(2) Non-GAAP Net income attributable to common shareholders and EPS excludes $4.9 million share-based compensation expenses, net of tax and $0.5 million non-cash acquisition related charge, net of tax.
FY 2016 Revenue Breakdown by Product Line (USD in millions) (unaudited)
| FY 2016 | % | FY 2015 | % |
% Change
| ||||||||||||
| Display drivers for large-sized panels | $ | 272.9 | 34.0 | % | $ | 224.4 | 32.4 | % | +21.6 | % | ||||||
| Display drivers for small/medium-sized panels | $ | 369.0 | 46.0 | % | $ | 336.0 | 48.6 | % | +9.8 | % | ||||||
| Non-driver products | $ | 161.0 | 20.0 | % | $ | 131.4 | 19.0 | % | +22.6 | % | ||||||
| Total | $ | 802.9 | 100.0 | % | $ | 691.8 | 100.0 | % | +16.1 | % | ||||||
Revenues totaled $802.9 million in 2016, representing a 16.1% increase over 2015. Revenues from large panel display drivers increased 21.6% year-over-year, representing 34.0% of the Company’s total revenues, as compared to 32.4% in 2015. The Company’s large panel driver sales totaled $272.9 million for the year. The strong year-over year growth originated from the Company’s focus in China starting in 2012 and its efforts to achieve a more diversified customer base by adding new customers in Taiwan, China and Korea.
Small and medium-sized driver sales increased 9.8% year-over-year, representing 46.0% of total revenues, as compared to 48.6% in 2015. Contributing to this growth was the strong momentum in driver ICs for smartphone and automotive applications. Himax has the most comprehensive coverage of leading Chinese smartphone names and their fast growing market share has led to the Company’s good result in 2016. Automotive driver IC sales registered the strongest growth in this segment to increase about 26% year-over-year.
Non-driver products increased 22.6% year-over-year, representing 20.0% of total sales, as compared to 19.0% a year ago. This growth was primarily due to higher LCOS and WLO shipments to a major AR customer during the year. Other product lines such as timing controller and ASIC also delivered strong growth, but offset by sales declines in CMOS and PMIC.
Gross margin in 2016 was 24.2%, a 60 basis-point increase from 23.6% in 2015. The increased gross margin was primarily due to a more favorable product mix in small and medium-sized driver ICs, increased LCOS and WLO shipments for AR applications and certain engineering fees from AR/VR new project engagements. The gross margin increase for the whole year was offset substantially by the aforementioned inventory write-down. Gross margin improvement remains one of the Company’s business focuses.
GAAP operating expenses were $135.1 million, up $2.6 million or 2.0% compared to last year. GAAP operating income of $59.2 million represented a 93.1% increase versus 2015.
GAAP net income for the year was $50.9 million, or 29.5 cents per diluted ADS, up from $25.2 million, or 14.6 cents per diluted ADS, in 2015. GAAP net income and GAAP earnings per diluted ADS grew 102.1% and 101.7% year-over-year, respectively. The increase in GAAP net income was a combination of higher revenue, improved gross margin, and a lower income tax, partially offset by higher operating expenses.
Non-GAAP net income for 2016 was $59.7 million, or 34.7 cents per diluted ADS, up from $30.6 million, or 17.8 cents per diluted ADS, for 2015. Non-GAAP net income and Non-GAAP earnings per diluted ADS grew 95.2% and 94.8% year-over- year, respectively.
Balance Sheet and Cash Flow
Himax had $194.6 million of cash, cash equivalents and marketable securities as of the end of December 2016, compared to $148.3 million at the same time last year and $153.4 million a quarter ago. On top of the above cash position, restricted cash was $138.2 million at the end of the quarter, up from $138.0 million in the preceding quarter and down from $180.4 million a year ago. The restricted cash is mainly used to guarantee the Company’s short-term loan for the same amount. Himax continues to maintain a very strong balance sheet and remain a debt-free company.
Inventories as of December 31, 2016 were $149.7 million, down from $171.4 million a year ago and down from $169.4 million a quarter ago. Accounts receivable at the end of December 2016 were $191.0 million as compared to $177.2 million a year ago and $208.4 million last quarter. DSO was 87 days at the end of December 2016, as compared to 93 days a year ago and 95 days at end of the last quarter.
Net cash inflow from operating activities for the fourth quarter was $47.2 million as compared to an inflow of $25.9 million for the same period last year and an inflow of $2.9 million last quarter. Cumulative cash inflow from operations in 2016 was $84.7 million as compared to $22.5 million in 2015. The increase in cash inflow was a result of improved profitability and lower working capital.
Capital expenditures were $2.2 million in the fourth quarter of 2016 versus $3.6 million a year ago and $1.9 million last quarter. The capital expenditure in the fourth quarter consisted mainly of purchases of R&D related equipment. Total capital expenditures for the year were $7.9 million versus $10.0 million a year ago.
In August 2016, Himax paid an annual dividend of 13 cents per ADS, or 89.0% of 2015 GAAP earnings per diluted ADS. The Company remains committed to paying annual dividends, the amount of which is based primarily on its prior year’s profitability. The high payout ratio in 2016 is an illustration of the Company’s confidence in its future profitability.
