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Magnachip Reports Results for First Quarter 2023

SEOUL, South Korea, May 3, 2023 — (PRNewswire) — Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today announced financial results for the first quarter 2023.

YJ Kim, Magnachip's chief executive officer commented, "Our Q1 results continued to be affected by last year's OLED wafer shortages that impacted second half design-wins and the ongoing smartphone inventory correction in our Display business and weak consumer demand in our Power business. Despite the challenging environment, we remained focused on execution during the quarter. In our Display business, we successfully delivered our second OLED DDIC project sample ahead of schedule to a large non-Korean panel customer and remain on track for second half smartphone launches. We also completed the tape-out for a high-end smartphone project with a large Korean panel customer, with mass production on schedule near the end of this year. In our Power business, we continued our record pace of design-in and -win activities, driven by momentum in industrial, automotive and computing applications. Looking ahead, the macro environment remains uncertain. However, we believe we are bumping along the bottom for the Display business and we have hit the bottom in Q1 for our Power business."

YJ Kim continued, "Overall, we expect our financial results to remain soft in the near term, but we believe both Display and Power are poised for a recovery in the second half of this year based on our current customer feedback."

Q1 2023 Financial Highlights




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




GAAP





Q1 2023


Q4 2022


Q/Q change


Q1 2022


Y/Y change

Revenues


























Standard Products Business

























Display Solutions


10,841




7,556




up




43.5

%



29,185




down

62.9

%

Power Solutions


40,673




46,271




down




12.1

%



64,825




down

37.3

%

Transitional Fab 3 foundry services(1)


5,491




7,163




down




23.3

%



10,083




down

45.5

%

Gross Profit Margin


21.2

%



26.4

%



down




5.2

%pts 



37.5

%



down

16.3

%pts 

Operating Income (Loss)


(21,818




(10,117)




down




n/a




12,879




down

n/a


Net Income (Loss)


(21,470




2,971




down




n/a




9,528




down

n/a


Basic Earnings (Loss) per Common Share


(0.49




0.07




down




n/a




0.21




down

n/a


Diluted Earnings (Loss) per Common Share


(0.49




0.07




down




n/a




0.20




down

n/a







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



Non-GAAP(2)





Q1 2023



Q4 2022


Q/Q change


Q1 2022


Y/Y change


Adjusted Operating Income (Loss)


(12,249





(8,567)




down




n/a




14,517




down


n/a


Adjusted EBITDA


(7,873





(4,768)




down




n/a




18,755




down

n/a


Adjusted Net Income (Loss)


(10,367





(15,848)




up




n/a




12,936




down

n/a


Adjusted Earnings (Loss) per Common Share—Diluted


(0.24





(0.36)




up




n/a




0.28




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 Q2 2023:

Based on our current projections, and assuming a steady state global economy, we are cautiously optimistic that our key financial metrics have the potential to show sequential improvement in both the third and fourth quarters of 2023.

Q1 2023 Earnings Conference Call

Magnachip will host a corresponding conference call at 2:00 p.m. PT / 5:00 p.m. ET on Thursday, May 3, 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/BI51f45e599c544fe9bad00a197e100fca 

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 second quarter 2023, third quarter 2023 and full year 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 second 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
Email Contact

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)




Three Months Ended



     March 31,

      December 31,

      March 31,



2023


2022


2022

Revenues:













Net sales – standard products business


$

51,514



$

53,827



$

94,010


Net sales – transitional Fab 3 foundry services



5,491




7,163




10,083


Total revenues



57,005




60,990




104,093


Cost of sales:













Cost of sales – standard products business



37,312




37,150




56,080


Cost of sales – transitional Fab 3 foundry services



7,599




7,742




9,017


Total cost of sales



44,911




44,892




65,097


Gross profit



12,094




16,098




38,996


Gross profit as a percentage of standard products business net sales



27.6

%



31.0

%



40.3

%

Gross profit as a percentage of total revenues



21.2

%



26.4

%



37.5

%

Operating expenses:













Selling, general and administrative expenses



12,165




12,562




14,163


Research and development expenses



13,298




13,653




11,954


Early termination charges



8,449








Total operating expenses



33,912




26,215




26,117


Operating income (loss)



(21,818)




(10,117)




12,879


Interest income



2,842)




2,420




715)


Interest expense



(256)




(269)




(111)


Foreign currency gain (loss), net



(3,430)




17,492




(690)


Other income (expense), net



(35)




(42)




218


Income (loss) before income tax expense



(22,697)




9,484




13,011


Income tax expense (benefit)



(1,227)




6,513




3,483


Net income (loss)


$

(21,470)



$

2,971



$

9,528


Basic earnings (loss) per common share—


$

(0.49)



$

0.07



$

0.21


Diluted earnings (loss) per common share—


$

(0.49)



$

0.07



$

0.20


Weighted average number of shares—













Basic



43,390,832




44,054,275




45,603,208


Diluted



43,390,832




44,731,683




46,693,294
















 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)



