-- Q3 Revenue at High-End of Guidance Range; Gross Profit Margin of 26.5% Exceeds Guidance Range --SEOUL, South Korea and SAN JOSE, Calif., Oct. 23, 2019 — (PRNewswire) — MagnaChip Semiconductor Corporation (NYSE: MX) today announced financial results for the third quarter of 2019.
Q3 2019 Summary
- Revenue of $229.7 million at high-end of guidance range of $220-230 million; Q3 revenue up 11.5% Year-over-Year (YoY); up 12% Quarter-over-Quarter (QoQ)
- Standard Products Group (SPG) revenue of $139.2 million, up 14.1% YoY; up 5.5% QoQ
- Display standard products revenue of $90.6 million, up 16.7% YoY; up 7.5% QoQ
- OLED display driver IC revenue of $78.3 million up 34.2% YoY; up 7.2% QoQ
- Power standard products revenue of $48.7 million, up 9.5% YoY; up 2.0% QoQ
- Foundry Services Group (FSG) revenue of $90.3 million, up 7.7% YoY; up 23.6% QoQ
- Total gross profit margin (GPM) of 26.5% exceeded the guidance range of 22-24%; GPM was 27.1% in Q3 2018; 21.4% in Q2 2019
Fourth Quarter 2019 Business Outlook
- Normal seasonal softness in revenue but improvement from the fourth quarter of 2018. Revenue is expected to be in the range of $181 million to $191 million, down 19% at the mid-point of the projected range when compared with revenue of $229.7 million in the third quarter of 2019, and up 3.7% year-over-year when compared to revenue of $179.4 million in the fourth quarter of 2018.
- Gross profit margin to be in the range of 24% to 26%, when compared to 26.5% in the third quarter of 2019 and 24.5% in the fourth quarter of 2018. Gross margin guidance for the fourth quarter reflects the current expectation that fab utilization will show an expected sequential decline from the third quarter of 2019.
CEO YJ Kim comments on Q3
Revenue of $229.7 million was the highest quarterly level achieved since we went public in 2011. Our Display and Power businesses both had record quarterly revenue, and Foundry revenue was at the highest level in five years. Demand continued to be robust for our OLED display drivers, as revenue increased over 34% year-over-year and over 7% sequentially.
We were awarded a record 11 new design wins for OLED display drivers in Asia, including three for mid-range smartphones from a major smartphone maker in Korea. Of the 11 design wins, seven were for display drivers in our 40-nanometer product family and four were for our new and lowest-power 28-nanometer display drivers. Smartphone makers in Asia launched a total of six high-end and mid-range models using our OLED display drivers. Our Power business showed sequential growth and the Foundry business showed sharp sequential growth, as customer demand was strong, particularly from the smartphone and computing segments.
Strategic Evaluation Process
"I'm pleased to report that we continue to make substantial progress on our previously announced strategic evaluation process of the Foundry business and Fab 4, including discussions with multiple interested parties toward a possible sale of the business as well as consideration of accretive business conversions, joint ventures and partnerships," said YJ Kim, CEO. "As stated previously, our decisions regarding the outcome of the various options of the strategic evaluation process will be guided by what the management and Board consider to be the best available path to improve MagnaChip's profitability and to maximize shareholder value."
CFO Jonathan Kim comments on Q3
Total revenue came in at the high-end of our guidance range, as Display, Power and Foundry all showed year-over-year and sequential revenue growth. Gross profit margin of 26.5% in Q3 exceeded our guidance range due primarily to higher-than-expected fab utilization, mainly as a result of a significant increase in Foundry revenue.
Cash and cash equivalents totaled $131.3 million, up sequentially from $123.8 million, and net operating cash flow was $12.9 million, marking the second consecutive quarter of net positive operating cash flow.
Third Quarter Financial Review
Total revenue in the third quarter was $229.7 million, up 11.5% as compared to reported revenue of $206 million from the third quarter of 2018, and up 12.0% from $205.1 million in the second quarter of 2019.
Foundry Services Group revenue in the third quarter was $90.3 million, up 7.7% from the third quarter of 2018, and up 23.6% sequentially. Standard Products Group revenue in the third quarter was $139.2 million, up 14.1% from the third quarter of 2018, and up 5.5% sequentially.
Total Gross Profit and Gross Profit Margin
Total gross profit in the third quarter of 2019 was $60.9 million or 26.5% as a percentage of revenue, as compared with gross profit of $55.7 million or 27.1% as a percentage of revenue in the third quarter of 2018, and $43.8 million or 21.4% as a percentage of revenue in the second quarter of 2019.
Segment Gross Profit Margin
Foundry Services Group gross profit margin was 28.3% as compared with 24.4% in the third quarter of 2018 and 16.7% in the second quarter of 2019. The YoY and sequential improvement in the Foundry Services Group's gross profit margin was primarily due to an increase in Foundry revenue, an improved product mix and also higher fab utilization. The Standard Products Group gross profit margin was 25.3% as compared with 28.8% in the third quarter of 2018 and 23.9% in the second quarter of 2019. The sequential improvement in the Standard Products Group's gross profit margin was due primarily to an increase in fab utilization. The sequential improvement as well as a YoY decline in the Standard Product Group's gross profit margin was due to an increase in fab utilization that benefited Power and non-OLED products manufactured in-house, but the gain was offset by temporarily lower wafer yields from external suppliers on OLED products that recently entered production.
Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income was of $25.9 million for the third quarter of 2019, as compared to operating income of $18.3 million in the third quarter of 2018 and operating income of $6.7 million for the second quarter of 2019.
Net loss, on a GAAP basis, was $1.6 million or $0.05 cents per basic and diluted share in the third quarter of 2019 as compared with a net income of $17.2 million or $0.50 per basic share and $0.41 per diluted share in the third quarter of 2018 and net loss of $9.5 million or $0.28 per basic and diluted share in the second quarter of 2019.
Adjusted Net Income, a non-GAAP financial measure, totaled $20.9 million or $0.61 per basic share and $0.49 per diluted share in the third quarter of 2019, as compared to Adjusted Net Income of $13.3 million or $0.38 per basic share and $0.32 per diluted share in the third quarter of 2018 and Adjusted Net Income of $2.9 million or $0.08 per basic and diluted share in the second quarter of 2019.