Magnachip Reports Results for Second Quarter 2021
-- Second quarter revenue of $113.9 million was down 7.4% sequentially and down 4.2% year-over-year (YoY).
-- Gross profit margin for the second quarter was 29.8%, up 190 bps sequentially and up 280 bps YoY.
-- GAAP net loss was $(0.2) million or $(0.00) per diluted share.
-- Non-GAAP net income was $7.0 million or $0.15 per diluted share.
SEOUL, South Korea, Aug. 5, 2021 /PRNewswire/ -- Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today announced financial results for the second quarter 2021.
"Despite sustained demand across our product portfolio, our Display business revenue was negatively impacted by severe supply constraints that continued to deepen in the second quarter. Global shortages in manufacturing capacities, as well as changes in our foundry partners' wafer allocation plans, limit our ability to meet customers' needs. This revenue decline, however, was partially offset by the strong performance in our Power business that achieved record-setting quarterly revenue for the second consecutive quarter. Gross profit margin expanded to 29.8% due to the high utilization rate at our Fab 3, coupled with an improved product mix under a favorable pricing environment. We continue to work closely with our strategic customers and foundry partners to secure long-term supply capacity for OLED DDICs, being mindful of the fact that global supply constraints are having a significant impact on our OLED business." said YJ Kim, Magnachip's chief executive officer.
Due to the pending merger with an investment vehicle formed by an affiliate of Wise Road Capital LTD pursuant to a definitive agreement executed on March 25, 2021, Magnachip is not hosting a quarterly earnings conference call and has suspended the practice of providing forward-looking guidance. Please review the 'Investors' section of the Company's website for the quarterly financial results and SEC filings for the latest updates on the pending transaction.
Q2 2021 Financial Highlights | ||||||||||||||
In thousands of US dollars, except share data | ||||||||||||||
GAAP | ||||||||||||||
Q2 2021 | Q1 2021 | Q/Q change | Q2 2020 | Y/Y change | ||||||||||
Revenues | ||||||||||||||
Standard Products Business | ||||||||||||||
Display Solutions | 46,601 | 58,895 | down | 20.9% | 69,176 | down | 32.6% | |||||||
Power Solutions | 56,667 | 54,011 | up | 4.9% | 39,779 | up | 42.5% | |||||||
Transitional Fab 3 Foundry Services(1) | 10,608 | 10,113 | up | 4.9% | 9,873 | up | 7.4% | |||||||
Gross Profit Margin | 29.8% | 27.9% | up | 1.9%pts | 27.0% | up | 2.8%pts | |||||||
Operating Income (Loss) (2) | 1,627 | (2,091) | up | 177.8% | 8,622 | down | 81.1% | |||||||
Net Income (Loss) | (198) | (7,473) | up | 97.4% | 29,171 | down | 100.7% | |||||||
Basic Earnings (Loss) per Common Share | (0.00) | (0.19) | up | 100.0% | 0.84 | down | 100.0% | |||||||
Diluted Earnings (Loss) per Common Share | (0.00) | (0.19) | up | 100.0% | 0.65 | down | 100.0% | |||||||
In thousands of US dollars, except share data | ||||||||||||||
Non-GAAP(3) | ||||||||||||||
Q2 2021 | Q1 2021 | Q/Q change | Q2 2020 | Y/Y change | ||||||||||
Adjusted Operating Income | 9,052 | 9,971 | down | 9.2% | 10,125 | down | 10.6% | |||||||
Adjusted EBITDA | 12,692 | 13,504 | down | 6.0% | 12,711 | down | 0.1% | |||||||
Adjusted Net Income | 7,034 | 9,346 | down | 24.7% | 4,753 | up | 48.0% | |||||||
Adjusted Earnings per Common Share—Diluted | 0.15 | 0.22 | down | 31.8% | 0.13 | up | 15.4% | |||||||
