SEOUL, South Korea and SAN JOSE, Calif., Feb. 9, 2017 /PRNewswire/ — MagnaChip Semiconductor Corporation (“MagnaChip” or the “Company”) (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the fourth quarter ended December 31, 2016.
Revenue for the fourth quarter of 2016 was $180.5 million, a decline of 6.2% compared to $192.3 million for the third quarter of 2016, and up 18.4% as compared to $152.4 million for the fourth quarter of 2015. Revenue in the fourth quarter was at the high end of the previous guidance range provided in October 2016, and was consistent with the Company’s pre-announcement of fourth quarter financial results on January 10, 2017.
Revenue for the 2016 full year was $688.0 million, an increase of 8.6% from $633.7 million in 2015. The 2016 figure included $10 million of revenue from a 6″ fab closed in February 2016, whereas 2015 included $74 million in revenue from that same 6″ fab.
Foundry Services Group revenue in the fourth quarter of 2016 was $77.8 million, a sequential increase of 5.3% from $73.9 million, marking the third consecutive quarter of growth. Foundry Services revenue in the fourth quarter increased 18.2% from revenue of $65.8 million in the fourth quarter of 2015.
Revenue in the Standard Products Group was $102.5 million in the fourth quarter, a sequential decline of 13.4% from $118.3 million in the prior quarter, due primarily to seasonal factors in display products. Standard Products Group revenue in the fourth quarter increased 18.6% from $86.5 million in the fourth quarter of 2015.
Total gross profit in the fourth quarter was $46.1 million, or 25.5%, as compared with gross profit of $39.1 million, or 20.4%, for the third quarter of 2016 and $29.9 million or 19.6%, for the fourth quarter of 2015. Gross profit and gross profit margin figures in the fourth quarter were at the highest levels in more than three years. The gross profit margin in the fourth quarter of 2016 exceeded the high-end of the guidance range provided in October 2016 by 150 basis points.
Foundry gross profit margin was 30.3% in the fourth quarter of 2016, as compared with 23.5% in the third quarter of 2016, and 22.7% in the fourth quarter of 2015. Standard Products Group gross profit margin was 21.8% in the fourth quarter of 2016, as compared with 18.3% in the third quarter of 2016 and 17.2% in the fourth quarter of 2015.
Net loss, on a GAAP basis, for the fourth quarter of 2016 was $49.8 million or $1.42 per basic share as compared with net income in the third quarter of 2016 of $29.9 million or $0.86 per basic share and $0.85 per diluted share, and as compared to net income of $22.9 million or $0.66 per basic and diluted share for the fourth quarter of 2015. The net loss in the fourth quarter of 2016 was attributable primarily to a non-cash foreign exchange loss on the Company’s intercompany loans.
Adjusted Net Income, a non-GAAP financial measure, for the fourth quarter of 2016 totaled $1.6 million or $0.05 per basic share and $0.04 per diluted share, compared to Adjusted Net Loss of $1.3 million or $0.04 per basic share in the third quarter of 2016, and compared to Adjusted Net Income of $5.2 million or $0.15 per basic and diluted share in the fourth quarter of 2015.
Adjusted EBITDA in the fourth quarter of 2016 was $14.1 million as compared with $9.9 million in the third quarter of 2016 and a negative $1.2 million in the fourth quarter of 2015.
“The financial results in the fourth quarter of 2016 and the full year continue to reflect the operational progress we’ve made in our business turnaround,” said YJ Kim, Chief Executive Officer of MagnaChip. “Our key priorities in 2017 include a plan to achieve higher gross profit margin, improve overall profitability and invest in initiatives to fuel long-term growth.”
The Company this month launched a new headcount reduction plan that is expected to be two to three times larger than a 2016 program, which resulted last year in a reduction in headcount of 169 employees. The expected payback period is estimated at approximately 1.5 years, with estimated annual cost savings from $20 million to $27 million, depending upon the final size of the workforce reduction. The Company expects to use $30-40 million of the proceeds from the Exchangeable Senior Notes Offering completed earlier this year to pay severance and other benefits to affected employees.
In commenting on the fourth quarter financial results, Chief Financial Officer Jonathan Kim said, “Gross profit margin exceeded our expectation, due primarily to a richer-than-expected product mix and a larger-than expected increase in foundry revenue. Gross margin for the AMOLED product line continued to exceed the corporate average in the fourth quarter despite a seasonal slowdown in revenue.” Mr. Kim added, “We believe our gross profit margin and Adjusted EBITDA will increase sequentially throughout 2017 beginning in the second quarter, based on our current view of the business as well as our assumptions of the cost reductions we expect to achieve from the current headcount reduction program.”
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 $83.4 million at the end of the fourth quarter of 2016, an increase from $75.4 million at the end of the third quarter of 2016. In the fourth quarter of 2016, MagnaChip received proceeds of $18.2 million in advance, including $1.7 million valued added tax, related to the sale of a building that housed a 6″ wafer fab that was closed in February 2016. The Company is required to perform certain removal construction work that is expected to be completed by the end of March 2017. Accordingly, once the construction obligation is completed, the proceeds will be recorded as cash and cash equivalents on the consolidated balance sheet.
The following table sets forth information relating to our operating segments:
Fourth Quarter and Recent Company Highlights
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For the first quarter of 2017, MagnaChip anticipates:
Revenue to be in the range of $157 million to $163 million, a sequential decline of 9.7% to 13%, reflecting both a typical first quarter seasonal decline and the timing of new AMOLED products previously described during our last earnings call in October 2016. The first quarter revenue outlook represents year-on-year growth as compared to total revenue of $148.1 million in the first quarter of 2016.
Gross profit is anticipated to be in the range of 24% to 26%, about flat with Q4 2016, and above the 23.1% gross profit margin in the first quarter of 2016.
MagnaChip will hold a conference call on Feb. 10 at 8 a.m. ET to discuss the fourth quarter 2016 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 toll-free at 1-614-999-9318. The conference ID number is 58406105. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 8 a.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 58406105.
About MagnaChip Semiconductor Corporation
MagnaChip is a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer, communication, industrial and computing 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 a 30-year operating history, owns a portfolio of more than 3,400 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 fourth quarter 2016 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, 2016 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.
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