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Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today is correcting an error to its press release issued on November 2, 2022 announcing the Company's financial results for the third quarter of 2022. Subsequent to the furnishing of the press release, the Company identified a scrivener's error in the Non-GAAP reconciliation table attached to the press release for Adjusted Net Income per common share (basic and diluted) for the nine month period ended September 30, 2021, which should have been $0.82 and $0.78 per share, respectively, consistent with the Company's prior reports for that historical period. No other amounts or information reported in the press release were changed. The complete, corrected release follows:

Magnachip Reports Results for Third Quarter 2022

  • Revenue of $71.2 million was within our guidance range. The year-over-year and sequential decline were primarily driven by the supply shortages of OLED wafers in the 2nd half of this year that impacted design-in projects from our large panel customer in Korea.
  • Gross profit margin was 24.2%, below the low end of our guidance range as we recorded a $3.3 million charge to scrap 12-inch wafers as a result of slowing demand caused by elevated smartphone inventories in China.
  • GAAP diluted loss per share was $0.38.
  • Non-GAAP diluted earnings per share was $0.02.

SEOUL, South Korea, Nov. 4, 2022 /PRNewswire/ -- Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today announced financial results for the third quarter of 2022.

Commenting on the results for the third quarter of 2022, YJ Kim, Magnachip's chief executive officer stated, "Our Q3 revenue of $71.2 million was within our guidance range. As we mentioned last quarter, our Display business in the 2nd half is impacted by supply shortages of 28nm 12-inch OLED wafers that impacted design-in projects from our large panel customer in Korea, which are typically given in advance based on future wafer supply allocation. In addition, China covid lockdowns and the dramatic slowdown in consumer spending due to inflationary pressures reduced demand for smartphones and TVs and resulted in an oversupply of channel inventories, particularly in China. Our Power business also slowed due to lower consumer spending."  

YJ Kim continued, "While the global economic situation remains challenging, our balance sheet is strong, and we are focused on executing a recovery of our Display business. During the quarter, we successfully released our new OLED DDIC sample to our new panel customer and we expect to begin mass production in 2023. In addition, due to the global economic slowdown, we are seeing more wafer capacity availability and we are in discussion with multiple foundries to secure capacity and believe that our 2023 wafer supply will be more than two times higher than 2022. As such, we expect to see a significant recovery of Display business in 2023."

Q3 2022 Financial Highlights
































In thousands of U.S. dollars, except share data




GAAP




Q3 2022



Q2 2022



Q/Q change



Q3 2021



Y/Y change


Revenues





























Standard Products Business





























Display Solutions



6,355




28,336




down




77.6 %




58,528




down




89.1

%

Power Solutions



56,416




62,952




down




10.4 %




58,887




down




4.2

%

Transitional Fab 3 foundry services(1)



8,428




10,088




down




16.5 %




9,585




down




12.1

%

Gross Profit Margin



24.2

%



28.6

%



down




4.4

%pts



36.7

%



down




12.5

%pts

Operating Income (Loss)



(10,008)




2,002




down




n/a




20,001




down




n/a


Net Income (Loss)



(17,195)




(3,340)




down




n/a




10,768




down




n/a


Basic Earnings (Loss) per Common Share



(0.38)




(0.07)




down




n/a




0.23




down




n/a


Diluted Earnings (Loss) per Common Share



(0.38)




(0.07)




down




n/a




0.23




down




n/a






In thousands of U.S. dollars, except share data




Non-GAAP(2)




Q3 2022



Q2 2022



Q/Q change



Q3 2021



Y/Y change


Adjusted Operating Income (Loss)



(6,646)




4,787




down




n/a




22,691




down



n/a


Adjusted EBITDA



(2,995)




8,525




down




n/a




26,361




down




n/a


Adjusted Net Income



1,097




10,567




down




89.6 %




20,073




down




94.5 %


Adjusted Earnings per Common Share—Diluted



0.02




0.23




down




91.3 %




0.42




down




95.2 %


 

___________

(1)

Following the consummation of the sale of the Foundry Services Group business and Fab 4 in Q3 2020, and for a period of up to three years, we will provide transitional foundry services to the buyer for foundry products manufactured in our fabrication facility located in Gumi ("Transitional Fab 3 Foundry Services"). Management believes that disclosing revenue of Transitional Fab 3 Foundry Services separately from the standard products business allows investors to better understand the results of our core standard products display solutions and power solutions business lines.

