Q3 2023 Himax Technologies Inc Earnings Call
Yes.
[music].
Yeah.
Speaker 1: Hello ladies and gentlemen and welcome to Hymax Technologies Inc. Third Corps 2023 Earnings Conference Call.
Hello, Ladies and gentlemen, and welcome to <unk> Technologies, Inc. Third quarter 2023 earnings Conference call.
Speaker 1: At this time, all participants are in a listen only mode. After the speakers presentation, there would be a question and answer session. To ask the question during this session, you would need to press start 1-1 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press start 1-1 again. As a reminder, this call is being recorded. I would now like to hand the conference over to your host, Mr. Mark Schwalingberg from MZ Group. Sir, you may begin.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
You asked a question during this session you will need to press star one on your telephone you would then your automated message advising your hand is race to withdraw your question. Please press star one again.
A reminder, this call is being recorded.
I would now like to hand, the conference over to your host Mr. Mark swelling Burke from MZ group, Sir you may begin.
Speaker 2: Welcome, everyone, to the HMX 3rd quarter 2023 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer, Miss Jessica Pan, Chief Financial Officer, and Mr. Eric Lee, Chief IRP Air Officer. After the company's prepared comments, we have allocated time for a question and a question and answer session. If you have not yet received a copy of today's results, please email HIMX.
Thank you.
Welcome everyone to the IMAX third quarter 2023 earnings call joining us from the company are Mr. Jordan, <unk>, President and Chief Executive Officer, Ms. Jessica Tan Chief Financial Officer, and Mr. Eric Lee Chief <unk> Officer. After the Companys prepared comments, we have allocated time for a question and a question and answer session.
If you've not yet received a copy of today's results release. Please email H I M axe that MSA group got U S. Access the press release on financial portals or download a copy from <unk> website at Www Dot IMAX dot com Dot GW.
Speaker 2: at mzgroup.us. Access the press release on financial portals.
Speaker 2: or download a copy from Hymax's website at www.hymax.com.tw.
Speaker 2: Before we begin the formal remarks, I'd 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 actual events or results to differ materially from those described in this conference call.
Before we begin the formal remarks I'd 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 actual events or results to differ materially from those described in this conference call.
Speaker 2: A list of risk factors to be found in the company's SEC filings form 20F. For the year ended December 31st, 2022 in the section entitled Risk Factors as may be amended.
A list of risk factors can be found in the company's SEC filings form 20-F.
For the year ended December 31, 2022 in the section entitled Risk factors.
May be amended.
Speaker 2: Except for the company's full year of 2022 financials, which were provided in the company's 20 app and file with the FCC on April 6, 2023, the financial information included in this conference call is un audited and consolidated and prepared in accordance with IBS accounting.
Except for the Companys full year of 2022 financials, which were provided in the company's 20-F and filed with the SEC on April six 2023. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with <unk> accounting.
Speaker 2: 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 which we subject our annual consolidated financial statements, and may vary materially from the audited consolidated financial information for the same period.
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 auditors to which we subject our annual consolidated financial statements and May vary materially from the audited consolidated financial information for the same period.
Speaker 2: The company undertakes no obligations to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. I would now like to turn the call over to Mr. Eric Lee, Eric, the floor's yours.
The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.
I'd now like to turn the call over to Mr. Eric Lee Eric the floor is yours.
Speaker 3: Thank you, Mark, and thank you, everyone, for joining us. My name is Eric Lee, Chief IRP Officer at HighMax. On today's call, I first review the HighMax consolidated financial performance for the third quarter 2023, followed by our fourth quarter outlook. Jordan will then give an update on the status of our business. After which, we will take questions. We will review our financials upon an IFI.
Thank you Mark and thank you everyone for joining us.
Name is Eric Lee Chief <unk> Officer, a high Max on today's call I will first review the <unk> consolidated financial performance for the third quarter of 2023.
Follow by our fourth quarter outlook, Jordan will then give an update on the status of our business after which we will take questions.
We'll review our financial results.
<unk> basis.
Speaker 3: We are pleased to report that Himec third quarter revenues in the profit both exceeded our guidance. Why growth margin can be at the upper end of the guidance range issued on August 10th, 2021?
We are pleased to report that <unk> third quarter revenue and profit both exceeded our guidance while gross margin came in at the upper end of the guidance range issued on August 10 2023.
Speaker 3: The better they expect it results are treatable to the resilience of our co-business in the face of macroeconomic challenge.
The better than expected results.
<unk>.
Zero.
Our core business in the face of macroeconomic challenges.
Speaker 3: The Dakota Remnews registered 238.5 million dollars, an increase of 1.5% sequentially and up 11.6% on the year-over-year basis.
Third quarter revenues registered $238 5 million, an increase of one 5% sequentially and up 11, 6% on a year over year basis.
Speaker 3: the guidance range of a 7% decline to flight sequential.
The guidance range.
7% decline to flat sequentially.
Speaker 3: This can be credited to positive, all-year momentum across all business.
This can be credited to positive order momentum across all business segments.
Speaker 3: Gorsmogin came in at 31.4%. A substantial increase from 21.7% of last quarter, and at the upper end of our guidance range of 30.5% to 32%.
