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MagnaChip Revenue of $200.0 Million At High-End of Updated Q4 2019 Guidance Range; OLED Revenue of $67.3 Million in Fourth Quarter Up Two-Fold Year-Over-Year

- Gross Margin of 26.6% in Q4 Slightly Above Mid-Point of Updated Guidance Range -
- Cash of $151.7 Million, Up 15.5% Sequentially; $20.5 Million Net Operating Cash Flow -
- Revenue of $792.2 Million for 2019 Up 5.5%; OLED, Power Revenue Set Annual Records -

SEOUL, South Korea and SAN JOSE, Calif., Feb. 19, 2020 /PRNewswire/ -- MagnaChip Semiconductor Corporation (NYSE: MX) today announced financial results for the fourth quarter of 2019 and full year.

Q4 2019 Highlights

  • Revenue of $200.0 million exceeded high-end of original guidance range of $181-191 million provided on October 23, 2019; met high-end of updated guidance range of $198-200 million provided on January 13, 2020.
  • Q4 revenue up 11.5% Year-over-Year (YoY); down 12.9% Quarter over Quarter (QoQ) due primarily to normal seasonal softness; OLED revenue significantly better-than-expected, Foundry revenue better-than-expected, and Power revenue softer-than-expected.
  • OLED DDIC revenue of $67.3 million sets record; up two-fold YoY and down 14.0% QoQ
  • Power standard products revenue of $37.8 million, down 18.1% YoY; down 22.4% QoQ
  • Foundry Services Group (FSG) revenue of $86.6 million, up 4.2% YoY; down 4.1% QoQ
  • Total gross profit margin of 26.6% exceeded original guidance range of 24-26%; exceeded the mid-point of updated guidance range of 26-27%, driven primarily by higher-than-expected fab utilization, an improved OLED product mix and better manufacturing yields at an external foundry on latest-generation OLED display drivers.
  • Balance sheet: Cash and cash equivalents totaled $151.7 million, up 15.5% sequentially from $131.3 million, and highest in six years; $20.5 million net operating cash flow; third consecutive quarter of net positive operating cash flow.

2019 Summary

  • Revenue of $792.2 million, up 5.5% YoY from $750.9 million
  • Record OLED revenue of $267.1 million, up 42.1% from $188.0 million in 2018
  • Record Power revenue of $176.2 million, up 4.1% from $169.3 million in 2018
  • Foundry revenue of $307.1 million, down 5.6% from $325.3 million in 2018
  • Total gross profit margin of 22.8%, despite abnormally low gross margin in Q1 2019

CEO YJ Kim comments on Coronavirus and Q1 2020 financial guidance
On behalf of MagnaChip, let me extend our deepest thoughts and prayers to those coping with the impact of the COVID-19 coronavirus in China and elsewhere. From a business perspective, we are still assessing the potential impact since the coronavirus situation is still very dynamic. MagnaChip historically has experienced typical seasonal softness and a decline in revenue in its first quarter as compared to the prior fourth quarter, but we entered 2020 with a more optimistic view. Prior to the coronavirus outbreak, our preliminary internal forecast had anticipated Q1 2020 revenue would be slighter higher than the $200 million in revenue we reported in Q4 2019.

MagnaChip's manufacturing supply chain resides largely outside China so there is negligible impact on our results. However, based on our preliminary assessments, public health measures taken in China to protect the population likely will affect customer demand in Q1. As a result, we've lowered our internal expectation and widened the typical guidance range we normally would provide for Q1 2020 to help account for lingering uncertainty around this public health crisis. While actual results may vary based upon events that are still unfolding, MagnaChip currently anticipates, based on best available current estimates, in Q1 2020:

  • Revenue to be in the range of $180 million to $195 million, down 6.2% at the mid-point of the projected range when compared with revenue of $200.0 million in the fourth quarter of 2019, and up 19.1% year-over-year when compared to revenue of $157.4 million in the first quarter of 2019.
  • Gross profit margin to be in the range of 23% to 25%, when compared to 26.6% in the fourth quarter of 2019 and 14.4% in the first quarter of 2019.

CEO YJ Kim comments on business highlights
Revenue of $200.0 million was the highest level achieved in a fourth quarter since 2012, primarily due   to significantly better-than-expected revenue for our OLED display drivers as well as better-than-expected revenue in our Foundry business. OLED revenue in the fourth quarter increased two-fold year-over-year, driven primarily by a sharp increase in demand for our latest generation 28-nanometer display drivers. We enter 2020 with an OLED driver lineup about twice as large as a year ago, and we're positioned for continued long-term growth with OLED drivers that meet the dual technical requirements for low power and high-resolution displays in next-generation 5G-enabled smartphones and new foldables. Power revenue declined 18.1%, more than had been expected in Q4, due to pricing pressure and weakness in the industrial and television markets. However, Power revenue in 2019 showed growth for the third consecutive year, and revenue from premium Power products increased by more than 20% in 2019 over the prior year. Our Foundry revenue in the fourth quarter increased 4.2% year-over-year and was at the highest level for 8" foundry revenue since our initial public offering in 2011.

