Magnachip Reports Results for First Quarter 2021

- First quarter revenue of $123.0 million was down 13.9% sequentially and up 2.1% year-over-year (YoY).

SEOUL, South Korea, May 10, 2021 — (PRNewswire) —  Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today announced financial results for the first quarter 2021.

"Magnachip delivered solid quarterly results despite the industry-wide supply constraints. Our revenue came in above the midpoint of the company's Q1 revenue guidance range, driven by strong growth in the Power solutions business. Gross profit margin exceeded the high-end of our expectations due to the improved product mix and higher utilization," 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 will not be 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.

Q1 2021 Financial Highlights


















 

In thousands of US dollars, except share data



GAAP



Q1 2021

Q4 2020

Q/Q change

Q1 2020

Y/Y change

Revenues











Standard Products Business











Display Solutions

58,895

82,705


down

28.8%

77,593


down

24.1%


Power Solutions

54,011

46,861


up

15.3%

33,143


up

63.0%


Transitional Fab 3 Foundry Services(1)

10,113

13,379


down

24.4%

9,737


up

3.9%

Gross Profit Margin

27.9%

26.9%


up

1.0% pts

24.2%


up

3.7% pts

Operating Income (Loss) (2)

(2,091)

9,206


down

122.7%

5,965


down

135.1%

Net Income (Loss) (3)

(7,473)

66,581


down

111.2%

(23,749)


up

68.5%

Basic Earnings (Loss) per Common Share

(0.19)

1.87


down

110.2%

(0.68)


up

72.1%

Diluted Earnings (Loss) per Common Share

(0.19)

1.45


down

113.1%

(0.68)


up

72.1%





























 

In thousands of US dollars, except share data



Non-GAAP (3)



Q1 2021

Q4 2020

Q/Q change

Q1 2020

Y/Y change

Adjusted Operating Income

9,971

15,355


down

35.1%

7,281


up

36.9%

Adjusted EBITDA

13,504

18,582


down

27.3%

9,895


up

36.5%

Adjusted Net Income

9,346

17,268


down

45.9%

1,092


up

755.9%

Adjusted Earnings per Common Share—Diluted

0.22

0.40


down

45.0%

0.03


up

633.3%


























(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 Q1 2021, operating loss of $2.1 million included non-recurring professional fees and certain transaction related expenses of $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)     In Q4 2020, total net income of $66.6 million included one-time recognition of deferred tax benefits of $43.9 million.

 

(4)     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 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; 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; the impact of competitive products and pricing; timely design acceptance by our customers; timely introduction of new products and technologies; ability to ramp new products into volume production; industry wide shifts in supply and demand for semiconductor products; industry and/or company overcapacity; effective and cost efficient utilization of manufacturing capacity; financial stability in foreign markets and the impact of foreign exchange rates; unanticipated costs and expenses or the inability to identify expenses which can be eliminated; compliance with U.S. and international trade and export laws and regulations by us and our distributors; 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

Investor.relations@magnachip.com


 

 

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,



2021



2020



2020

Revenues:









Net sales – standard products business

$

112,906


$

129,566


$

110,736

Net sales – transitional Fab 3 foundry services


10,113



13,379



9,737

Total revenues


123,019



142,945



120,473

Cost of sales:









Cost of sales – standard products business


79,247



92,503



81,606

Cost of sales – transitional Fab 3 foundry services


9,390



11,981



9,737

Total cost of sales


88,637



104,484



91,343

Gross profit


34,382



38,461



29,130

Gross profit as a percentage of standard products









business net sales


29.8%



28.6%



26.3%

Gross profit as a percentage of total revenues


27.9%



26.9%



24.2%

Operating expenses:









Selling, general and administrative expenses


12,634



12,576



12,102

Research and development expenses


13,423



11,604



10,509

Early termination and other charges


10,416



5,075



554

Total operating expenses


36,473



29,255



23,165

Operating income (loss)


(2,091)



9,206



5,965

Interest expense


(1,041)



(1,625)



(5,607)

Foreign currency gain (loss), net


(4,671)



13,256



(30,971)

Loss on early extinguishment of borrowings, net




(766)



Other income, net


620



767



838

Income (loss) from continuing operations before









income tax expense


(7,183)



20,838



(29,775)

Income tax expense (benefit)


290



(47,064)



1,303

Income (loss) from continuing operations


(7,473)



67,902



(31,078)

Income (loss) from discontinued operations, net of tax




(1,321)



7,329

Net income (loss)

$

(7,473)


$

66,581


$

(23,749)

Basic earnings (loss) per common share—









Continuing operations

$

(0.19)


$

1.91


$

(0.89)

Discontinued operations




(0.04)