Gross margin came in at 31, 4%.
Sequential increase from 21, 7% of last quarter and the and at the upper end of our guidance range of 35% to 32%.
Speaker 3: The Q3-Ghost-Mongen improvement reflected the absence of the one-ton expense incurred in the second quarter related to the strategic termination of certain high-cost, the Fondry-Capati agreement. In addition to a favor-
The Q3 gross margin improvement reflected the absence of the one time expense.
Incurred in the second quarter related to the strategic termination of certain high cost of foundry capacity agreements. In addition to a favorable product mix.
Speaker 3: Primarily dry driven by the remarkable performance of our automotive pedal line, which maintains a higher margin profile than corporate average.
Primarily dry driven by the remarkable performance of our automotive put online which maintains a higher margin profile than corporate average.
Speaker 3: Q3-profit per diluted ADS was 6.4 cents exceeding the guidance range of 1.5 cents to 6 cents.
Q3 profit per diluted ads was $6.04 exceeding the guidance range of one five to <unk>.
Speaker 3: Revenue from large display drivers came in at $43.7 a decrease of 3.7% sequentially but up 5.9% year over year.
Revenue from large display drivers.
Came in at $43 $7 million, a decrease of three 7% sequentially, but up five 9% year over year.
Speaker 3: TV IC cells declined as expected. As customers already replenished their inventory in previous quarters and suspended further pooling.
Television sales declined as expected.
Customers already replenished their inventory in previous quarters and have suspended further pull inks.
Speaker 3: Monitor and noble IC sales were up, single digit, and a nice double digit respectively, respectively in the third quarter, predominantly driven by rush order from key customers.
Monitor and notebook IC sales were up single digit and a nice double digit respectively respective.
In the third quarter predominantly driven by rush order from key customers.
Speaker 3: Large panel driver IZ cells accounted for 18.3% of total revenues for this quarter compared to 19.3% last quarter and a year
Large panel driver IC accounted for 18, 3% of total revenues for this quarter.
Compare to 19, 3% last quarter and a year ago.
Speaker 3: Moving on to our small and immediate 5 display driver section.
Moving onto our small and medium sized display driver segment.
Speaker 3: Revenue was $161.1 million, an increase of 7.2% sequentially and up 13.9%. Compared to the San Pirea loss...
Revenue was $161 $1 million.
Increase of seven 2% sequentially and up 13, 9%.
Compared to same period last year.
Speaker 3: surpassing the guidance range due to better than expected sales performance, particularly in automotive sector and the TDDI product.
Having the guidance range due to better than expected sales performance, particularly in automotive sector and the TDI products.
Speaker 3: Q3 automotive driver sales saw a decent double-digit sequential increase.
Q3, automotive driver sales saw a decent double digit sequential increase thanks to a strong uptick in both TDI and the traditional DD IC.
Speaker 3: Thanks to a strong optic in both TDI and the traditional DDI.
Speaker 3: As clients worldwide, resume order replenish.
Clients worldwide resume order replenishment.
Speaker 3: smartphone and the tablet driver's cell on the other hand decreased double digit and the mid-ting sequentially reflecting continued soft market demand
Smartphone and tablet driver sales on the other hand decreased double digits in the mid teens sequentially.
<unk> continue with our soft market demand.
Speaker 3: In the third quarter, the automotive business remained our largest revenue contributor, accounting for nearly 45% of total sales.
In the third quarter the Automd.
Automotive business remained our largest revenue contributor.
<unk> for nearly 45% total sales.
Speaker 3: One notable highlight during the quarter was our commencement of the world's first mass production of LTDI.
One notable notable highlight during the quarter was our commencement of the award.
Production of LTI.
Speaker 3: This further demonstrates our leadership position in the lucrative automotive display battlefield. Jordan. Jordan.
This further demonstrates our leadership position in the lucrative automotive display battlefield.
Jordan will elaborate in a few minutes.
Speaker 3: Small and medium-sized driver IC segments accounted for 67.6% of total sales for this quarter, compared to 63.9% in previous quarter and 66.2% a year ago.
Small and medium sized driver IC segment accounted for 57, 6% of total sales for this quarter.
Compared to a 63, 9% in previous quarter, and a 66, 2% a year ago.
Speaker 3: Third-quarter non-driver sales also exceeded guidance with revenue of $33.7 million, down 14.4 percent from a quarter ago, but up 9 percent compared to the same period last year.
Third quarter non driver sales also exceeded guidance with revenue of $33 $7 million down 14, 4%.
A quarter ago, but up 9% compared to the same period last year.
Speaker 3: The better than expected performance was a result of higher instrument of W.O. and the CMOS EMI sense.
The better than expected performance.
<unk> of higher shipment of W O and the Cmos image sensor.
Speaker 3: TICON business represented over 8% of our total sales in the third quarter. Yet experienced a low-team sequential decline, hampered by decreased demand for both large display panels and AMOLED display for tabulate.
T Com business represented over 8% of our total sales in the third quarter.
It experienced a low teen sequential decline.
