Himax Techs Q2 2026 Earnings Call Transcript

Himax Techs (NASDAQ: HIMX ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

2% sequential increase, driven primarily by strong automotive IC sales. 1%, surpassing the guidance of 32%, due to a favorable product mix with higher automotive IC sales. 4 cents, exceeding guidance and up significantly from the previous quarter. The automotive segment remained the largest revenue contributor, accounting for over 50% of total revenues.

Management highlighted strong growth in the automotive TCON market and ongoing strategic initiatives in smart glasses and CPO. Q3 2026 guidance forecasts a 7% to 11% revenue increase with a gross margin of approximately 34%. 3 million, primarily for R&D-related equipment. The company anticipates a decline in cash due to a $44 million dividend payment in Q3.

Himax Techs is optimistic about long-term growth, particularly in automotive display ICs, driven by advancements in smart vehicle materials. Management expressed confidence in significant future contributions from CPO, starting in 2027. Full Transcript OPERATOR Hello, ladies and gentlemen. Welcome to Himax Techs second quarter 2026 earnings conference call.

At this time, all participants are in listen-only mode. 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 Tao, Head of IR/PR at Himax Techs. Ms. Tao, please go ahead. Karen Tao, Head of IR/PR Welcome, everyone.

My name is Karen Tao, Head of IR/PR at Himax Techs. Joining me today are Jordan Wu, President and Chief Executive Officer, and Jessica Penn, Chief Financial Officer. As companies prepare comments, we have allocated time for your questions in the Q&A section. tw or HIMX C Group US, or download a copy from Himax Techs' website.

Before we begin the formal remarks, I would 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 the actual events or results to differ materially from those described in the conference call. A list of risk factors can be found in the Company's latest SEC filing, Form 20-F, in the section titled Risk Factors, as may be amended, except for the Company's full year 2025 financials, which were provided in the Company's 20-F and filed with the SEC on March 27, 2026.

The financial information included in this conference call is unaudited, consolidated, and prepared in accordance with IFRS accounting. Such financial information is generally generated internally and has not been subjected to the same review and scrutiny and may vary materially from the consolidated financial information for the same period. On today's call, I will first review Himax Techs' consolidated financial performance for the second quarter 2026, followed by our third quarter 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. The rapid rise in AI demand is placing a representative strain on memory chip supply and affecting many non-AI applications, creating a more challenging cost and capacity environment across the industry. Against this backdrop, we are pleased to report that our second quarter revenues, gross margin, and profit all exceeded the guidance we provided on May 7, 2026.

9% compared to the same period last year. Q2 revenues exceeded our guidance range of a 10% to 13% increase, primarily driven by better-than-expected automotive IC sales. 2% a year ago. This is primarily due to a more favorable product mix, which increased sales from higher-margin automotive IC products.

5 cents a year ago. 0% from the previous quarter, attributable to panel makers pulling forward their inventory purchases for high-end TV ICs in prior quarters. In contrast, sales for both the monitor and notebook IC products increased quarter over quarter due to higher legacy product shipment to key customers. 6% a year ago.

6% sequentially. Q2 automotive driver sales, including both traditional DDIC and TDDI, increased by double digit quarter, primarily driven by broad-based customer replenishment of TDDI and DDIC following seasonally lower shipment during the Lunar New Year in Q1. The ramp-up of new TDDI and DDIC projects for leading panel customers also contributed to the sequential increase. Customers continue to operate under a make-to-order model while maintaining lean inventory levels.

Our automotive business, comprising DDIC, TDDI, TCON, and OLED IC sales, remained the largest revenue contributor in the second quarter, representing well over 50% of total revenues. Second quarter tablet IC sales, covering both LCD and OLED products, also increased sequentially, attributable to customers' early pull-in demand against the backdrop of the rising memory price sentiment in the market, together with a continuous shipment for a customer's premium OLED model. In contrast, smartphone IC sales decreased sequentially, following the initial ramp-up of an OLED IC for a leading smartphone brand midstream model in Q1. 3% a year ago.

7% increase from the previous quarter, attributable to robust automotive TCON, supported by replenishment across the broad customer base. TCON business accounted for over 10% of the total sales, with more than half contributed by automotive TCON. As the market leader in automotive TCON, particularly in solutions featuring local dimming functionality, we expect strong growth momentum to continue into next year. 1% a year ago.

6% compared to the same period last year. The year-over-year increase was mainly attributable to higher tape-out expenses. We remain disciplined in managing cost while continuing to invest strategically in select non-driver ICs with compelling long-term growth potential. 4% for the same period last year.

Both the quarter-over-quarter and year-over-year changes were primarily driven by higher revenues and gross margin. 5 cents, in the same period last year. 7 million of cash, cash equivalents, and other financial assets as of June 30, 2026. 6 million last quarter.

5 million in the second quarter. Before moving on, I would like to highlight one point regarding this quarter's cash flow. As is our usual practice, income tax payments are made in the second quarter. 0 million of this payment for one year without interest.

5 million. Looking ahead to Q3, we anticipate a decline in cash, cash equivalents, and other financial assets primarily due to the payment of the $44 million for the annual dividend to shareholders made on July 10. 7 million, the immediately vested portion of this year's employee bonus award, at the end of Q3. 6 million in the same period last year.