(2)

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 our 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 (loss) 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.

Q4 2022 Financial Guidance
The Company's near-term outlook is being challenged by previous OLED wafer allocation constraints that impacted 2nd half design-in projects, elevated smartphone channel inventories, a pushout of the initial mass production ramp of our new OLED customer and weakening demand in consumer end markets on growing recession fears and cost increases, including labor, due to inflationary pressures. In addition, we estimate our Q4 revenue will be further negatively impacted by approximately $5 million of foreign exchange hedging instruments. While actual results may vary, looking into the next quarter, Magnachip currently expects:

  • Revenue to be in the range of $57 million to $62 million, including about $7 million of Transitional Fab 3 Foundry Services.
  • Gross profit margin to be in the range of 26 % to 28%.

Q3 2022 Earnings Conference Call
Magnachip will host a corresponding conference call at 2:00 p.m. PT / 5:00 p.m. ET on Wednesday, November 2, 2022, to discuss its financial results. In advance of the conference call, all participants must use the following link to complete the online registration process. Upon registering, each participant will receive access details for this event including the dial-in numbers, a PIN number, and an e-mail with detailed instructions to join the conference call. A live and archived webcast of the conference call and a copy of earnings release will be accessible from the 'Investors' section of the Company's website at www.magnachip.com.

Online registration: https://register.vevent.com/register/BIccd8bcc64c4a4092bc5e11273a22e8f2

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 expectations about estimated historical or future operating results and financial performance, outlook and business plans, including fourth quarter 2022 revenue and gross profit margin expectations, and the impact of market conditions associated with inflation and rising interest rates, the COVID-19 pandemic or the emergence of various variants of the virus, geopolitical conflict between Russia and Ukraine, and escalated trade tensions and supply constraints on Magnachip's fourth quarter 2022 and future operating results. 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, among others: the impact of changes in macroeconomic and/or general economic conditions, including those caused by or related to inflation, potential recessions or other deteriorations, economic instability or civil unrest; the COVID-19 pandemic or the emergence of various variants of the virus or other outbreaks of disease, and governmental lock-downs or other measures implemented in response thereto, and the Russia-Ukraine conflict; manufacturing capacity constraints or supply chain disruptions that may impact our ability to deliver our products or affect the price of components, which may lead to an increase in our costs, as well as impacting demand for our products from customers who are similarly affected by such capacity constraints or disruptions; 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, our customers and our distributors, including those related to the Russia-Ukraine conflict; change or ratification of local or international laws and regulations, including those related to environment, health and safety; public health issues, including the COVID-19 pandemic or the emergence of various variants of the virus; other business interruptions that could disrupt supply or delivery of, or demand for, Magnachip's products, including uncertainties regarding the impacts of the COVID-19 pandemic or the emergence of various variants of the virus that may result in factory closures, reduced workforces, scarcity of raw materials and goods produced in infected areas, as well as reduced consumer and business spending affecting demand for Magnachip's products due to government and private sector mandatory business closures, travel restrictions or the like to prevent the spread of disease; and other risks detailed from time to time in Magnachip's filings with the U.S. Securities and Exchange Commission (the "SEC"), including our Form 10-K filed on February 23, 2022 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.

About Magnachip Semiconductor 
Magnachip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, computing, industrial and automotive applications. The Company provides a broad range of standard products to customers worldwide. Magnachip, with more than 40 years of operating history, owns a portfolio of approximately 1,100 registered patents and pending applications, 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.