Hampered by decreased demand for both large display panels and am OLED display for tablet.
On a positive note.
Speaker 3: We continue to solidify our leadership in automotive TCOM market with local-deming technology adoption, rising rapidly by leading panel makers, tier ones and the filmmakers across the board.
We continue to stop solidify our leadership in automotive telecom market with local dimming technology adoption.
Rising rapidly by leading panel makers tier ones and the car makers across the board.
Speaker 3: with numerous projects of worth already in hand. We expect a strong growth trajectory for automotive T-COM in next few years.
With numerous project awards already in hand, we expect a strong growth trajectory for automotive telecom in next few years.
Speaker 3: Now driver products accounted for 14.1% of total revenues as compared to 16.8% in the previous quarter and 14.5% a year.
Non driver products accounted for 14.1% of total revenues.
Compared to a 16, 8% in the previous quarter and 14, 5% a year ago.
Speaker 3: Sir Quarter operating expenses were $63.7 million. An increase of 19.8% from the previous quarter, but down to 0.5% from a year ago.
Third quarter operating expenses were $63 $7 million.
An increase of 19, 8% from the previous quarter, but down 12, 5% a year ago.
Speaker 3: As a reminder, we grant annual bonuses to employees at the end of September each year, including all I see you and casual work.
As a reminder.
We grant annual bonuses to employees at the end of September each year, including ICU and cash a word.
Speaker 3: Our 2023 annual bonus conversation of $10.4 million was in line with guidance.
Our 2023 annual bonus compensation of 10 $4 million was in line with guidance.
Speaker 3: Out of quiche, $9.7 million, or $4.4 cents per diluted ABS, was immediately immediately exhausted and dispensed in the third quarter.
Although quitch $9 $7 million or four four.
Diluted avs.
What's immediately adopted and the expense in the third quarter.
Speaker 3: In comparison, bonuses for 2022 and 2021 were $39.6 million and $74.7 million, respectively.
In comparison.
For 2022, and 2021 were $39 $6 million and the $74 $7 million respectively.
Speaker 3: of which $18.5 million and the $24.8 million were invested and expense immediate.
Which 18 $5 million and $24 $8 million were invested and the expense that immediately.
Speaker 3: The changes in Q3 operating expenses were mainly associated with the weight, we expensive the employee annual bonus grant based on high FRS account.
The changes in Q3 operating expenses.
Mainly associated with the way we expense the employee annual bonus Greg.
Based on <unk> accounting.
To clarify.
Speaker 3: The Q3 bonus expense includes true portion. First,
The Q3 bonus expense in Q2 portion.
First as mentioned above.
Speaker 3: $9.7 million for the immediately lasted and recognized portion of the current year bonus grant.
Nine seven meaning for the immediately locked it and recognize the portion of the current year bonus grant.
Speaker 3: That is based on the expected profit for the full year.
<unk> is based on the expected.
Expected profit for the full year.
Speaker 3: Second, $6.2 million for the amortized trenches of the Pai Ears Monument.
Second $6 $2 million for the amortize the tranches of the pilot year small notice.
Speaker 3: As a reference, the amortized expense of the pi-year employee bonuses for full year 2023
As a reference the amortize the expense.
Of the pie year employee bonuses for full year 2023.
Speaker 3: would be a high, a 21.8 million dollar due to substantially high profits in 2021 and 2020.
It's high of $21 $8 million due to a substantially high profit in 2021 into 2020 to.
Speaker 3: leading to a significantly increased boners carry over a modulation.
Leading to a significantly increased foreigners carryover amortization expense.
Speaker 3: This has caused the volatility in our IFIS figures for 2023.
This has caused volatility in our <unk> figures for 2023.
Speaker 3: Why for the annual bonus grant? High math has always followed a consistent compensation policy and the rules for employees. MSPRE-
Higher for the annual bonus Grant Timex has always followed a consistent compensation policy and the rules for employees.
And if the prevailing macroeconomic headwinds.
Speaker 3: We are currently exercising strict budget and expense control, with four-year 2023 OPEC post to decline.
We are currently exercising strict budget and expense control with full year 2023, OPEC poised to declined.
Compared to last year.
Speaker 3: Their quota operating income was 11.1 million dollars, also 0.6% of sales.
Third quarter operating income was 11.1, meaning other all four 6% of sales.
Speaker 3: Compared to 1.8% of sales for the same period last year, and the minus 0.9% last quarter.
Compared to one 8% of sales for the same period last year and the minus <unk>, 9% last quarter.
Speaker 3: The sequential increase was primarily a result of increased sales and growth models.
The sequential increase was primarily a result of increased sales and gross margin.
Speaker 3: partially offset by higher operating expenses in the third quarter.
Partially offset by higher operating expenses in the third quarter.
Speaker 3: The year-over-year increase was primarily a result of lower operating expenses brought by lower annual bonus compensation, partially offset by lower course margin compared to same period last.
The year over year.
Increase was primarily a result of lower operating expenses brought by lower annual bonus compensation, partially offset by lower gross margin compared to same period last year.
