HIMX Himax Technologies Inc

Company Meets Q3 Revenues, Gross Margin and EPS Guidance

• Sales increased 17.5% year-over-year to $190.4 million, the highest quarterly revenues since Q409
• Small and medium-sized panel driver sales increased 9.5% year over year to $87.3 million, achieving record-high quarterly revenues
• Non-driver sales increased 30.2% year-over-year to $26.6 million
• Gross margin increased 480 basis points to 23.3% from 18.5% in Q311 and increased 20 basis points from 23.1% in Q212.
• Non-GAAP net income increased 244.1% to $16.5 million from $4.8 million in Q311. Non-GAAP diluted earnings per ADS increased 259.3% to$9.7 cents from $2.7 cents in Q311
• GAAP net income increased 1521.7% to $10.4 million from $0.6 million in Q311. GAAP diluted earnings per ADS increased 1425% to $6.1 cents from $0.4 cents in Q311

Himax Technologies, Inc. (Nasdaq:HIMX) ("Himax" or "Company"), a leading supplier and fabless manufacturer of display drivers and other semiconductor products, today announced financial results for the third quarter ended September 30, 2012.

SUMMARY FINANCIALS

"We are pleased with the top and bottom line financial improvements during the third quarter of 2012. We will continue to execute our strategy and are excited about further growth opportunities going forward," explained Mr. Jordan Wu, President and Chief Executive Officer of Himax.

Third quarter 2012 Financial Results

Total revenues for the third quarter of 2012 increased 17.5% to $190.4 million year-over-year and increased 0.5% sequentially. Strong sales in Himax's large-size panel drivers and non-driver ICs were the primary contributors to the Company's year over year revenue growth.

Revenues from large panel display drivers were $76.5 million, up 23.4% from a year ago and down 4.0% from the second quarter of 2012 and accounted for 40.2% of total revenues. The sequential decrease came in after three consecutive quarters of growth and was attributed to slower demand from the TV models which Himax's customers launched earlier this year. The sales increase over the previous year was mainly due to the growing sales to the panel customers in China. The Company will continue to strive toward winning more market share in this segment.

Sales of small and medium-sized drivers reached another record high in the third quarter. They came in at $87.3 million, up 9.5% in the third quarter from the same period 2011 and up 4.1% from the previous quarter and accounted for 45.8% of total revenues with tablet and automotive display being the fastest growing applications. These products will continue to contribute noteworthy growth in 2013. As the Company expected, sales for smartphone driver ICs were flat from the second quarter of 2012 as a select group of Himax customers in China, many of them leaders in higher end market, were experiencing competitive pressure from lower-end peers penetrating the marketplace aggressively. Notwithstanding the short-term momentum, smartphone remains Himax's strongest-growing product segment overall driven by strong demand from both Chinese and international brands. The Company has won further design-wins from leading global brands which it will start shipment from the fourth quarter. Additionally, the Company has also experienced positive results from its efforts in working with the fast growing tier-2 smartphone customers in China during the third quarter. The Company will continue to make progress and gain market share in that area.  The Company remains bullish on the growth prospect of the smartphone segment for the remainder of 2012 and beyond.

Revenues from Himax's non-driver businesses, which include CMOS image sensors, LCOS microdisplays, touch panel controllers, power management ICs, LED diver ICs, wafer level optics, timing controllers, ASIC services and IP licensing, were $26.6 million, an increase of 30.2% from the same period last year and 2.3% higher than the second quarter of 2012 and accounted for 14.0% of total revenues. Touch panel controller, power management ICs, WLED drivers, wafer level optics, and operational amplifiers experienced double digit growth in the third quarter 2012. The Company remains confident that its non-driver business will continue to account for an increasing percentage of its sales over time and it provides the most exciting long-term prospects for growth.

Gross margins were 23.3% for the three months ended September 30, 2012, up 480 basis points from 18.5% in the third quarter of 2011 and up 20 basis points from 23.1% in the second quarter of 2012. This is the fourth consecutive quarter of gross margin improvement for the Company. The increase in gross margin is a direct result of a richer mix of Himax's higher-margin products like those in its fast-growing non-driver category. The Company will also focus on more value-added high-end driver IC products which have higher entry barrier. Gross margin improvement will continue to be one of the Company's business goals going forward.

