MagnaChip Reports Second Quarter 2016 Financial Results
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MagnaChip Reports Second Quarter 2016 Financial Results

-- Revenue Exceeds Expectations as Business Turnaround Gains Momentum --

(PRNewswire) —  MagnaChip Semiconductor Corporation ("MagnaChip") (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor products, today announced financial results for the second quarter ended June 30, 2016.

Revenue for the second quarter of 2016 was $167.1 million, an increase of 12.8% compared to $148.1 million for the first quarter of 2016, and up 3.1% compared to $162.0 million for the second quarter of 2015. The double-digit increase in sequential revenue growth was better than expected and reflected healthy demand for the Company's Display and Power products and Foundry services. The robust growth in revenue in the second quarter also was notable, in part, because it was achieved without the benefit of approximately $9 million in revenue that was recorded in the first quarter from an underutilized 6" fab that was closed at the end of February.

Foundry Services revenue in the second quarter of 2016 was $62.3 million, a sequential increase of 3.9%, and Standard Products Group revenue was $104.6 million, a sequential increase of 18.9%, and the highest since 2012. Foundry demand continued its gradual recovery driven by new key global IC customers. AMOLED display driver IC revenue surged 73%, quarter-over-quarter, reflecting continued strong demand, primarily from smartphone makers in China. Display products for UHD televisions also showed gains in the quarter, while Power products held steady.

Gross profit was $36.7 million, or 22.0% as a percent of revenue for the second quarter of 2016. This compared with gross profit of $34.2 million, or 23.1%, for the first quarter of 2016 and $35.3 million, or 21.8%, for the second quarter of 2015. Foundry gross profit was 22.8% and Standard Products Group gross profit was 21.4% in the second quarter of 2016.

Net loss, on a GAAP basis, for the second quarter of 2016 totaled $17.8 million or $0.51 per basic share, as compared to net income of $8.1 million or $0.23 per basic and diluted share for the first quarter of 2016 and a net loss of $30.6 million or $0.90 per basic share for the second quarter of 2015. The net loss in the second quarter of 2016 included a one-time extraordinary charge of approximately $5 million. This amount included a previously announced one-time charge of approximately $4 million related to termination benefits payable under a voluntary resignation program for employees who left the company when an underutilized 6" fab was closed at the end of February. The remainder of the one-time charge pertains to transition costs related to employees who had worked in our 6' fab. 

"Our revenue in the second quarter exceeded expectations and was at the highest level since the fourth quarter of 2014," said YJ Kim, Chief Executive Officer of MagnaChip. "Customer demand was strong, especially for AMOLED display driver ICs, as well as for our specialized foundry services." Mr. Kim added, "Our results in the second quarter reflect the success of our strategy over the last two years to streamline the organization, expand our customer base, improve product execution, and leverage our strong position as a leading supplier of analog and mixed signal products and services."

Chief Financial Officer Jonathan Kim said, "We continued to exercise discipline in managing the balance sheet and preserving our cash in the second quarter, and we maintained tight control over spending while still supporting the strong growth in the business." Mr. Kim added, "As always, we continue to focus on opportunities to improve cash flow and explore ways to reduce spending."

Adjusted Net Loss, a non-GAAP financial measure, for the second quarter of 2016 totaled $1.9 million or $0.05 per basic share, compared to Adjusted Net Loss of $2.8 million or $0.08 per basic share in the first quarter of 2016, and compared to Adjusted Net Loss of $11.1 million or $0.32 per basic share in the second 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. 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 $83.9 million at the end of the second quarter, essentially flat compared with the first quarter when taking into account the one-time effects in the second quarter of a $10 million product pre-payment from a key foundry customer.

The following table sets forth information relating to our operating segments:



Three Months Ended



Six Months Ended




June 30,

2016



June 30,

2015



June 30,

2016



June 30,

2015


Net Sales

















Foundry Services Group


$

62,310



$

78,962



$

122,289



$

153,482


Standard Products Group

















Display Solutions



74,406




48,918




132,465




105,271


Power Solutions



30,213




33,995




60,131




67,832


Total Standard Products Group



104,619




82,913




192,596




173,103


All other



177




140




326




315


Total net sales


$

167,106



$

162,015



$

315,211



$

326,900
























Three Months Ended

June 30, 2016



Three Months Ended

June 30, 2015




  Amount 



% of

  Net Sales 



  Amount 



% of

  Net Sales 


Gross Profit

















Foundry Services Group


$

14,187




22.8

%


$

17,183




21.8

%

Standard Products Group



22,385




21.4




17,963




21.7


All other



177




100.0




140




100.0


Total gross profit


$

36,749




22.0

%


$

35,286




21.8

%























Six Months Ended

June 30, 2016



Six Months Ended

June 30, 2015




  Amount 



% of

  Net Sales 



  Amount 



% of

  Net Sales 


Gross Profit

















Foundry Services Group


$

28,480




23.3

%


$

32,560




21.2

%

Standard Products Group



43,145




22.4




37,388




21.6


All other



(627)




