SEOUL, South Korea and SAN JOSE, Calif., April 30, 2018 /PRNewswire/ — MagnaChip Semiconductor Corporation (NYSE: MX) today announced financial results for the first quarter of 2018.
Q1 2018 Summary
• Revenue of $165.8 million exceeded the high-end of $158-164 million guidance range; revenue increased 2.5% YoY
• OLED display driver revenue of $34.3 million increased 112% YoY and 141% from Q4 2017; achieved 10 new design wins for
OLED display drivers
• Gross profit margin of 26.9% in line with 26-28% guidance range; gross profit margin increased by 1.2 percentage points YoY and
gross profit dollars increased 7.2% YoY
• Operating income of $7.4 million increased 15.9% YoY
• Adjusted EBITDA of $15.5 million increased 18.4% YoY
CEO Comments: “Revenue in the first quarter exceeded expectations, fueled by a sharp rebound in demand for our mobile OLED display drivers from smartphone makers, primarily in China,” said YJ Kim, Chief Executive Officer. “When we reported Q4 2017 financial results in February, we stated that OLED revenue in Q1 2018 had the potential to increase sequentially by more than 75%, and expressed confidence that OLED revenue was on track to exceed 50% growth in 2018 as compared to 2017 or clearly exceed $100 million for the full year. In fact, our OLED revenue in Q1 increased 141% sequentially and, based upon our current business visibility, we now anticipate OLED revenue growth in 2018 will surpass our previous targets.” CEO Kim added, “During Q1, MagnaChip secured a total of 10 new OLED design wins from smartphone makers in China and elsewhere in Asia, and sampled a new third-generation 40-nanometer rigid bezel-less OLED display driver that already has won design-in by a leading smartphone maker for a device targeted to the mainstream market in the second half of 2018.”
CFO Comments: “Key financial indicators in the first quarter compared favorably with results achieved in the same year-ago period despite previously disclosed headwinds, including higher raw wafer costs and typical seasonal weakness.” said Jonathan Kim, Chief Financial Officer. Revenue in Q1 2018 increased 2.5% as compared to Q1 2017, gross profit margin improved by 1.2 percentage points, gross margin dollars increased by 7.2%, operating income rose 15.9% and Adjusted EBITDA was higher by 18.4% as compared to the first quarter a year ago. Revenue from lower-margin products in the non-OLED portion of the Display business line decreased in Q1 due to a strategic portfolio optimization initiative to improve product mix and profitability over time. CFO Kim added, “Our results in Q1 demonstrated our ongoing commitment to focus on achieving profitable growth.”
First Quarter Financial Review
Total revenue in the first quarter of 2018 was $165.8 million, up 2.5% as compared to $161.7 million from the first quarter of 2017, and down 5.0% from the fourth quarter of 2017.
Segment Revenue and Segment Adjustments
In January 2018, as part of the Company’s ongoing portfolio optimization effort to realign business processes and streamline the organizational structure, the Company transferred a portion of the non-OLED Display business, which was $4.4 million for Q1 2018, from the Standard Products Group to the Foundry Services Group. The transferred non-OLED Display business has characteristics more closely aligned with the Foundry business than with Standard Products and resided within the Display business line primarily as a result of a long standing customer relationship established many years ago. The historical financial results below are discussed both on an as reported and as adjusted basis for comparative purposes.
Foundry Services Group revenue in the first quarter was $77.4 million, about flat with reported revenue of $77.5 million from the first quarter of 2017, and down 4.0% from the fourth quarter of 2017 on an as reported basis; and down 7.3% from the first quarter of 2017, and down 14.2% from the fourth quarter of 2017 on an as adjusted basis.
Following the strategic realignment and portfolio optimization discussed above, Standard Products Group revenue in the first quarter of 2018 was $88.4 million, up 5.0% year-over-year and down 5.9% sequentially on an as reported basis; and up 13.1% year-over-year and up 4.8% sequentially on an as adjusted basis. The improved results in the Standard Products Group reflected an improvement in mobile OLED driver revenue in connection with the introduction of new OLED smartphones from China manufacturers, higher demand for MOSFETS for mobile battery and television products, despite lower LCD display driver revenue. The sequential revenue decline in Q1 2018 as compared with the fourth quarter of 2017 stemmed primarily from a previously announced strategic plan to reduce business from lower-margin LCD display drivers in the Standard Products Group.
