Himax Technologies, Inc. (HIMX) Q4 2025 Earnings Call Transcript

Hello ladies and gentlemen, welcome to Himex Technologies Incorporation 4th 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 Tell, Head of IR, PR and Himex. Ms. Tao, please go ahead.

Welcome, everyone. My name is Karen Tao, head of IRPI at HIMEX. 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 HIMEX.com.tw or h-i-n-x at mzgroup.us or download a copy from HIMEX'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 or loss described in this conference call. A list of risk factors can be found in the company's latest ACC filings, 420S, 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 20s and file with sec on f4 second 2025. the financial information included in this conference code 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 reach, 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 Himex 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 growth margin were both in line with the guidance. Both quarter revenue registered the $203.1 million, representing a sequential increase of 2.0%, better than our flag quarter over quarter guidance. Growth margin was 30.4% in line with our guidance of flag to slightly up from 30.2% in the previous quarter. Q4 profit for diluted ADS was 3.6 cents, at the high end of the guidance range of 2.0 to 4.0 cents. Revenue from large display driver came in 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 NERBUT 3DGI project entering match 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 percent last quarter and 10.5 percent a year ago revenue from the small and medium size display driver segment totaled 139.1 million dollars reflecting applied decline at 1.3 percent sequentially q4 automotive driver cells including both the traditional ddic and tdpi increased approximately 10 percent quarter over quarter largely driven by widespread adoption of our marketing-related TGDI technology among major customers across all continents. Despite customers in global automotive markets, our automotive driver ISC sales for the full year of 2025 grew single-digit year-over-year, outpacing the broader market. Meanwhile, revenues for both smartphone and tablet ISC segments declined quarter-over-quarter as customers pulled 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 ASTC consummate to a leading projector customer, along with robust t-consumers for automotive application t-cons are high max continued to hold an undisputed leadership position with the summoner market share in the automotive t-cons t-cons business accounted for over 10 percent of total sales with notable contribution for automotive t-cons also during the quarter our automotive or late on sale touch ic and from this production with the leading brand marking another milestone and threatening the foundation for future growth non-driver products accounted for 20.8 percent of total revenue as compared to 19.7 percent in the previous quarter and 19.2 percent a year ago fourth quarter operating expenses worth fifty four point nine million dollars a decrease of nine point six percent from the previous quarter by increase of the 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 U.S. dollar, partially offset by an increase in paypal 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 land in other quarters the year-over-year increase was primarily driven by the increase in table expenses salary expenses and appreciation of the NT dollar against the US dollar were also factors behind a year-over-year increase and the ongoing macroeconomic challenges we continue to exercise trade budget and expense controls profit was 6.8 million dollars representing an operating margin of 3.4 percent compared to negative 0.3 percent in the previous quarters and 9.7 percent for the same period last year the sequential increase was the result of increased revenue and high gross margin as well as the lower operating expenses the year-over-year decline reflected the lower sales and gross margin coupled with higher operating expenses. Q4 after-tax profits was at $6.8 million or 3.6 cents per diluted ADS, compared to $1.1 million or 0.6 cents per diluted ADS 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, shared by tariffs and our geopolitical uncertainty. Panel customers generally maintain a conservative method order strategy with a lean inventory level. While consumer electronics demand remains soft, automotive and AI-related applications, where high NAICS had strong exposure proved comparatively resilient. Despite discipline expense control, our four-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 minimally starting in 2027. Reflecting these market conditions, our 2025 four-year revenue totaled $832.2 million, a decline of 8.2% compared to 2024. Our revenue from large-tenal 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 30.9% in 2024. Small and medium-sized revenue 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. Gold margin in 2025 was 13.6%, drastically 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 dollars or 5.3 percent of sales as compared to 68.2 million dollars or 7.5 percent of sales in 2024 our net profit for 2025 was at 43.9 million dollars or 0.25 per diluted ADS, a decline from $0.46 US dollars per diluted ADS in 2024. Turning to a balance sheet, we had a $286.2 million of cash, cash equivalent, and other financial assets as of December 31, 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 have $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 $137.4 million last quarter but 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 quarter and 3.2 million dollars a year ago fourth quarter capex was many for r&d related equipment for our ic design business total capital expenditure for 2025 was 20.1 million dollars as compared to 13.1 million dollars in 2024 the increase was primarily due to the construction in progress for the new preschool near our china headquarters built for employees children with completion expected by the end of q2 2026 as the 31st 2025 timex 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 million now 10-12 first quarter 2022 guidance we expect q1 revenues to decline 2.0 percent to 6.0 percent sequentially growth 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 per fully diluted ADS. I will now turn the call over to Jordan to discuss our Q1 2026 outlook. Jordan, the flow is yours.

