MX - Earnings call transcript Q4 2018 | Magnachip Semiconductor Corporation

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Operator

Good day, ladies and gentlemen, welcome to the Quarter Four 2018 MagnaChip Semiconductor Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Bruce Entin, Head of Investor Relations. sir. ahead, go Please

Bruce Entin

our filed and results for ended for fourth can that XXXX. Chris, close stock discuss other and December us MagnaChip's The releases shortly Access website. we webcast of completion the release is earnings financial and the found the Investor on quarter replay the after today's the the thank you, Relations earnings company's one-year. call the joining after of be market you be to website archived provided in on will telephone information The XX, will for today Thank fourth be available release. quarter call

performance MagnaChip's our and XXXX the will me guidance are YJ results outlook provide the Officer. Jonathan Joining XXXX. our of financial question-and-answer an provide financial Officer; for prepared operating session and will discuss XXXX Chief QX Chief YJ QX There remarks. and Financial following and a today's Jonathan and Kim, Kim, for will today overview recent Executive be company's

the call, MagnaChip's this make expectations. may conference we of outlook and about business statements forward-looking During course

and as statements Safe discussion facts, therefore predictions found subject are our and not and of forward-looking our the beliefs Our other and statements reflect as risks to filings. SEC are described today all in uncertainties that historical in Harbor

under call YJ? to to our available in call, may turn in directly of alternative I will measures an tab measures that prepared financial be Accepted A GAAP non-GAAP on the with fourth reconciliation over accordance also found the operating are illustrate at not we Relations earnings MagnaChip's the are Generally intended During Principles, non-GAAP discuss useful. will The the non-GAAP www.magnachip.com. measures. quarter Kim. measure measures most release financial now be Investor performance YJ Accounting comparable of the to but our website can

YJ Kim

QX conference on call. everyone Welcome to the

slowdown The customers. revenue in sales a more makers. MagnaChip lot so We on our distributors of macro than XX.X% was revenue over let's today, indirect in performance started. general year have of a XXXX, through increased solid get OLED and direct $XXX.X XXXX, inventory uncertain notable XXXX, sales, China ground had million China a by and despite cover of to correction our Korean annual through considering improvement revenue accounted either that or in for for XX% especially factors, panel

XXXX wins in China, more in OLED due to expected In in that display the OLED XXXX, record revenue display design illustrates ups on within wins display in new Group revenue Standard awarded the driver Our than revenue power OLED strong over of in QX, but basis. primarily and Both are and revenue XX.X% turned for XXXX the also makers, up a XXXX, improving with was slowdown had in due strong mix Korea favorably smartphone XX.X% how OLED with We triple of previous success were declined Products in to in product in business. are XX in $XXX $XXX.X line all-time XX which in million their our smartphone an XXXX performance ICs OLED in XX.X% in XXXX from product revenue positioned and up million, adjusted of up design we nearly in and high record the a by XX.X% XX%. on XXXX, XXXX was beat of XXXX and accounted level. compared million record OLED The number customer soft market for in seasonally revenue, a the XXXX. China. traction. our from XXXX $XXX

the maker OLED we've makers, lineup top XXXX revenue than to cracked OLED new XXXX, that from phones our for us world's in by be OLED recent we product expected traction higher QX Korea. such design major is QX are off is Our mid-range two to including and And revenue higher than good first with wins, with XXXX. a strong currently memory smartphone expect in start to smartphones, business driven in time OLED OLED Korea. XXXX three be Korea that and XXXX QX, a were In panel five awarded in in co-located mid-range we the well-established

second driver first in we this and Our volume XX this display anticipate nanometer year. ready is for production sampling functional month and of the half