Strategic Evaluation Process
We continue to make substantial progress in discussions with multiple interested parties toward a possible sale of the business as well as consideration of accretive business conversions and other options. We reiterate that our decisions regarding the outcome of the various options of the strategic evaluation process will be guided by what the Board and management consider to be the best available path to improve MagnaChip's profitability and to maximize shareholder value.   

Fourth Quarter Financial Review
Total Revenue
Total revenue in the fourth quarter was $200.0 million, up 11.5% as compared to reported revenue of $179.4 million from the fourth quarter of 2018, and down 12.9% from $229.7 million in the third quarter of 2019.

Segment Revenue
Foundry Services Group revenue in the fourth quarter was $86.6 million, up 4.2% from the fourth quarter of 2018, and down 4.1% sequentially. Standard Products Group revenue in the fourth quarter was $113.3 million, up 17.7% from the fourth quarter of 2018, and down 18.6% sequentially.

Total Gross Profit and Gross Profit Margin
Total gross profit in the fourth quarter of 2019 was $53.2 million or 26.6% as a percentage of revenue, as compared with a gross profit of $43.9 million or 24.5% as a percentage of revenue in the fourth quarter of 2018, and $60.9 million or 26.5% as a percentage of revenue in the third quarter of 2019. 

Segment Gross Profit Margin
Foundry Services Group gross profit margin in the fourth quarter was 26.1% as compared with 23.2% in the fourth quarter of 2018 and 28.3% in the third quarter of 2019. The YoY in the Foundry Services Group's gross profit margin was primarily due to an improved product mix. The Standard Products Group gross profit margin in the fourth quarter was 26.9% as compared with 25.6% in the fourth quarter of 2018 and 25.3% in the third quarter of 2019. The YoY and sequential improvement in the Standard Products Group's gross profit margin was due primarily to an improved product mix, and stabilized wafer yields from external suppliers on OLED products that entered production in the third quarter of 2019.

Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income was $10.0 million for the fourth quarter of 2019 as compared to operating income of $7.9 million for the fourth quarter of 2018 and $25.9 million in the third quarter of 2019.

Net income, on a GAAP basis, was $23.4 million or $0.68 per basic share and $0.54 per diluted share in the fourth quarter of 2019 as compared with net loss of $2.4 million or $0.07 per basic and diluted share in the fourth quarter of 2018 and net loss of $1.6 million or $0.05 per basic and diluted share in the third quarter of 2019.

Adjusted Net Income, a non-GAAP financial measure, totaled $13.2 million or $0.38 per basic share and $0.32 per diluted share in the fourth quarter of 2019 as compared to Adjusted Net Income of $3.5 million or $0.10 per basic and diluted share in the fourth quarter of 2018 and Adjusted Net Income of $20.9 million or $0.61 per basic share and $0.49 per diluted share in the third quarter of 2019.

Adjusted EBITDA, a non-GAAP financial measure, was $27.7 million or 13.8% of revenue in the fourth quarter of 2019 as compared to Adjusted EBITDA of $17.4 million or 9.7% of revenue in the fourth quarter of 2018 and Adjusted EBITDA of $35.5 million or 15.4% of revenue in the third quarter of 2019.

Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a meaningful understanding of the factors and trends affecting MagnaChip's business and operations and assist in evaluating our core operating performance. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income or as a better indicator of our operating performance than measures that are presented in accordance with GAAP. A reconciliation of GAAP results to non-GAAP results is included in this press release.

Cash and cash equivalents totaled $151.7 million in the fourth quarter, up from $131.3 million in the third quarter of 2019.




















