MagnaChip Reports Second Quarter 2018 Financial Results
Q2 2018 Summary
- Revenue of
$199.7 million exceeded high-end of guidance range of$182-188 million ; revenue increased 19.8% Year-over-Year (YoY) - Record OLED display driver revenue of
$62.2 million quadrupled YoY and increased 81.3% from Q1 2018 - Power products revenue increased 13.3% YoY; Foundry revenue decreased 0.8% YoY on a reported basis, but had better product mix with 17% increase in new products YoY
- Gross profit margin of 27.0% in line with 26-28% guidance range; gross profit margin declined by one percentage point YoY and gross profit dollars increased 15.4% YoY
- Operating income of
$13.9 million increased 42.8% YoY - Adjusted EBITDA of
$23.5 million increased 15.7% YoY - Cash flow from operations of
$25.7 million up fivefold YoY; free cash flow, which represents cash flow from operations less capital expenditures, totaled$17.3 million as compared with a negative$0.2 million a year ago
CEO Comments from YJ Kim: "Revenue in the second quarter far exceeded previous guidance due to record demand for our OLED display drivers coupled with a higher-than-expected number of launches of OLED smartphones, primarily in
CFO Comments from
"Key financial metrics showed continued improvement in the second quarter, driven primarily by higher-than-expected revenue. Revenue, gross profit dollars, operating income and Adjusted EBITDA, all showed double-digit percentage gains year-over-year, as well as sequentially. Operating income, Adjusted EBITDA and gross profit increased 88.6%, 51.7%, and 20.8% sequentially, and the Company remains committed to show improvement in gross profit over time. Our improved financial performance helped MagnaChip achieve positive free cash flow of
Second Quarter Financial Review
Total Revenue
Total revenue in the second quarter of 2018 was
Segment Revenue and Segment Adjustments
In
Following the strategic realignment and portfolio optimization discussed above,
Total Gross Profit and Gross Profit Margin
Total gross profit in the second quarter of 2018 was
Segment Gross Profit Margin
Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income, on a GAAP basis, for the second quarter was
Net loss on a GAAP basis, for the second quarter was
Adjusted Net Income, a non-GAAP financial measure, for the second quarter of 2018 totaled
Adjusted EBITDA, a non-GAAP financial measure, in the second quarter was
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
Note: The following table sets forth information relating to our operating segments (in thousands). The historical amounts below are presented both on an as reported and as adjusted basis to show the impact of the strategic realignment and transfer of a portion of the non-OLED Display business from the
|
Three Months Ended |
||||||||||||
|
June 30, 2018
|
June 30, 2017 As Reported |
June 30, 2017 As Adjusted |
||||||||||
|
Net Sales |
||||||||||||
|
Foundry Services Group |
$ |
80,907 |
$ |
81,528 |
$ |
87,549 |
||||||
|
Standard Products Group |
||||||||||||
|
Display Solutions |
78,712 |
49,753 |
43,732 |
|||||||||
|
Power Solutions |
40,028 |
35,314 |
35,314 |
|||||||||
|
Total Standard Products Group |
$ |
118,740 |
$ |
85,067 |
$ |
79,046 |
||||||
|
All other |
38 |
90 |
90 |
|||||||||
|
Total net sales |
$ |
199,685 |
$ |
166,685 |
$ |
166,685 |
||||||
|
Six Months Ended |
||||||||||||
|
June 30, 2018
|
June 30, 2017 As Reported |
June 30, 2017 As Adjusted |
||||||||||
|
Net Sales |
||||||||||||
|
Foundry Services Group |
$ |
158,336 |
$ |
159,056 |
$ |
171,091 |
||||||
|
Standard Products Group |
||||||||||||
|
Display Solutions |
128,408 |
98,632 |
86,597 |
|||||||||
|
Power Solutions |
78,695 |
