Himax(US:HIMX)2023-11-09 15:36Financial Data and Key Metrics Changes - Third quarter revenues were $238.5 million, an increase of 1.5% sequentially and up 11.6% year-over-year, exceeding guidance [6] - Gross margin improved to 31.4%, significantly up from 21.7% in the previous quarter, reflecting a favorable product mix and absence of one-time expenses [6][10] - Profit per diluted ADS was 6.4 cents, surpassing the guidance range of 1.5 cents to 6.0 cents [7] Business Line Data and Key Metrics Changes - Revenue from large display drivers was $43.7 million, down 3.7% sequentially but up 5.9% year-over-year, with a decline in TV IC sales as expected [7] - Small and medium-sized display driver revenue reached $161.1 million, up 7.2% sequentially and 13.9% year-over-year, driven by strong automotive sector performance [8] - Non-driver sales were $33.7 million, down 14.4% from the previous quarter but up 9.0% year-over-year, with Tcon business experiencing a low teens sequential decline [10] Market Data and Key Metrics Changes - The automotive business accounted for nearly 45% of total sales, with a notable increase in TDDI and local dimming Tcon technologies [9] - The smartphone and tablet driver sales decreased double digits sequentially, reflecting continued soft market demand [8] - Inventory levels decreased significantly to $259.6 million from $297.3 million in the previous quarter, indicating effective destocking [15] Company Strategy and Development Direction - The company aims to solidify its leadership in the automotive display market, focusing on TDDI and local dimming Tcon technologies [18][25] - A partnership with Nexchip is expected to optimize cost structures and expand foundry supply, particularly in the automotive sector [19][50] - The company is implementing measures to reduce costs and improve operational efficiencies amidst challenging economic conditions [19] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the automotive business, anticipating continued growth despite macroeconomic headwinds [18] - The fourth quarter is expected to see subdued sales growth due to sluggish end market demand and cautious inventory management [17] - Management noted that ASP is stabilizing, but price pressure may persist due to macroeconomic conditions [47] Other Important Information - Operating expenses for Q3 were $63.7 million, up 19.8% sequentially but down 12.5% year-over-year, primarily due to annual bonus expenses [11] - The company expects fourth quarter revenues to decline by 5.0% to 11.0% sequentially, with gross margin projected around 30% [16] Q&A Session Summary Question: Guidance discrepancies across product lines - Management acknowledged the differences in guidance versus market conditions, attributing strong automotive demand to their market dominance and customer restocking needs [40][42] Question: ASP trends and foundry cooperation - Management indicated that ASP is stabilizing, with price pressure expected to persist but not as severe as in previous quarters, and highlighted the benefits of the Nexchip partnership [46][48] Question: Fourth quarter EPS guidance - Management confirmed that tax benefits and financial modeling contributed to the higher end of the EPS guidance for Q4 [51][52]