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Semiconductor maker Himax Technologies (NASDAQ:HIMX) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 2% year on year to $239.6 million. It made a GAAP profit of $0.17 per share, improving from its profit of $0.01 per share in the same quarter last year.
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Himax (HIMX) Q2 CY2024 Highlights:
- Revenue: $239.6 million vs analyst estimates of $232.8 million (2.9% beat)
- EPS: $0.17 vs analyst estimates of $0.14 (17.9% beat)
- Q3 2024 Guidance: Revenues to Decrease 12.0% to 17.0% from Q2 (below expectations)
- Gross Margin (GAAP): 32%, up from 21.7% in the same quarter last year
- Inventory Days Outstanding: 114, down from 125 in the previous quarter
- Adjusted EBITDA Margin: 14.7%, up from 1.5% in the same quarter last year
- Free Cash Flow of $26.56 million, down 50.9% from the previous quarter
- Market Capitalization: $1.02 billion
Analog SemiconductorsDemand 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 GrowthHimax's revenue has been declining over the last three years, dropping by 1.1% on average per year. As you can see below, this was a weaker quarter for the company, with revenue growing from $235 million in the same quarter last year to $239.6 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).
While Himax beat analysts' revenue estimates, this was a sluggish quarter for the company as its revenue only grew 2% year on year. Himax's growth, however, flipped from negative to positive this quarter. This encouraging sign will likely be welcomed by shareholders.
Product Demand & Outstanding InventoryDays 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.
This quarter, Himax's DIO came in at 114, which is 4 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Himax's Q2 Results We were impressed by Himax's strong gross margin improvement this quarter. We were also glad its operating margin improved. Revenues guidance for next quarter calls for a 12.0% to 17.0% decrease from Q2, which was below expectations. This guidance weighed on the stock. Shares traded down 4.4% to $5.60 immediately after reporting.