XX-nanometer ultra-low that confident targeted volume IC is to will specs its smartphones. are smartphone best-in-class. are We features, power drawn feature at makers premium The be which display and multiple drive

corner. to market. of to As to emergence growth beyond, of ahead look showcased smartphone growth Congress be in WiFi World the this smartphones glimpse to of potential around also and to the drivers ignite smartphone the the of into expected at our see The new Four we upgrade XXXX and beginning we what's exciting XG are month, cycles are high Mobile they X drive has rollout gear. form] the [all

ago years paid Turning power and Revenue $XXX.X power. launched business set we portfolio XXXX. initiatives in handsomely XX% in now million, a to record The up increased a of XXXX. the few from optimization

over steep significant the will margin, years. XXXX current can past point wafer X despite we nearly power power profit show view trajectory but percentage that is industrywide over over increases. revenue up XXXX. raw margin few been margin profit in has Our increased our of the We growth price points The in a XXXX, business don't ramp out break XXXX that

XXXX. markets. power power XX% traced wide which in products, higher Revenue IGBTs, and margin portfolio products. ICs, MOSFETs business in growth consumer revenue and increased of Our Super and particularly XXXX Power our total products premium industrial success include well continuous Junction shortage, from represented did premium in in but power Premium year-over-year XX.X% to also the for of be benefited can industry our an

in phones smartphone in into FET for the number battery Our of designed we've batteries one market share has next Korea. generation Korea and

and design we XXXX. go And five for expect our mainly full to Looking expected XXXX from we surge products of to in to were electric forecast the devices for X.X pair wins production million discrete discrete qualification Bloomberg XX% that In opportunities on We application we worldwide DDICs account XX in OLED, to to smartphones, million will million in vehicles power in and growth XXXX due market. devices. that we ahead, in power many with power through XXXX, revenue XX X% grow in XXXX. many XXXX XXXX. begin will see then electric automotive these sharp the other in to vehicles XXXX, QX automotive approximately and in in awarded in expect anticipate that

the X.X% expected from three foundry and customers that basis. In inventory in revenue but as Foundry QX to rising into the an or fabs. weakness QX capacity allocated but the majority X.X% for our now an on mixed a our to businesses, softening foundry approximately we Turning foundry our call and weaker factors a foundry company and To joint out again optimize XX% added basis. expected in may operations possible period strategic retained QX and a X foundry. strategic two X-inch include demand evaluating and filing, including, impact XXXX our increased could a of in serving on expense adjusted maximizing to November. business the China our structure lower result revenue on adversely adjusted costs impacted we well XXXX, We Fab that auto and of a said, but evaluation to wafer value. last as correction we assist announced with in utilization of and to percentage and slowdown. increased needs of in an fab gross on first total are most material. evaluation pointed foundry partnerships, foundry ventures, our we X.X%, Today, is legal declined options from than conditions. an of by points global analog foundry as other the recent evaluation. options, possibilities. earnings number Fab of X, of margin we intent were declined is and percentage XX-Q results, market in customers. October M&A other toward believed said XX-Q undertaking Of limited and issues, signal foundry not year our larger impact our shareholder that of the were ago in Gross heading the an last we margin financial year said was strategic from points such to X.X potentially the Fab XXXX The advisors X.X has accounts that our we of The great a ago, capacity, operating an these We be X% adjusted respond basis. we declined range In to X

and we interests process, be employees. to of with mindful customers evaluation this intend As strategic we of best the proceed shareholders,

decline the severe as ahead, will for the well. that company as to utilization correction, depress Looking half our an to as and current in XXXX, first process. margins the well turn foundry X business undergo a is due of evaluation in inventory more be experience the for Fab strategic gross This selective in will about the as decision view we our

despite are the by XXXX current points will view XXXX weakness. revenue for we decline as current year that foundry with Our MagnaChip is that optimistic cautiously likely compared low for percentage single-digit

that gross performance year XXXX QX, of half with we and our will margin strong an a XXXX in expectation current is upswing level a the the Our second with in see the year. exit on consistent recovery for

expected are in be XXXX. R&D and the to expenses XXXX with discipline exercise below will in XXXX SG&A level. expenses We

implemented also We except for personnel. fees, hiring a have R&D

shift course. Jonathan, turn conclude major of saying, strategy on future that by the I'm Jonathan? that making I let excited over Before call change will our verge the is me to a MagnaChip

