Himax Technologies, Inc.

Hello, ladies and gentlemen. Welcome to Hymex Technologies Incorporation fourth quarter and fiscal year of 2025 earnings conference call. At this time, all participants are in no listening mode. And later, we will conduct a question and answer session. And instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Karen Teo, head of IR, PR, and Hymex. Ms. Chow, please go ahead.

Welcome, everyone. My name is Karen Chow, head of IRPI at HyMEX. Joining me today are Jordan Wu, President and Chief Executive Officer, and Jessica Pan, Chief Financial Officer. After the company's prepared comments, we have allocated time for questions in the Q&A section. If you have not yet received a copy of today's result release, please email hx-ir at hymex.com.tw or hinx at mzgroup.us or download a copy from Hymex's website. Before we begin the formal remarks, I would like to remind everyone that fiscal 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 risk factors can be found in a company's latest ACC filing, Form 20S, and the section entitled Risk Factors, as may be amended. Except for the company's full year 2024 financials, which were provided in the company's 20F and filed with FCC on April 2, 2025. 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 independent auditors. to which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period. On today's call, I will first review the high net consolidated financial performance for the fourth quarter and four years 2025, followed by our first quarter 2026 outlook. Jordan will then give an update on the status of our business. After which, we will take questions. You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. We are pleased to report that our Q4 profit was at the high end of the projected range, issued on November 6, 2025, while sales and gross margin were both in line with the guidance. Both quarter revenue registered at $203.1 million, representing a sequential increase of 2.0%, better than our flat quarter-over-quarter guidance. Gross margin was 30.4%, in line with our guidance of flat just slightly up from 30.2% in the previous quarter. Q for profit for diluted ADS was 3.6%. at the high end of the guidance range of 2.0 to 4.0 cents. Revenue from large display driver canning at $21.7 million, representing an increase of 14.2% from the previous quarter, outperforming our guidance range of a single-digit increase sequentially. This was primarily due to the rush order for both the TV and notebook IC legacy products from panel makers. Customers, through stocking of TV and monitor IC products, along with new Nobility DGI project entering mesh production during the quarter, contributed to the sequential increase. Sales of large panel driver IC accounted for 10.7% of total revenue for the quarter, compared to 9.5% last quarter and 10.5% a year ago. Revenue from the small and medium-sized display driver segment totaled $139.1 million, reflecting a slight decline of 1.3% sequentially. Q4 automotive driver sales, including both the traditional DDIC and TTDI, increased approximately 10% quarter-over-quarter, largely driven by widespread adoption of our marketing-leading TTDI technology among major customers across all continents. Despite customers in global automotive markets, our automotive driver IC sales for the full year of 2025 grew single-digit year-over-year, outpacing the broader market. Meanwhile, revenues for both smartphone and tablet IC segments declined quarter-over-quarter, as customers poured forward purchases in prior quarters. The small and medium-sized display driver IC segment accounted for 68.5% of total sales for the quarter, compared to 70.8% in the previous quarter and 70.3% a year ago. Two-fold non-driver sales reached $42.3 million, a 7.9% increase from the previous quarter, primarily attributable to increased ASIC T-CON shipment to a leading projector customer, along with robust T-CON shipment for automotive applications. T-CON, IMAX continued to hold an undisputed leadership position with the dominant market share in automotive T-CONs. T-Con business accounted for over 10% of total sales, with notable contribution from automotive T-Con. Also during the quarter, our automotive OLED on-sale touch IC entered mass production with the leading brand, marking another milestone and strengthening the foundation for future growth. Non-driver products accounted for 20.8% of total revenue. as compared to 19.7% in the previous quarter and 19.2% a year ago. Fourth quarter operating expenses were $54.9 million, a decrease of 9.6% from the previous quarter by increase of 11.6% compared to the same period last year. The sequential decrease was mainly attributed to a reduction in the annual employee bonuses and the depreciation of the NT dollar against the US dollar, partially offset by an increase in tap out expenses. As part of our standard company practice, annual cash and RSU bonuses