(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, the Company will provide transitional foundry services to the buyer for foundry products manufactured in the Company's 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) | In Q2 and Q1 2021, respectively, operating income (loss) included non-recurring professional fees and certain transaction related expenses of $2.5 million and $9.8 million in connection with a definitive agreement (the "Merger Agreement") that the Company entered into with South Dearborn Limited, an exempted company incorporated in the Cayman Islands with limited liability ("Parent"), formed by an affiliate of Wise Road Capital LTD, and Michigan Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Parent ("Merger Sub"). The Merger Agreement provides that, among other things, Merger Sub will be merged with and into the Company (the "Merger"), with the Company continuing its corporate existence as the surviving corporation in the Merger and becoming a wholly owned subsidiary of Parent. |
(3) | Non-GAAP financial measures are calculated based on the results from continuing operations. 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 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 from continuing operations 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. |
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. 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 possibility that any or all of the conditions precedent to the consummation of the pending merger may not be satisfied or waived; unanticipated difficulties or expenditures relating to the proposed merger; the possibility that the merger may not be completed in a timely manner or at all; the diversion of and attention of Magnachip's management on merger-related issues; legal proceedings, judgments or settlements following the announcement of the proposed merger; disruptions of current plans and operations caused by the announcement and pendency of the proposed merger; potential difficulties in employee retention due to the announcement and pendency of the proposed merger; the response of customers, suppliers, business partners and regulators to the announcement of the proposed merger; the impact of changes in macroeconomic and/or general economic conditions, including those caused by or related to the COVID-19 outbreak, recessions, economic instability and the outbreak of disease; 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 or supply constraints; 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; 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; 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 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 SEC, including our Form 10-K filed on March 9, 2021 (including that the impact of the COVID-19 pandemic, trade tensions and supply constraints may also exacerbate the risks discussed therein) and subsequent registration statements, amendments or other reports that we may file from time to time with the Securities and Exchange Commission 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, 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 1,200 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:
So-Yeon Jeong
Head of Investor Relations
Tel. +1-408-712-6151
[email protected]
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, | March 31, | June 30, | June 30, | June 30, | |||
Revenues: | |||||||
Net sales – standard products business | $ 103,268 | $ 112,906 | $ 108,955 | $ 216,174 | $ 219,691 | ||
Net sales – transitional Fab 3 foundry services | 10,608 | 10,113 | 9,873 | 20,721 | 19,610 | ||
Total revenues | 113,876 | 123,019 | 118,828 | 236,895 | 239,301 | ||
Cost of sales: | |||||||
Cost of sales – standard products business | 70,409 | 79,247 | 76,817 | 149,656 | 158,423 | ||
Cost of sales – transitional Fab 3 foundry services | 9,497 | 9,390 | 9,873 | 18,887 | 19,610 | ||
Total cost of sales | 79,906 | 88,637 | 86,690 | 168,543 | 178,033 | ||
Gross profit | 33,970 | 34,382 | 32,138 | 68,352 | 61,268 | ||
