MagnaChip Reports Third Quarter 2018 Financial Results

-- Revenue up 16.6% Year-over-Year; Operating Income, Adjusted EBITDA Highest in Six Years --

SEOUL, South Korea and SAN JOSE, Calif., Oct. 30, 2018 — (PRNewswire) — MagnaChip Semiconductor Corporation (NYSE: MX) today announced financial results for the third quarter of 2018 ended September 30.  

Q3 2018 Summary

  • Revenue of $206 million within the guidance range of $200-210 million, and highest since fourth quarter of 2012; revenue increased 16.6% Year-over-Year (YoY) as Display and Power showed gains.  
  • Standard Products Group revenue grew 26.8% YoY; gross margin of 28.8% sets record
  • OLED display driver revenue of $58.3 million up 232.2% YoY; OLED revenue at nearly $155 million Year-to-Date (YTD) and poised to set revenue record in 2018
  • Highest-ever Power standard products revenue; increased 14% YoY
  • Total gross profit margin of 27.1% in line with 26-28% guidance range, and down 1.4 percentage points YoY; gross profit dollars of $55.7 million increased 10.8% YoY
  • Operating income of $18.3 million, or 8.9% of revenue, increased 17.9% YoY
  • Adjusted EBITDA of $27.9 million, or 13.5% of revenue, increased 12.8% YoY

CEO Comments from YJ Kim:
"Revenue increased 16.6% from the same quarter a year ago, and was the highest since the fourth quarter of 2012. Within the Standard Products Group, the Power products business generated record revenue of $44.5 million and achieved double-digit growth year-over-year as well as sequentially. The OLED display driver business, which represented 75% of the total Display business, grew three-fold to $58.3 million. With OLED revenue of nearly $155 million through the first three quarters of 2018, we are on track to surpass the previous record of $161 million achieved in 2016. During Q3, six smartphones with our OLED drivers were launched, as anticipated, and we continued to win several new designs for smartphones in Asia."

CFO Comments from Jonathan Kim:
"Key profitability metrics continued to improve in Q3. Higher revenue contributed to a year-over-year increase in gross profit dollars, operating income and Adjusted EBITDA. Gross profit dollars of $55.7 million increased 10.8% year-over-year, operating income of $18.3 million increased 17.9% and Adjusted EBITDA of $27.9 million rose 12.8%. Total revenue, operating income and Adjusted EBITDA all were at their highest levels since the fourth quarter of 2012. Total gross margin of 27.1% was in line with the previous guidance of 26-28% despite headwinds from higher wafer prices and lower fab utilization. As previously stated, the Company remains fully committed to improving profitability over time."

Third Quarter Financial Review
Total Revenue
Total revenue in the third quarter of 2018 was $206.0 million, up 16.6% as compared to reported revenue of $176.7 million from the third quarter of 2017, and up 3.2% from $199.7 million in the second quarter of 2018. 

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 $11.5 million for Q3 2018 and $19.6 million YTD, from the Standard Products Group to the Foundry Services Group. As a result, 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 third quarter was $83.9 million, up 4.3% from, on an as reported basis, $80.4 million in the third quarter of 2017, and up 3.7% from the second quarter of 2018; and on an as adjusted basis, down 5.8% from the third quarter of 2017, and down 4.2% from the second quarter of 2017.

Following the strategic realignment and portfolio optimization discussed above, Standard Products Group revenue in the third quarter of 2018 was $122.0 million, up 26.8% year-over-year on an as reported basis and up 2.8% sequentially; and on an as adjusted basis, up 39.3% year-over-year, and up 54.4% from the second quarter of 2017. The improved results in the Standard Products Group reflected continued higher demand for premium Power products as well as continued strong demand for mobile OLED drivers, primarily from China manufacturers.  

Total Gross Profit and Gross Profit Margin
Total gross profit in the third quarter of 2018 was $55.7 million or 27.1% as a percentage of sales as compared with gross profit of $50.3 million or 28.5% gross profit margin in the third quarter of 2017, and $53.9 million or 27.0% gross profit margin for the second quarter of 2018.

Segment Gross Profit Margin
Foundry Services Group gross profit margin was 24.4% in the third quarter of 2018 as compared with 30.3% on an as reported basis in the third quarter of 2017 and 27.4% in the second quarter of 2018. The Foundry Services Group gross profit margin was, on an as adjusted basis, 29.6% in the third quarter of 2017 and 28.2% in the second quarter of 2017. The Standard Products Group gross profit margin was 28.8% in the third quarter of 2018 as compared with, on an as reported basis, 26.9% in the third quarter of 2017, and 26.6% in the second quarter of 2018. The Standard Products Group gross profit margin was, on an adjusted basis, 27.3% in the third quarter of 2017, and 27.7% in the second quarter of 2017.

Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income, on a GAAP basis, for the third quarter was $18.3 million as compared with $15.5 million in the third quarter of 2017 and $13.9 million in the second quarter of 2018.

Net income on a GAAP basis, for the third quarter was $17.2 million or $0.50 per basic share and $0.41 per diluted share, as compared with net income of $5.6 million or $0.16 per basic share and $0.15 per diluted share in the third quarter of 2017, and a net loss of $21.5 million or $0.62 cents per basic share and diluted share in the second quarter of 2018. The net income in the third quarter was attributable primarily to a non-cash foreign exchange gain on the Company's intercompany loans.

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