Total Gross Profit and Gross Profit Margin
Total gross profit in the first quarter of 2018 was $44.6 million or 26.9% as a percentage of sales as compared with gross profit of $41.6 million or 25.7% gross profit margin in the first quarter of 2017, and $49.4 million or 28.3% gross profit margin for the fourth quarter of 2017.
Segment Gross Profit Margin
Foundry Services Group gross profit margin was 26.7% in the first quarter of 2018 as compared with, on an as reported basis, 28.5% in the first quarter of 2017 and 31.7% in the fourth quarter of 2017. The Foundry Services Group gross profit margin was, on an as adjusted basis, 27.9% in the first quarter of 2017 and 30.4% in the fourth quarter of 2017. The Standard Products Group gross profit margin was 27.2% in the first quarter of 2018 as compared with, on an as reported basis, 23.1% in the first quarter of 2017, and 25.3% in the fourth quarter of 2017. The Standard Products Group gross profit margin was, on an adjusted basis, 23.3% in the first quarter of 2017, and 26.0% in the fourth quarter of 2017.
Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income, on a GAAP basis, for the first quarter was $7.4 million, as compared with $6.4 million in the first quarter of 2017, and $7.6 million in the fourth quarter of 2017.
Net income, on a GAAP basis, for the first quarter was $2.8 million or $0.08 per basic share and diluted share, as compared with net income on a GAAP basis of $43.7 million or $1.30 per basic share and $1.05 per diluted share in the first quarter of 2017, and compared with net income of $43.7 million or $1.28 per basic share and $0.99 per diluted share in the fourth quarter of 2017.
Adjusted Net Income, a non-GAAP financial measure, for the first quarter of 2018 totaled $1.4 million or $0.04 per basic and diluted share, as compared with Adjusted Net Income of $0.5 million or $0.01 per basic and diluted share in the first quarter of 2017, and compared with Adjusted Net Income of $9.1 million or $0.27 per basic share and $0.23 per diluted share in the fourth quarter of 2017.
Adjusted EBITDA, a non-GAAP financial measure, in the first quarter was $15.5 million or 9.3% of revenue, as compared with Adjusted EBITDA of $13.1 million or 8.1% of revenue in the first quarter of 2017, and compared with Adjusted EBITDA of $20.5 million or 11.8% of revenue in the fourth quarter of 2017.
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 $123.1 million at the end of the first quarter, down from $128.6 million at the end of the fourth quarter of 2017.
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 Standard Products Group to the Foundry Services Group beginning in the first quarter of 2018:
First Quarter 2018 and Recent Company Highlights
• Announced it will host its Annual Foundry Technology Symposium in Santa Clara, California on May 23, 2018
• Now offers automotive-grade 0.18 micron BCD process technology with up to 100V Operation Voltage
• Announced that Second-Generation 0.13 micron BCD process technology with high-density embedded flash memory is now available
to Foundry customers
• Multi-level thick IMD process for capacity with ultra-high breakdown voltage is now available to Foundry customers
Second Quarter 2018 Business Outlook
For the second quarter of 2018, MagnaChip anticipates:
• Revenue to be in the range of $182 million to $188 million, up sequentially 11.6% at the mid-point of the projected range. The guidance
for the second quarter compares with revenue of $165.8 million in the first quarter of 2018 and $166.7 million in the second quarter
• Despite headwinds, gross profit margin to be in the range of 26% to 28%. This compares to 26.9% in the first quarter of 2018, and
28.0% in the second quarter of 2017.
First Quarter 2018 Conference Call
The conference call will be webcast live today and also is available by dialing toll-free at 1-844-536-5472. International call-in participants can dial toll-free at 1-614-999-9318. The conference ID number is 1777267. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. EDT start time today 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 1777267.
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 3,200 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 second 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 SEC, including our Form 10-K filed on February 22, 2018 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