Gross profit as a percentage of standard products business net sales | 31.8% | 29.8% | 29.5% | 30.8% | 27.9% | ||
Gross profit as a percentage of total revenues | 29.8% | 27.9% | 27.0% | 28.9% | 25.6% | ||
Operating expenses: | |||||||
Selling, general and administrative expenses | 14,001 | 12,634 | 12,408 | 26,635 | 24,510 | ||
Research and development expenses | 13,322 | 13,423 | 11,108 | 26,745 | 21,617 | ||
Other charges | 5,020 | 10,416 | — | 15,436 | 554 | ||
Total operating expenses | 32,343 | 36,473 | 23,516 | 68,816 | 46,681 | ||
Operating income (loss) | 1,627 | (2,091) | 8,622 | (464) | 14,587 | ||
Interest expense | (85) | (1,041) | (5,430) | (1,126) | (11,037) | ||
Foreign currency gain (loss), net | 250 | (4,671) | 8,469 | (4,421) | (22,502) | ||
Other income, net | 611 | 620 | 791 | 1,231 | 1,629 | ||
Income (loss) from continuing operations before income tax expense | 2,403 | (7,183) | 12,452 | (4,780) | (17,323) | ||
Income tax expense | 2,601 | 290 | 678 | 2,891 | 1,981 | ||
Income (loss) from continuing operations | (198) | (7,473) | 11,774 | (7,671) | (19,304) | ||
Income from discontinued operations, net of tax | — | — | 17,397 | — | 24,726 | ||
Net income (loss) | $ (198) | $ (7,473) | $ 29,171 | $ (7,671) | $ 5,422 | ||
Basic earnings (loss) per common share— | |||||||
Continuing operations | $ (0.00) | $ (0.19) | $ 0.34 | $ (0.18) | $ (0.55) | ||
Discontinued operations | — | — | 0.50 | — | 0.71 | ||
Total | $ (0.00) | $ (0.19) | $ 0.84 | $ (0.18) | $ 0.16 | ||
Diluted earnings (loss) per common share— | |||||||
Continuing operations | $ (0.00) | $ (0.19) | $ 0.28 | $ (0.18) | $ (0.55) | ||
Discontinued operations | — | — | 0.37 | — | 0.71 | ||
Total | $ (0.00) | $ (0.19) | $ 0.65 | $ (0.18) | $ 0.16 | ||
Weighted average number of shares— | |||||||
Basic | 46,322,027 | 40,292,838 | 35,092,312 | 43,324,088 | 34,992,734 | ||
Diluted | 46,322,027 | 40,292,838 | 46,474,237 | 43,324,088 | 34,992,734 | ||
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share data) (Unaudited) | ||
June 30, | December 31, | |
Assets | ||
Current assets | ||
Cash and cash equivalents | $ 271,880 | $ 279,940 |
Accounts receivable, net | 56,730 | 64,390 |
Inventories, net | 41,369 | 39,039 |
Other receivables | 9,173 | 4,338 |
Prepaid expenses | 6,836 | 7,332 |
Hedge collateral | 4,830 | 5,250 |
Other current assets | 5,117 | 9,321 |
Total current assets | 395,935 | 409,610 |
Property, plant and equipment, net | 94,721 | 96,383 |
Operating lease right-of-use assets | 4,520 | 4,632 |
Intangible assets, net | 2,541 | 2,727 |
Long-term prepaid expenses | 5,626 | 4,058 |
Deferred income taxes | 43,069 | 44,541 |
Other non-current assets | 11,141 | 9,739 |
Total assets | $ 557,553 | $ 571,690 |
Liabilities and Stockholders' Equity | ||
Current liabilities | ||
Accounts payable | $ 52,040 | $ 52,164 |
Other accounts payable | 9,119 | 2,531 |
Accrued expenses | 13,020 | 16,241 |
Accrued income taxes | 1,679 | 12,398 |
Operating lease liabilities | 2,181 | 2,210 |
Current portion of long-term borrowings, net | — | 83,479 |
Other current liabilities | 5,001 | 4,595 |
Total current liabilities | 83,040 | 173,618 |
Accrued severance benefits, net | 39,520 | 40,462 |
Non-current operating lease liabilities | 2,338 | 2,422 |
Other non-current liabilities | 10,024 | 9,588 |
Total liabilities | 134,922 | 226,090 |
Commitments and contingencies | ||
Stockholders' equity | ||
Common stock, $0.01 par value, 150,000,000 shares authorized, 55,562,907 shares issued and | 556 | 450 |
Additional paid-in capital | 253,244 | 163,010 |
Retained earnings | 279,163 | 286,834 |
Treasury stock, 9,211,962 shares at June 30, 2021 and 9,160,507 shares at December 31, 2020, | (109,407) | (108,397) |
Accumulated other comprehensive income (loss) | (925) | 3,703 |