Speaker 3: Sir Quarter after tax profit was $11.2 million or $6.4 cents per diluted ADS compared to $0.9 million or $0.5 cents per diluted ADS lost quarter and $8.3 million or $4.8 cents in the same period lost
Third quarter after tax profit was $11 $2 million or $6.04 per diluted ads.
Compared to <unk> $9 million or <unk> <unk> per diluted ads last quarter and $8 $3 million all four eight in.
In the same period last year.
Speaker 3: Turning to the balance sheet, we had $155.4 million of cash, cash equivalents, and other financial assets as of September 30, 2023.
Turning to the balance sheet, we had 155 $4 million of cash cash equivalents and other financial assets.
Our September 32023.
Speaker 3: compared to a $2,027.9 million at the same time last year and a $219.5 million a quarter.
Compared to our 2027 $9 million at the same time last year and the $2219 five meaning dollar.
A quarter ago.
Speaker 3: Third quarter cash flows were impacted primarily by two cash payouts.
Third quarter cash flows were impacted by primarily by two cash payouts.
Speaker 3: $83.7 million for annual dividend and $29.5 million for employee bonus.
<unk> three <unk>.
<unk>, four annual dividend and $29 $5 million for employee bonus.
Speaker 3: The employee bonus is comprised of $9.3 million for the immediately vasted portion of this year's award. And $20.2 million for vasted award granted over the last three.
The employee bonus is comprised of $93 million for the immediate to the vast portion of this year's award and a $22 million for vested award granted over the last three years.
Speaker 3: This might be the substantial payout in Q3. We delivered strong positive operating cash flow of $16 million. Again, due to the ongoing destocking process across major personal lines with inventory experiencing a meaningful reduction compared to the past quarter.
This is Mike.
Substantial payout in Q3, we did.
Levered strong positive operating cash flow of 16, meaning dollar again.
Due to the ongoing destocking process across major product lines with inventory experiencing meaningful reduction compared to the past quarters.
Speaker 3: We had 42 million dollars of long-term unsecured loans as of the end of the third quarter of which six million dollars was the current push.
We had $42 million of long term unsecured long.
At the end of the third quarter of which six meaning the other one.
The current portion.
Speaker 3: Our quota and inventory as of September 30, 2023 were $259.6 million. Marketably lower than $297.3 million lacks not-
Our quarter end inventory as of September 32023 were $259 6 million.
Markedly lower than 297 $3 million last quarter.
Accounts receivable at the end of September 2023, plus.
$248 $5 million up from $239 million last quarter and down from $253 $3 million a year ago.
DSO was 95 days at quarter end as compared to 90 days last quarter and 74 days a year ago.
Speaker 3: Sir Quater Capital is badgers for $2.6 million. Third is $2.9 million last quarter and the $3.4 million a year.
Third quarter capital expenditures for $2 6 million versus $2 9 million last quarter, and a $3 $4 million a year ago.
Speaker 3: The third quarter cap-axe was many full hour IC design.
The third quarter, our Capex was mainly for our IC design business.
Speaker 3: As of September 30, 2023, HIMAC has 174.7 million AKS outstanding. Little changed.
As of September 32023, IMAX has $174 seven meaning Ats outstanding little changed from last quarter.
Speaker 3: Angafuri diluted the basis total number of ADS outstanding for the third quarter was 174.8.
On a fully diluted basis.
Total number of ads outstanding for the third quarter.
$174 8 million.
Speaker 3: Now, turning to our fourth quarter 223 guidance.
Now turning to our fourth quarter to 123 guidance, we expect fourth quarter revenues to decline, 5% to 11% sequentially.
Speaker 3: We expect fourth quarter revenues to decline 5% to 11% sequentially. Gorsmogin is expected to be around 30%, depending on the final predominance. The fourth quarter profit attributable to shareholders is estimated to be in the range of 9 to 13 cents per fully diluted ADF.
Gross margin is expected to be around 30%, depending on the final product mix.
First quarter profit attributable to shareholders is estimated to be in the range of 9% to 13%.
Per fully diluted ads.
Speaker 3: I will now turn the call over to Jordan to discuss our Q4 Outlook. Jordan, the floor is yours.
Yeah.
I will now turn the call over to Jordan to discuss our Q4 outlook Jordan the floor is yours.
Sure.
Sure.
Thank you Eric.
Speaker 4: We expect our fourth quarter sales growth to be relatively subdued.
We expect fourth quarter sales growth to be relatively subdued.
Speaker 4: compared to typical seasonal trends, primarily due to sluggish and market demand, as well as cautious inventory management, and rigorous procurement scrutiny by our customers.
Compared to.
Typical seasonal trends, primarily due to sluggish end market demand as far as cautious inventory management.
<unk> procurement scrutiny by our customers.
Speaker 4: Additionally, ongoing macro headwinds are limiting our visibility as panel customers remain tentative about demand process.
Sure.
Additionally, ongoing macro headwinds limiting our visibility as panel customers remain tentative.
Demand prospects.
Speaker 4: leading to short-term forecasts and more frequent last-minute orders.
Leading to.
Short term focus.
More frequent in last minute orders.
Having said that.
Speaker 4: or let's go turn my outlook for the automotive business or largest raving new contributor remains positive.
