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Magnachip Reports Results for Second Quarter 2023 Announces New $50 Million Stock Buyback Program

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  • Revenue of $61.0 million was in-line with guidance (vs $60.5M mid-point) and was down 39.8% YoY and up 7% sequentially.
  • Gross profit margin was 22.2%, up 100 basis points from Q1. The sequential improvement was primarily driven by higher utilization at our Gumi Fab.
  • GAAP diluted loss per share was $0.09; Non-GAAP diluted loss per share was $0.06.
  • Completed $25.5 million of stock buyback during the quarter.
  • Ended the quarter with a strong balance sheet with $173 million cash and no debt.
  • Board of Directors authorized a new $50 million stock buyback program.

SEOUL, South Korea, Aug. 7, 2023 /PRNewswire/ -- Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today announced financial results for the second quarter 2023.

YJ Kim, Magnachip's chief executive officer commented, "Our year-over-year results continued to be impacted by macro challenges but I am pleased to see sequential improvement in our Power business driven by Industrial and Automotive applications. We also continued our strong pace of design-in and design win activities during the quarter. Looking forward, we expect to see further sequential growth in our Power business in Q3."

YJ Kim continued, "In our Display business, we continue to collaborate closely with our new global panel customer. We are very optimistic about our long-term growth prospects, as our products offer compelling competitive advantages that will enable us to penetrate the rapidly expanding OLED market in Asia. Additionally, we are pleased to announce our Board of Directors' authorization of a new $50 million stock buyback program as part of our commitment to enhance shareholder value."

Q2 2023 Financial Highlights






















































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




GAAP




Q2 2023



Q1 2023



Q/Q change



Q2 2022



Y/Y change


Revenues





























Standard Products Business





























Display Solutions



9,657




10,841




down




10.9

%



28,336




down




65.9

%

Power Solutions



41,718




40,673




up




2.6

%



62,952




down




33.7

%

Transitional Fab 3 foundry services(1)



9,604




5,491




up




74.9

%



10,088




down




4.8

%

Gross Profit Margin



22.2

%



21.2

%



up




1.0

%pts



28.6

%



down




6.4

%pts

Operating Income (Loss)



(10,656)




(21,818)




up




n/a




2,002



down




n/a


Net Income (Loss)



(3,947)




(21,470)




up




n/a




(3,340)




down




n/a


Basic Loss per Common Share



(0.09)




(0.49)




up




n/a




(0.07)




down




n/a


Diluted Loss per Common Share



(0.09)




(0.49)




up




n/a




(0.07)




down




n/a






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




Non-GAAP(2)




Q2 2023



Q1 2023



Q/Q change



Q2 2022



Y/Y change


Adjusted Operating Income (Loss)



(7,762)




(12,249)




up




n/a




4,787




down




n/a


Adjusted EBITDA



(3,594)




(7,873)




up




n/a




8,525




down




n/a


Adjusted Net Income (Loss)



(2,472)




(10,367)




up




n/a




10,567




down




n/a


Adjusted Earnings (Loss) per Common Share—Diluted



(0.06)




(0.24)




up




n/a




0.23




down




n/a


___________

(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 businesses.

(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.

Financial Guidance
While actual results may vary, Magnachip currently expects the following for Q3 2023:

  • Revenue to be in the range of $59 million to $65 million, including about $8 million of Transitional Fab 3 Foundry Services.
  • Gross profit margin to be in the range of 22.5% to 24.5%.

