected to increase double digits quarter-over-quarter, driven by large size display shipments [26] Company Strategy and Development Direction - The company is cautiously managing wafer starts to balance inventory levels and foundry contract fulfillment amid macroeconomic challenges [18] - Focus on high visibility segments such as automotive, AMOLED, Tcon, and WiseEye AI image sensing for future growth [19][20] - Plans to maintain a flat operating expense while reallocating resources to high visibility product lines [44] Management's Comments on Operating Environment and Future Outlook - The near-term economic outlook is bleak due to elevated inflation, rising interest rates, and geopolitical conflicts affecting visibility in consumer-centric products [18] - Despite challenges, the automotive segment shows better visibility and is expected to drive growth, with a projected 50% growth in the automotive business for 2022 [19][23] - The company anticipates gross margin pressure due to high inventory offloading but expects to emerge stronger post-destocking cycle [41] Other Important Information - The company had $227.9 million in cash and equivalents as of September 30, 2022, down from $461.6 million a quarter ago due to dividend payouts [15] - Inventory levels increased to $410.1 million, reflecting a drop in demand and customer inventory control measures [16] - The company announced the divestiture of its subsidiary Emza Visual Sense, which will not affect existing business with Dell [33] Q&A Session Summary Question: Comments on gross margin outlook - Management indicated that gross margins are under pressure due to high inventory levels and price reductions from foundries, making it difficult to predict the lowest point for gross margins next year [38][39] Question: Expectations on managing operating expenses in 2023 - Management plans to keep non-IFRS operating expenses flat while reallocating resources to high visibility product lines, despite inflationary pressures [43][44] Question: Future foundry adoption plans - The company intends to continue using Taiwanese foundries as the primary source while expanding collaborations with Chinese foundries amid geopolitical tensions [48][49] Question: Impact of new Chinese competitors - Management acknowledged intensified competition from Chinese firms but emphasized their strong position in automotive and other segments, focusing on technology upgrades and strategic partnerships [53][54]