Three Months Ended



Year Ended




December 31,

2019



December 31,

2018



December 31,

2019



December 31,

2018


Net Sales

















Foundry Services Group


$

86,631



$

83,114



$

307,144



$

325,312


Standard Products Group

















Display Solutions



75,490




50,127




308,531




256,113


Power Solutions



37,802




46,131




176,245




169,284


Total Standard Products Group


$

113,292



$

96,258



$

484,776



$

425,397


All other



70




22




275




189


Total net sales


$

199,993



$

179,394



$

792,195



$

750,898


 




















Three Months Ended



Three Months Ended




December 31, 2019



December 31, 2018




Amount



% of

Net Sales



Amount



% of

Net Sales


Gross Profit

















Foundry Services Group


$

22,649




26.1

%


$

19,286




23.2

%

Standard Products Group



30,485




26.9




24,604




25.6


All other



70




100.0




22




100.0


Total gross profit


$

53,204




26.6

%


$

43,912




24.5

%

 




















Year Ended



Year Ended




December 31, 2019



December 31, 2018




Amount



% of

Net Sales



Amount



% of

Net Sales


Gross Profit

















Foundry Services Group


$

64,010




20.8

%


$

82,578




25.4

%

Standard Products Group



116,327




24.0




115,478




27.1


All other



274




99.6




40




21.2


Total gross profit


$

180,611




22.8

%


$

198,096




26.4

%

 

Fourth Quarter 2019 and Recent Company Highlights
MagnaChip:

Fourth Quarter 2019 Earnings Conference Call
The earnings conference call will be webcast live today (February 19, 2020) at 5:00 p.m. ET, and also is available by dialing toll-free at 1-844-536-5472. International call-in participants can dial 1-614-999-9318. The conference ID number is 7994839. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. ET start time to ensure a timely connection. The webcast and earnings release will be accessible at www.magnachip.com. A replay of the conference call will be available the same day and will run for 72 hours. The replay dial-in numbers are 1-404-537-3406 or toll-free at 1-855-859-2056.  The access code is 7994839.

About MagnaChip Semiconductor Corporation
MagnaChip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, industrial and automotive applications. The Company's Standard Products Group and Foundry Services Group provide a broad range of standard products and manufacturing services to customers worldwide. MagnaChip, with 41 years of operating history, owns a portfolio of approximately 2,950 registered patents and pending applications, and has extensive engineering, design and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through, MagnaChip's website is not a part of, and is not incorporated into, this release.

Safe Harbor for Forward-Looking Statements
Information in this release regarding MagnaChip's forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include statements about our future operating and financial performance, including but not limited to first quarter 2020 revenue and gross profit margin expectations. All forward-looking statements included in this release are based upon information available to MagnaChip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include general economic conditions, the impact of competitive products and pricing, timely design acceptance by our customers, timely introduction of new products and technologies, ability to ramp new products into volume production, industry wide shifts in supply and demand for semiconductor products, industry and/or company overcapacity, effective and cost efficient utilization of manufacturing capacity, financial stability in foreign markets and the impact of foreign exchange rates, unanticipated costs and expenses or the inability to identify expenses which can be eliminated, compliance with U.S. and international trade and export laws and regulations by us and our distributors, the risk that the strategic evaluation and the initiatives related thereto described above are not successful, public health issues, including the outbreak of COVID-19, coronavirus, and other business interruptions that could disrupt supply or delivery of, or demand for, MagnaChip's products, and other risks detailed from time to time in MagnaChip's filings with the SEC, including our Form 10-K filed on February 22, 2019 and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website. MagnaChip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

 

CONTACTS:


In the United States:

Bruce Entin

Investor Relations

Tel. +1-408-625-1262

Investor.relations@magnachip.com

 

In Korea:

Chankeun Park

Director, Public Relations

Tel. +82-2-6903-5223

chankeun.park@magnachip.com

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US dollars, except share data)
(Unaudited)
























Three Months Ended



Year Ended




December 31,

2019



September 30,

2019



December 31,

2018



December 31,

2019



December 31,

2018


Net sales


$

199,993



$

229,677



$

179,394



$

792,195



$

750,898


Cost of sales



146,789




168,811




135,482




611,584




552,802


Gross profit



53,204




60,866




43,912




180,611




198,096


Gross profit %



26.6

%



26.5

%



24.5

%



22.8

%



26.4

%

Operating expenses





















Selling, general and administrative expenses



19,780




16,812




17,516




71,637




72,639


Research and development expenses



18,981




17,368




18,536




75,356




78,039


Restructuring and other charges



4,408




763







9,195





Total operating expenses



43,169




34,943




36,052




156,188




150,678


Operating income



10,035




25,923




7,860




24,423




47,418


Interest expense



(5,655)




(5,656)




(5,743)




(22,627)




(22,282)


Foreign currency gain (loss), net



19,820




(21,205)




(4,316)




(21,813)




(24,445)


Loss on early extinguishment of long-term borrowings, net









(206)




(42)




(206)


Other income, net



866




785




555




2,980




264


Income (loss) before income tax expense



25,066




(153)




(1,850)




(17,079)