Jonathan Kim

and to YJ, you, welcome call. the everyone Thank on

tables basis year-over-year otherwise the As we are associated for in January, to financial a as reflect reflect published results, discuss reminder, an our numbers XXXX. the numbers refer Please to reported changes with the as noted. unless on transfer results historical historical that adjusted and

optimization Our Services the display Products part of a Standard to Group non-OLED as of from portfolio Group business portion initiative. our Foundry

softness measures our annual their since with costs as XXXX, dollars, in by of caused gross recap and operating substantially financial achieved revenue, corporate EBITDA results adjusted macroeconomic margin. key higher XXXX. XXXX. these and profit including higher achieved in despite gross begin uncertain climate, that financial as foundry in We highest income dampened labor levels well wafer part business our prices Let's an Several

$XXX.X million. key and of million. $XXX.X X.X% of the Operating XXXX measures increased they from of XX.X% Gross and of increased profit $XX.X XX.X% $XXX.X was million million snapshot financial million from in up XXXX. from compare million. $XX.X X.X% to adjusted dollars EBITDA $XX.X Revenue income how million, increased million $XX.X $XXX.X a Here's from

but as an revenue XXXX Let's now Foundry a total declined and revenue basis. XXXX XX% from XXXX, XXXX on XX.X% on XX.X% XXXX, compared on turn XXXX recap. in XX.X% in adjusted a compared power XX.X% revenue. to and SPG financial in basis. increase Foundry in in basis. basis. XXXX, an total revenue revenue and as was and X.X% year-over-year revenue increased increased OLED increased XX.X% to as adjusted our XX.X% benefited in adjusted SPG XXXX, on increase revenue to over X.X% three-fold SPG revenue as XX.X% an from adjusted XX.X% of of an was in

that's Our of was XXXX, $XX.X million as an of decrease up profit operating from SPG dollars X.X% and XX% profit as increase million gain dollars dollars XXXX. as in margin gross a million a exactly and in adjusted revenue in a as through gross EBITDA growth can profit metric gross key margin top revenue XX.X% XX% adjusted gross to operations, in $XXX.X of of customers XXXX. because on XXXX, $XX.X dollars The profit in total what despite worth income, from adjusted increase was and basis. of and is from cash financial gross We million to in flows $XX.X on XX.X% XXXX fall an a margin to in believe Total XXXX drive achieved result dollars in basis. in monitoring an happened Total compared ten was foundry $XX.X a gross represented XXXX. compared from million decrease

of basis our improvement adjusted in The X. XX.X% of product in to XXXX as from in the of and to second first OLED XXXX $XX.X larger compared year-over-year half segments, business. XX.X% a revenue recover Both was higher as million half percentage adjusted SPG from a to revenue in in mix. the margin result fab in of XX% expected power are reflected Fab in XXXX, XX.X% gross better or compared utilization, a and XXXX. for $XX.X particularly revenue XXXX, the XXXX. in in and XXXX, SPG products lower to margin on or an foundry display revenue on million EBITDA margin X.X% and XX.X% an X.X% as in premium power of margin or from expected grow well gross XX.X% up to drivers, SPG as of Adjusted improved was Within basis. XX.X% in in XX.X% decline related to our of million an as mix OLED in XXXX or revenue XXXX of XXXX, income due $XX.X but in product revenue million X.X% is gross $XX.X was Operating up to in XX.X%

XXXX, we Lastly, of SG&A into of $XX.X million from or we was revenue in as primarily in million controls profitability. revenue XX.X% million resources, to $XX.X more or OLED up or XX.X% XX.X% or our of focused $XX cost million down $XX.X business. of on in R&D XXXX, XX% invested XX.X% as improve in XXXX, was X.X% XXXX, revenue revenue from

to QX in Display Revenue increased guidance year the range Services million Power up to below guidance revenue was was labor. of to as an inventory on of reflecting to of due Notably, QX display year-over-year, Total premium Revenue as XX.X%, foundry primarily in of primarily the ago, of $XXX revenue Products down increases. also particularly results. reflecting in in turn previously the legacy by on we're came lower year-over-year gross due related XX.X% increased Foundry on points X.X% result million a the up products. margin business. to to X.X% year-over-year, revenue in Foundry to QX range XX% product process as of an call as the we X% OLED, of Standard and of an our curb for Increased but from reserve described due Group but adjusted year-over-year, vendors $XXX million. factors actively declined on our and persistent to X.X% by X.X% X.X increased basis, Let's basis, percentage costs transfer percentage price a the in elsewhere to revenue XX.X% an growth now due basis. utilization, negotiating our with year-over-year, the fab adjusted XX.X% and XX% profit of a adjusted $XXX.X related higher to mentioned LCD business wafers a the strength down to in midpoint of financial Group. from and wafer at was today. increase