are granted at the end of September each year, leading to higher IFRS operating expenses in the Q3 than in other quarters. The year-over-year increase was primarily driven by the increase in tap-out expenses. Salary expenses and the appreciation of the NT dollar against the U.S. dollar were also factors behind the year-over-year increase. Amid the ongoing macroeconomic challenges, we continue to emphasize trade budget and expense controls. Our business was $6.8 million. representing an operating margin of 3.4% compared to negative 0.3% in the previous quarter and 9.7% for the same period last year. The sequential increase was the result of increased revenue and higher gross margin as well as the lower operating expenses. The year-over-year decline reflected the lower sales and gross margin coupled with the higher operating expenses. Q4 after-tax profit was $6.3 million or 3.6 cents per diluted ADF compared to $1.1 million or 0.6 cents per diluted ADF last quarter and down from $24.6 million or 14.0 cents in the same period last year. Now let's quickly review the financial performance for the full year 2025. 2025 was a challenging year for the global economy, shaped by tariffs and other geopolitical uncertainties. Tender customers generally maintained a conservative method of order strategy with a lean inventory level. While consumer electronics demand remained soft, automotive and AI-related applications, where Hynix has strong exposure, proved comparatively resilient. Despite disciplined expense control, R4 in year 2025 operating expenses increased by 1.1%, as we strategically invested in select non-display IC areas with compelling long-term growth potential. Some of which are poised to ramp meaningfully starting in 2027. Reflecting on this market condition, our 2025 four-year revenue totaled $832.2 million, a decline of 8.2% compared to 2024. Our revenue from large-panel display driver IC totaled $90.7 million in 2025, marking a decrease of 28.0% year-over-year and representing 10.9% of total sales. as compared to 13.9% in 2024. Small and medium-sized service sales totaled $575.1 million, reflecting a decrease of 8.0% year-over-year, and accounting for 69.1% of our total revenue, as compared to 69.0% in 2024. Now, driver product sales totaled $166.4 million, an increase of 7.0% year-over-year, and representing 20.0% of our total sales as compared to 17.1% a year ago. Cost margin in 2025 was 13.6%, slightly up from 30.5% in 2024. Operating expenses in 2025 were $210.2 million, a slight increase of 1.1% from 2024, primarily due to the increase in tip-out and salary expenses, as well as the appreciation of the NT dollar against the U.S. dollar in 2025, partially offset by the lower employee bonus compensation compared to last year. 2025 operating income was $44.1 million, or 5.3% of sales, as compared to $68.2 million, or 7.5% of sales in 2024. Our net profit for 2025 was $43.9 million, or 0.25 per diluted ADS, as declined from $70.46 of U.S. dollars per diluted ADS in 2024. Turning to a balance sheet, we had $286.2 million of cash, cash equivalent, and other financial assets as of December 31st, 2025. This compared to $224.6 million at the same time last year and $278.2 million a quarter ago. Q4 operating cash inflow was $15.8 million compared to an inflow of $6.7 million in the prior quarters. We had $28.5 million in long-term unsecured loans with $6.0 million representing the current portion at the end of 2025. Our year-end inventories were $152.7 million. an increase from the $137.4 million last quarter, lower than $158.7 million a year ago. Accounts receivable at the end of December 2025 was $200.9 million, little change from last quarter, but down from $200 a year ago. DSO was 88 days at the quarter end as compared to 87 days last quarter, and 96 days a year ago. Fourth quarter capital expenditure was $4.0 million versus $6.3 million last quarter and $3.2 million a year ago. Fourth quarter capex was mainly for R&D-related equipment for our IC design business. Total capital expenditure for 2025 It was $20.1 million, as compared to $13.1 million in 2024. The increase was primarily due to the construction in progress for the new preschool near our Thailand headquarters built for employees' children, with completion expected by the end of Q2 2026. As of December 31st, 2025, HyMEX had a 174.4 million ADS outstanding, little change from last quarter, and on a fully diluted basis, the total number of ADS outstanding for the fourth quarter, 1.5 million. Now, 2022, our first quarter 2022 guidance. We expect Q1 revenues to decline 2.0% to 6.0% sequentially. Gross margin is expected to be flat to slightly down, depending on product mix. Q1 profit attributable to the shareholder is estimated to be in the range of 2.0 to 4.0 cents per fully diluted area. I will now turn the call over to Jordan to discuss our Q1 2026 outlook. Jordan, the floor is yours.

Thank you, Karen.