CONTACT:
Yujia Zhai
The Blueshirt Group
Tel. (860) 214-0809
Yujia@blueshirtgroup.com

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except share data)

(Unaudited)



Three Months Ended

Nine Months Ended


September 30,
2022

June 30,
2022

September 30,
2021

September 30,
2022

September 30,
2021

Revenues:                               






Net sales – standard products business       

$         62,771

$         91,288

$         117,415

$       248,069

$       333,589

Net sales – transitional Fab 3 foundry services               

8,428

10,088

9,585

28,599

30,306







Total revenues   

71,199

101,376

127,000

276,668

363,895

Cost of sales:          






Cost of sales – standard products business 

45,497

63,620

71,641

165,197

221,297

Cost of sales – transitional Fab 3 foundry services

8,477

8,811

8,772

26,305

27,659







Total cost of sales             

53,974

72,431

80,413

191,502

248,956







Gross profit            

17,225

28,945

46,587

85,166

114,939

Gross profit as a percentage of standard products business net sales              

27.5 %

30.3 %

39.0 %

33.4 %

33.7 %

Gross profit as a percentage of total revenues        

24.2 %

28.6 %

36.7 %

30.8 %

31.6 %

Operating expenses:






Selling, general and administrative expenses               

11,411

12,736

12,550

38,310

39,185

Research and development expenses           

13,321

13,410

12,270

38,685

39,015

Merger-related costs    

1,552

13,842

Other charges, net        

2,501

797

214

3,298

3,360







Total operating expenses   

27,233

26,943

26,586

80,293

95,402







Operating income (loss)         

(10,008)

2,002

20,001

4,873

19,537

Interest expense           

(278)

(499 )

(113)

(888)

(1,239)

Foreign currency loss, net           

(12,809)

(7,012 )

(7,579)

(20,511)

(12,000 )

Other income, net        

1,958

1,272

1,608

4,163

2,839







Income (loss) before income tax expense

(21,137)

(4,237 )

13,917

(12,363)

9,137

Income tax expense (benefit)

(3,942)

(897 )

3,149

(1,356)

6,040







Net income (loss)   

$         (17,195)

$          (3,340 )

$         10,768

$         (11,007)

$           3,097







 

Basic earnings (loss) per common share—

$             (0.38)

$            (0.07 )

$             0.23

$             (0.24)

$             0.07

Diluted earnings (loss) per common share—

$             (0.38)

$            (0.07 )

$             0.23

$             (0.24)

$             0.07

Weighted average number of shares—






Basic            

44,865,266

44,897,278

46,449,234

45,119,214

44,377,250

Diluted                                      

44,865,266

44,897,278

47,808,457

45,119,214

45,811,792

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)

(Unaudited)



September 30,
2022

December 31,
2021


(In thousands of U.S. dollars, except share data)

Assets



Current assets



Cash and cash equivalents

$                 250,831

$                   279,547

Accounts receivable, net

36,759

50,954

Inventories, net

37,298

39,370

Other receivables

8,248

25,895

Prepaid expenses

10,322

7,675

Hedge collateral

15,370

3,060

Other current assets

20,208

2,619




Total current assets

379,036

409,120

Property, plant and equipment, net

94,411

107,882

Operating lease right-of-use assets

4,928

4,275

Intangible assets, net

1,770

2,377

Long-term prepaid expenses

11,382

8,243

Deferred income taxes

34,299

41,095

Other non-current assets

10,382

10,662




Total assets

$                 536,208

$                   583,654




Liabilities and Stockholders' Equity



Current liabilities



Accounts payable

$                   26,545

$                     37,593

Other accounts payable

14,809

6,289

Accrued expenses

15,800

20,071

Accrued income taxes

11,823

Operating lease liabilities

1,324

2,323

Other current liabilities

15,881

7,382




Total current liabilities

74,359

85,481

Accrued severance benefits, net

28,036

33,064

Non-current operating lease liabilities

3,811

1,952

Other non-current liabilities

16,787

10,395




Total liabilities

122,993

130,892




Commitments and contingencies



Stockholders' equity



Common stock, $0.01 par value, 150,000,000 shares authorized, 56,234,774 shares issued and 44,579,075 outstanding at September 30, 2022 and 55,905,320 shares issued and 45,659,304 outstanding at December 31, 2021

562

559

Additional paid-in capital

264,510

241,197

Retained earnings

332,535

343,542

Treasury stock, 11,655,699 shares at September 30, 2022 and 10,246,016 shares at December 31, 2021, respectively