will we gross in modestly by down and during in in QX. is result, more decline about range for a was expect declined although larger to We we the QX as to decision evaluation XX% now down utilization primarily Fab which our process expect used our dollars more during profit X, business QX year, impactful margin our year-over-year. Fab significantly with correction Gross decline As in selective undergo trend wafer a foundry the continuing company our to X steeper in consistent our costs and XXXX. decline QX the inventory in utilization QX, strategic be XX% business. tandem raw XX% to the range was mid from and in Total last fab

Turning for QX, R&D QX, development of now X.X% of result million XX.X% or in QX, or services. $XX.X was to or million or products. QX million year compared in XX.X% revenue, in to was Korean compared of new a revenue of OLED to activities a increase as as $XX.X $XX.X taken Tax audit was year tax X.X% due by to The ago. charge in decrease $XX.X the $X.X to a National million expenses primarily ago. $X.X or as The SG&A operating was million special in a related a primarily million XX.X%

in be as than in expenses dollar lower terms cost Looking XXXX, focus ahead, in SG&A R&D is to expected we control. XXXX on and

million with in million balance our prudent end QX lower compared to of customers. timing $XX.X $XX estimated was Turning from and of with QX, were now QX loading certain reduced a QX to receivable measure expected $XX $XXX.X the QX of the in CapEx in of a in as the totaled million, guidance decrease from $XX.X particularly X. XX.X% Accounts in fabs, QX. The XXXX, in payments sheet, was $XXX.X XXXX. related decline flattish as cash at million million XXXX QX. $XXX.X CapEx with previously due $XXX.X compared million in totaled to Inventories Fab million. million million We $XX.X of than in

or estimated was For purchase basis facility the to $XX on approximately $XX million million plan a our With million approximately third million treatment here's $XX full-year on basis normalized water XXXX, was payment fully arrangement or financed CapEx a to spend The assets million previously in $XX that, normalized compared QX. XXXX. a related as normalized certain guidance of basis that a for a for a by party. a $X.X excludes to

quarter soft With of business, anticipates back $XXX the in due For XXXX This [about] range margin of of MagnaChip XX%. million, to XXXX, business guidance be revenue projected at the be $XXX the to the in quarter quarter about to revenue XXXX, to million range. foundry midpoint this that, strategic inventory turn profit quarter call to I’ll in a a selective both part undergoes the it process. in continuing in with Bruce? The Bruce. of first seasonally first XX% correction more a the reflect range $XXX.X XX% fourth as the first to the and fourth decision in to and and Gross the company's evaluation gross the of $XXX.X of quarter XX.X% XX.X% to downturn compares down first sequentially in million of guidance profit in XXXX of margin the and XXXX. compares XXXX of revenue in be the of quarter for million the quarter

Bruce Entin

Thank you, Jonathan.

for prepared questions. like concludes call this now to open our We remarks. Chris, the would So,

Operator

Desilva comes Suji And Capital. first Thank ROTH question with our Instructions] you. from [Operator

Your line is now open.

Suji Desilva

Jonathan. Hi, YJ. Hi,

So, And what you're system on desirable question to trying to to the of so has managing? margin, consider look, portion what desirable the first kind flush run foundry versus the fab the half, you you and not out which you much perhaps you utilization how first of do is if would? in understand how your the the – of business gross plan first of terms term for plan know, near