Our liberal term outlook for the automotive business, our largest revenue contributor remains positive.
Speaker 4: as we maintain a dominant position in the sector.
As we maintain a dominant position in the sector.
Speaker 4: The majority of our design wins in TDI and logo Dmin Tcon both relatively new technologies for the multi-factor are slated to commence mass production during the next two years.
The majority of our design wins in TDD local dimming T com, both relatively new technologies for automotive sector.
Slated to commence mass production during the next two years, thereby further fortify our market share leadership.
Speaker 4: thereby further fortifying our Magician leadership amidst growing competition.
<unk> growing competition.
Speaker 4: point coupled with the mega trend of increasing quantity, size and sophistication of displays in SyV.
Claim coupled with the mega trends of increasing quantity and size and sophistication of displays.
Speaker 4: Hi-Mex is poised to enjoy the tenable growth in the automotive market for years to come, regardless of other industries headwinds.
Equals carmax is poised to enjoy.
So tenable growth in the automotive market for years to come regardless of all the although industry headwinds or <unk>.
Economic challenges.
Speaker 4: Amidst the prevailing challenging economic conditions, we continue to implement a range of measures to reduce costs including improving, manufacturing and operational effusion.
Of missed the prevailing challenging economic conditions, we continue to implement a range of measures to reduce costs.
Including improving manufacturing and operational efficiencies and leveraging diverse partners in foundries have taken sources.
Speaker 4: and leveraging diverse partners in boundaries and vegan sources.
Speaker 4: The recently announced partnership aligns with next chip in Automotive in the illustration of high-maxes fondue supply that was patient strategy.
The recently announced partnerships alliance with snack chips.
In automotive you said you said it was illustration of high mixes funds you supply diversification strategy.
Speaker 4: The collaboration expands high-mixes, foundry supply, or optimizing cost structure.
The collaboration expense higher mixes foundry supply.
<unk> cost structure.
Speaker 4: for the thriving automotive market, especially in China.
For the soybean automotive pockets, especially in China.
Speaker 4: In terms of inventory, the disclocking process is progressing nicely with Q3 seeing a meaningful reduction.
In terms of inventory.
Discussing process is progressing nicely with Q3 seen a meaningful reduction.
Speaker 4: Currently we are nearing historical every levels after several quarters of aggressive inventory depletion.
Currently we are nearing historical average levels after several quarters of aggressive inventory depletion.
Okay.
Speaker 4: Thanks to accelerating growth in automotive business, improved cost structure, normalized inventory levels, terrible product.
Thanks to accelerating growth in our automotive business improved cost structure normalized inventory levels favorable product mix and our end.
<unk> on higher margin higher value added areas.
<unk> OLED and AI.
We are well positioned to deliver sustainable long term revenue growth and profitability.
We start I will now begin with an update on the large panel driver IC business.
For our fourth quarter.
Our fourth quarter 2023, large display driver IC revenue is projected to decline by double digits sequentially.
In the absence of festival season shopping this year.
Densify, China local competition.
In the TV business, leaving and brands continue to implement stringent production controlled measures amidst soft demand and are maintaining loan inventory levels low inventory levels rather.
Consequently, we expect a double digit quarter over quarter decline in Q4, TV IC sales.
Notebook and monitor IC.
So facing a challenging business environment we.
We expect sales for both product lines to decrease by double digits sequentially.
Yes.
Turning to the small and medium sized display driver IC business.
Fourth quarter revenue is expected to decline single digits.
On the pitch drop although muted festival season hurt demand for consumer electronics remains sluggish.
Smartphone sales are projected to decline in double digits.
The type of sales are expected to increase single digit sequentially in Q4.
Automotive revenue is expected to be flat or slightly down.
Sequentially following a surge in orders resuming full both traditional <unk> during the previous quarter.
Q4, automotive Tds sales are poised to continue to increase by low teens sequentially.
Fueled by strong customer orders across the board is supportive government governmental policies, especially in China and U S.
It incentivizes new vehicle purchases.
Secured.
<unk> wind projects for automotive <unk> continue to expand across the board and now total nearly 400.
Significantly ahead of our peers.
The market for the.
Automotive PDI sales are expected to account for.
Almost 40 almost.
40% of total automotive driver sales in Q4.
As Eric mentioned earlier automotive service sales are now our largest revenue contributor.
And.
If combined with automotive Telecom, you said to represent almost half of our total sales in Q4.
Moving on to our industry, leading OTT.
As we recently announced high mix is a first in the world to commence mass production of <unk> for certain customers. The evs starting in Q3 this year.
We expect <unk> adoption to further proliferate.
As it gains traction in car models, featuring large sized displays as car makers look to distinguish their vehicle products.
Additionally, we are seeing an increasing number of customers choosing to adopt our integrated <unk> <unk>.
Local dimming <unk> solution.
The standard platform for the.
Altra loss automotive display development.
This newly designed automotive displays are typically larger than inches deliver a shock.
<unk> visual experience being culprit high intensity <unk> functionality.
High density.
High density <unk> functionality, which typically necessitate the utilization of six or more OTT chips together with at least one level of immunity.