70,594 |
70,594 |
|||||||||
|
Total Standard Products Group |
$ |
207,103 |
$ |
169,226 |
$ |
157,191 |
||||||
|
All other |
65 |
113 |
113 |
|||||||||
|
Total net sales |
$ |
365,504 |
$ |
328,395 |
$ |
328,395 |
||||||
|
Three Months Ended |
||||||||||||||||||||||||||||
|
June 30, 2018
|
June 30, 2017 As Reported |
June 30, 2017 As Adjusted |
||||||||||||||||||||||||||
|
Amount |
% of Net Sales |
Amount |
% of Net Sales |
Amount |
% of Net Sales |
|||||||||||||||||||||||
|
Gross Profit |
||||||||||||||||||||||||||||
|
Foundry Services Group |
$ |
22,185 |
27.4 |
% |
$ |
23,433 |
28.7 |
% |
$ |
24,670 |
28.2 |
% |
||||||||||||||||
|
Standard Products Group |
31,631 |
26.6 |
23,139 |
27.2 |
21,902 |
27.7 |
||||||||||||||||||||||
|
All other |
38 |
100.0 |
90 |
100.0 |
90 |
100.0 |
||||||||||||||||||||||
|
Total gross profit |
$ |
53,854 |
27.0 |
% |
$ |
46,662 |
28.0 |
% |
$ |
46,662 |
28.0 |
% |
||||||||||||||||
|
Six Months Ended |
||||||||||||||||||||||||||||
|
June 30, 2018
|
June 30, 2017 As Reported |
June 30, 2017 As Adjusted |
||||||||||||||||||||||||||
|
Amount |
% of Net Sales |
Amount |
% of Net Sales |
Amount |
% of Net Sales |
|||||||||||||||||||||||
|
Gross Profit |
||||||||||||||||||||||||||||
|
Foundry Services Group |
$ |
42,849 |
27.1 |
% |
$ |
45,520 |
28.6 |
% |
$ |
47,982 |
28.0 |
% |
||||||||||||||||
|
Standard Products Group |
55,670 |
26.9 |
42,599 |
25.2 |
40,137 |
25.5 |
||||||||||||||||||||||
|
All other |
(84) |
(129.2) |
113 |
100.0 |
113 |
100.0 |
||||||||||||||||||||||
|
Total gross profit |
$ |
98,435 |
26.9 |
% |
$ |
88,232 |
26.9 |
% |
$ |
88,232 |
26.9 |
% |
||||||||||||||||
Second Quarter 2018 and Recent Company Highlights
MagnaChip:
- Launched a new third generation 40-nanometer OLED display driver integrated circuit (DDIC) for the next wave of OLED smartphone displays. The new rigid OLED DDIC supports various configurations such as FHD to FHD++, a wide aspect ratio of up to 21:9 and bezel-less, edge-type, and notch-type OLED displays. http://investors.magnachip.com/news-releases/news-release-details/magnachip-introduces-third-generation-40-nanometer-mobile-oled
- Made available 0.13-micron Multiple-Time-Programmable Intellectual Property (MTP-IP) memory cores targeted for mobile and industrial applications. http://investors.magnachip.com/news-releases/news-release-details/magnachip-and-ymc-offer-cost-effective-013-micron-multiple-time
- Now offers planar-type Hall-effect sensors for foundry customers. The Hall-effect sensor has been adopted by the marketplace for an increasing number of applications, such as smartphone cameras for the closed-loop auto focus feature and for the auto iris function. http://investors.magnachip.com/news-releases/news-release-details/magnachip-offer-planar-type-hall-effect-sensors-suitable-mobile
- Will host its annual Foundry Technology Symposium at
Ambassador Hotel Hsinchu ,Taiwan , onSeptember 18 th, 2018. The Foundry Technology Symposium will showcase MagnaChip's latest technology offerings and provide a wide-ranging overview of MagnaChip's manufacturing capabilities, specialty technologies, target applications and end-markets.
Third Quarter 2018 Business Outlook
For the third quarter of 2018, MagnaChip anticipates:
- Revenue to be in the range of
$200 million to $210 million , up sequentially about 2.7% at the mid-point of the projected range. The guidance for the third quarter compares with higher-than- expected revenue of$199.7 million in the second quarter of 2018 and$176.7 million in the third quarter of 2017. - Gross profit margin to be in the range of 26% to 28%. This compares to 27.0% in the second quarter of 2018, and 28.5% in the third quarter of 2017.
