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
Q4 2019 Highlights
- Revenue of
$200.0 million exceeded high-end of original guidance range of$181-191 million provided onOctober 23, 2019 ; met high-end of updated guidance range of$198-200 million provided onJanuary 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
MagnaChip's manufacturing supply chain resides largely outside
- 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
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
Segment Revenue
Total Gross Profit and Gross Profit Margin
Total gross profit in the fourth quarter of 2019 was
Segment Gross Profit Margin
Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income was
Net income, on a GAAP basis, was
Adjusted Net Income, a non-GAAP financial measure, totaled
Adjusted EBITDA, a non-GAAP financial measure, 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
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:
- Announced that CEO YJ Kim was awarded the National Industrial Service Medal by the Korean President in acknowledgement of his efforts to attract investment and encourage job development in Korea. The medal was presented at the annual 'Foreign Company Day' ceremony hosted by the Korea Ministry of Industry, Trade and Energy, and the Korea Foreign Company Association (FORCA).
http://investors.magnachip.com/news-releases/news-release-details/magnachip-semiconductor-ceo-yj-kim-awarded-koreas-prestigious - Was nominated as a 2019 Finalist for the award of "
Most Respected Emerging Public Semiconductor Company " by theGlobal Semiconductor Alliance .
https://www.gsaglobal.org/2019-global-semiconductor-alliance-award-nominees-announced/
Fourth Quarter 2019 Earnings Conference Call
The earnings conference call will be webcast live today (
About
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 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
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
|
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||
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 |
|||||||||||||||||||||
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 |
||||||||
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 |
||||||||||||
Three Months |
Year Ended |
|||||||||||
December 31, |
December 31, |
December 31, |
||||||||||
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 |
||||||||||||
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 |
SOURCE