749


Income tax expense



1,640




1,454




530




4,747




4,649


Net income (loss)


$

23,426



$

(1,607)



$

(2,380)



$

(21,826)



$

(3,900)


Earnings (loss) per common share :





















- Basic


$

0.68



$

(0.05)



$

(0.07)



$

(0.64)



$

(0.11)


- Diluted


$

0.54



$

(0.05)



$

(0.07)



$

(0.64)



$

(0.11)


Weighted average number of shares—Basic



34,542,415




34,357,745




34,627,292




34,321,888




34,469,921


Weighted average number of shares—Diluted



46,078,768




34,357,745




34,627,292




34,321,888




34,469,921
























 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME
(In thousands of US dollars, except share data)
(Unaudited)
























Three Months Ended



Year Ended




December 31,

2019



September 30,

2019



December 31,

2018



December 31,

2019



December 31,

2018


Net income (loss)


$

23,426



$

(1,607)



$

(2,380)



$

(21,826)



$

(3,900)


Adjustments:





















Interest expense, net



4,788




4,982




5,180




19,921




20,417


Income tax expense



1,640




1,454




530




4,747




4,649


Depreciation and amortization



8,068




8,156




8,165




32,729




32,048


EBITDA



37,922




12,985




11,495




35,571




53,214


Restructuring and other charges



4,408




763







9,195





Equity-based compensation expense



5,032




479




1,320




6,952




4,409


Foreign currency loss (gain), net



(19,820)




21,205




4,315




21,813




24,445


Derivative valuation loss, net



149




33




144




318




2,369


Restatement related gain















(765)


Loss on early extinguishment of long-term borrowings, net









206




42




206


Others









(89)




585




384


Adjusted EBITDA


$

27,691



$

35,465



$

17,391



$

74,476



$

84,262


Net income (loss)


$

23,426



$

(1,607)



$

(2,380)



$

(21,826)



$

(3,900)


Adjustments:





















Restructuring and other charges



4,408




763







9,195





Equity-based compensation expense



5,032




479




1,320




6,952




4,409


Foreign currency loss (gain), net



(19,820)




21,205




4,315




21,813




24,445


Derivative valuation loss, net



149




33




144




318




2,369


Restatement related gain















(765)


Loss on early extinguishment of long-term borrowings, net









206




42




206


Others










(89)




585




384


Adjusted Net Income


$

13,195



$

20,873



$

3,516



$

17,079



$

27,148


Adjusted Net Income per common share:





















- Basic


$

0.38



$

0.61



$

0.10



$

0.50



$

0.79


- Diluted


$

0.32



$

0.49



$

0.10



$

0.48



$

0.71


Weighted average number of shares – Basic



34,542,415




34,357,745




34,627,292




34,321,888




34,469,921


Weighted average number of shares – Diluted



46,078,768




45,516,245




35,128,341




35,405,077




45,941,853


We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) Restructuring and other charges, (ii) Equity-based compensation expense, (iii) Foreign currency loss (gain), net, (iv) Derivative valuation loss, net, (v) Restatement related gain, (vi) Loss on early extinguishment of long-term borrowings, net and (vii) Others. EBITDA for the periods indicated is defined as net income (loss) before interest expense, net, income tax expense and depreciation and amortization. We prepare Adjusted Net Income by adjusting net income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income for the periods as net income, adjusted to exclude (i) Restructuring and other charges, (ii) Equity-based compensation expense, (iii) Foreign currency loss (gain), net, (iv) Derivative valuation loss, net, (v) Restatement related gain, (vi) Loss on early extinguishment of long-term borrowings, net and (vii) Others. Other charges within the adjustment line item of the Restructuring and other charges included in the above table represent professional and other fees incurred in connection with our strategic evaluation. Others adjustment in the table above primarily represents legal expense related to the indemnification of a former employee.

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share data)
(Unaudited)