Second Quarter 2018 Conference Call
The conference call will be webcast live today at
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
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 third quarter 2018 revenue and gross profit 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, and other risks detailed from time to time in MagnaChip's filings with the
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CONTACTS: |
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In the United States: |
In Korea: |
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Bruce Entin |
Chankeun Park |
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Investor Relations |
Director, Public Relations |
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Tel. +1-408-625-1262 |
Tel. +82-2-6903-5223 |
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
|||||||||
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||
|
(In thousands of US dollars, except share data) |
|||||||||
|
(Unaudited) |
|||||||||
|
Three Months Ended |
|||||||||
|
June 30, |
March 31, |
June 30, |
|||||||
|
Net sales |
$ 199,685 |
$ 165,819 |
$ 166,685 |
||||||
|
Cost of sales |
145,831 |
121,238 |
120,023 |
||||||
|
Gross profit |
53,854 |
44,581 |
46,662 |
||||||
|
Gross profit % |
27.0 % |
26.9 % |
28.0 % |
||||||
|
Operating expenses |
|||||||||
|
Selling, general and administrative expenses |
18,935 |
17,622 |
17,730 |
||||||
|
Research and development expenses |
21,005 |
19,580 |
16,928 |
||||||
|
Early termination charges |
— |
— |
2,262 |
||||||
|
Total operating expenses |
39,940 |
37,202 |
36,920 |
||||||
|
Operating income |
13,914 |
7,379 |
9,742 |
||||||
|
Interest expense |
(5,489 ) |
(5,463 ) |
(5,441 ) |
||||||
|
Foreign currency gain (loss), net |
(27,449 ) |
1,318 |
(11,905 ) |
||||||
|
Other income (expense), net |
(960 ) |
519 |
83 |
||||||
|
Income (loss) before income taxes |
(19,984 ) |
3,753 |
(7,521 ) |
||||||
|
Income tax expenses |
1,521 |
990 |
538 |
||||||
|
Net income (loss) |
$ (21,505 ) |
$ 2,763 |
$ (8,059 ) |
||||||
|
Earnings (loss) per common share— |
|||||||||
|
Basic |
$ (0.62 ) |
$ 0.08 |
$ (0.24 ) |
||||||
|
Diluted |
$ (0.62 ) |
$ 0.08 |
$ (0.24 ) |
||||||
|
Weighted average number of shares— |
|||||||||
|
Basic |
34,420,654 |
34,253,111 |
33,952,574 |
||||||
|
Diluted |
34,420,654 |
35,154,693 |
33,952,574 |
||||||
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||||||
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RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME |
||||||||||||
|
(In thousands of US dollars, except share data) |
||||||||||||
|
(Unaudited) |
||||||||||||
|
Three Months Ended |
||||||||||||
|
June 30, 2018 |
March 31, 2018 |
June 30, 2017 |
||||||||||
|
Net income (loss) |
$ |
(21,505) |
$ |
2,763 |
$ |
(8,059) |
||||||
|
Adjustments: |
||||||||||||
|
Interest expense, net |
5,059 |
5,123 |
5,187 |
|||||||||
|
Income tax expenses |
1,521 |
990 |
538 |
|||||||||
|
Depreciation and amortization |
8,012 |
7,958 |
6,773 |
|||||||||
|
EBITDA |
(6,913) |
16,834 |
4,439 |
|||||||||
|
Early termination charges |
— |
— |
2,262 |
|||||||||
|
Equity-based compensation expense |
1,341 |
665 |
349 |
|||||||||
|
Foreign currency loss (gain), net |
27,449 |
(1,318) |
11,905 |
|||||||||
|
Derivative valuation loss, net |
1,632 |
76 |
467 |
|||||||||
|
Restatement related expenses (gain), net |
— |
(765) |
900 |
|||||||||
|
Adjusted EBITDA |
$ |
23,509 |
$ |
15,492 |
$ |
20,322 |
||||||
|
Net income (loss) |
$ |
(21,505) |
$ |
2,763 |
$ |
(8,059) |
||||||
|
Adjustments: |
||||||||||||
|
Early termination charges |
— |
— |
2,262 |