Q2 2023 Earnings Conference Call
Magnachip will host a corresponding conference call at 2:00 p.m. PT / 5:00 p.m. ET on Monday, August 7, 2023, 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/BI115ecf6f0d5b4f12ae6130b5b7b40ff1

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 third quarter 2023 revenue and gross profit margin expectations, and the impact of market conditions associated with inflation and higher interest rates, remaining effects from the COVID-19 pandemic, geopolitical conflict between Russia and Ukraine, escalated trade tensions between the U.S. and China and continuing supply constraints on Magnachip's third quarter 2023 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 conditions, including those caused by or related to inflation, potential recessions or other deteriorations, economic instability or civil unrest; remaining effects from the COVID-19 pandemic, the geopolitical conflict between Russia and Ukraine, and escalated trade tensions between the U.S. and China; 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 and impact demand for our products from customers who are similarly affected by such capacity constraints or disruptions; the impact of competitive products and pricing; timely -acceptance of our designs by customers; timely introduction of new products and technologies; our ability to ramp new products into volume production; industry-wide shifts in supply and demand for semiconductor products; overcapacity within the industry or at Magnachip; 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 that can be eliminated; compliance with U.S. and international trade and export laws and regulations by us, our customers and our distributors; change to or ratification of local or international laws and regulations, including those related to environment, health and safety; public health issues, including the remaining effects of the COVID-19 pandemic; other business interruptions that could disrupt supply or delivery of, or demand for, Magnachip's products; 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 22, 2023, 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 


Six Months Ended 


June 30,
2023


March 31,
2023


June 30,
2022


June 30,
2023


June 30,
2022

Revenues:                               










Net sales – standard products business       

$         51,375


$         51,514


$         91,288


$       102,889


$       185,298

Net sales – transitional Fab 3 foundry services               

9,604


5,491


10,088


15,095


20,171











Total revenues   

60,979


57,005


101,376


117,984


205,469

Cost of sales:          










Cost of sales – standard products business 

37,867


37,312


63,620


75,179


119,700

Cost of sales – transitional Fab 3 foundry services

9,574


7,599


8,811


17,173


17,828

Total cost of sales             

47,441


44,911


72,431


92,352


137,528











Gross profit            

13,538


12,094


28,945


25,632


67,941

Gross profit as a percentage of standard products business net sales              

26.3 %


27.6 %


30.3 %


26.9 %


35.4 %

Gross profit as a percentage of total revenues        

22.2 %


21.2 %


28.6 %


21.7 %


33.1 %

Operating expenses:










Selling, general and administrative expenses               

12,137


12,165


12,736


24,302


26,899

Research and development expenses           

11,255


13,298


13,410


24,553


25,364

Early termination and other charges             

802


8,449


797


9,251


797

Total operating expenses   

24,194


33,912


26,943


58,106


53,060











Operating income (loss)         

(10,656)


(21,818)


2,002


(32,474)


14,881

           Interest income

2,692


2,842


1,061


5,534


1,776

Interest expense           

(200)


(256)


(499)


(456)


(610)

Foreign currency gain (loss), net 

1,237


(3,430)


(7,012)


(2,193)


(7,702)

Other income (loss), net              

3


(35)


211


(32)


429

Income (loss) before income tax expense

(6,924)


(22,697)


(4,237)


(29,621)


8,774

Income tax expense (benefit)

(2,977)


(1,227)


(897)


(4,204)


2,586











Net income (loss)   

$           (3,947)


$        (21,470)


$          (3,340)


$       (25,417)


$           6,188











Basic earnings (loss) per common share—

$            (0.09)


(0.49)


$            (0.07)


$           (0.60)


$             0.14

Diluted earnings (loss) per common share—

$            (0.09)


(0.49)


$            (0.07)


$           (0.60)


$             0.13

Weighted average number of shares—










Basic            

41,741,310


43,390,832


44,897,278


42,561,514


45,248,293

Diluted         

41,741,310


43,390,832


44,897,278


42,561,514


46,329,559

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)