(192.3)




315




100.0


Total gross profit


$

70,998




22.5

%


$

70,263




21.5

%


































 

Second Quarter and Recent Company Highlights

Business Outlook

For the third quarter of 2016, MagnaChip anticipates:

Conference Call 
MagnaChip will hold a conference call at 5 p.m. EDT today (August 3, 2016) to discuss the second quarter financial results. The conference call will be webcast live and is also available by dialing 1-866-776-2061 in the U.S. or 1-706-679-0298 for all other locations. The conference ID number is 51291099 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 numbers are 1-855-859-2056 or 1-404-537-3406. The access code is 51291099.

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 third 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:

Bruce Entin

Investor Relations

Tel. +1-408-625-1262

Email Contact

 

In Korea:

Chankeun Park

Senior Manager, Public Relations

Tel. +82-2-6903-3195

Email Contact

 

 

 


MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US dollars, except share data)

(Unaudited)




Three Months Ended




June 30,

2016



March 31,

2016



June 30,

2015


Net sales


$

167,106



$

148,105



$

162,015


Cost of sales



130,357




113,856




126,729


Gross profit



36,749




34,249




35,286


Gross profit %



22.0

%



23.1

%



21.8

%

Operating expenses













Selling, general and administrative expenses



25,948




19,952




28,588


Research and development expenses



18,178




17,815




21,931


Restructuring gain






(7,785)





Total operating expenses



44,126




29,982




50,519


Operating income (loss)



(7,377)




4,267




(15,233)


Interest expense



(4,073)




(4,057)




(3,987)


Foreign currency gain (loss), net



(7,101)




8,195




(12,296)


Other income, net



1,007




535




288


Income (loss) before income tax expenses (benefits)



(17,544)




8,940




(31,228)


Income tax expenses (benefits)



272




815




(602)


Net income (loss)


$

(17,816)



$

8,125



$

(30,626)


Earnings (loss) per common share :













- Basic


$

(0.51)



$

0.23



$

(0.90)


- Diluted


$

(0.51)



$

0.23



$

(0.90)


Weighted average number of shares - Basic



34,716,081




34,698,904




34,092,402


Weighted average number of shares - Diluted



34,716,081




34,918,568




34,092,402


 

 

 

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




June 30,

2016



Mar 31,

2016



June 30,

2015


Net income (loss)


$

(17,816)



$

8,125



$

(30,626)


Adjustments:













Interest expense, net



4,001




3,999




3,933


Income tax expenses (benefits)



272




815




(602)


Depreciation and amortization



6,228




6,024




6,797


 

EBITDA


$

(7,315)



$

18,963



$

(20,498)















Restructuring and other (gain), net



5,545




(6,832)





Equity-based compensation expense



968




536




1,792


Foreign currency loss (gain), net



7,101




(8,195)




12,296


Derivative valuation loss (gain), net



8




(42)




306


Restatement related expenses



2,306




3,592




5,168


 

Adjusted EBITDA


$

8,613



$

8,022



$

(936)















Net income (loss)


$

(17,816)



$

8,125



$

(30,626)


Adjustments:













Restructuring and other (gain), net



5,545




(6,832)





Equity-based compensation expense



968




536




1,792


Foreign currency loss (gain), net



7,101




(8,195)




12,296


Derivative valuation loss (gain), net



8




(42)




306


Restatement related expenses



2,306




3,592




5,168


Adjusted net loss


$

(1,888)



$

(2,816)



$

(11,064)


Adjusted net loss per common share:













- Basic / Diluted


$

(0.05)



$

(0.08)



$

(0.32)


Weighted average number of shares – Basic / Diluted



34,716,081




34,698,904




34,092,402


 

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 (gain), net, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss (gain), net and (v) restatement related expenses. EBITDA for the periods indicated is defined as net income (loss) before interest expense, net, income tax expenses (benefits) 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 (gain), net, (ii) equity-based compensation expense, (iii) foreign currency loss (gain), net, (iv) derivative valuation loss (gain), net, and (v) restatement related expenses.