(152,161)

(130,306 )

Accumulated other comprehensive loss

(32,231)

(2,230 )




Total stockholders' equity

413,215

452,762




Total liabilities and stockholders' equity

$                 536,208

$                   583,654




 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)



Three Months
Ended

Nine Months
Ended



September 30,
2022

September 30,
2022

September 30,
2021


Cash flows from operating activities





Net income (loss)   

$    (17,195)

$     (11,007)

$       3,097


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





Depreciation and amortization     

3,623

11,225

10,576


Provision for severance benefits  

1,923

5,163

5,514


Amortization of debt issuance costs and original issue discount 

261


Loss on foreign currency, net      

37,152

66,335

32,607


Provision for inventory reserves 

2,448

7,730

1,484


Stock-based compensation          

861

4,487

6,056


Other, net     

(81)

631

442


Changes in operating assets and liabilities





Accounts receivable, net              

20,182

7,805

6,696


Inventories   

(7,722)

(13,208)

(4,561)


Other receivables         

5,475

17,115

(5,287)


Other current assets     

(12,028)

(14,117)

7,933


Accounts payable        

(17,221)

(14,792)

(16,192)


Other accounts payable

(354)

(6,215)

(3,729)


Accrued expenses        

8,575

5,866

(1,641 )


Accrued income taxes  

30

(11,483)

(8,308)


Other current liabilities

570

(1,583)

555


Other non-current liabilities         

(47)

523

(666 )


Payment of severance benefits     

(1,247)

(4,181)

(4,772)


Other, net     

335

(50)

(49 )







Net cash provided by operating activities               

25,279

50,244

30,016


Cash flows from investing activities





Proceeds from settlement of hedge collateral               

2,805

3,995


Payment of hedge collateral         

(8,438)

(15,282)

(2,744 )


Purchase of property, plant and equipment  

(10,301)

(11,812)

(13,368)


Payment for intellectual property registration              

(148)

(301)

(455)


Collection of guarantee deposits  

3,192


Payment of guarantee deposits    

(1,026)

(2,075)

(4,960 )


Other, net     

778

792

(103)







Net cash used in investing activities       

(19,135)

(25,873)

(14,443 )


Cash flows from financing activities





Proceeds from exercise of stock options     

1,786

3,920


Acquisition of treasury stock       

(3,239)

(5,065)

(1,653 )


Repayment of financing related to water treatment facility arrangement      

(120)

(381)

(427 )


Repayment of principal portion of finance lease liabilities           

(18)

(50)

(49)







Net cash provided by (used in) financing activities

(3,377)

(3,710)

1,791


Effect of exchange rates on cash and cash equivalents           

(25,733)

(49,377)

(21,003)







Net decrease in cash and cash equivalents              

(22,966)

(28,716)

(3,639 )


Cash and cash equivalents





Beginning of the period          

273,797

279,547

279,940







End of the period    

$   250,831

$     250,831

$   276,301






















 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS)

(In thousands of U.S. dollars)

(Unaudited)




Three Months Ended



Nine Months Ended




September 30,
2022



June 30,
2022



September 30,
2021



September 30,
2022



September 30,
2021


Operating income (loss)


$

(10,008)



$

2,002



$

20,001



$

4,873



$

19,537


Adjustments:





















Equity-based compensation expense



861




1,988




2,005




4,487




6,056


Inventory reserve related to Huawei









(1,081)







(1,081)


Merger-related costs









1,552







13,842


Other charges, net



2,501




797




214




3,298




3,360























Adjusted Operating Income (Loss)


$

(6,646)



$

4,787



$

22,691



$

12,658



$

41,714


















































We present Adjusted Operating Income (Loss) as a supplemental measure of our performance. We define Adjusted Operating Income (Loss) for the periods indicated as operating income (loss) adjusted to exclude (i) Equity-based compensation expense (ii) Inventory reserve related to Huawei (iii) Merger-related costs and (iv) Other charges, net. For the three and nine months ended September 30, 2022, Other charges, net includes $2.8 million of one-time employee incentives, in each period, and professional service fees and expenses of $0.2 million and $1.0 million, respectively, incurred in connection with certain strategic evaluations, both of which were offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi. For the three and nine months ended September 30, 2021, Other charges, net includes professional service fees and expenses of $0.2 million and $3.4 million, respectively, incurred in connection with the regulatory requests.