Representing much higher contract value for us on a per panel basis.
This unknown the ramps up the new revenue stream, but also reinforces our leadership position in the automotive display market as we move into 2024.
Hi, Max.
<unk> at the forefront of the automotive display IC market with a diverse.
Protocol folio covering the full range of specifications technologies, including Deedee, IC TVD local dimming T Con OTT OLED.
This holistic offerings cater to a wide range of customer preferences and needs.
Strong customer loyalty and collaborations with global panel makers Tos and carmakers.
We expect automotive segment to continue to be a key growth driver for us.
In terms of our smartphone and tablet product lines, we continue to see lackluster demand in the market.
On a positive note.
Inventory has substantially rebalanced to a satisfactory level after consecutive quarters of inventory depletion.
We are still discussing process nearly complete.
We place where stars full slick.
Products starting in Q2, this year and continue to work on improving our cost structure with the aim of improving our efficiency for Quinn.
And returns.
Yes.
Next for an update on our intermodal business.
By partnering with leading panel manufacturers in Korea in China, we are accelerating our AMOLED driver IC advancements.
Covering various applications from automotive and tablet to smartphones notebooks and Tvs.
In the automotive sector, our design wins are steadily increasing from both traditional carbon ventures and MTV vendors worldwide.
For smartphone AMOLED display driver sluggish demand in the smartphone market has resulted in a slight delay.
Our original target targeted timelines.
The less we continue to look continue collaborations with customers from Korea and China.
<unk> ongoing reputation and partnership projects.
Yes.
I would now like to turn.
Two our non driver IC business.
We continue to make steady progress.
Yes.
First for an update on our telecom business.
Anticipated Q4, pecan sales to decreased double digits sequentially tempered by reduced shipment for large size displays in OLED displays or tablets as.
As customer inventory Offloading continues due to substitute that market demand.
Despite the soft market sentiment we have activity.
Developing the next generation <unk> for OLED tablet notebook and automotive.
Two diversify offerings and strategically position ourselves for a resurgence in demand.
Moving on to our automotive business for LCD panels are positioning remains challenged in level of immunity.
Dunst by growing accreditation is widespread deployment globally impulse premium premium image.
Mainstream new car models with.
We plan to rollout a series of T con for Automotives to expand our product offerings catering to different needs of global customers.
The host immune technology has fall increasing applications in automotive display initially for high end car models and gradually into mainstream vehicles.
One emerging use case.
<unk> is in head up display or issue.
Thanks to our <unk> unique ability to deliver a high contrast ratio plus selected content.
Along with slow heat dissipation and minimal Coca assumption.
Although motive and <unk> can effectively eliminate the frequently occurring.
So call a postcard effect in issue the application.
Cost by <unk>.
Leakage.
In TMT LCD panels.
Okay.
That shows a square shaped display image.
Uh huh.
On the windshield.
Automotive telecom business is poised to experience explosive growth with strong momentum expected into 2024.
In years to come.
<unk> is one of our major growth engines.
Switching gears to the Wi Fi.
Smart image sensing total solution pushing incorporates <unk> proprietary.
Low power AI approach.
As always some Cmos image sensor.
Then based.
Algorithm.
For notebook, we continue to support the mass production of sales notebook.
Given.
The growing <unk> of the human presence detection Fisher in notebooks.
One with global and local claims for their next generation products are progressing nicely.
Sure.
OSI solution is also in full adoption across a range of endpoint AI applications, including video conference device automotive excess can show.
Sure.
So look as smart do culture among others.
Notably OSI adoption is also growth going smoothly.
<unk> application.
We joined forces with leading players.
Players in China.
We smooth production.
<unk> to commence starting in the end of this year.
Moreover, the latest smart lock design surpasses the existing human presence detection Fisher.
And takes a step forward to support an additional camera offset in Italy.
Camera functionality.
The secondary camera can be oriented toward full ground level status monitoring for events such as parcel delivery.
In doors to enhance security detection.
More innovative features are also under development together with key customers in the field targeting the next generation smart door lock.
We anticipate that lifestyle adoption in surveillance will significantly increase starting in 2024.
Now for an update on our WD to AI processor.
Compared to the B one his predecessor.
<unk> two processor offers further advancements interests speed and ultra low power.
In context aware AI W. Two enables detailed real time computer vision optics analysis, such as official landmark Hayden, Dave Mark and human post a skeleton among others.
<unk> low power consumption.
This enables sophisticated human expression detection for small notebook and broader applications.
Alongside our ongoing collaboration with end customers.
We are also making significant progress in partnerships with major CPU in AP as Soc players.
In preparation for their target markets.
Our next generation Smart notebooks. So village is a host of other endpoint applications.
We will provide more details as they come about.
In addition to the wise.
Total solution.
We're also focused on expanding our embedded sensor module business Park.
Targeting users that may be less familiar with AI or wish to incorporate AI capabilities into their applications with us who've kept.
A significant development effort.
This.
Particularly applies to small volume or early stage.
Market engagement applications.
The module.
<unk> incorporating <unk> technology provides clients with a series of highly integrated talked in play module pools, which are extremely compact in size.
