Good day, ladies and gentlemen, and welcome to the Himax Technologies, Inc. First Quarter 2015 Earnings Conference Call. At this time, all participants are in a 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 Adam Holdsworth from PCG Advisory Group, the company's external IR representative. You may begin.

Thank you, operator. Welcome, everyone, to Himax's first quarter 2015 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer; and Ms. Jackie Chang, Chief Financial Officer. After the company's prepared comments, we've allocated time for questions and a Q&A session. If you have not yet received a copy of today's results release, please call PCG Advisory Group at 1-646-862-4607. You can also access the press release on financial portals or download a copy from Himax's website at www.himax.com.tw. 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. Factors that could cause actual results include, but are not limited to, general business and economic conditions, the state of the semiconductor industry, market acceptance and competitiveness of the driver and non-driver products developed by Himax, technological innovations as well as other operational and market challenges and other risks described from time-to-time in the company's SEC filings, including those risks identified in the section entitled the Risk Factors in its Form 20-F for the year ended December 31, 2014, filed with the SEC as amended. Except for the company's full year of 2014 financials, which were provided on the company's 20-F, filed with the SEC on April 15, the financial information included in this conference call is unaudited and consolidated, and prepared in accordance with U.S. GAAP accounting. 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…

Thank you, Jordan. I will now provide additional details for our first quarter financial results. Our GAAP operating expenses were $30.4 million in the first quarter of 2015, up 5.1% from the same period a year ago and down 9% from the previous quarter. Operating expenses increased from the first quarter of 2014 due to higher expenses for additional head count to support our new projects and annual salary increases. The quarter-over-quarter operating expense decline reflected decreases in R&D expenses and allowances for bad debt. GAAP operating income for first quarter of 2015 was $15.6 million or 8.7% of revenue, down 18.1% year-over-year and down 30.9% sequentially. The decline was mainly due to lower sales in the quarter. Non-GAAP net income in the first quarter was $13.1 million, or $0.076 per diluted ADS, representing a decline of 19.3% year-over-year and a decline of 18.9% sequentially. Non-GAAP earnings per diluted ADS declined 19.3% from the same period last year, and declined 19% over the previous quarter. Our cash, cash equivalents and marketable securities were $178.8 million at the end of March 2015, up from $139.7 million during the same time last year, and down from $187.8 million last quarter. In addition, to our strong cash position, our restricted cash was $130.2 million at the end of the quarter. The restricted cash is mainly used to guarantee the company's short-term loan for the same amount. We continue to maintain a strong balance sheet, and we remind investors that we'll remain a debt free company. Inventories at March 31, 2015, were $186.1 million, up from $172.3 million for the same period last year and up from $166.1 million last quarter. As mentioned in last earnings call, we foresaw higher inventory as a move to counter foundry capacity constraints in 8-inch wafers, but expected…

Thank you. Our first question comes from the line of Jaeson Schmidt with Lake Street Capital. Your line is open.

Hey, guys. Thanks for taking my questions. Jordan, just wondering if you could talk about your visibility into the second half of this year and your confidence within that? Jordan Wu - President, Chief Executive Officer & Director: Okay. Thank you, Jaeson. Our target for the whole year is to achieve at least a flat revenue compared to last year, which means around 10% year-over-year growth for the second half. And which also implies around 40% plus to close to 60% spread between first half and second half, meaning we are more optimistic for our second half prospect compared to the very low visibility of the present. And the opportunities will mainly come from firstly in our traditional driver IC business, the panel resolution upgrades, 4K TV continues to grow, and I mentioned earlier, smartphone, we are one of the early movers in – now the highest grade QHD panels. And the panel, our driver IC for QHD will start some shipment towards the end of Q2, and we expect to see some volume in the second half. And on our CMOS image sensor, 8-megapixel and 13-megapixel, we are in the process of finalizing the design phase with some of the heavy weight customers. So we expect to see volume there as well for the second half. On-cell touch, while we are particularly excited about in-cell price (31:15), we do expect in-cell to start to see some volume in Q3. However, the real more meaningful volume for this next-generation touch together with display will be on-cell touch brought in-cell. In-cell is revenue wise will be more of a story of next year. On-cell will make contribution in the second half. And finally, LCOS and WLO, there will be initial ramp-up. They will have marginal contribution only on the top line in 2015, but certainly they will help improve our corporate gross margin in the second half.