      June 30,

      2023

    December 31,

      2022

Assets







Current assets







Cash and cash equivalents


$     172,954



$     225,477


Accounts receivable, net


35,009



35,380


Inventories, net


32,337



39,883


Other receivables


3,498



7,847


Prepaid expenses


9,553



10,560


Hedge collateral


2,120



2,940


Other current assets


19,070



15,766


Total current assets


274,541



337,853


Property, plant and equipment, net


101,067



110,747


Operating lease right-of-use assets


5,224



5,265


Intangible assets, net


1,706



1,930


Long-term prepaid expenses


7,430



10,939


Deferred income taxes


37,141



38,324


Other non-current assets


16,626



11,587


Total assets


$     443,735



$      516,645


Liabilities and Stockholders' Equity







Current liabilities







Accounts payable


$       20,367



$       17,998


Other accounts payable


8,473



9,702


Accrued expenses


10,456



9,688


Accrued income taxes


91



3,154


Operating lease liabilities


1,745



1,397


Other current liabilities


4,506



5,306


Total current liabilities


45,638



47,245


Accrued severance benefits, net


20,123



23,121


Non-current operating lease liabilities


3,671



4,091


Other non-current liabilities


10,011



14,035


Total liabilities


79,443



88,492


Commitments and contingencies







Stockholders' equity







Common stock, $0.01 par value, 150,000,000 shares authorized, 56,449,782 shares issued and 40,133,898
     outstanding at June 30, 2023 and 56,432,449 shares issued and 43,824,575 outstanding at December 31,
     2022


564



564


Additional paid-in capital


269,297



266,058


Retained earnings


310,089



335,506


Treasury stock, 16,315,884 shares at June 30, 2023 and 12,607,874 shares at December 31, 2022,
     respectively


(199,248)



(161,422)


Accumulated other comprehensive loss


(16,410)



(12,553)


Total stockholders' equity


364,292



428,153


Total liabilities and stockholders' equity


$   443,735



$     516,645


 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)






Three Months
Ended


Six Months
Ended



June 30,
2023


June 30,
2023


June 30,
2022


Cash flows from operating activities







Net income (loss)   

$      (3,947)


$   (25,417)


$       6,188


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







Depreciation and amortization     

4,145


8,502


7,602


Provision for severance benefits  

1,761


4,091


3,240


Loss on foreign currency, net      

35


9,117


29,183


Provision for inventory reserves 

(17)


1,121


5,282


Stock-based compensation          

2,092


3,212


3,626


Other, net     

213


450


712


Changes in operating assets and liabilities







Accounts receivable, net              

(3,315)


(342)


(12,377)


Inventories   

3,849


4,911


(5,486)


Other receivables         

2,031


4,407


11,640


Other current assets     

(1,061)


395


(2,089)


Accounts payable        

976


2,880


2,429


Other accounts payable

(5,064)


(6,488)


(5,861)


Accrued expenses        

(6,496)


1,104


(2,709)


Accrued income taxes  

(49)


(2,972)


(11,513)


Other current liabilities

125


(471)


(2,153)


Other non-current liabilities         

(45)


(214)


570


Payment of severance benefits     

(4,857)


(5,728)


(2,934)


Other, net     

(181)


(487)


(385)


Net cash provided by (used in) operating activities

(9,805)


(1,929)


24,965


Cash flows from investing activities







Proceeds from settlement of hedge collateral               

2,180


3,335


2,805


Payment of hedge collateral         

(1,493)


(2,586)


(6,844)


Purchase of property, plant and equipment  

(1,383)


(1,518)


(1,511)


Payment for intellectual property registration              

(89)


(163)


(153)


Payment of guarantee deposits    

(3,425)


(6,907)


(1,049)


Other, net     

1,426


1,445


14


Net cash used in investing activities       

(2,784)


(6,394 )


(6,738 )


Cash flows from financing activities







Proceeds from exercise of stock options     

18


27


1,786


Acquisition of treasury stock       

(24,576)


(36,840)


(1,826)


Repayment of financing related to water treatment facility arrangement      

(122)


(248)


(261)


Repayment of principal portion of finance lease liabilities           

(22)


(46)


(32)









Net cash used in financing activities       

(24,702)


(37,107)


(333)


Effect of exchange rates on cash and cash equivalents           

(1,840)


(7,093)


(23,644)









Net decrease in cash and cash equivalents              

(39,131)


(52,523)


(5,750)


Cash and cash equivalents







Beginning of the period          

212,085


225,477


279,547


End of the period    

$   172,954


$   172,954


$   273,797

























 

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


Six Months Ended




June 30,
2023



March 31,
2023


June 30,
2022


June 30,
2023


June 30,
2022


Operating income (loss)


$

(10,656)



$

(21,818)



$

2,002



$

(32,474)



$

14,881


Adjustments:





















Equity-based compensation expense



2,092




1,120




1,988




3,212




3,626


Early termination and other charges



802




8,449




797




9,251




797























Adjusted Operating Income (Loss)


$

(7,762)



$

(12,249)



$

4,787



$

(20,011)



$

19,304























 

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 and (ii) Early termination and other charges.