Conditions remain under pressure from ongoing macroeconomic uncertainties. In memory, the further weight for electronic products. However, compared with consumer products, the automotive segment total sales is more immune to memory crisis. Visibility outlook of automotive sector remains limited amid the backdrop of uncertain government policy and consumer sentiment. However, we expect the first quarter to with sales rebounded in the second quarter and this is going into the second half, supported by lean customer inventory levels and new projects for automotive customers scheduled to enter mass production. Later, it continues growth in our known driver IC business, TECON, and the WhiteLine AI, new technology offerings, and strong design wind pipeline in DDI on the screen.

Now if you would like to ask the question you may press star key and number one on your telephone keypad or submit your questions through the web If you would like to ask the question, please press star key and number one on your telephone keypad. Thank you. First question, Nathan and Jeff, Morgan Stanley, go ahead please.

Thank you Jordan and Karen for taking my question and congrats on the great results. Yeah, so my first question is on first quarter gross margin. I know why the margin would be flat to down in first quarter. Is it because of product mix or are we seeing elevated pressure coming from like the increasing material cost and also the oxide cost? Thank you. And I have a follow-up.

Thank you, Tiffany. Actually, we are only, so we are not seeing material change from the gross margin of last And the difference is really that we are seeing a proportion-wise slightly in Q1 compared to last quarter. And you pointed out about the material price increase, which is obviously, it has been a factor for like a pretty long time as we all know, as we know gold price has been increasing over the years. And now we are seeing our boundary capacity tightening, and therefore prices appear to be rising. And for that reason, I mean, with our boundary vendors, we are in discussion with them, you know, how to get our delivery support, while in the meantime, you know, hoping for a, a a manageable price increase from that, and at the same time we are also in active discussion with our customers about the possibility for a price increase to reflect our costs. So that both are ongoing. So we don't have any conclusion yet, but I think, you know, so far, I mean this is all pretty recent and so far we are seeing our customers all kind of recognize the fact that you know as we all know memory price the memory demand and you know squeeze out the the supply of other types of ICs and therefore demand is appears to be rising for other kind of memory IT products because because of supply is being squeezed and prices is rising. So again, we are in discussion with both our customer side and vendor side. But that doesn't really, that is not really a crossfunding type guidance, if anything. I think that is going to become an effect starting from Q2 and onward.

Got it very clear, thank you. So my second question would be regarding CPO, could you give us more details or maybe some guidance for the CPO revenue in maybe 2026 and 2097, as I think investors are very excited about our development and progress in this area. Thank you.

Thank you. Actually, we are also online getting a few people, I tried to and I'm going to repeat that. The main goal of 2026 for us and also for our partner is to complete the validation of both our validation by key customers. So with the validation being the target, the revenue contribution will be limited for 2026 because we will be talking about sample shipments only. Notably, while I'm commenting on 2027, in close collaboration with Anchor customer and partner, again, OCIE and Hymex are close in the trend to product target bandwidth of greater than 6.4T. Okay, this is important. Again, we are finalizing the Gen 2 product for its production readiness targeting bandwidth of greater than 6.4. This product, Gen 2 product, we can potentially see meaning for target bottom line contribution starting from 2027, even before the official MP gets started. it. The reason why I emphasize this is because when and how this CTO product was done with production, it's really a call which can only be made by the customer. We don't really know and also it's actually a complex and lengthy ecosystem run by our customer. So it is not a matter of when we are proven to be ready, the customer can just click a button and then, you know, in full volume production it is not going to happen that way. So we cannot, we don't have full visibility on exactly when and how the ramping, the mass production ramping will take place. Our current view is that it is likely to be 2027 or 2028 we don't know however what i'm trying to say is even before the official ramping official mp let's say it's 2027 or 2028 even before then because uh prior to the official mp there will be further sample shipments for various purposes with a certain quantity which will be greater than 2026. So even before the official MP gets started, just from pre-MP shipments, we, based on internal count, the contribution can be already pretty meaningful for Himex in terms of our total profit. I guess that addresses your issue about 2027. And again, I want to emphasize this product targeting 6.5T bandwidth is done in close collaboration with our anchor customer and partner. It is not like we are closing our doors and we try to think of a product and try to push it to the customer. No, it is actually from beginning to now, it has been a joint development by our direct partner 4C and our joint anchor customer and partner. And the so-called 6.4T transmission product spec, the target is the biggest volume potential while demanding the highest transmission bandwidth, mainly in this, you're talking about the GPU market, right, which requires a very high transmission rate. So that, I guess, Tiffany, that kind of addresses your question directly, and also people asked about when it starts MP. For this, even in what I call early stage of mass production, meaning we are far from reaching full penetration, full deployment, and so on and so forth. How exactly that is defined cannot say precisely, but in early stage mass production, for HIMEX we'll be talking about hundreds of millions of sales. So it's going to be very, very significant, based on what the customer is telling us, based on how we price it, and based on our internal calculation. I'm still holding the same deal now. And we do have existing W.O. capacity to manage a pretty big volume of production, you know, for that kind of scale, hundreds of millions of dollars of annual sales. Okay, so I guess that's my answer, you know, for all questions related to CPO right now. Thank you.