Total stockholders' equity | 422,631 | 345,600 |
Total liabilities and stockholders' equity | $ 557,553 | $ 571,690 |
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) (Unaudited) | |||||
Three Months | Six Months | ||||
June 30, | June 30, | June 30, | |||
Cash flows from operating activities | |||||
Net income (loss) | $ (198) | $ (7,671) | $ 5,422 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | |||||
Depreciation and amortization | 3,550 | 6,998 | 10,479 | ||
Provision for severance benefits | 1,736 | 3,507 | 10,179 | ||
Amortization of debt issuance costs and original issue discount | — | 261 | 1,205 | ||
Loss (gain) on foreign currency, net | (1,520) | 13,353 | 26,397 | ||
Restructuring and other charges | 3,295 | 3,295 | 141 | ||
Provision for inventory reserves | 1,842 | 3,346 | 2,033 | ||
Stock-based compensation | 2,405 | 4,051 | 2,528 | ||
Other, net | 112 | 266 | (111) | ||
Changes in operating assets and liabilities | |||||
Accounts receivable, net | (4,696) | 5,098 | (438) | ||
Unbilled accounts receivable, net | — | — | 10,933 | ||
Inventories | (13,241) | (7,170) | (14,060) | ||
Other receivables | (3,403) | (4,841) | 67 | ||
Other current assets | 3,196 | 8,623 | 4,747 | ||
Accounts payable | 8,741 | 1,040 | 4,947 | ||
Other accounts payable | (3,857) | (2,287) | (5,898) | ||
Accrued expenses | (6,373) | (3,980) | 161 | ||
Accrued income taxes | 451 | (10,249) | 349 | ||
Other current liabilities | (1,189) | (102) | 871 | ||
Other non-current liabilities | (292) | (274) | 1,238 | ||
Payment of severance benefits | (1,343) | (2,836) | (4,272) | ||
Other, net | (74) | (62) | 147 | ||
Net cash provided by (used in) operating activities | (10,858) | 10,366 | 57,065 | ||
Cash flows from investing activities | |||||
Proceeds from settlement of hedge collateral | 972 | 972 | 5,855 | ||
Payment of hedge collateral | (585) | (585) | (7,841) | ||
Purchase of property, plant and equipment | (3,784) | (4,866) | (8,842) | ||
Payment for intellectual property registration | (117) | (288) | (473) | ||
Collection of guarantee deposits | 306 | 307 | 47 | ||
Payment of guarantee deposits | (4,884) | (4,960) | (571) | ||
Other, net | (94) | (130) | 21 | ||
Net cash used in investing activities | (8,186) | (9,550) | (11,804) | ||
Cash flows from financing activities | |||||
Proceeds from exercise of stock options | 11 | 2,549 | 663 | ||
Acquisition of treasury stock | (113) | (1,653) | (1,021) | ||
Repayment of financing related to water treatment facility arrangement | (144) | (288) | (267) | ||
Repayment of principal portion of finance lease liabilities | (17) | (33) | (119) | ||
Net cash provided by (used in) financing activities | (263) | 575 | (744) | ||
Effect of exchange rates on cash and cash equivalents | 993 | (9,451) | (3,350) | ||
Net increase (decrease) in cash and cash equivalents | (18,314) | (8,060) | 41,167 | ||
Cash and cash equivalents | |||||
Beginning of the period | 290,194 | 279,940 | 151,657 | ||
End of the period | $ 271,880 | $ 271,880 | $ 192,824 | ||
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES | ||||||
Three Months Ended | Six Months Ended | |||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||
Operating income (loss) | $ 1,627 | $ (2,091) | $ 8,622 | $ (464) | $ 14,587 | |
Adjustments: | ||||||
Equity-based compensation expense | 2,405 | 1,646 | 1,503 | 4,051 | 2,265 | |
Other charges | 5,020 | 10,416 | — | 15,436 | 554 | |
Adjusted Operating Income | $ 9,052 | $ 9,971 | $ 10,125 | $ 19,023 | $ 17,406 | |
We present Adjusted Operating Income as a supplemental measure of our performance. We define Adjusted Operating Income for the periods indicated as operating income (loss) adjusted to exclude (i) Equity-based compensation expense and (ii) Other charges.