|||||||||
|
Equity-based compensation expense |
1,341 |
665 |
349 |
|||||||||
|
Foreign currency loss (gain), net |
27,449 |
(1,318) |
11,905 |
|||||||||
|
Derivative valuation loss, net |
1,632 |
76 |
467 |
|||||||||
|
Restatement related expenses (gain), net |
— |
(765) |
900 |
|||||||||
|
Adjusted Net Income |
$ |
8,917 |
$ |
1,421 |
$ |
7,824 |
||||||
|
Adjusted Net Income per common share: |
||||||||||||
|
– Basic |
$ |
0.26 |
$ |
0.04 |
$ |
0.23 |
||||||
|
– Diluted |
$ |
0.23 |
$ |
0.04 |
$ |
0.21 |
||||||
|
Weighted average number of shares – Basic |
34,420,654 |
34,253,111 |
33,952,574 |
|||||||||
|
Weighted average number of shares – Diluted |
45,735,521 |
35,154,693 |
44,974,577 |
|||||||||
|
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) early termination charges, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss, net and (v) restatement related expenses (gain), net. EBITDA for the periods indicated is defined as net income (loss) before interest expense, net, income tax expenses 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 (loss), adjusted to exclude (i) early termination charges, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss, net and (v) restatement related expenses (gain), net. |
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEETS |
||||
|
(In thousands of US dollars, except share data) |
||||
|
(Unaudited) |
||||
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June 30, |
December 31, |
|||
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(In thousands of US dollars, |
||||
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Assets |
||||
|
Current assets |
||||
|
Cash and cash equivalents |
$ 131,682 |
$ 128,575 |
||
|
Accounts receivable, net |
85,570 |
92,026 |
||
|
Unbilled accounts receivable |
35,857 |
— |
||
|
Inventories, net |
57,456 |
73,073 |
||
|
Other receivables |
8,468 |
4,292 |
||
|
Prepaid expenses |
10,227 |
9,250 |
||
|
Hedge collateral |
10,100 |
7,600 |
||
|
Other current assets |
11,023 |
15,444 |
||
|
Total current assets |
350,383 |
330,260 |
||
|
Property, plant and equipment, net |
197,034 |
205,903 |
||
|
Intangible assets, net |
3,966 |
4,061 |
||
|
Long-term prepaid expenses |
13,858 |
12,791 |
||
|
Other non-current assets |
5,851 |
5,774 |
||
|
Total assets |
$ 571,092 |
$ 558,789 |
||
|
Liabilities and Stockholders' Equity |
||||
|
Current liabilities |
||||
|
Accounts payable |
$ 60,742 |
$ 65,940 |
||
|
Other accounts payable |
11,123 |
10,261 |
||
|
Accrued expenses |
49,506 |
51,746 |
||
|
Deferred revenue |
13,440 |
8,335 |
||
|
Other current liabilities |
5,149 |
1,860 |
||
|
Total current liabilities |
139,960 |
138,142 |
||
|
Long-term borrowings, net |
304,489 |
303,416 |
||
|
Accrued severance benefits, net |
145,542 |
148,905 |
||
|
Other non-current liabilities |
14,894 |
7,963 |
||
|
Total liabilities |
604,885 |
598,426 |
||
|
Stockholders' equity |
||||
|
Common stock, $0.01 par value, 150,000,000 shares authorized, 42,877,395 shares issued and |
429 |
426 |
||
|
Additional paid-in capital |
139,502 |
136,259 |
||
|
Accumulated deficit |
(51,147 ) |
(40,889 ) |
||
|
Treasury stock, 8,393,641 shares at June 30, 2018 and 8,374,209 shares at December 31, 2017 |
(102,518 ) |
(102,319 ) |
||
|
Accumulated other comprehensive loss |
(20,059 ) |
(33,114 ) |
||
|
Total stockholders' deficit |
(33,793 ) |
(39,637) |
||
|
Total liabilities and stockholders' equity |
$ 571,092 |
$ 558,789 |
||
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MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||||
|
(In thousands of US dollars) |
||||||||||||
|
(Unaudited) |