December 31,

2019



December 31,

2018


Assets









Current assets









Cash and cash equivalents


$

151,657



$

132,438


Accounts receivable, net



95,641




80,003


Unbilled accounts receivable, net



17,094




38,181


Inventories, net



73,267




71,611


Other receivables



10,254




3,702


Prepaid expenses



12,250




11,133


Hedge collateral



9,820




5,810


Other current assets



9,382




9,867


Total current assets



379,365




352,745


Property, plant and equipment, net



182,574




202,171


Operating lease right-of-use assets



11,482





Intangible assets, net



4,014




3,953


Long-term prepaid expenses



8,834




15,598


Other non-current assets



9,059




8,729


Total assets


$

595,328



$

583,196


Liabilities and Stockholders' Equity









Current liabilities









Accounts payable


$

60,879



$

55,631


Other accounts payable



10,293




15,168


Accrued expenses



55,076




46,250


Deferred revenue



1,422




6,477


Operating lease liabilities



2,036





Other current liabilities



4,127




9,133


Total current liabilities



133,833




132,659


Long-term borrowings, net



304,743




303,577


Non-current operating lease liabilities



9,446





Accrued severance benefits, net



146,728




146,031


Other non-current liabilities



15,559




18,239


Total liabilities



610,309




600,506


Commitments and contingencies









Stockholders' equity









Common stock, $0.01 par value, 150,000,000 shares authorized, 43,851,991 shares issued and 34,800,312 outstanding at December 31, 2019 and 43,054,458 shares issued and 34,441,232 outstanding at December 31, 2018



439




431


Additional paid-in capital



152,404




142,600


Accumulated deficit



(58,131)




(36,305)


Treasury stock, 9,051,679 shares at December 31, 2019 and 8,613,226 shares at December 31, 2018, respectively



(107,033)




(103,926)


Accumulated other comprehensive loss



(2,660)




(20,110)


Total stockholders' deficit



(14,981)




(17,310)


Total liabilities and stockholders' equity


$

595,328



$

583,196


 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
(Unaudited)
















Three Months
Ended



Year Ended




December 31,
2019



December 31,
2019



December 31,
2018


Cash flows from operating activities













Net income (loss)


$

23,426



$

(21,826)



$

(3,900)


Adjustments to reconcile net income (loss) to net cash provided by operating 
     activities













Depreciation and amortization



8,068




32,729




32,048


Provision for severance benefits



6,648




17,139




17,644


Amortization of debt issuance costs and original issue discount



587




2,299




2,183


Loss (gain) on foreign currency, net



(25,820)




24,692




30,215


Restructuring gain and other



3,128




3,598





Stock-based compensation



5,032




6,952




4,409


Loss on early extinguishment of long-term borrowings, net






42




206


Other



186




247




(1,235)


Changes in operating assets and liabilities













Accounts receivable, net



12,988




(19,824)




8,294


Unbilled accounts receivable, net



5,066




19,274




(1,284)


Inventories, net



2,111




(4,210)




(30,675)


Other receivables



(1,386)




(6,200)




1,260


Other current assets



5,628




11,984




9,942


Accounts payable



(20,210)




7,375




(8,389)


Other accounts payable



1,556




(8,518)




(11,183)


Accrued expenses



1,448




5,279




(3,926)


Deferred revenue



(4,578)




(4,768)




2,891


Other current liabilities



1,699




(4,460)




2,123


Other non-current liabilities



(1,114)




(306)




2,346


Payment of severance benefits



(3,093)




(9,288)




(11,688)


Other



(892)




(1,713)




(2,045)


Net cash provided by operating activities



20,478




50,497




39,236


Cash flows from investing activities













Proceeds from settlement of hedge collateral



958




13,583




14,342


Payment of hedge collateral



(809)




(17,833)




(12,907)


Proceeds from disposal of property, plant and equipment






202




1,685


Purchase of property, plant and equipment



(6,262)




(22,955)




(28,948)


Payment for property related to water treatment facility arrangement









(4,283)


Payment for intellectual property registration



(196)




(1,103)




(961)


Collection of guarantee deposits



10




549




801


Payment of guarantee deposits



(19)




(1,349)




(3,016)


Other



(14)




9




(19)


Net cash used in investing activities



(6,332)




(28,897)




(33,306)


Cash flows from financing activities













Repurchase of long-term borrowings






(1,175)




(2,228)


Proceeds from exercise of stock options



1,822




2,860




1,132


Acquisition of treasury stock



(114)




(2,702)




(1,607)


Proceeds from property related to water treatment facility arrangement









4,283


Repayment of financing related to water treatment facility arrangement



(137)




(552)




(286)


Repayment of principal portion of lease liabilities



(59)




(233)





Net cash provided by (used in) financing activities



1,512




(1,802)




1,294


Effect of exchange rates on cash and cash equivalents



4,658




(579)




(3,361)


Net increase in cash and cash equivalents



20,316




19,219




3,863


Cash and cash equivalents













Beginning of the period



131,341




132,438




128,575


End of the period


$

151,657



$

151,657



$

132,438


 

Cision View original content:http://www.prnewswire.com/news-releases/magnachip-revenue-of-200-0-million-at-high-end-of-updated-q4-2019-guidance-range-oled-revenue-of-67-3-million-in-fourth-quarter-up-two-fold-year-over-year-301007317.html

SOURCE MagnaChip Semiconductor Corporation