For the three and six months ended June 30, 2021, other charges of $5,020 thousand and $15,436 thousand, respectively, related to non-recurring professional service fees and expenses in connection with the Merger and regulatory requests.
For the six months ended June 30, 2020, other charges were $554 thousand, which pertained to non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives.
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME (In thousands of U.S. dollars, except share data) (Unaudited) | ||||||
Three Months Ended | Six Months Ended | |||||
June 30, | March 31, | June 30, | June 30, | June 30, | ||
Income (loss) from continuing operations | $ (198) | $ (7,473) | $ 11,774 | $ (7,67) | $ (19,304) | |
Adjustments: | ||||||
Interest expense, net | (493) | 420 | 4,736 | (73) | 9,666 | |
Income tax expense | 2,601 | 290 | 678 | 2,891 | 1,981 | |
Depreciation and amortization | 3,550 | 3,448 | 2,544 | 6,998 | 5,114 | |
EBITDA | 5,460 | (3,315) | 19,732 | 2,145 | (2,543) | |
Equity-based compensation expense | 2,405 | 1,646 | 1,503 | 4,051 | 2,265 | |
Other charges | 5,020 | 10,416 | — | 15,436 | 554 | |
Foreign currency loss (gain), net | (250) | 4,671 | (8,469) | 4,421 | 22,502 | |
Derivative valuation loss (gain), net | 57 | 86 | (55) | 143 | (172) | |
Adjusted EBITDA | $ 12,692 | $ 13,504 | $ 12,711 | $ 26,196 | $ 22,606 | |
Income (loss) from continuing operations | $ (198) | $ (7,473) | $ 11,774 | $ (7,671) | $ (19,304 ) | |
Adjustments: | ||||||
Equity-based compensation expense | 2,405 | 1,646 | 1,503 | 4,051 | 2,265 | |
Other charges | 5,020 | 10,416 | — | 15,436 | 554 | |
Foreign currency loss (gain), net | (250) | 4,671 | (8,469) | 4,421 | 22,502 | |
Derivative valuation loss (gain), net | 57 | 86 | (55) | 143 | (172) | |
Adjusted Net Income | $ 7,034 | $ 9,346 | $ 4,753 | $ 16,380 | $ 5,845 | |
Adjusted Net Income per common share— | ||||||
- Basic | $ 0.15 | $ 0.23 | $ 0.14 | $ 0.38 | $ 0.17 | |
- Diluted | $ 0.15 | $ 0.22 | $ 0.13 | $ 0.36 | $ 0.16 | |
Weighted average number of shares – basic | 46,322,027 | 40,292,838 | 35,092,312 | 43,324,088 | 34,992,734 | |
Weighted average number of shares – diluted | 47,846,217 | 47,470,416 | 36,330,083 | 47,685,875 | 36,248,039 | |
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) Other charges, (iii) Foreign currency loss (gain), net and (iv) Derivative valuation loss (gain), net. EBITDA for the periods indicated is defined as Income (loss) from continuing operations before interest expense, net, income tax expense, and depreciation and amortization.
We present Adjusted Net Income by adjusting income (loss) from continuing operations 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 income (loss) from continuing operations, adjusted to exclude (i) Equity-based compensation expense, (ii) Other charges, (iii) Foreign currency loss (gain), net and (iv) Derivative valuation loss (gain), net.
For the three and six months ended June 30, 2021, other charges of $5,020 thousand and $15,436 thousand, respectively, related to non-recurring professional service fees and expenses in connection with the Merger and regulatory requests.
For the six months ended June 30, 2020, other charges were $554 thousand, which pertained to non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives.
SOURCE Magnachip Semiconductor Corporation
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