Thank you. If you would like to ask a question, you may press star key and number one on your telephone keypad.

It's going to be huge in 2026. In our prepared remarks, we said we started in mass production volume for a smartphone. starting with the last quarter and certainly this quarter but the sales contribution from the smartphone outlet for HIMAX right now is still low if you combine the smartphone outlet for HIMAX all it together our expected sales contribution for 2026 is still less than 10% of our total sales so I would say probably high single digits of contribution 2026 the the rampant the real rampant is going to be 2027 I will explain why 2027 and why is it different from 2026 in a minute. Let's get back to your question about margin. For HiMax, the gross margin for smartphone, it is actually lower than our corporate average. So to be honest, we are not very, very keen. I mean, we recognize the fact that our peers are already ahead of us and probably should be bigger volume than us. So it is already a very competitive market with low margin across the board. So that is for smartphones. However, I would say something very different for automotive OLED and IT OLED. The ICs, these two areas are our focus area right now. And they both enjoy much better gross margin compared to our traditional LCD products. And also, on a per-panel basis, the IT content are materially higher, again, than LCD products. So I would probably describe our status separately for auto and IT. First on auto, we are in strategic partnership with TopCare Korean and Chinese panel makers. And this is a market which is now being led by major Korean panel makers. And we are the IC partners for both Korean panel makers. And I say it's like we expect to see breakout demand from 2027, mainly because it is actually now the career makers leading the charge in terms of aggressively promoting the oil market has been bottom-wide has suffered from two main factors one is cost and the other one is reliability that through many years of effort across the ecosystem the reliability has been kind of resolved so it's a issue of yesterday no longer an issue so the real issue is now cost They have a lot of legacy OLED capacity, which can only do rigid displays. Advantage of those fully depreciated, running with very good efficiency, and so on and so forth, to price their products aggressively to the extent that the OLED prices for automotive products in certain specs are already approaching the levels of LCD products already. and certainly all they enjoy pedal quality, a few very good benefits. You start to see prices approaching those of LCD, this becomes very appealing. So we are in the middle of very, very busy design tier 1s at the moment, a lot of design design projects going on and many of which are slated for mass production in 2027. So this year while we do ship some volumes but I think hopefully 2027 volume will be much much bigger than this year. And for this we offer our standard products including driver IC and timing controller and AC products for both leading panel, for both T-card, timing controller, and driver IC. And on top of that, we also offer discrete touch IC, which we are now leading the pack. We all competed in technology, in performance, compared to their old vendors. So we are slightly different story, but very similar timing, 2020-70 is likely to break out a year. Now for IT, you need the larger panel size, larger panel size. So you do require Gen 8.5 or 8.6 to be most producing IT products effectively. Korean panel makers have led the charge to complete their 8.5 gen production line. But the Chinese are catching up, so across the port, quite a few Chinese panel makers are starting mass production for their GenPoint 8.6 of this line, all targeting IT products, mainly template and notebook, and likewise we are going through very, very busy design status stage with a few such customers. So the story here is that when you have new Gen 8.6 into production, joining production in the same time, 2037, it is likely to be price pressure. And that's certainly for market demand for noble bankers is good news. And again, you know, all the panel enjoys lighter weight, better contrast, and better brightness, and, you know, good power consumption, and, you know, all these benefits as we all know, right? So the major issue stopping all the panel from high penetration is coming online starting in 2027. I think it's likely to bring out the cost man. So again, we are going through our design.

Okay, thank you, Jordan, and we don't have further questions at the moment.

We thank you for all your questions, and I'll pass the call back to Jordan. for IRPR or Maintain Investor Marketing Activities and continue to attend investor conferences and will announce the details as they come about. Thank you and have a nice day.

Yes, thank you. And ladies and gentlemen, this concludes 4th quarter 2025 earnings conference. You may now disconnect. Thank you again. Goodbye.