Good day, and thank you for standing by. Welcome to the Himax Technologies, Inc. First Quarter 2024 Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. And at this time, I'd like to hand the conference over to your host, Mr. Mark Schwalenberg from MZ Group. Please go ahead.

Welcome, everyone, to the Himax First Quarter 2024 Earnings Call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer; Ms. Jessica Pan, Chief Financial Officer; and Mr. Eric Li, Chief IR/PR Officer. After the company's prepared comments, we've allocated time for questions in a Q&A session. If you have not yet received a copy of today's results release, please e-mail himx@mzgroup.us, 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. A list of the factors can be found in the company's SEC filings, Form 20-F for the year ended December 31, 2023, in the section entitled Risk Factors as may be amended. Except for the company's full year of 2023 financials, which were provided in the company's 20-F and filed with the SEC on April 2, 2024. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS 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 which we subject our annual consolidated financial statements and may vary materially from the audited consolidated financial information for the same period. 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 would now like to turn the call over to Mr. Eric Li. Eric, the floor is yours.

Thank you, Mark, and thank you, everyone, for joining us. My name is Eric Li, Chief IR/PR Officer at Himax. On today's call, I will first review Himax consolidated financial performance for the first quarter 2024, followed by our second 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 on an IFRS basis. We are pleased to report that Q1 revenue, gross margin and profit all exceeded guidance issued on February 6, 2024, despite the seasonal downturn as well as ongoing macro headwinds. The better-than-expected financial results primarily stemmed from strong order momentum in our automotive and the Tcon product line, coupled with cost improvements and a favorable product mix. First quarter revenues registered $207.6 million, a decrease of 8.8% sequentially, exceeding our guidance range of 9% to 16% decline. Gross margin came in at 29.3%, outperforming our guidance of around 28.5%. Q1 profit per diluted ADS was $0.071, surpassing the guidance range of $0.02 to $0.05. Revenue from large display drivers decreased 7% sequentially to $31.3 million due to seasonally soft macroeconomic conditions compounded by ongoing production and inventory control measures by our leading panel customers. Consequently, our sales of TV and monitor ICs declined sequentially. However, notebook IC sales saw a nice double-digit increase quarter-over-quarter, as customers accelerated their purchases after several quarters of destocking. Sales of large panel driver ICs accounted for 15.1% of total revenues for the quarter, compared to 14.8% last quarter and 21.7% a year ago. Small and medium-sized display driver segment revenue reached $144.3 million, a sequential decline of 11.5%. The better-than-guidance result was fueled by strong sales in DDIC for automotive and OLED tablets. Driven by rush orders for traditional DDIC, Q1 automotive driver sales, encompassing…

Thank you, Eric. Amid ongoing macroeconomic uncertainty, customer behavior in the display market remains conservative with panel makers continuing to implement strict outlook control measures amidst the cautious end brand panel procurement environment. Given the limited visibility, customers tend to maintain lean inventory levels and underestimate demand, thereby providing us with conservative forecasts, accompanied by last-minute order increases. This trend has persisted over the last 7 consecutive quarters, including Q1, with our actual sales consistently at the upper end of or exceeding our guidance range. As we look ahead to the second half, even with lean inventory levels, we anticipate this conservative market sentiment will persist, causing customers to continue to prioritize agility in response to market dynamics. With that being said, we believe Q1 will be the low point for this year and see sales starting to pick up in Q2, especially in the automotive sector. With several other upcoming demand catalysts on the horizon, including major sporting events and festival shopping seasons, business momentum is expected to continue to steadily improve throughout the second half. Now let me elaborate a bit on the near-term outlook for automotive business, our largest source of revenue. While many semiconductor vendors and their customers, are still going through painstaking destocking processes, our inventory position for automotive sector has become healthy since the end of last year with our panel customers also maintaining low stock levels at present. This is best illustrated by the large quantities of rush orders we received from panel customers over the last 2 months, for which we also had to place rush orders to our foundry vendors. Therefore, notwithstanding the recent headwinds faced by the global automotive industry, our outlook for the automotive display IC business remains positive for the second half of the year. The automotive display…

[Operator Instructions]. Our first question comes from the line of Frank Wang with Athena Capital.

My first question is on the auto business. [indiscernible] instruments, [ NHP], UMC, TSMC indicate some softness in auto...

We can't hear you, Frank.

Okay. Can you hear me now?

Frank, we can hear you. I'm going to actually remove you and then repromote you because it seems like the team with Jordan and Eric are unable to hear you. So please stand by. Frank, we have brought you online again. Please proceed and confirm that the team with Eric and Jordan and team can hear you.

The first question is on the auto sector. [ Texas ] Instruments [ NHP ], TSMC, UMC indicate some softness in the auto sector. What is your view? And why are these leading semiconductor companies seems to be more pessimistic on the auto sector, while you are expecting a decent quarter-over-quarter growth in the auto sector.