Okay. So it's fair to say you think this near-term pause is simply a demand issue and not a market share issue? Jordan Wu - President, Chief Executive Officer & Director: No. Definitely not. It's a demand issue.

Okay. And then, Jackie, how should we look at OpEx for this year?

Well, we already are into the monitoring mode to somewhat control our operating expenses. However, we continue to focus on the head counts and resources that's required for our new projects, such as LCOS and WLO. So I think we will expect about $140 million in total operating expenses for 2015, probably mid single digit increase year-over-year.

All right. Thanks a lot, guys. Jordan Wu - President, Chief Executive Officer & Director: Thank you, Jaeson.

Thank you. Our next question comes from the line of Daniel Heyler with Bank of America. Your line is open.

Thanks. Good evening, Jordan and Jackie. I had – first one to ask, elaborate a little bit on the large panel DDI market, because you said that the volume there is picking up, 4K is starting to show positive signs. How should we think about pricing and margins there? On the one hand, you said there is some pricing pressure, but on the other hand I'm wondering whether there is offsetting factors for that, such as maybe more capacity from foundries, perhaps you could get some pricing there, just maybe you could elaborate a little bit on pricing and margins for the large panel DDI? Jordan Wu - President, Chief Executive Officer & Director: Pricing pressure remains because of two main factors. One, the market is soft. So the buyer has more bargain power. And secondly, most buyers happen to have big plans for capacity expansion so everybody is kind of after that. And you're absolutely right in saying that the foundry capacity in particular 8-inch and for large panel driver we use primarily 8-inch. And 8-inch foundry has been loosened, which is a good sign for us. Although we did mention our inventory level is slightly above our normal range, that means we have to digest our inventory first before we get to use the more kind of price attractive foundry offering, but it will take place in the second half we'll get to enjoy the more loosening foundry situation. And I would also highlight that large panel, because when you move to 4K, both driver and the timing controller, timing controller in particular, are becoming a lot more technically challenging. So you are limiting a lot of competitors in the marketplace. So there are actually only a very, very small handful of players at the moment. So that is something a very good sign for us. And we are the market share leader in China. And China is the market, which is very expanded. So I think we will benefit from there too.

Great. So on the large side, just to clarify, the 4K definitely more competitive, technically more difficult. Is it fair to say the merchant market provider is excluding the captive suppliers of large panel DDI? When you said handful, is that like two or is it three in your view, from merchant market provider? Jordan Wu - President, Chief Executive Officer & Director: It's probably two and a half. There is (36:02) and they are too independents. And the captive supplier, they also – I mean, the group is a major end TV maker, so they get to penetrate into other panel makers (36:18) kind of a bundle deal. They are the customer and they are the IT suppliers as well. But they are pretty much limited by that. So I would say mainly two competitors, major competitors.