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA AND ADJUSTED NET INCOME

(In thousands of U.S. dollars, except share data)

(Unaudited)



Three Months Ended 



Nine Months Ended 



September 30,
2022

June 30,
2022

September 30,
2021


September 30,
2022

September30,
2021


Net income (loss)   

$        (17,195 )

$         (3,340 )

$            10,768


$     (11,007)

$         3,097


Adjustments:








Interest income, net      

(1,506 )

(562 )

(439)


(2,672 )

(512)


Income tax expense (benefit)       

(3,942)

(897 )

3,149


(1,356)

6,040


Depreciation and amortization     

3,623

3,711

3,578


11,225

10,576










EBITDA

(19,020 )

(1,088 )

17,056


(3,810)

19,201


Equity-based compensation expense           

861

1,988

2,005


4,487

6,056


Foreign currency loss, net           

12,809

7,012

7,579


20,511

12,000


Derivative valuation gain, net      

(146)

(184 )

(237)


(201)

(94)


Inventory reserve related to Huawei            

(1,081)


(1,081)


Merger-related costs

1,552


13,842


Other charges, net        

2,501

797

(513)


3,298

2,633










Adjusted EBITDA

$           (2,995)

$          8,525

$           26,361


$       24,285

$          52,557










Net income (loss)   

$         (17,195)

$         (3,340 )

$           10,768


$       (11,007)

$            3,097


Adjustments:          








Equity-based compensation expense           

861

1,988

2,005


4,487

6,056


Foreign currency loss, net           

12,809

7,012

7,579


20,511

12,000


Derivative valuation gain, net      

(146 )

(184 )

(237)


(201 )

(94)


Inventory reserve related to Huawei            

(1,081)


(1,081)


Merger-related costs

1,552


13,842


Other charges, net        

2,501

797

(513)


3,298

2,633


Income tax effect on non-GAAP adjustments               

2,267

4,294


7,512










Adjusted Net Income

$             1,097

$         10,567

$         20,073


$       24,600

$        36,453










Adjusted Net Income per common share—








- Basic         

$              0.02

$             0.24

$             0.43


$           0.55

$              0.82


- Diluted

$             0.02

$             0.23

$             0.42


$           0.53

$              0.78


Weighted average number of shares – basic

44,865,266

44,897,278

46,449,234


45,119,214

44,377,250


Weighted average number of shares – diluted

45,747,255

45,937,515

47,808,457


46,134,231

47,718,578






















We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss, net, (iii) Derivative valuation gain, net, (iv) Inventory reserve related to Huawei, (v) Merger-related costs and (vi) Other charges, net. EBITDA for the periods indicated is defined as net income (loss) before interest income, net, income tax expense (benefit) and depreciation and amortization.

We prepare Adjusted Net Income 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 is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income for the periods as net income (loss), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss, net, (iii) Derivative valuation gain, net, (iv) Inventory reserve related to Huawei, (v) Merger-related costs, (vi) Other charges, net and (vii) Income tax effect on non-GAAP adjustments.

For the three and nine months ended September 30, 2022, Other charges, net includes $2.8 million of one-time employee incentives, in each period, and professional service fees and expenses of $0.2 million and $1.0 million, respectively, incurred in connection with certain strategic evaluations, both of which were offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi. For the three and nine months ended September 30, 2021, Other charges, net includes professional service fees and expenses of $0.2 million and $3.4 million, respectively, incurred in connection with the regulatory requests, both of which were offset in part by a $0.7 million legal settlement gain related to certain expenses incurred in prior periods in connection with our legacy Fab 4 (which was sold during the year ended December 31, 2020) and awarded in the third quarter of 2021.

 

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SOURCE Magnachip Semiconductor Corporation

Magnachip Semiconductor Corp.

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