Third quarter 2012 GAAP operating expenses were $31.1 million, up 2.1% from $30.5 million a year ago and up 32.4% from $23.5 million in the previous quarter. The sequential increase was primarily due to the expenses from the 2012 RSU vest of $6.3 million and higher salary expenses as the Company made its annual salary adjustment in the third quarter. GAAP operating income was $13.2 million, or 6.9% of sales, in the third quarter of 2012. It went down $7.0 million sequentially and up $13.7 million year over year. The sequential decline in operating income is also attributed to the RSU vest expenses and salary expense increases identified above, which accounted for 4.0% of sales.

Reported GAAP net income was $10.4 million, or 6.1 cents per ADS, for the third quarter of 2012 compared to $0.6 million, or 0.4 cents per ADS, in the corresponding quarter a year ago, and $15.1 million, or 8.9 cents per ADS, in the previous quarter. GAAP net income improved 1521.7% compared to third quarter 2011 but decreased 31.1% quarter over quarter mainly due to the $6.3 million 2012 RSU charge in the third quarter.

Non-GAAP net income in the third quarter was $16.5 million, or 9.7 cents per diluted ADS, up from $4.8 million, or 2.7 cents per ADS, for the same period last year, and up from $15.9 million, or 9.3 cents per ADS, in the previous quarter. Non-GAAP net income for the third quarter 2012 grew 244.1% over the same period last year and 3.5% over second quarter of 2012.

Revenues were $546.7 million and gross profits were $126.1 million, representing growth of 17.9% and 43.0% over the first nine months of 2011 respectively. Gross margin increased to 23.1% in the first nine months of 2012, up from 19.0% in the same period last year, a 410 basis point improvement.

GAAP operating expenses were $78.3 million for the first nine months of 2012, down $4.5 million, or 5.4% from the same period 2011. The significant reduction was due to a better overall cost control and the reduction in the ramp-up costs for production of WLO, WLM and LCOS products at Himax's in-house factories for these product lines, offset by increased share-based expenses of $0.9 million.

Operating income was $47.8 million, or 8.8% of sales, as compared to $5.4 million, or 1.2% of sales, for the first nine months of 2011, representing $42.4 million or 780.9% increase year over year. The improvement in operating income was a reflection of its overall top and bottom line financial improvement from last year.

GAAP net income for the first nine months 2012 was $36.8 million, or 21.6 cents per diluted ADS, up from $7.0 million, or 3.9 cents per ADS, for the same period last year. GAAP net income for the first nine months of 2012 grew 427.0% and GAAP EPS per diluted share grew 453.8% year over year.

Non-GAAP net income for the first nine months of 2012 was $44.6 million, or 26.1 cents per diluted ADS, up from $14.0 million, or 7.9 cents per ADS, for the same period last year. Non-GAAP net income for the first nine months of 2012 grew 219.5% and Non-GAAP EPS per diluted ADS grew 230.4% over the same period last year.

Balance Sheet and Cash Flow

The Company had $89.0 million in cash, cash equivalents and marketable securities available for sale on September 30, 2012, compared to $103.2 million on June 30, 2012 and $90.8 million for the same time last year. The Company made a cash payment for RSU of $6.3 million and a cash dividend of $10.7 million during the quarter. Inventories at the end of September were $128.3 million, up from $104.7 million a year ago and down from $139.2 million a quarter ago.

Accounts receivable were $218.3 million on September 30, 2012 as compared to $212.9 million on June 30, 2012 and $174.7 million a year ago. Day Sales Outstanding ("DSO") was 109 days at end of third quarter 2012 versus 109 days in the second quarter of 2012 and 103 days last year.

Net cash outflow from operating activities for the third quarter was $7.1 million. This is mainly because the Company had a relatively high inventory level at the end of the second quarter as delivery for much goods prepared for shipping before quarter-end was postponed into the third quarter out of short notice by the customers. As a result, while the Company had to pay for those goods in the third quarter, the Company will not get paid until the fourth quarter. Himax expects to generate a substantial net cash inflow from operations during the fourth quarter.

Share Buyback Update

With regards to the Company's $25 million dollars share buyback program, Himax has purchased a total of $12.7 million, or approximately 9.1 million ADS through September 30, 2012. Himax purchased approximately $0.4 million or 0.3 million ADS in the three months ended September 30, 2012. Himax management has stated they will continue to execute the remaining share repurchase program in accordance with Rule 10b-18. 

December 2012 Non-Deal Road Show

Ms. Jackie Chang, CFO, Ms. Penny Lin, IR Manager, and John Mattio, US-Based IR from the MZ Group, will host a number of investor meetings in the New York Metro and Boston area from December 3rd to 7th, 2012. If you are interested in meeting with the Company in a 1-1 session or group session, please contact Himax's US or Taiwan based investor relations contact at the numbers below.