Okay. One quick one on small and then another one on non-driver. So on the small size, clearly, first half data points have been pretty soft. The outlet on the second half looks, I guess, implied by some of the mobile processor companies seems pretty positive actually on the small panel DDI. Yet I'm trying to read kind of your commentary on smartphone. Do you have confidence that when you see a significant pick-up in second half? (37:11) do you think it's going to be remain pretty competitive? And also you did talk about some of your issues may have been some customer related, may be your customers not doing quite as well as maybe your competitors' customers, so does that imply that you may be losing a bit of share short-term and can you take back market share there? Jordan Wu - President, Chief Executive Officer & Director: Good questions, Dan. Firstly, on the market momentum, we are just starting to see signs of market coming back the momentum, meaning customers are revising up their forecast. It's just happening right now. And I mean, after almost two quarters of rather dismal atmosphere, I think people remain very, very cautious in terms of the way they provide forecast. So although these are early signs, but we do see a forecast being revised up and momentum coming back. So we are excited about that. And your second question is about maybe our customers are outcompeted by some others and firstly, I mean, our customers over the years have been those big names, the traditional big names in China and certainly elsewhere as well, but China now being the biggest market is very important. And certainly they were a bit called by surprise, some people – some exporters come in with a very high end phone, you know who, and then there are some others coming in from e-commerce model and we're seeing literally all of our traditional leading brand Chinese customers getting into e-commerce model of their own by adopting U.S. second brand name, sometime second third brand name. So they are fighting back. And also some are turning more of their focus to exports, although we explained the difficulty of export market because of currency situation. But I think, I don't believe our customers are going away. I think they are here to stay. And also we certainly – we talked to everybody. So we cannot talk specific about customer engagement and activities. But I mean, we certainly – we take less and we try to penetrate to like non-core, traditionally non-core customers of ours. They have some progress, but certainly, unfortunately, I cannot disclose details. So we believe, our competitive strength remains; and we just have to work hard, helping our customers out.

That's super helpful. Thank you. Jordan Wu - President, Chief Executive Officer & Director: Thank you, Dan.

Thank you. Our next question comes from the line of Jerry Su with Credit Suisse. Your line is open.

Hello. Yeah. Hi (40:26). My first question, regarding your full year revenue growth, I think you have mentioned (40:36) Jordan Wu - President, Chief Executive Officer & Director: Jerry, I can hardly hear you. Can you speak up?

Yeah. Hello. Can you hear me now? Jordan Wu - President, Chief Executive Officer & Director: Better.

Yeah. Sorry. So my first question is actually on your full year revenue target. You mentioned that you target to stay flat year-over-year. And then I think in the release you mentioned that large sites revenue is going to grow double digit. And also I think you had also said that, the LCOS and WLO is only (41:08) marginal contribution this year. So can you help me to understand does that mean that your small, medium-size revenues going to decline year-over-year? Am I getting that correctly? Jordan Wu - President, Chief Executive Officer & Director: Likely, yes. Large panel will grow and whole year will be flat, meaning small panel will decline. Yes.

Okay. Got it. And then on the smartphone business, I think in the second quarter, if we look at the industry and also your peers, I think some of them are saying that second quarter their revenue for smartphone is clearly seeing some rebound already. So I'm just very curious about why your second quarter is declining? And then which customer was seeing a softness? Is it on China or your other bigger customers (42:10) Jordan Wu - President, Chief Executive Officer & Director: I think – good question. We enjoyed greatly last year from one of our major Korean end customers. We actually occupied a very, very large percentage of their TFT-LCD shares. And this year, they ship a lot more AMOLED compared to TFT-LCD. So we are affected rather significantly I would say. So you are saying – so if you take away that particular factor, we are comfortable or better compared to our peers. We've actually done the analysis of sales internally. And so are we losing shares from that end customer for good? The answer is, no. We are actually working with them. We have a long-term partnership. So the goal both sides is to see Himax covering the whole spectrum of their products and we are working very closely on that together we them. And certainly, on AMOLED, it will take a little bit of time to really take off, but it's something that we are working very hard on.

Thank you. Lastly, I think you have already mentioned on the revenue growth (43:42) also follow up on gross margin. What do you think about your gross margin (43:51)? I think, although that non-drive mix will increase, but can your gross margin get back to first quarter level, like, 25.5% to 26%? Jordan Wu - President, Chief Executive Officer & Director: We always want to defend our gross margin, but we have to also accept the reality, which is the market is soft and people are competing to win particular business from those who have further upside in their capacity. So I'm afraid, I cannot really give you a very solid guidance for that. So at the moment, gross margin wise, we are lowering liquidity. There are conflicting factors. Dan mentioned earlier, on the foundry side it's probably in our favor, but on the market side the pressure remains. So it's hard to tell at this moment.

All right. Okay. Thank you. Jordan Wu - President, Chief Executive Officer & Director: Thank you, Jerry.