User programmable and loaded we saw pre trained AI models for straightforward system integration.
This can effectively short end customers time to market and reduce development costs.
Two broader market reach.
Chris of embedded sensor modules will be rolled out to cover more diverse markets that cater to various AI needs.
The interior sensing module solution will also be made available through online resellers.
<unk>.
Like PTC and others.
Customers.
Yes.
Through our recent quarters.
Our interior sensing module has received excellent feedback with adoptions.
Before various applications.
One, particularly successful adoption.
In systems.
Which has been deployed by several vendors in different regions of Asia.
Our module offers precise realtime emotion and occupancy detection to streamline the billing procedure for vehicles.
Recently, our module operates efficiently with ultra low power, making it a viable choice for battery powered parking systems.
Hi.
Greatly simplify the installation process and reducing maintenance costs.
Moreover, our AI functionality can include fee cotype recognition, which enhances the effective utilization of parking spaces.
Beyond the parking solution there is a growing interest in applications for intelligent sensing module in areas such as retail shell retail shelf management.
And the human flow monitoring among others. We are excited about the upcoming gross product our prospects.
For this product.
Yes.
Our leading position in ultra low power AI processing and image sensing for endpoint applications demonstrates our commitment and conviction.
Two the ongoing development and growth of Wi Fi business.
By leveraging our broad ecosystem partners and customers, we aim to maximize market reach and explore more potential endpoint AI applications.
While adoption is.
Still at an early stage, we believe our business will serve as a multiyear structure a growth driver for high mix.
Okay.
Plus the <unk>.
For an update on our optical related product lines with over a decade optical.
Oh, probably electronics, knowhow and capabilities under our belt.
Hi, Max has been offering various technologies, including <unk> <unk> and <unk>.
Driving continuous advancements in diverse field feels related to emerging metal versus applications.
Additionally, we have other innovative solutions under development to further expand our technological portfolio.
The recent introduction of Leesville gruff display technology.
Veiled by high message subsidiary Dick's store technology.
You saw an illustration of <unk> capability to provide more diverse offerings to the industry.
The <unk> is still based optical product provides.
<unk> technology that defies imagination through the display a personalized and Carla content on the exterior lens of classes.
All external viewers to enjoy while also providing wearers.
Although obstructed visibility.
We expect nixdorf graph display technology to create a broad array of applications possibilities for wearable devices in the future.
Yes.
Next on our progress on <unk>.
Following the unveiling of our cutting edge color sequential from <unk> micro display.
The display week in May.
Several tech Giants in the industry have shifted their focus away from Michael.
Away from <unk>.
Micro OLED tool.
<unk> of course for the idea of goggles.
This shift is demonstrated exceptional shipments in both performance and functionality.
Marked by breakthroughs not only in the illuminate b in the luminance performance in four RGB color, but also in terms of superior optical efficiency tiny form factor industrial lightweight design.
These factors are critical.
Technical technological advancements.
Getting ready to meet rigorous requirements to support next generation see-through goggles.
Next an update on <unk>.
As previously mentioned, we initiated volume production of our W or technology to a leading north American customer in the second quarter.
The <unk> solution.
It's integrated into the customer's new generation VR goggles to enhance to enable <unk>.
<unk> gesture control.
So decent shipment was made in the third quarter in preparation for the upcoming seasonal shopping sales.
For non driver IC business, we expect revenue to decline mid teens sequentially in the fourth quarter.
That concludes my report for this quarter. Thank you for your interest in Hi, Max We appreciate Youre joining todays call.
Now ready to take questions.
Thank you.
Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced.
To withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Donnie Teng with Nomura. Your line is open.
Hi, Jordan and Eric can you hear me.
Yeah slowly clear.
Hey, Thank you Jordan for taking my question.
My first question is regarding to your guidance.
If I look at your guidance across different product lines or by applications I feel is a lipid opposite to the current market condition for simple.
Smartphone and PC it looks like to be recovery, while automotive if you look at the IBM companies RASM guidance. It seems like the auto demand in non China markets being weekend.
But your guidance shows that.
PC notebook and monitor as being slowing down into the fourth quarter as well as <unk>.
Muscle, while automotive looks like steel quite resilient.
So could you kindly explain.
Why there is differences between the current market dynamics versus your guidance. Thank you.
Thank you Tony.
To be honest I don't.
Im not sure I have a very.
Clearly explanation to that.
I agree with your view that.
In our guidance.
It seems to indicate.
Towards a different direction right.
<unk> auto.
Overall the consensus.
Seems to be.
Pessimistic.
Smartphone and <unk> seems to be.
In early stage of a rebound I think the.
Thank you.
Explanations and I can offer perhaps you start for auto multi display market.
We really dominated the market.
As you will recall.
<unk>.
The.
Q1 for this year, there was a southern drop in demand for automotive display Ics and.
In China started to.
Implement this rather stringent COVID-19 control.
Our mandate right.
Which causes a lot of factories to get shut down. So in Q2, there was a widespread industry wide.
<unk>.
This competition, which.
I'd have led to a.
