MAGNACHIP SEMICONDUCTOR CORPORATION SEOUL, South Korea and SAN JOSE, Calif., Oct. 27, 2016 /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 third quarter ended September 30, 2016.
Revenue for the third quarter of 2016 was $192.3 million, an increase of 15.1% compared to $167.1 million for the second quarter of 2016, and up 24.6% as compared to $154.4 million for the third quarter of 2015. The increase in sequential revenue was 4% higher than the top end of prior guidance and reflected across-the-board strength in customer demand for the Company's foundry services, display and power products.
Foundry Services revenue in the third quarter of 2016 was $73.9 million, a sequential increase of 18.5%, marking the third consecutive quarter of growth. Revenue in the Standard Products Group was $118.3 million, a 13.1% sequential increase and the fourth consecutive quarter of growth. Standard Product Group revenue in the third quarter was at its highest level since 2012 and Foundry Services revenue rebounded to mid-2015 levels.
Gross profit was $39.1 million, or 20.4% as a percent of revenue for the third quarter of 2016. This compared with gross profit of $36.7 million, or 22.0%, for the second quarter of 2016 and $34.7 million, or 22.5%, for the third quarter of 2015. Foundry gross profit was 23.5% and Standard Products Group gross profit was 18.3% in the third quarter of 2016.
Net income, on a GAAP basis, for the third quarter of 2016 totaled $29.9 million or $0.86 per basic share and $0.85 per diluted share, as compared to net loss of $17.8 million or $0.51 per basic share for the second quarter of 2016 and a net loss of $57.1 million or $1.65 per basic share for the third quarter of 2015. Net income in the third quarter of 2016 was attributable primarily to a non-cash foreign exchange gain on the Company's intercompany loans.
"Demand was strong across the board in the third quarter, with our Power, Display and Foundry businesses each recording a double digit gain in revenue as compared with the prior quarter," said YJ Kim, Chief Executive Officer of MagnaChip. "Our foundry business was especially strong, and our fab utilization climbed to the highest level in more than three years."
In commenting on the third quarter, Chief Financial Officer Jonathan Kim said, "We continued to execute on our strategy to increase fab utilization in order to reduce unit costs and prudently manage cash flows." Mr. Kim added, "We now are implementing a comprehensive plan to improve gross profit margin."
Adjusted Net Loss, a non-GAAP financial measure, for the third quarter of 2016 totaled $1.3 million or $0.04 per basic share, compared to Adjusted Net Loss of $1.9 million or $0.05 per basic share in the second quarter of 2016, and compared to Adjusted Net Loss of $10.4 million or $0.30 per basic share in the third quarter of 2015.
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 $75.4 million at the end of the 2016 third quarter, down from $83.9 million at the end of our 2016 second quarter.
As previously announced, the Board of Directors has established a Strategic Review Committee ("SRC") to assist the Board in reviewing, considering and evaluating strategic alternatives that may be available to MagnaChip, including the potential sale of all or a substantial portion of the Company. The SRC continues to evaluate strategic alternatives but is not currently engaged in an active process of considering alternatives for the sale of the entire Company. The SRC will consider any strategic opportunities that arise in the future.
The following table sets forth information relating to our operating segments:
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30, September 30, September 30,
2016 2015 2016 2015
---- ---- ---- ----
Net Sales
Foundry Services Group $73,863 $71,471 $196,152 $224,953
Standard Products Group
Display Solutions 84,706 48,314 217,171 153,585
Power Solutions 33,619 34,406 93,750 102,238
------ ------ ------ -------
Total Standard Products Group 118,325 82,720 310,921 255,823
All other 108 191 434 506
--- --- --- ---
Total net sales $192,296 $154,382 $507,507 $481,282
======== ======== ======== ========
Three Months Ended Three Months Ended
September 30, 2016 September 30, 2015
------------------ ------------------
Amount % of Amount % of
Net Sales Net Sales
--------- ---------
Gross Profit
Foundry Services Group $17,340 23.5% $18,681 26.1%
Standard Products Group 21,691 18.3 15,827 19.1
All other 108 100.0 191 100.0
--- ----- --- -----
Total gross profit $39,139 20.4% $34,699 22.5%
======= ==== ======= ====
Nine Months Ended Nine Months Ended
September 30, 2016 September 30, 2015
------------------ ------------------
Amount % of Amount % of
Net Sales Net Sales
--------- ---------
Gross Profit
Foundry Services Group $45,820 23.4% $51,241 22.8%
Standard Products Group 64,836 20.9 53,216 20.8
All other (519) (119.6) 505 99.8
---- ------ --- ----
Total gross profit $110,137 21.7% $104,962 21.8%
======== ==== ======== ====
Third Quarter and Recent Company Highlights
-- The Foundry Services Group and the Standard Products Group both recorded
double-digit increases in revenue
-- Hosted its annual Foundry Technology Symposium in Taiwan
-- Selected by a leading Taiwanese fabless company to begin volume
production on jointly developed power management IC
Business Outlook
For the fourth quarter of 2016, MagnaChip anticipates:
-- Revenue will be in the range of $174 million to $180 million, a
sequential decline of 6% to 10%, reflecting a typical seasonal decline,
but representing double-digit year-over-year growth.