||||||||||||
|
Three Months Ended |
Six Months Ended |
|||||||||||
|
June 30, 2018 |
June 30, 2018 |
June 30, 2017 |
||||||||||
|
Cash flows from operating activities |
||||||||||||
|
Net income (loss) |
$ |
(21,505) |
$ |
(18,742) |
$ |
35,679 |
||||||
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) |
||||||||||||
|
Depreciation and amortization |
8,012 |
15,970 |
13,531 |
|||||||||
|
Provision for severance benefits |
4,653 |
9,165 |
10,776 |
|||||||||
|
Amortization of debt issuance costs and original issue discount |
541 |
1,073 |
950 |
|||||||||
|
Loss (gain) on foreign currency, net |
34,051 |
32,369 |
(35,813) |
|||||||||
|
Restructuring gain and other |
— |
— |
(17,010) |
|||||||||
|
Stock-based compensation |
1,341 |
2,810 |
1,179 |
|||||||||
|
Other |
1,390 |
1,053 |
220 |
|||||||||
|
Changes in operating assets and liabilities |
||||||||||||
|
Accounts receivable, net |
2,190 |
5,305 |
(9,730) |
|||||||||
|
Unbilled accounts receivable |
1,526 |
887 |
— |
|||||||||
|
Inventories, net |
(3,647) |
(16,797) |
2,646 |
|||||||||
|
Other receivables |
(762) |
(4,508) |
2,598 |
|||||||||
|
Other current assets |
3,288 |
2,253 |
1,135 |
|||||||||
|
Accounts payable |
(7,641) |
(4,473) |
(1,919) |
|||||||||
|
Other accounts payable |
(2,470) |
(5,229) |
(7,790) |
|||||||||
|
Accrued expenses |
5,694 |
(1,435) |
(10,776) |
|||||||||
|
Other current liabilities |
1,330 |
760 |
(436) |
|||||||||
|
Deferred revenue |
604 |
5,413 |
(265) |
|||||||||
|
Other non-current liabilities |
498 |
1,116 |
(268) |
|||||||||
|
Payment of severance benefits |
(3,507) |
(5,754) |
(18,082) |
|||||||||
|
Other |
87 |
516 |
(107) |
|||||||||
|
Net cash provided by (used in) operating activities |
25,673 |
21,752 |
(33,482) |
|||||||||
|
Cash flows from investing activities |
||||||||||||
|
Proceeds from disposal of plant, property and equipment |
13 |
13 |
1,125 |
|||||||||
|
Purchase of plant, property and equipment |
(4,103) |
(11,432) |
(10,807) |
|||||||||
|
Payment for property related to water treatment facility arrangement |
(4,283) |
(4,283) |
— |
|||||||||
|
Payment for intellectual property registration |
(165) |
(574) |
(566) |
|||||||||
|
Proceeds from settlement of hedge collateral |
— |
4,863 |
6,781 |
|||||||||
|
Payment of hedge collateral |
(7,490) |
(7,490) |
(10,036) |
|||||||||
|
Collection of guarantee deposits |
645 |
659 |
1,400 |
|||||||||
|
Payment of guarantee deposits |
— |
— |
(41) |
|||||||||
|
Other |
(2) |
(38) |
22 |
|||||||||
|
Net cash used in investing activities |
(15,385) |
(18,282) |
(12,122) |
|||||||||
|
Cash flows from financing activities |
||||||||||||
|
Proceeds from issuance of senior notes |
— |
— |
86,250 |
|||||||||
|
Payment of debt issuance costs |
— |
— |
(5,902) |
|||||||||
|
Proceeds from exercise of stock options |
293 |
435 |
2,525 |
|||||||||
|
Acquisition of treasury stock |
— |
— |
(11,401) |
|||||||||
|
Proceeds from property related to water treatment facility arrangement |
4,283 |
4,283 |
— |
|||||||||
|
Net cash provided by financing activities |
4,576 |
4,718 |
71,472 |
|||||||||
|
Effect of exchange rates on cash, cash equivalents and restricted cash |
(6,318) |
(5,081) |
4,049 |
|||||||||
|
Net increase in cash, cash equivalents and restricted cash |
8,546 |
3,107 |
29,917 |
|||||||||
|
Cash, cash equivalents and restricted cash |
||||||||||||
|
Beginning of the period |
123,136 |
128,575 |
101,606 |
|||||||||
|
End of the period |
$ |
131,682 |
$ |
131,682 |
$ |
131,523 |
||||||
View original content:http://www.prnewswire.com/news-releases/magnachip-reports-second-quarter-2018-financial-results-300688616.html
SOURCE