Thank you. Our next question comes from the line of Tom Sepenzis with Northland. Your line is open.

Hi. Thank you for taking my question. I was wondering if you could just talk a little bit about your CMOS image sensors, and whether you expect that to be up again this year or if the slow start might keep that more flattish? Jordan Wu - President, Chief Executive Officer & Director: We nearly doubled last year as you probably know. And we mention earlier, first half this year has been poor. I think part of the factors being that, for us to continue to the momentum, we have to move up the ladder by selling high-end products such as 8 megapixel, 13 megapixel. And we do as a product offerings, but in the down market situation, people tend to open to the mainstream suppliers and Himax being the newcomer in this space, this finds the market situation to be against us. In particular, the situation worsened by the fact that the first half was very – market situation very poor and some mainstream suppliers were sitting on inventory and also they are customer focused. So the customer (46:29) application to help them sell the inventory. So this all hurt our 8 megapixel and 13 megapixel product sales in the first half. But we are fairly confident they will start to pick up starting from Q3. It will be in Q2, but many from Q3 and Q4 and onward. So they do enjoy a lot better ASP and a lot better gross margin, 13 megapixel in particular, with actually very – they are relatively without competition in the marketplace. But, again, we are newcomers. So I don't want to comment on the whole year revenue, size of revenue compared to last year and I think probably hopefully next year we are here in the next call, we'll give you better visibility, but I think 8 megapixel, 13 megapixel certainly would take off in the second half.

Thank you. That's helpful. And then just in terms of TDDI, this is going towards the low to mid range devices. Does that – is that correct, how lower 720P capabilities in the second half? Jordan Wu - President, Chief Executive Officer & Director: Yes. They will start from HD720, and then move up to full HD and we believe next year you will see it moving both up and down in terms of resolution, eventually covering the whole space; and we are not just talking about smartphone, you'll start from smartphone obviously, then you will move up to tablet and eventually towards a multi as well. So I think you'll cover literally all of small and medium sized panel applications. That's why we think this is really a true game changer for both panel makers obviously and also for driver IC companies and touch panel controller companies. And I just want to emphasize that some of our competitors have done mergers and acquisitions in order for them to own both technologies. And Himax 3D is the only halt in the marketplace where we have both technology coming from in-house, and when it comes to integration and design-wins at this stage, lot of technical challenges, a lot of our customers actually favor our approach, because they believe now that M&A our communication – internal communication will be more effective. So we are having design-wins with literally every panel maker you can think of in the world right now. Some shipments starting from Q3, but I said in my prepared remarks a more meaningful online contribution will come starting from next year, but we believe this is a big deal.

Good. Thank you. And then lastly, just on the LCOS and array lenses, I think you've mentioned that that's not going to be meaningful this year. So I was just curious because you mentioned that your building capacity. So are you fairly confident that that will start to hit the model next year or how should we be thinking about that? Jordan Wu - President, Chief Executive Officer & Director: Yes, yes, yes. That's why we are expanding and we are expanding our clean room and the capacity and whatnot. This is – you're talking about really pushing the technology – technological limits together with our customers. So there is always a higher degree of uncertainty. This is not smartphone or tablet, where the market is already very mature, the technology is very mature and the market is very transparent. This is very much the opposite. So there is always some risk, but we are – I mean, they don't really show in our P&L right now, but our time is so busy right now. And I mean, obviously, we are under a lot of pressure to really make this happen, because I mean, the success of our customers' device depend to quite a large degree on our success. And in each particular product, we're talking about head mounted designs, head mounted equipment and our year-end head-mounted materials as well. But right now, we saw certain key customers; we are pushing towards finishing the engineering, getting ready for mass production run. So would it happen next year, I think we have a very high competence. The answer is, yes.

Well. Thank you so much. Jordan Wu - President, Chief Executive Officer & Director: Thank you, Tom.

Thank you. Our next question comes from the line of Jay Srivatsa with Chardan Capital Markets. Your line is open.