Conference Call

Himax Technologies, Inc. will hold a conference call with investors and analysts tomorrow, November 8, 2012 at 8:00 a.m. US Eastern Standard Time to discuss the Company's third quarter and year-to-date 2012 financial results. Details of the call follow below.

A replay of the call will be available beginning two hours after the call through midnight November 15, 2012 (12 p.m. November 16, Taiwan time) on www.himax.com.tw and by telephone at +1-877-870-5176 (US Domestic) or +1-858-384-5517 (International). The conference ID number is 402099. This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this http://public.viavid.com/index.php?id=102174 or at ViaVid's website at http://www.viavid.net, where the webcast can be accessed through November 7, 2013.

About Himax Technologies, Inc.

Himax Technologies, Inc. (HIMX) is a fabless semiconductor solution provider dedicated to display imaging processing technologies. Himax is a worldwide market leader in display driver ICs and timing controllers used in TVs, laptops, monitors, mobile phones, tablets, digital cameras, car navigation, and many other consumer electronics devices. Additionally, Himax designs and provides controllers for touch sensor displays, LCOS micro-displays used in palm-size projectors and head-mounted displays, LED driver ICs, power management ICs, scaler products for monitors and projectors, tailor-made video processing IC solutions and silicon IPs. The company also offers digital camera solutions, including CMOS image sensors and wafer level optics, which are used in a wide variety of applications such as mobile phone, tablet, laptop, TV, PC camera, automobile, security and medical devices. Founded in 2001 and headquartered in Tainan, Taiwan, Himax currently employs 1,400 people from three Taiwan-based offices in Tainan, Hsinchu and Taipei and country offices in China, Korea, Japan and the US. Himax has 1,657 patents granted and 1,504 patents pending approval worldwide as of September 30, 2012. Himax has retained its position as the leading display imaging processing semiconductor solution provider to consumer electronics brands worldwide.

http://www.himax.com.tw

About Non-GAAP Financial Measures

To supplement the unaudited consolidated statement of income and comprehensive income presented in accordance with GAAP, the Company is also providing non-GAAP measures of income before income tax expenses, net income, net income attributable to us and basic and diluted earnings per share for the three and nine months ended September 30, 2012 and 2011, which are adjusted from results based on GAAP to exclude the non-cash transactions. The non-GAAP financial measures are provided to enhance the Investors' overall understanding of our current performance in on-going core operations as well as the prospects for the future. These measures should be considered in addition to results prepared and presented in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The Company uses both GAAP and non-GAAP information in evaluating our operating business results internally and therefore deems it important to provide all of this information to investors. The non-GAAP adjustments include share based compensations and acquisition related charges.

Forward-Looking Statements

Factors that could cause actual events or results to differ materially include, but not limited to, general business and economic conditions and the state of the semiconductor industry; market acceptance and competitiveness of the driver and non-driver products developed by the Company; demand for end-use applications products; reliance on a small group of principal customers; the uncertainty of continued success in technological innovations; our ability to develop and protect our intellectual property; pricing pressures including declines in average selling prices; changes in customer order patterns; changes in estimated full-year effective tax rate; shortages in supply of key components; changes in environmental laws and regulations; exchange rate fluctuations; regulatory approvals for further investments in our subsidiaries; our ability to collect accounts receivable and manage inventory; the uncertainty of success in our Taiwan listing plan which is still under review by Taiwan regulatory authorities and subject to change due to, among other things, changes in either Taiwan or U.S. authorities' policies and Taiwan regulatory authorities' acceptance of the Company's Taiwan listing application and other risks described from time to time in the Company's SEC filings, including those risks identified in the section entitled "Risk Factors" in its Form 20-F for the year ended December 31, 2011 filed with the SEC, as may be amended.

-- FINANCIAL TABLES –

CONTACT: For the Company
         Jackie Chang, CFO
         Himax Technologies, Inc.
         Tel: 886-2-2370-3999 Ext.22300
         Fax: 886-2-2314-0877
         Email: jackie_chang@himax.com.tw
         www.himax.com.tw
         
         Penny Lin, Investor Relations
         Himax Technologies, Inc.
         Tel: 886-2-2370-3999 Ext.22320
         Fax: 886-2-2314-0877
         Email: penny_lin@himax.com.tw
         www.himax.com.tw
         
         Investor Relations - US Representative
         MZ North America
         John Mattio, SVP
         Tel: +1-212-301-7130
         Email: john.mattio@mzgroup.us
         www.mz-ir.com

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