Himax (NASDAQ:HIMX) Exceeds Q3 Expectations

Kayode Omotosho /
2023/11/09 5:48 am EST

Semiconductor maker Himax Technologies (NASDAQ:HIMX) reported Q3 FY2023 results exceeding Wall Street analysts' expectations, with revenue up 11.6% year on year to $238.5 million. Turning to EPS, Himax made a GAAP profit of $0.06 per share, improving from its profit of $0.05 per share in the same quarter last year.

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Himax (HIMX) Q3 FY2023 Highlights:

  • Revenue: $238.5 million vs analyst estimates of $229.6 million (3.9% beat)
  • EPS: $0.06 vs analyst estimates of $0.05 
  • Free Cash Flow of $13.83 million is up from -$1.18 million in the previous quarter
  • Inventory Days Outstanding: 144, down from 147 in the previous quarter
  • Gross Margin (GAAP): 31.4%, down from 36% in the same quarter last year

“Ongoing macro headwinds are limiting our visibility as panel customers remain tentative about demand prospects, leading to shortened forecasts and more frequent last-minute orders. Having said that, our longer-term outlook for the automotive business, our largest revenue contributor, remains positive, as we maintain a dominant position in the sector. The majority of our design-wins in TDDI and local dimming Tcon, both relatively new technologies for automotive sector, are slated to commence mass production during the next two years, thereby further fortifying our market share leadership amidst growing competition,” said Mr. Jordan Wu, President and Chief Executive Officer of Himax.

Taiwan-based Himax Technologies (NASDAQ:HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones.

Analog Semiconductors

Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.

Sales Growth

Himax's revenue growth over the last three years has been solid, averaging 19.5% annually. But as you can see below, this quarter wasn't particularly strong, with revenue growing from $213.6 million in the same quarter last year to $238.5 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Himax Total Revenue

Himax had an average quarter as its 11.6% year-on-year revenue growth beat analysts' estimates by 3.9%. Himax's growth flipped from negative to positive this quarter, news that will likely be appreciated by shareholders.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

Himax Inventory Days Outstanding

This quarter, Himax's DIO came in at 144, which is 26 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.

Key Takeaways from Himax's Q3 Results

Sporting a market capitalization of $962.8 million, Himax is among smaller companies, but its more than $147.3 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

It was good to see Himax beat analysts' revenue expectations this quarter. That really stood out as a positive in these results. On the other hand, the revenue guidance for the next quarter implies a sequential decline. The company expects Q4 sales growth to be relatively modest compared to typical seasonal trends primarily due to "sluggish end market demand as well as cautious inventory management and rigorous procurement scrutiny by customers." Overall, this was a mixed quarter for Himax.

Himax may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.