      March 31,

      2023

    December 31,

      2022

Assets







Current assets







Cash and cash equivalents


$     212,085



$     225,477


Accounts receivable, net


32,143



35,380


Inventories, net


36,360



39,883


Other receivables


5,342



7,847


Prepaid expenses


11,238



10,560


Hedge collateral


2,820



2,940


Other current assets


14,927



15,766


Total current assets


314,915



337,853


Property, plant and equipment, net


104,568



110,747


Operating lease right-of-use assets


5,413



5,265


Intangible assets, net


1,784



1,930


Long-term prepaid expenses


9,101



10,939


Deferred income taxes


37,380



38,324


Other non-current assets


14,683



11,587


Total assets


$     487,844



$      516,645


Liabilities and Stockholders' Equity







Current liabilities







Accounts payable


$       19,921



$       17,998


Other accounts payable


9,216



9,702


Accrued expenses


17,125



9,688


Accrued income taxes


146



3,154


Operating lease liabilities


1,622



1,397


Other current liabilities


5,261



5,306


Total current liabilities


53,291



47,245


Accrued severance benefits, net


23,608



23,121


Non-current operating lease liabilities


3,996



4,091


Other non-current liabilities


13,596



14,035


Total liabilities


94,491



88,492


Commitments and contingencies







Stockholders' equity







Common stock, $0.01 par value, 150,000,000 shares authorized, 56,437,182 shares issued and 42,589,315
outstanding at March 31, 2023 and 56,432,449 shares issued and 43,824,575 outstanding at December 31, 2022


564



564


Additional paid-in capital


267,187



266,058


Retained earnings


314,036



335,506


Treasury stock, 13,847,867 shares at March 31, 2023 and 12,607,874 shares at December 31, 2022, respectively


(173,441)



(161,422)


Accumulated other comprehensive loss


(14,993)



(12,553)


Total stockholders' equity


393,353



428,153


Total liabilities and stockholders' equity


$   487,844



$     516,645


 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)



Three Months Ended 


March 31,
2023


March 31,
2022

Cash flows from operating activities




Net income (loss)   

$        (21,470)


$          9,528

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




Depreciation and amortization     

4,357


3,891

Provision for severance benefits  

2,330


1,670

Loss on foreign currency, net      

9,082


6,380

Provision for inventory reserves 

1,138


145

Stock-based compensation          

1,120


1,638

Other, net     

237


161

Changes in operating assets and liabilities




Accounts receivable, net              

2,973


(1,213 )

Inventories   

1,062


1,456

Other receivables         

2,376


667

Other current assets     

1,456


(6,829 )

Accounts payable        

1,904


538

Other accounts payable

(1,424 )


(702 )

Accrued expenses        

7,600


187

Accrued income taxes  

(2,923 )


(2,346 )

Other current liabilities

(596 )


(711 )

Other non-current liabilities         

(169 )


(73 )

Payment of severance benefits     

(871 )


(1,389 )

Other, net     

(306 )


(178)





Net cash provided by operating activities               

7,876


12,820

Cash flows from investing activities




Proceeds from settlement of hedge collateral               

1,155


1,829

Payment of hedge collateral         

(1,093 )


(2,891 )

Purchase of property, plant and equipment  

(135 )


(944 )

Payment for intellectual property registration              

(74 )


(59 )

Payment of guarantee deposits

(3,482 )


(79 )

Other, net     

19


2





Net cash used in investing activities       

(3,610 )


(2,142 )

Cash flows from financing activities




Proceeds from exercise of stock options     

9


1,781

Acquisition of treasury stock       

(12,264 )


(830 )

Repayment of financing related to water treatment facility arrangement      

(126 )


(134 )

Repayment of principal portion of finance lease liabilities           

(24 )


(16 )





Net cash provided by (used in) financing activities

(12,405 )


801

Effect of exchange rates on cash and cash equivalents           

(5,253 )


(6,105 )





Net increase (decrease) in cash and cash equivalents             

(13,392 )


5,374

Cash and cash equivalents




Beginning of the period

225,477


279,547





End of the period

$      212,085


$      284,921





 

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



March 31,


December 31,


March 31,



2023


2022


2022


Operating income (loss)


$

(21,818)



$

(10,117)



$

12,879


Adjustments:













Equity-based compensation expense



1,120




1,550




1,638


Early termination charges



8,449








Adjusted Operating Income (Loss)


$

(12,249)



$

(8,567)



$

14,517


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 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.

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



March 31,


December 31,


   March 31,



2023


2022


2022


Net income (loss)


$

(21,470)



$

2,971



$

9,528


Adjustments:













Interest income



(2,842)




(2,420)




(715)


Interest expense



256




269




111


Income tax expense (benefit)



(1,227)




6,513




3,483


Depreciation and amortization



4,357




3,775




3,891


EBITDA



(20,926)




11,108




16,298


Equity-based compensation expense



1,120




1,550




1,638


Foreign currency loss (gain), net



3,430




(17,492)




690


Derivative valuation loss, net



54




66




129


Early termination charges



8,449








Adjusted EBITDA


$

(7,873)



$

(4,768)



$

18,755















Net income (loss)


$

(21,470)



$

2,971



$

9,528


Adjustments:













Equity-based compensation expense



1,120




1,550




1,638


Foreign currency loss (gain), net



3,430




(17,492)




690


Derivative valuation loss, net



54




66




129


Early termination charges



8,449








Income tax effect on non-GAAP adjustments



(1,950)




(2,943)




951


Adjusted Net Income (Loss)


$

(10,367)



$

(15,848)



$

12,936


Adjusted Net Income (Loss) per common share—













- Basic


$

(0.24)



$

(0.36)



$

0.28


- Diluted


$

(0.24)



$

(0.36)



$

0.28


Weighted average number of shares – basic



43,390,832




44,054,275




45,603,208


Weighted average number of shares – diluted



43,390,832




44,054,275




46,693,294


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, net and (iv) Early termination 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, net, (iv) Early termination 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.

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SOURCE Magnachip Semiconductor Corporation

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