0.21

Total

$

(0.19)


$

1.87


$

(0.68)

Diluted earnings (loss) per common share—









Continuing operations

$

(0.19)


$

1.47


$

(0.89)

Discontinued operations




(0.02)



0.21

Total

$

(0.19)


$

1.45


$

(0.68)

Weighted average number of shares—









Basic


40,292,838



35,582,966



34,893,157

Diluted


40,292,838



47,062,903



34,893,157











 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)




March 31,


December 31,




2021




2020


Assets








Current assets








Cash and cash equivalents


$

290,194


$

279,940

Accounts receivable, net



52,250



64,390

Inventories, net



29,964



39,039

Other receivables



5,649



4,338

Prepaid expenses



9,136



7,332

Hedge collateral



5,250



5,250

Other current assets



2,435



9,321

Total current assets



394,878



409,610

Property, plant and equipment, net



91,014



96,383

Operating lease right-of-use assets



4,592



4,632

Intangible assets, net



2,602



2,727

Long-term prepaid expenses



5,993



4,058

Deferred income taxes



42,906



44,541

Other non-current assets



9,422



9,739

Total assets


$

551,407


$

571,690

Liabilities and Stockholders' Equity







Current liabilities







Accounts payable

$


43,357


$

52,164

Other accounts payable



8,261



2,531

Accrued expenses



17,867



16,241

Accrued income taxes



1,224



12,398

Operating lease liabilities



2,352



2,210

Current portion of long-term borrowings, net





83,479

Other current liabilities



6,558



4,595

Total current liabilities



79,619



173,618

Accrued severance benefits, net



39,070



40,462

Non-current operating lease liabilities



2,240



2,422

Other non-current liabilities



10,131



9,588

Total liabilities



131,060



226,090

Commitments and contingencies







Stockholders' equity







Common stock, $0.01 par value, 150,000,000 shares authorized, 55,469,375 shares issued and 46,257,413







outstanding at March 31, 2021 and 44,943,854 shares issued and 35,783,347 outstanding at December 31, 2020        



555



450

Additional paid-in capital



250,829



163,010

Retained earnings



279,361



286,834

Treasury stock, 9,211,962 shares at March 31, 2021 and 9,160,507 shares at December 31, 2020, respectively



(109,407)



(108,397)

Accumulated other comprehensive income (loss)



(991)



3,703

Total stockholders' equity



420,347



345,600

Total liabilities and stockholders' equity


$

551,407


$

571,690










 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)



Three Months Ended  


March 31,
2021
 


March 31,
2020
 

Cash flows from operating activities




Net loss

$       (7,473)


$     (23,749)

Adjustments to reconcile net loss to net cash provided by operating activities




Depreciation and amortization             

3,448


7,935

Provision for severance benefits          

1,771


5,071

Amortization of debt issuance costs and original issue discount  

261


598

Loss on foreign currency, net

14,873


38,480

Restructuring and other charges          

9,504


2,138

Provision for inventory reserves           

1,504


570

Stock-based compensation   

1,646


885

Deferred income tax assets  

30


23

Others, net 

124


107

Changes in operating assets and liabilities




Accounts receivable, net        

9,794


(10,430)

Unbilled accounts receivable, net        


6,937

Inventories

6,071


(4,863)

Other receivables    

(1,438)


1,982

Other current assets

5,427


909

Accounts payable    

(7,701)


1,988

Other accounts payable         

(2,009)


(1,817)

Accrued expenses   

(3,532 )


(6,611)

Accrued income taxes            

(10,700)


(274)

Other current liabilities            

1,087


1,336

Other non-current liabilities   

18


1,808

Payment of severance benefits            

(1,493)


(2,080)

Others, net 

12


125

Net cash provided by operating activities      

21,224


21,068

Cash flows from investing activities




Proceeds from settlement of hedge collateral  


4,239

Payment of hedge collateral 


(7,841)

Purchase of property, plant and equipment       

(1,082)


(3,351)

Payment for intellectual property registration    

(171)


(229)

Payment of guarantee deposits           

(76)


Others, net 

(35)


55

Net cash used in investing activities               

(1,364)


(7,127)

Cash flows from financing activities




Proceeds from exercise of stock options            

2,538


Acquisition of treasury stock  

(1,540)


(1,021)

Repayment of financing related to water treatment facility arrangement    

(144)


(135)

Repayment of principal portion of finance lease liabilities             

(16)


(60)

Net cash provided by (used in) financing activities     

838


(1,216)

Effect of exchange rates on cash and cash equivalents            

(10,444)


(7,089)