-- Gross profit to be in the range of 22% to 24% as a percent of revenue,
representing a sequential and year-over-year improvement.
Conference Call
MagnaChip will hold a conference call at 5 p.m. EDT today (October 27, 2016) to discuss the third quarter financial results. The conference call will be webcast live and is also available by dialing 1-216-562-0462. The conference ID number is 1615389 and participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. EDT 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 access number is 1-404-537-3406 or toll-free at 1-855-859-2056. The access code is 1615389.
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 3,500 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.
CONTACTS:
In the United States: In Korea:
Bruce Entin Chankeun Park
Investor Relations Director, Public Relations
Tel. +1-408-625-1262 Tel. +82-2-6903-3195
Investor.relations@magnachip.com chankeun.park@magnachip.com
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of US dollars, except share data)
(Unaudited)
Three Months Ended
------------------
September 30, June 30, September 30,
2016 2016 2015
---- ---- ----
Net sales $192,296 $167,106 $154,382
Cost of sales 153,157 130,357 119,683
Gross profit 39,139 36,749 34,699
Gross profit % 20.4% 22.0% 22.5%
Operating expenses
Selling, general and administrative expenses 20,082 25,948 22,107
Research and development expenses 18,439 18,178 20,450
Total operating expenses 38,521 44,126 42,557
Operating income (loss) 618 (7,377) (7,858)
Interest expense (4,055) (4,073) (4,075)
Foreign currency gain (loss), net 33,174 (7,101) (44,139)
Other income, net 887 1,007 256
Income (loss) before income tax expenses 30,624 (17,544) (55,816)
Income tax expenses 758 272 1,250
Net income (loss) $29,866 $(17,816) $(57,066)
Earnings (loss) per common share :
- Basic $0.86 $(0.51) $(1.65)
- Diluted $0.85 $(0.51) $(1.65)
Weighted average number of shares - Basic 34,849,805 34,716,081 34,664,246
Weighted average number of shares - Diluted 35,302,706 34,716,081 34,664,246
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME
(In thousands of US dollars, except share data)
(Unaudited)
Three Months Ended
------------------
September 30, June 30, September 30,
2016
2016 2015
---- ----
Net income (loss) $29,866 $(17,816) $(57,066)
Adjustments:
Interest expense, net 3,996 4,001 4,023
Income tax expenses 758 272 1,250
Depreciation and amortization 6,539 6,228 6,399
EBITDA $41,159 $(7,315) $(45,394)
Restructuring and other - 5,545 -
Equity-based compensation expense 1,462 968 393
Foreign currency loss (gain), net (33,174) 7,101 44,139
Derivative valuation loss, net 32 8 270
Restatement related expenses 476 2,306 1,891
Adjusted EBITDA $9,955 $8,613 $1,299
Net income (loss) $29,866 $(17,816) $(57,066)
Adjustments:
Restructuring and other - 5,545 -
Equity-based compensation expense 1,462 968 393
Foreign currency loss (gain), net (33,174) 7,101 44,139
Derivative valuation loss, net 32 8 270
Restatement related expenses 476 2,306 1,891
Adjusted net loss $(1,338) $(1,888) $(10,373)
Adjusted net loss per common share:
- Basic / Diluted $(0.04) $(0.05) $(0.30)
Weighted average number of shares - Basic / Diluted 34,849,805 34,716,081 34,664,246
We present Adjusted EBITDA and Adjusted Net Income (loss) as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) restructuring and other, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss, net and (v) restatement related expenses. EBITDA for the periods indicated is defined as net income (loss) before interest expense, net, income tax expenses and depreciation and amortization. We prepare Adjusted Net Income (loss) by adjusting net income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income (loss) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income (loss) for the periods as net income (loss), adjusted to exclude (i) restructuring and other, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss, net, and (v) restatement related expenses.
