MagnaChip Reports Second Quarter 2017 Financial Results

28% Gross Profit Margin in Q2 Tops Previous Guidance Range; At Highest Level in Four Years

(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:




















Three Months Ended



Six Months Ended




June 30,

2017



June 30,

2016



June 30,

2017



June 30,

2016


Net Sales













Foundry Services Group


$

81,528



$

62,310



$

159,056



$

122,289


Standard Products Group













Display Solutions



49,753




74,406




98,632




132,465


Power Solutions



35,314




30,213




70,594




60,131


Total Standard Products Group



85,067




104,619




169,226




192,596


All other



90




177




113




326


Total net sales


$

166,685



$

167,106



$

328,395



$

315,211



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