Q4 Summary
- Revenue of $174.6 million, slightly higher than the mid-point of the guidance range
- Gross profit margin of 28.3%, slightly higher than mid-point of guidance range
- Operating income of $7.6 million, up 46.1% from $5.2 million in Q4 2016, and Adjusted EBITDA of $20.5 million, up 45.8% from $14.1 million in Q4 2016, reflecting improvement in core operating performance
- Foundry gross profit margin of 31.7%, the highest level in 4 years
- Power revenue highest since Q4 2013 with gross margin improvement of about 15 percentage points
- Achieved 6 new OLED design wins
2017 Full-Year Highlights
- $679.7 million in revenue achieved despite a prolonged slowdown in China smartphone market
- Gross profit margin of 27.6% rose nearly 5 percentage points over 2016, due to improved product mix, higher utilization rate, product portfolio optimization and implementation of a headcount reduction plan
- Operating income of $39.2 million increased from $2.7 million in 2016 and Adjusted EBITDA of $78.7 million increased 93.3% from $40.7 million in 2016
- Foundry revenue grew 16.8% over 2016; Power standard product revenue increases 14.0%
- Introduced 4 new advanced OLED display drivers and achieved a total of 18 new smartphone design wins
CEO Comments: "Revenue and gross profit margin in the fourth quarter topped the mid-point of our guidance range despite a typically soft seasonal period, a slowdown in the China smartphone market that affected our Display business, and an industry-wide increase in wafer prices that began in the second half of 2017, which kept a lid on gross profit," said YJ Kim, Chief Executive Officer.
"Revenue in our Foundry and Power businesses edged higher sequentially in the fourth quarter, while revenue in the Display business, including OLED drivers, declined due to general market factors." Mr. Kim said, "Based upon our current business visibility, we anticipate a sharp rebound and steep growth in our OLED business in the first quarter of 2018 and remain confident that our OLED revenue this year is on track to exceed 50% growth as compared to 2017 or clearly exceed $100 million." CEO Kim added, "Overall, we made significant operational progress across the board in 2017 and have set a solid foundation for MagnaChip's growth in 2018."
CFO Comments:
"Gross profit margin of 27.6% for the 2017 calendar year increased approximately 5 percentage points over 2016, operating income of $39.2 million increased substantially from $2.7 million in 2016, and Adjusted EBITDA of $78.7 million increased 93.3% from $40.7 million in 2016," said Jonathan Kim, Chief Financial Officer. "The sharp improvement in our financial results stemmed primarily from the success of our business strategy to improve product mix, achieve a higher utilization rate, increase manufacturing efficiencies and reduce expenses by implementing a substantial headcount reduction plan." CFO Kim added, "We remain fully committed in 2018 to focus on the overall profitability of MagnaChip, continue to optimize our product portfolio, and to manage the business in order to maximize opportunities for revenue growth."
Fourth Quarter and Full-Year 2017 Financial Review
Total Revenue
Total revenue for the fourth quarter of 2017 was $174.6 million, down 3.3% as compared to $180.5 million from the fourth quarter a year ago, and down 1.2% as compared to $176.7 million from the third quarter of 2017. Total revenue for the full year 2017 was $679.7 million, down 1.2% from $688.0 million in 2016.
Segment Revenue
Foundry Services Group revenue in the fourth quarter was $80.6 million, up 3.6% year-over year, and up 0.3% from $80.4 million in the prior quarter. Standard Products Group revenue in the fourth quarter was $93.9 million, down 8.4% year-over- year, and down 2.4% sequentially, which primarily reflected changes in the mobile OLED business in both periods.
Total Gross Profit and Gross Profit Margin
Total gross profit in the fourth quarter of 2017 was $49.4 million or 28.3% as a percentage of sales as compared with gross profit of $46.1 million or 25.5% gross profit margin in the fourth quarter of 2016, and $50.3 million or 28.5% gross profit margin for the third quarter of 2017.
Segment Gross Profit Margin
Foundry Services Group gross profit margin was 31.7% in the fourth quarter of 2017 as compared with 30.3% in the fourth quarter of 2016 and 30.3% in the third quarter of 2017. The Standard Products Group gross profit margin was 25.3% in the fourth quarter of 2017 as compared with 21.8% in the fourth quarter of 2016 and 26.9% in the third quarter of 2017.
Operating Income, Net Income, Adjusted Net Income, Adjusted EBITDA
Operating income, on a GAAP basis, for the fourth quarter was $7.6 million, as compared with $5.2 million in the fourth quarter of 2016 and $15.5 million in the third quarter of 2017.
Net income, on a GAAP basis, for the fourth quarter was $43.7 million or $1.28 per basic share and $0.99 per diluted share, as compared with a net loss on a GAAP basis of $49.8 million or $1.42 per basic share in the fourth quarter of 2016, and 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.
Adjusted Net Income, a non-GAAP financial measure, for the fourth quarter of 2017, totaled $9.1 million or $0.27 per basic share and $0.23 per diluted share, as compared with Adjusted Net Income of $1.6 million or $0.05 per basic share and $0.04 per diluted share in the fourth quarter of 2016, and compared with Adjusted Net Income of $11.4 million or $0.33 per basic share and $0.28 per diluted share in the third quarter of 2017.