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share data)
(Unaudited)
September 30, December 31,
2016 2015
---- ----
Assets
Current assets
Cash and cash equivalents $75,428 $90,882
Restricted cash 6,118 -
Accounts receivable, net 66,013 63,498
Inventories, net 72,056 57,619
Other receivables 5,931 31,932
Prepaid expenses 12,860 7,075
Hedge collateral 2,100 6,000
Other current assets 4,405 3,228
Total current assets 244,911 260,234
Property, plant and equipment, net 195,553 191,985
Intangible assets, net 3,229 2,629
Long-term prepaid expenses 12,435 12,117
Deferred income tax assets 249 238
Other non-current assets 7,038 6,897
Total assets $463,415 $474,100
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $66,514 $55,476
Other accounts payable 12,332 10,961
Accrued expenses 58,284 76,721
Deferred revenue 12,780 10,060
Deposits received - 8,165
Other current liabilities 2,920 5,128
Total current liabilities 152,830 166,511
Long-term borrowings, net 220,902 220,375
Accrued severance benefits, net 142,846 134,148
Other non-current liabilities 11,758 15,396
Total liabilities 528,336 536,430
Stockholders' equity
Common stock, $0.01 par value, 150,000,000 shares authorized, 41,566,019 shares issued 415 411
and 34,987,254 outstanding at September 30 2016, and 41,147,707 shares issued and
34,568,942 outstanding at December 31, 2015
Additional paid-in capital 129,083 124,618
Accumulated deficit (76,035) (96,210)
Treasury stock, 6,578,765 shares at September 30, 2016 and December 31, 2015 (90,918) (90,918)
Accumulated other comprehensive loss (27,466) (231)
Total stockholders' deficit (64,921) (62,330)
Total liabilities and stockholders' equity $463,415 $474,100
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars)
(Unaudited)
Three Months Nine Months
Ended Ended
----- -----
September 30, September 30, September 30,
2016 2016 2015
---- ---- ----
Cash flows from operating activities
Net income (loss) $29,866 $20,175 $(107,721)
Adjustments to reconcile net income (loss) to net cash used in
operating activities
Depreciation and amortization 6,539 18,791 20,066
Provision for severance benefits 3,782 13,609 14,173
Amortization of debt issuance costs and original issue discount 180 527 491
Loss (gain) on foreign currency, net (37,042) (38,182) 65,730
Restructuring gain - (7,785) -
Stock-based compensation 1,462 2,966 2,370
Other 257 421 (352)
Changes in operating assets and liabilities
Accounts receivable, net (7,528) 977 8,672
Inventories, net 2,534 (9,412) 11,302
Other receivables 23,849 20,214 7,115
Other current assets (1,613) 510 669
Deferred tax assets (6) 31 367
Accounts payable (691) 7,088 (18,894)
Other accounts payable 392 (4,764) (10,199)
Accrued expenses (24,000) (22,087) (32,731)
Other current liabilities (2,505) (3,869) (686)
Deferred revenue 1,185 2,662 (1,236)
Other non-current liabilities (751) (1,412) 190
Payment of severance benefits (1,076) (14,178) (7,905)
Other (76) (213) 141
Net cash used in operating activities (5,242) (13,931) (48,438)
Cash flows from investing activities
Proceeds from settlement of hedge collateral 400 6,317 10,841
Payment of hedge collateral (2,494) (2,494) (17,182)
Proceeds from disposal of plant, property and equipment 182 185 1,698
Purchase of plant, property and equipment (5,511) (11,345) (4,250)
Payment for intellectual property registration (276) (754) (550)
Collection of guarantee deposits 93 476 123
Payment of guarantee deposits (174) (185) (670)
Other 1 9 179
Net cash used in investing activities (7,779) (7,791) (9,811)
Cash flows from financing activities
Proceeds from issuance of common stock 1,502 1,502 3,434
Net cash provided by financing activities 1,502 1,502 3,434
Effect of exchange rates on cash and cash equivalents 3,033 4,766 20,891
Net decrease in cash and cash equivalents (8,486) (15,454) (33,924)
Cash and cash equivalents
Beginning of the period 83,914 90,882 102,434
End of the period $75,428 $75,428 $68,510
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SOURCE MagnaChip Semiconductor Corporation
