28% Gross Profit Margin in Q2 Tops Previous Guidance Range; At Highest Level in Four Years
SEOUL, South Korea and SAN JOSE, Calif., Aug. 3, 2017 /PRNewswire/ — MagnaChip Semiconductor Corporation (“MagnaChip” or the “Company”) (NYSE: MX), a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, industrial and automotive applications, today announced financial results for the second quarter ended June 30, 2017.
Total revenue for the second quarter of 2017 was $166.7 million, about flat as compared to $167.1 million for the second quarter of 2016, and an increase of 3.1% as compared to $161.7 million for the first quarter of 2017. Total revenue in the second quarter of 2017 came in at the higher end of the guidance range of $162-168 million provided in May.
Foundry Services Group revenue was $81.5 million in the second quarter of 2017, up 30.8% from revenue of $62.3 million in the second quarter of 2016, and up 5.2% sequentially from $77.5 million in the first quarter of 2017.
Revenue in the Standard Products Group was $85.1 million in the second quarter of 2017, down 18.7% from the second quarter a year ago, and up 1.1% sequentially from $84.2 million in the first quarter of 2017.
Total gross profit in the second quarter of 2017 was $46.7 million or 28% gross profit margin as compared with gross profit of $36.7 million, or 22% gross profit margin for the second quarter of 2016, and $41.6 million, or 25.7% gross profit margin in the first quarter of 2017. Gross profit margin in the second quarter topped the high end of the guidance range of 25-27% provided in May. Gross margin improved due to slightly higher fab utilization, a favorable product mix, and earlier-than-expected cost benefits from departures of manufacturing employees who participated in our 2017 voluntary headcount reduction plan.
Foundry gross profit margin was 28.7% in the second quarter of 2017 as compared with 22.8% in the second quarter of 2016 and 28.5% in the first quarter of 2017. Standard Products Group gross profit margin was 27.2% in the second quarter of 2017 as compared with 21.4% in the second quarter of 2016 and 23.1% in the first quarter of 2017.
Net loss, on a GAAP basis, for the second quarter of 2017 was $8.1 million or $0.24 per basic share as compared with a net loss in the second quarter of 2016 of $17.8 million or $0.51 per basic share and compared with net income of $43.7 million or $1.30 per basic share and $1.05 per diluted share in the first quarter of 2017. The net loss in the second quarter of 2017 was attributable primarily to a non-cash foreign exchange loss on the Company’s intercompany loans. Upon the finalization of a headcount reduction plan, the Company recorded an additional charge of $2.3 million in the second quarter of 2017.
Adjusted Net Income, a non-GAAP financial measure, for the second quarter of 2017, totaled $7.8 million or $0.23 per basic share and $0.21 per diluted share as compared to an Adjusted Net Loss of $1.9 million or $0.05 per basic share in the second quarter of 2016 and Adjusted Net Income of $0.5 million or $0.01 per basic and diluted share in the first quarter of 2017.
Adjusted EBITDA, a non-GAAP financial measure, in the second quarter was $20.3 million as compared with Adjusted EBITDA of $8.6 million in the second quarter of 2016, and up from $13.1 million in the first quarter of 2017. Adjusted EBITDA in the second quarter of 2017 was at the highest level since the first quarter of 2013.
“Our financial results in the second quarter demonstrate the successful execution of our business strategy and our ongoing commitment to improve profitability,” said YJ Kim, Chief Executive Officer of MagnaChip. “With our diversified and balanced portfolio of higher gross margin power and display standard products and analog foundry services, we have created a solid foundation for future profitable growth.”
Chief Financial Officer Jonathan Kim said, “We successfully concluded a headcount reduction plan in the second quarter to further streamline the company, drive significant cost savings and improve key financial metrics.” The headcount reduction is expected to generate cost savings of approximately $24 million with an expected payback period of less than 1.5 years.
Mr. Kim added, “Our gross profit margin as a percentage of revenue in the second quarter was at the highest level in more than four years and our Adjusted EBITDA of $20.3 million increased 55% from the prior quarter and more than doubled as compared to the same quarter a year ago.”
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 $131.5 million at the end of the second quarter, a decrease of $1.1 million from $132.6 million at the end of the first quarter of 2017.
The following table sets forth information relating to our operating segments:
Second Quarter and Recent Company Highlights
• Hosted its Annual Foundry Technology Symposium in Silicon Valley to showcase the Company’s technology offerings and provide an in-depth understanding of MagnaChip’s manufacturing capabilities, its specialty technology processes, target applications and end-markets.
• Announced it now offers 0.13 micron BCD process technology integrated with high-density embedded Flash. This BCD process offers 40V power LDMOS and delivers 64K Bytes flash memory, making it suitable for programmable PMIC, wireless power chargers and USB-C power-delivery IC products.
• Was selected as a foundry partner by ELAN Microelectronics to manufacture the world’s first fingerprint sensor IC-based smartcard. The smartcard uses biometrics technology that provides secure identification to prevent credit card fraud, a severe and growing problem globally. The sensor-IC based smartcard will be manufactured utilizing MagnaChip’s 0.35 micron Mixed Signal Thick IMD manufacturing process technology.
For the third quarter of 2017, MagnaChip anticipates:
•Revenue to be in the range of $172 million to $178 million, or up sequentially nearly 5% at the mid-point of the projected range as compared with the second quarter of 2017, and compared to $192.3 million in the third quarter of 2016.
•Gross profit margin to be in the range of 27% to 29%, as compared to 28.0% in the second quarter of 2017, and as compared to 20.4% in the third quarter of 2016.
MagnaChip will hold a conference call on August 3 at 5 p.m. EDT to discuss the second quarter 2017 financial results. The conference call will be webcast live and is also available by dialing toll-free at 1-844-536-5472. International call-in participants can dial at 1-614-999-9318. The conference ID number is 53163731. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. EDT 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 53163731.
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 over 30 years of operating history, owns a portfolio of approximately 3,300 registered and pending patents, 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 third quarter 2017 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 SEC, including our Form 10-K filed on February 21, 2017 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.
In the United States:
Director, Public Relations