Frank, it seems the team is still unable to hear you. So we're going to bring you back and then try again. We're going to prompt for questions, hold on.

Can you hear, Frank?

I can hear you fine.

We can hear Frank and the rest of the people can't. I don't know why the folks in your room are not able to hear him.

That is very weird.

That's all right. I've got another person coming to assist on this. We're going to keep Frank in questions. Please, thank everyone, for your patience. Crystal, thank you for coming in to assist. Everyone can hear, Frank, except for Eric's line where the group is gathered.

Well, Mr. Operator can you relay the question of Frank to us because we can clearly hear you. And we are assuming you can hear us. I'm assuming everybody can hear us and it appears that everybody hear Frank, except for us. I don't know why. So if you can talk on Frank's question to us, then we can respond to the question.

I can do my best. He asked a lot of information.

So let me set up one more time. So the first question is regarding the auto sector. Himax is more optimistic, expecting a very good growth for the second quarter, but other companies -- semiconductor companies are expecting some softness. So I want the view -- how is that different?

So what is the view from Himax in terms of the auto sector, Frank asked some pieces about there was some softness. So I'm doing my best to relay information.

Okay. I think I got the answer to the question. Yes, that is the question. So I suppose the question from Frank, again, I apologize for some system reasons, we cannot hear it. But relay from the operator appears to be that the industry is going through softness in auto semiconductor business, where we are guiding for a pretty strong outlook. So I guess, Frank's question is why we are seeing this departure of directions. I think, indeed, we have seen in recent earnings calls from semiconductor companies, both foundries and ODMs across U.S., Europe and Japan where they are giving rather cautionary outlook on the auto market demand. But if you retail for -- about their comments, you'll be able to see that they are not saying the auto industry's overall shipment is going to decline. What they are saying really is that their stocks are perhaps too high and they are going through destocking process. And that is the reason for their cautionary outlook. And if you look at the leaders -- industry forecast, most people are -- I mean, while we are not expecting a very strong auto shipment for this year, people are not focusing any decline either typically at least something like 3% or 5% or some forecast or even perspective or higher growth outlook for the vehicle shipment volume this year. So the industry actually remains solid. And we -- I mentioned in my prepared remarks that our inventory for auto market actually is very, very lean and so are our customers' inventory positions. And I particularly mentioned in my prepared remarks that we actually had to take another rush orders recently. Actually I'm talking about very sizable quantities of rush orders for our panel customers. And the reason why they are giving rush…

Can I just ask you to relay one more question, please. Himax is a leader in LCoS. Can I talk about the chance for see-through AR glasses to really happen?

So I'm going to do my best to relay. They're asking about Himax as a leader about B2BR AR like classes or glasses and want you guys to speak to that scenario.

Okay. Yes, I suppose, Frank, asking about AR glasses and particularly our LCoS solution topping that market. And in my -- towards the end of my prepared remarks, we highlighted the major breakthrough in technology and our excitement about the breakthrough. And I suppose we're not hearing the details of Frank's question. I suppose many people may wonder, AR as a general of our products has not seen a great success so far. And LCoS is just a supporting technology for AR glasses industry. So what is our comment is, they're really a future. And the company over the many years seems to have been committed to the development of LCoS industry -- LCoS technology for AR glasses. So I guess many people may have questions about whether this strategy actually makes sense. And my response is, obviously, we believe there's a reasonable chance for AR glasses to become successful. And I will elaborate on the importance of microdisplay or LCoS Microdisplay for the success of AR glasses. And clearly, we are committed and frankly bringing money to develop this technology for many, many years because of the simple reason that we have a very strong commitment for its success, and we certainly believe that the chance of success is quite good. And I will also highlight the fact that because -- simply because the technology is so difficult, when it is successful, it's going to be tremendous potential, tremendous business opportunity for Himax because very few people are involved simply because the technology is actually quite challenging. Now let me elaborate the background a little bit. One of the major technical challenges for see-through AR glasses is the displays which, by definition, needs to be totally different than the displays we are so used to every day for, say,…

[Operator Instructions]. Our next question comes from the line of Tyler Bomba with Baird. Tyler, your line is open. We're going to proceed to the next question. [Operator Instructions]. Our next question comes from the line of [ Nathan De ] with Morgan Stanley.

We are still not hearing the question. Operator, I wonder if really you can hear their questions?

So we tried two people that were supposed to take questions. We did not hear them. This concludes the Q&A. We're going to hand it over to you, Jordan, for closing remarks.

I apologize for the system issue. But as a final note, Eric Li, our Chief IR/PR Officer, will maintain investor marketing activities and continue to attend investor conferences. We'll announce the details as they come about. Thank you, and have a nice day.

This concludes today's conference. You may now disconnect.