Yeah. Thanks for taking my question. Jordan, just in terms of the smartphone market in China itself, what do you think is the reason for the weakness? Is it customers are not transitioning from 3G to 4G or is it the cost of the handsets? And when do you really expect some others issues to be mitigated for the demand to pick up again? Jordan Wu - President, Chief Executive Officer & Director: You've actually mentioned a couple of factors yourself; 3G to 4G transition, initially very strong and then kind of slowed down and the current subsidy certainly is a major factor. People are satisfied with their old phone and they're all 3G system. Without subsidy why rush to switch their phone. I think that is really big issue. And certainly, (53:03) is ultimately a very big issue, right, (53:06) is fairly new to the China market, and yet it has been very successful, so certainly that is a lot of pressure for Chinese MEMS. Export is also a big issue, we mentioned because Chinese phone makers, all their costs are in renminbi or U.S. dollar, and when they export to several countries, these currencies are depreciating against the renminbi. So with their thin margin, they are very reluctant to pay us (53:15) our demand as well. And certainly within the China market, landscape is changing as well. E-commerce is becoming popular and has grabbed up big piece of the market already. So people who are not catching up with the trend are (54:00). So they are creating new brand names, and they are copying those who are successful in the e-commerce market model. So they are doing that. And we are seeing kind of wipe off market being eliminated, but local brands are getting stronger, by then within local brands, there's this intense competition going on. There are people coming from traditional approach, new commerce from the e-commerce model, and then they're all emerging. So it will be interesting to see how it's going to evolve, but I think there will always be a bunch of very strong Chinese names they will be permanently in the top 10, of the world. So we think China being so effective and so sizeable in the market in smartphone and tablet, they are here to stay. Our job is to make sure we'll continue to be – whoever the winner and the loser, we will continue to be among the top tier leaders in driver IC and TDDI and C arrays and whatnot.

All right. In terms of the LCOS business, it appears it didn't materialize to the extent that you'd expected previously, but yet you seem to be continue to make a lot of investments in that in terms of capacity and technology. What gives you the confidence that that business will become material next year and all the investments you're making now will pay off? Jordan Wu - President, Chief Executive Officer & Director: We are only as good as our customers and we made it public that we are partner of Google Glass, and certainly Google Glass, we all know the progress, right, which is I think certainly disappointing for everybody involved. Having said that though we are, I mean, certainly we have (56:14) with Google and we mentioned – and they mentioned themselves as well that they'll keep pursuing this Google Glass business. So they reorganized their team and they got the new management, new leadership and beyond that I cannot comment on details, but Google remains a close partner. And certainly there are more names both top-tier mainstream and niche market players announcing different kinds of head mounted displays. And I can only say that Himax being the leader in mounted display, literally everybody comes to us and many of us – many of them actually use Himax as their co-partner. So why are we committed and where are we investing in the equipments and whatever, because we know firsthand the progress the customers are making, the key customers. And we discuss above forecast and I mean obviously you discuss something, I can share with the public right now, but that is where we get our confidence covered and strong.

Okay. Just last question from me. If we step back, in last few years, you've made some investments in some newer areas in LCOS and image sensors and touch panel controllers. Now, as you look out for the next 12 months, 18 months, where do you expect to make your R&D investments? Is it some newer areas or in a developed your existing areas? Help us understand that. Jordan Wu - President, Chief Executive Officer & Director: It is in the areas. We have to make that sizable. So I think in any foreseeable future you'll be looking at the same portfolio of technologies, pretty much.

Thank you. Good luck. Jordan Wu - President, Chief Executive Officer & Director: Thank you, Jerry.

Thank you. I would now like to turn the call back to Jordan Wu for closing remarks. Jordan Wu - President, Chief Executive Officer & Director: Well, thank you, everyone, for taking the time to join today's call. As a final note, Jackie, will attend investor conferences in the U.S., and we'll announce details as they come about. So please contact our IR and/or Adam Holdsworth if you are interested in speaking to us in person. Thank you again and have a nice day.