For the three months ended March 31, 2023, we recorded in our consolidated statement of operations $8,449 thousand of termination related charges in connection with the voluntary resignation program that we offered to certain employees during the first quarter of 2023. For the three and six months ended June 30, 2023, we recorded $802 thousand of one-time employee incentives.

For the three and six months ended June 30, 2022, we recorded $797 thousand of professional service fees and expenses incurred in connection with certain strategic evaluations.

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

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

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

(Unaudited)
















Three Months Ended  


Six Months Ended 


June 30,
2023


March 31,
2023


June 30,
2022


June 30,
2023


June 30,
2022


Net income (loss)  

$           (3,947)


$        (21,470)


$         (3,340)


$       (25,417)


$        6,188


Adjustments:











Interest income             

(2,692)


(2,842)


(1,061)


(5,534)


(1,776 )


Interest expense             

200


256


499


456


610


Income tax expense (benefit) 

(2,977)


(1,227)


(897)


(4,204)


2,586


Depreciation and amortization             

4,145


4,357


3,711


8,502


7,602













EBITDA

(5,271)


(20,926)


(1,088)


(26,197)


15,210


Equity-based compensation expense  

2,092


1,120


1,988


3,212


3,626


Foreign currency loss (gain), net         

(1,237)


3,430


7,012


2,193


7,702


Derivative valuation loss (gain), net             

20


54


(184)


74


(55 )


Early termination and other charges  

802


8,449


797


9,251


797


Adjusted EBITDA

$           (3,594)


$        (7,873)


$          8,525


$      (11,467)


$       27,280













Net income (loss)  

$           (3,947)


$       (21,470)


$         (3,340)


$      (25,417)


$        6,188


Adjustments:        











Equity-based compensation expense  

2,092


1,120


1,988


3,212


3,626


Foreign currency loss (gain), net         

(1,237)


3,430


7,012


2,193


7,702


Derivative valuation loss (gain), net             

20


54


(184)


74


(55 )


Early termination and other charges  

802


8,449


797


9,251


797


Income tax effect on non-GAAP adjustments             

(202)


(1,950)


4,294


(2,152)


5,245


Adjusted Net Income (Loss)

$           (2,472)


$      (10,367)


$        10,567


$      (12,839)


$     23,503













Adjusted Net Income (Loss) per common share—











- Basic        

$             (0.06)


$          (0.24)


$            0.24


$        (0.30)


$          0.52


- Diluted

$             (0.06)


$          (0.24)


$            0.23


$        (0.30)


$          0.51


Weighted average number of shares – basic

41,741,310


43,390,832


44,897,278


42,561,514


45,248,293


Weighted average number of shares – diluted

41,741,310


43,390,832


45,937,515


42,561,514


46,329,559


 

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) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net and (iv) Early termination and other charges. EBITDA for the periods indicated is defined as net income (loss) before interest income, interest expense, income tax expense (benefit) 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) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Early termination and other charges and (v) Income tax effect on non-GAAP adjustments.

For the three months ended March 31, 2023, we recorded in our consolidated statement of operations $8,449 thousand of termination related charges in connection with the voluntary resignation program that we offered to certain employees during the first quarter of 2023. For the three and six months ended June 30, 2023, we recorded $802 thousand of one-time employee incentives.

For the three and six months ended June 30, 2022, we recorded $797 thousand of professional service fees and expenses incurred in connection with certain strategic evaluations.

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SOURCE Magnachip Semiconductor Corporation

Magnachip Semiconductor Corp.

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