Himax Technologies, Inc.

Good day and thank you for standing by. Welcome to the Hymex Technologies Incorporated first quarter 2024 conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded At this time, I'd like to hand the conference over to your host, Mr. Mark Schwellenberg from MZ Group. Please go ahead.

Welcome, everyone, to the HIMAC's first quarter 2024 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer, Ms. Jessica Pan, Chief Financial Officer, and Mr. Eric Lee, Chief IRPR Officer. After the company's prepared comments, we've allocated time for questions in a Q&A session. If you have not yet received a copy of today's results release, please email HIMX at mzgroup.us, access the press release on financial portals, or download a copy from HIMX's website at www.himx.com.tw. Before we begin the formal remarks, I'd like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call. A list of the factors can be found in the company's SEC filings. Form 20F for the year ended December 31st, 2023, in the section entitled Risk Factors, as may be amended. Except for the company's full year of 2023 financials, which were provided in the company's 20F and filed with the SEC on April 2nd, 2024, the financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS accounting. Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by an independent auditor to which we subject our annual consolidated financial statement and may vary materially from the audited consolidated financial information for the same period. The company undertakes no obligation to publicly update or advise any forward-looking statements, whether as a result of new information, future events, or otherwise. I would now like to turn the call over to Mr. Eric Lee. Eric, the floor is yours.

Thank you, Mark, and thank you, everyone, for joining us. My name is Eric Lee, Chief IRP Officer at HIMAC. On today's call, I will first review IMF's consolidated financial performance for the first quarter of 2024, followed by our second quarter outlook. Jordan will then give an update on the status of our business, after which we will take questions. We will review our financials on an ISI basis. We are pleased to report that Q1 revenue, gross margin, and profit all exceeded guidance issued on February 6, 2024, despite the seasonal downturn, as well as ongoing macro headwinds. The better-than-expected financial results primarily stemmed from strong order momentum in all automotive and the TECOM product lines, coupled with cost improvement and a favorable product mix. First quarter revenues registered $207.6 million, a decrease of 8.8% sequentially, exceeding our guidance range of a 9% to 16% decline. Gross margin came in at 29.3%, outperforming our guidance of around 28.5%. Q1 profit per diluted ADS was 7.1 cents, surpassing the guidance range of 2 cents. to 5 cents. Revenue from large district drivers decreased 7% sequentially to $31.3 million due to seasonally soft macroeconomic conditions compounded by ongoing production and inventory control measures by our leading panel customers. Consequently, our sales of TV and monitor ICs declined sequentially. However, notebook IC sales saw a nice double-digit increase quarter over quarter as customers associated their purchases after several quarters of the stocking. Sales of large panel driver ICs accounted for 15.1% of total revenues for the quarter, compared to 14.8% last quarter and 21.7% a year ago. Small and medium-sized district driver segment revenue reached $144.3 million, a sequential decline of 11.5%. The better-than-guidance result was fueled by strong sales in DDIC for automotive and on late tabloids. Driven by rush orders for traditional DDIC, Q1 automotive driver sales encompassing both traditional DDIC and the TDDI experienced a single-digit decline, outperforming the guidance of a mid-teens decline. Meanwhile, automotive TDDI sales continued to defy the industrial downturn and increased sequentially thanks to our robust pipeline of design win projects. The automotive business including traditional DDIC, TDDI, TCAM, and Olay sales remained the largest revenue contributor in first quarter, representing around 46% of total sales. Q1 smartphone ISD sales declined sequentially but exceeded guidance fueled by rush orders from leading customers. Conversely, tablet driver sales declined as expected amnesty, the typical low season characterized by sluggish demand. The small and medium-sized driver IC segment accounted for 69.5% of total sales for the quarter, compared to 71.6% in the previous quarter and 63.3% a year ago. First quarter non-driver sales exceeded guidance, reaching $32 million an increase of 3.4% from the previous quarter. The better-than-expected performance is attributable to a resurgence in order for large-sized spray TCAM products. In the realm of automotive TCAM, the adoption of our automotive local DMH TCAM continues to rapidly expand, as evidenced by increasing number of project awards from numerous tier one for the new vehicle project of their OEM customers around the world. This set the stage for robust sales growth in coming years. Non-driver product accounted for 15.4% of total revenues as compared to 13.6% in previous quarter and the 15% a year ago. First quarter operating expenses were $50.7 million, a decrease of 3.1% from the previous quarter and a decline of 0.6% from a year ago. Given the persistent macroeconomic headwind, we continue to be diligent with strict budget and expense control measures. First quarter operating income was $10 million or 4.8% of sales compared to 7.2% of sales for the same period last year and 7.3% of sales last quarter. The decreases in operating margin were primarily driven by lower sales. The sequential decrease was also attributed to lower growth margin. However, Q2 growth margin is on track to rebound from Q1. First quarter after-test profit was $12.5 million, or 7.1 cents per diluted ADF, compared to $23.6 million, or 13.5 cents per diluted ADF last quarter, and $14.9 million, or 8.5 cents per diluted ADF in the same period last year. Turning to the balance sheet, we had $277.4 million of cash, cash equivalents, and other financial assets at the end of March 2024, compared to $223.8 million at the same time last year and $206.4 million a quarter ago. The increase in cash balance stemmed primarily from continuous debunking effort across all major profile lines. In Q2, however, cash equivalent and other financial assets are set to decline primarily due to decreasing sales in the previous two quarters, resulting in lower Q1 receivables. In addition, accounts payables is expected to increase as a result of the rising Q1 wafer orders placed in preparation for higher shipment volumes starting in Q2. Other significant Q2 cash outflows include annual income tax payments as well as refunds to certain customers for deposits made during the industry-wide capacity supply shortage. As of the end of the first quarter, we had $39 million in long-term unsecured loans, of which $6 million was the recurring portion. Our quarter end inventory as of March 31st, 2024, was $201.9 million, lower than $217.3 million last quarter, yet another illustration of our successful destructing effort. Accounts receivables at the end of March 2024 was $212.3 million, down from $235.8 million last quarter and down from $252.2 million a year ago. DSO was 93 days at the quarter end. as compared to 91 days the last quarter and 93 days a year ago. First quarter capital expenditures was $2.7 million versus $15.1 million last quarter and $2.8 million a year ago. The first quarter CAPEX was mainly for R&D-related equipment and in-house testers of our IC design business. Prior to today's call, we announced an annual cash dividend of $0.29 per ADS, totaling $51 million in the payroll on July 12, 2024. With a payout ratio of 100% of the previous year's profit, the high payout ratio is supported by our positive business outlook as we pursue business objectives and the strike for sustainable long-term growth and shareholder value while maintaining the healthy balance sheets. As of March 31, 2024, HyMAC has 174.7 million ADS outstanding unchanged from last quarter. On a fully diluted basis, the total number of ADS outstanding for the first quarter was Now, turning to our second quarter 2024 guidance, we expect second quarter revenues to increase 8% to 13% sequentially. Growth margin is expected to be around 31.5% to 33.5%, a notable increase from 29.3% of the previous quarter, primarily because of a higher sales from automotive and the T-com business, both of which enjoyed both better gross margin than corporate average. The final number may vary depending on product mix. The second quarter profit attributable to shareholders is estimated to be in the range of $0.13 to $0.17 per fully diluted area. I will now turn the call over to Jordan to discuss our Q2 outlook. Jordan, the floor is yours.