A lot of our customers suspending their orders to us. So in Q3, we saw a very very strong rebuilt.
Uh huh.
The rebound is not entirely a reflection of market sentiment as such rather I think is a tourist for our customers to restock.
From where they are probably more behind in the first and second quarter and I think the momentum continues into this quarter for us although certainly the rebound would not be as true. So we have guided.
You are guiding for Automotives.
Business for this quarter to be flat to slightly down. So I think that reflects our leading market position, where we have a very.
<unk> comprehensive and.
Thorough market coverage and customer coverage so when customers.
Need to restock.
Restock for there.
For their production I think we are probably the first point of call.
In comparison for smartphone and PC, our position was not certainly not as strong.
No.
Quite the opposite.
Actually.
I would highlight.
For monitors for example.
Our market share was relatively strong we also saw where social C. In Q4 demand to be.
So which.
I mean, if you think about the issue of the sugar beet.
A big departure from the demand for PC monitor.
<unk>.
One would not expect a major departure pro forma perspective or our.
Our focus full order book, we do see different.
Picture I think.
This can be explained by our different.
In these different markets.
Okay.
So sorry, Julien So you mean, the monitor momentum from your side is better than notebook.
Yes, slightly yes.
Al.
Understood.
And my second question is regarding to the ASP trend accruals.
The different product lines.
Are you seeing asps stabilizing or.
By different product there could be still some different client Gulf ASP erosion trends.
In the coming months.
And another thing is that you previously announced that you have more cooperation.
With the next ship and I feel resin driver IC companies are more aggressively.
Shifting.
Foundry capacity away from the foundries with higher priced.
The lower price.
So.
Is that will be helpful to your gross margin improvement going forward.
Not for the decline that much Wilder foundry calls can be further reduced.
First first on ASP trend.
<unk> to the <unk>.
Last few quarters certainly.
<unk> definitely stabilizing across the board.
Because.
The.
The order or the overall industry inventory.
<unk>.
It is now.
Healthier than before.
Certainly.
Our customers panel makers.
Either just starting to make money or some ILUVIEN I'll stay under the water.
In our P&L right so.
And certainly we are aware of the macroeconomic condition has not.
Now looking very positive so.
I think price pressure.
Because of lack of demand and our also because of our customers.
Not.
Not.
Uh huh.
Being very profitable I think price pressure, where proceeds although I don't I don't see.
This a similar kind of price pressure, though we.
Experience.
In the last few quarters.
And that.
Thank the comments kind of applies across different sectors I can't really tail.
No.
One sector.
From from another very different picture and certainly the picture May vary you know.
As we move along into next year, but we got where reported due course, but for now we don't see.
Very different picture.
Across different sectors.
You mentioned.
Foundry.
China Foundry in fact also perkin.
And our collaboration with NEC ship I mean, certainly.
We have a joint price announcements.
For our strategic alliance that is.
That is our focus on automotive display.
We snap ship actually will have kick started.
The collaboration of both <unk> and TDD.
We saw mass production for both expected to be around Q4 next year.
And I think <unk>.
Site, which certainly is always World Cup price side I think.
Having a strong partner in China.
Also.
Helps us in.
In dealing with China, Chinese customers and covering Chinese markets.
In.
Automotive, especially evs.
Where is very very important and I think they are.
Our Chinese customers and we're certainly with a favor oil companies. This move that we think we saw on that ship.
So.
Yes, so both.
In foundry and.
And probably a bit more so for back end.
Where possible.
We will look to diversify our customer base, our supplier base and.
Explain to expand further into China.
Longer term surely I think or help us.
We saw costs and hopefully you know alleviate pressure from.
For full price.
Yeah.
Understood.
Just one last follow up from me.
Uh huh.
Yeah.
If you look at your fourth quarter guidance.
Your EPS is between <unk> to <unk> 13 cents.
Uh huh.
Most of the pricing that I feel that.
The upper range of 13 said it looks like it could be higher.
Higher than my previous expectation.
Considering your sales is going to decline like.
8% quarter on quarter.
In the mid range so.
We will have lower tax rate in fourth quarter or you have more packs I.
Thank you.
For this question.
I appreciate it.
Diligent.
Even.
In.
Looking at our financials and building your model.
Yes, there will be some.
Some tech spending.
That we were.
We were enjoy because of certain tax planning that we made earlier.
In Q4.
Right on details right now over here, but.
But yes, it's Texas one of the reasons.
We.
We also run our financial Patricia module price. So the EPS range certainly is directly the outcome.
Those models based on our own.
Our our revenue gross margin guidance among other things.
And yes, you pick up the.
This fine detail and indeed, there will be.
Some tax benefits that were in Chile, we expect to Joey.
In Q4.
Okay that is due to.
As you know earlier tax planning that we did.
Understood.
Thank you Jordan I'll go back in queue.
I appreciate that Tony.
Thank you at this time I would now like to turn the call back over to Jordan.
Closing remarks.
As a final note Sara Lee our chief Yeah, obviously were maintained as the marketing activities.
Continue to attend Investor conferences, we will announce the details as they come about thank you and have a nice day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Yeah.
Okay.
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