Net increase in cash and cash equivalents  

10,254


5,636

Cash and cash equivalents




Beginning of the period    

279,940


151,657

End of the period

$    290,194


$    157,293

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF OPERATING INCOME TO ADJUSTED OPERATING INCOME

(In thousands of U.S. dollars)

(Unaudited)



Three Months Ended


March 31,


December 31,


March 31,


2021


2020


2020

Operating income (loss)

$

(2,091)


$

9,206


$

5,965

Adjustments:









Equity-based compensation expense


1,646



1,945



762

Early termination and other charges


10,416



5,075



554

Inventory reserve related to Huawei impact of









downstream trade restrictions




(871)



Adjusted operating income

$

9,971


$

15,355


$

7,281


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, (ii) Early termination and other charges and (iii) Inventory reserve related to Huawei impact of downstream trade restrictions.

 

For the three months ended March 31, 2021, early termination and other charges eliminate $10,416 thousand, of which $9,831 thousand related to non-recurring professional fees and certain transaction related expenses incurred in connection with the Merger. For the three months ended March 31, 2020, early termination and other charges eliminate $554 thousand of non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives.

 

For the three months ended December 31, 2020, early termination and other charges eliminate $5,075 thousand, of which $4,422 thousand related to the reduction of workforce under a voluntary resignation program and non-recurring professional service fees, and $653 thousand related to non-recurring professional fees and certain transaction related expenses incurred in connection with the Merger.

 

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


March  31,

December 31,

March  31,



2021



2020



2020

Income (loss) from continuing operations

$

(7,473)


$

67,902


$

(31,078)

Adjustments:









Interest expense, net


420



863



4,930

Income tax expense (benefit)


290



(47,064)



1,303

Depreciation and amortization


3,448



3,148



2,570

EBITDA


(3,315)



24,849



(22,275)

Equity-based compensation expense


1,646



1,945



762

Early termination and other charges


10,416



5,075



554

Foreign currency loss (gain), net


4,671



(13,256)



30,971

Derivative valuation loss (gain), net


86



74



(117)

Loss on early extinguishment of borrowings, net




766



Inventory reserve related to Huawei impact of









downstream trade restrictions




(871)



Adjusted EBITDA

$

13,504


$

18,582


$

9,895


Income (loss) from continuing operations

$

(7,473)


$

67,902


$

(31,078)

Adjustments:









Equity-based compensation expense


1,646



1,945



762

Early termination and other charges


10,416



5,075



554

Foreign currency loss (gain), net


4,671



(13,256)



30,971

Derivative valuation loss (gain), net


86



74



(117)

Loss on early extinguishment of borrowings, net




766



Inventory reserve related to Huawei impact of









downstream trade restrictions




(871)



GAAP and cash tax expense difference




(43,874)



Income tax effect on non-GAAP adjustments




(493)



Adjusted Net Income

$

9,346


$

17,268


$

1,092

Adjusted Net Income per common share—









- Basic

$

0.23


$

0.49


$

0.03

- Diluted

$

0.22


$

0.40


$

0.03

Weighted average number of shares – basic


40,292,838



35,582,966



34,893,157

Weighted average number of shares – diluted


47,470,416



47,062,903



35,883,200











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) Early termination and other charges, (iii) Foreign currency loss (gain), net, (iv) Derivative valuation loss (gain), net, (v) Loss on early extinguishment of borrowings, net and (vi) Inventory reserve related to Huawei impact of downstream trade restrictions. EBITDA for the periods indicated is defined as Income (loss) from continuing operations before interest expense, net, income tax expense (benefit) 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) Early termination and other charges, (iii) Foreign currency loss (gain), net, (iv) Derivative valuation loss (gain), net, (v) Loss on early extinguishment of borrowings, net, (vi) Inventory reserve related to Huawei impact of downstream trade restrictions, (vii) GAAP and cash tax expense difference and (viii) Income tax effect on non-GAAP adjustments.

 

For the three months ended March 31, 2021, early termination and other charges eliminate $10,416 thousand, of which $9,831 thousand related to non-recurring professional fees and certain transaction related expenses incurred in connection with the Merger. For the three months ended March 31, 2020, early termination and other charges eliminate $554 thousand of non-recurring professional service fees and expenses incurred in connection with certain treasury and finance initiatives.

 

For the three months ended December 31, 2020, early termination and other charges eliminate $5,075 thousand, of which $4,422 thousand related to the reduction of workforce under a voluntary resignation program and non-recurring professional service fees, and $653 thousand related to non-recurring professional fees and certain transaction related expenses incurred in connection with the Merger.

 

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SOURCE Magnachip Semiconductor Corporation

Contact:
Company Name: Magnachip Semiconductor Corporation
Web: http://www.magnachip.com
Financial data for Magnachip Semiconductor Corporation




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