After maintaining lean inventory levels for several years, we proactively adjusted our inventory strategy about a year ago, selectively building inventory in anticipation of the tightening supply across the industry. 0 million a year ago. DSO was 93 days at the quarter end as compared to 86 days last quarter and 92 days a year ago. 6 million a year ago.

4 million ADS outstanding, unchanged from last quarter. 4 million during the quarter. On July 1st, we announced the proposed divestiture of investment in one of our equity method investees. Based on the information provided by the said investee, we expect to recognize a pretax gain of approximately $23 million to $24 million upon closing.

The transaction is expected to close in the fourth quarter of this year, subject to customary closing conditions and regulatory approval. We will provide more updates as appropriate as the transaction progresses. Now, turning to our third quarter 2026 guidance, we expect Q3 revenue to increase 7% to 11% sequentially. Gross margin is expected to be around 34%, depending on the product mix.

0 cents per fully diluted ADS. As we have done historically, we will grant employees annual bonus, including RSUs and cash awards, on or around September 13 this year. 7 million will be vested and expensed immediately on the grant date. As a reminder, the total annual bonus amount and immediately vested portion are our current best estimates only, and the actual amount could vary materially depending on, among other things, our Q4 profit expectation and the final board decision for the total bonus amount and its vesting scheme.

It is also worth noting that the $13 million expected annual bonus does not yet include the above-mentioned gain on investment from divestiture of the equity method investee, as the transaction is pending regulatory approval and has not yet closed. As is the case for previous years, we expect the annual bonus grant in 2026 to lead to higher third quarter operating expenses compared to the other quarters of the year. 2 million vested immediately. 1 million of the amortized portion of the unvested bonuses from previous years.

2 million. I will now turn the call over to Jordan to discuss our Q3 outlook. Jordan, the floor is yours. Jordan Wu, CEO Thank you, Karen.

The ongoing surge in AI demand continues to impact known AI applications. It has rippled across the broader semiconductor supply chain, resulting in capacity constraints at foundry, packaging, and testing facilities on the mature process nodes where many of our products are manufactured. Consequently, we are experiencing higher manufacturing and procurement costs, extended lead times, and increased difficulty in securing sufficient capacity across a broad range of our product lines. We expect the supply environment to remain challenging in the near term.

To enhance production flexibility and secure the capacity needed to meet our customer needs and support upcoming production ramps, we continue to leverage our established supply chain in Taiwan while further strengthening our presence across China, Singapore, Korea, Japan, and Malaysia. As we mentioned last quarter, we've been working closely with customers on pricing adjustments to share this increased cost. Some adjustments took effect in the second quarter, with additional pricing adjustments possibly implemented over time as market conditions warrant.

Notwithstanding these industry—wide supply constraints, we remain optimistic about the long—term growth prospects of our automotive display IC business. We continue to view automotive as one of the industry's most attractive secular growth markets, driven by rapid advancements in smart vehicle materials. This trend is characterized by, among other things, the growing number of displays per vehicle, now averaging more than three and continuing to rise, along with larger, high—resolution displays and more diverse vehicle cabin configurations including curved, integrated multi—display, and pillar—to—pillar designs.

Himax Techs is well positioned to capitalize on these industry trends through our comprehensive automotive display portfolio spanning both LCD and OLED technologies, a broad and diversified global customer base, and a robust design—win pipeline. We further differentiate ourselves by continuously introducing next—generation multi—display technologies, including LTDI solutions for ultra—large displays, advanced TCON solutions for head—up displays, OLED driver and touch controller ICs, and micro—LED display technologies.

Our portfolio also includes platform display solutions and capacitive physical buttons, where customer interest continues to grow, driven in part by regulatory and vehicle safety initiatives in key automotive markets including China and Europe, where greater emphasis is being placed on intuitive physical controls to enhance driving safety and reduce driver distraction. The industry's ongoing pursuit of richer human—machine interfaces, immersive infotainment, and enhanced, capable user experiences is driving the adoption of a broader range of display technologies.

This not only increases Himax Techs' dollar content per vehicle but also creates multiple long—term growth opportunities. In addition, our well—established global supply chain provides us with greater flexibility to navigate the current supply environment while securing the capacity needed to support both existing projects and upcoming production ramps. We also see an important trend in the automotive industry with automakers introducing new vehicle models at an accelerated pace and intensifying competition.

As a result, product life cycles are becoming shorter, creating greater pressure to improve engineering efficiency, reduce development costs, and shorten time—to—market for new car models. These challenges are driving broader adoption of platform standardization across multiple vehicle models, favoring suppliers with comprehensive and validated technology portfolios and proven track records. Himax Techs is one such supplier, hosting the industry's most competitive automotive display IC offerings, market—leading positions across automotive DDIC, TDDI, and TCON, and continued leadership in next—generation technologies such as LTDI and OLED technologies.

By adopting Himax solutions as part of their standardized platforms, customers can quickly deploy validated display IC products across multiple new vehicle developments, reducing engineering efforts, lowering system costs, and shortening the development cycle of each project. In addition to automotive, we are also making solid progress across several strategic growth areas, including smart glasses, ultra—low—power AI, and CPO. These emerging businesses diversify our revenue base into markets with attractive long—term growth prospects and margin profiles while strengthening our overall competitive position.

We believe they are poised to become increasingly meaningful contributors to our future growth. First, on smart glasses, an area we remain particularly optimistic about. Himax Techs is one of the few companies offering both ultra—low—power AI sensing and micro—display technologies—both critical building blocks for next—generation smart glasses.