 


MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share data)

(Unaudited)




  June 30, 

2016



December 31,

2015


Assets









Current assets









Cash and cash equivalents


$

83,914



$

90,882


Restricted cash



29,600





Accounts receivable, net



54,702




63,498


Inventories, net



70,439




57,619


Other receivables



6,025




31,932


Prepaid expenses



10,241




7,075


Hedge collateral






6,000


Other current assets



2,942




3,228


Total current assets



257,863




260,234


Property, plant and equipment, net



184,665




191,985


Intangible assets, net



2,897




2,629


Long-term prepaid expenses



13,421




12,117


Deferred income tax assets



245




238


Other non-current assets



6,570




6,897


Total assets


$

465,661



$

474,100


Liabilities and Stockholders' Equity









Current liabilities









Accounts payable


$

64,243



$

55,476


Other accounts payable



8,836




10,961


Accrued expenses



80,062




76,721


Deferred revenue



11,310




10,060


Deposits received






8,165


Other current liabilities



4,741




5,128


Total current liabilities



169,192




166,511


Long-term borrowings, net



220,722




220,375


Accrued severance benefits, net



131,841




134,148


Other non-current liabilities



14,235




15,396


Total liabilities



535,990




536,430


Stockholders' equity









Common stock, $0.01 par value, 150,000,000 shares authorized, 41,310,519 shares issued
   and 34,731,754 outstanding at June 30 2016, and 41,147,707 shares issued and 34,568,942
   outstanding at December 31, 2015



412




411


Additional paid-in capital



126,121




124,618


Accumulated deficit



(105,901)




(96,210)


Treasury stock, 6,578,765 shares at June 30, 2016 and December 31,2015



(90,918)




(90,918)


Accumulated other comprehensive loss



(43)




(231)


Total stockholders' deficit



(70,329)




(62,330)


Total liabilities and stockholders' equity


$

465,661



$

474,100


 

 

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

(Unaudited)




Three Months

Ended



Six Months

Ended




June 30,

2016



June 30,

2016



June 30,

2015


Cash flows from operating activities













Net loss


$

(17,816)



$

(9,691)



$

(50,655)


Adjustments to reconcile net loss to net cash provided by (used in)
  operating activities













Depreciation and amortization



6,228




12,252




13,667


Provision for severance benefits



4,056




9,827




11,877


Amortization of debt issuance costs and original issue discount



174




347




324


Loss (gain) on foreign currency, net



7,717




(1,140)




17,146


Restructuring gain






(7,785)





Stock-based compensation



968




1,504




1,977


Other



174




164




1,544


Changes in operating assets and liabilities













Accounts receivable, net



789




8,505




3,145


Inventories, net



0




(11,946)




1,623


Other receivables



(3,309)




(3,635)




5,523


Other current assets



3,707




2,123




2,235


Deferred tax assets



12




37




339


Accounts payable



2,859




7,779




(12,431)


Other accounts payable



(1,408)




(5,156)




(5,550)


Accrued expenses



5,642




1,913




(10,710)


Other current liabilities



(2,192)




(1,364)




(699)


Deferred revenue



11,254




1,477




(1,359)


Other non-current liabilities



(336)




(661)




(1,084)


Payment of severance benefits



(9,004)




(13,102)




(4,231)


Other



(23)




(137)




(147)


Net cash provided by (used in) operating activities



9,492




(8,689)




(27,466)


Cash flows from investing activities













Proceeds from settlement of hedge collateral



1,924




5,917





Payment of hedge collateral









(6,555)


Purchase of plant, property and equipment



(1,546)




(5,834)




(1,964)


Payment for intellectual property registration



(241)




(478)




(263)


Collection of guarantee deposits



9




383





Payment of guarantee deposits



3




(11)




(642)


Other



1




11




237


Net cash provided by (used in) investing activities



150




(12)




(9,187)


Cash flows from financing activities













Proceeds from issuance of common stock









1,208


Net cash provided by financing activities









1,208


Effect of exchange rates on cash and cash equivalents



745




1,733




5,683


Net increase (decrease) in cash and cash equivalents



10,387




(6,968)




(29,762)


Cash and cash equivalents













Beginning of the period



73,527




90,882




102,434


End of the period


$

83,914



$

83,914



$

72,672















 

 

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SOURCE MagnaChip Semiconductor Corporation

Contact:
MagnaChip Semiconductor Corporation
Web: http://www.magnachip.com