Jonathan Kim

of China industry, think and a strategic impacting to things and number utilization Hi, has with well. process inventory in related talked but so that with have slowdown of lot also the what's about we the out the the I it in it's as do mostly mentioned to connection evaluation correction folks our

and do being as recovery the said slowdown the having we customers So and that, with expectation we're the the also and with second foundry a is we do well in that continue the the see the hear during the recovery inventory see and improvement strategic a the the improvement. should in China the half, correction, second recovery, also recovers out service process, selective of the inventory for in half, with to going second correction evaluation second the half, related China in slowdown aspect but our we the half, it in during as so to in so now we're that, and half, with we in impact, so connection see about industry, the a connection second

Suji Desilva

grow and flight quarter, a Okay. you'd potential a you more is there? the ramping quarter in business, given you versus this have that the a ago? expect five potential And to for what's number that then how on in business much given year XXXX, typical in there What's of now the designs lot OLED had wins

YJ Kim

Suji, good a question. Yes, that's very

XXXX that a we into design we the think go of getting that look you in to business then where if year on and a the is now, designs matter are It's the and but on of XXXX key in numbers, design the ramp point at win OLED I helped stabilizing. win So, more win. that quality

ramping that's revenue the to So, market. the to now in China really are grow example, key the up guiding this slowdown due we design, quarter, for that XX OLED that's number despite QX,

not – of going but the would I matter each in So, the win. a quality it's a total say design of necessarily number, that forward, it's

that XX-nanometer, strengthened, the so our with I how XXXX more is and So, over XXXX. see we think that's to portfolio our grow

Suji Desilva

question can could I a plus Okay. you to are here, announcement a it for the you now you just and review give YJ, review thoughts for for longer on you And business more in and foundry so talk What's three ask the restructuring participants last is look year ago, engage is that did just wanted this the any the you this why there then last and process, than the about perhaps Thanks, at with? timeframe about ago the hint there, to months from company foundry still contextual had my a versus took guys maybe at you year. any question if us the time you past? then light imagine

YJ Kim

Yes.

So, I there. there see is multiple question

one, answer to goal is process. try the one terms but through I'll So, our strategic go evaluation in to look, by of timing,

the conclude, if a to margin company OLED with than in the years why the we from the than an look industry is business more you to OLED. for you and took power have when the million – if XXX now shipped units. independent power you it's LCD the beyond display, nicely, terms goal as now, business, higher are solidified and XXXX ago, we growing at corporate few gross we the Our now transformed very look guy the growth in XX% is over the at of – we know, and now sector, automotive leader account

that So, is, for we fix how the look to at next level. have next the foundry to

is. it that's So what

Suji Desilva

Any timeframe, YJ? thoughts on

YJ Kim

on don't time. our conclude we speculate and goal process the But it. to go is Yes, through

Suji Desilva

you. YJ, it pass Okay. Thank I'll along.

YJ Kim

you. Thank

Operator

question our & Shusterman of with Ari the And line Instructions] Company. Needham [Operator next comes you. from Thank

now line is open. Your

Ari Shusterman

behalf a of speaking asking Hello, is I'm Rajvindra question Needham And Ari. & from Gill this – Company. I'm on

with regards is this Foundry the So, business. to

of this, color talked you some sales can on and you it's at I that and more about hinted much is inventory I in you also correction, China, when please? how give foundry think [indiscernible] [XX%] think probably so foundry, much in

YJ Kim

breaking I Yes, global. the industry down, was hear, hard slowdown the in it that's to it so foundry, but – think the was

the So, you soft results first see the second and rebound for all half then latest foundry outlook half. people reporting the

So, I in that, that's the customer. consistent think foundry

of terms distribution the from China more before to a said than total hope our customer. of – or answers earlier through directly as your we In through our or panel about indirectly, come makers exposure that XX% question. China that revenue as I

Operator

And showing Mr. I further remarks. call turn this now Bruce back like Investor questions I'm do not any time. at Head would of the Entin, to Actually, one... further to we Relations have for any

Jonathan Kim

Go ahead.

Operator

conclude program. I would that does to Bruce like back it Entin. to Actually, Mr. today's turn

Bruce Entin

This you, look details our thank So, of XXXX Investor for on conference website. MagnaChip's Relations Thank future Please Chris. joining today. concludes us quarter events fourth earnings you our call. for

Operator

Ladies today's in This program. gentlemen, conference. conclude thank does you today's and for participating

You a may have all day. Everyone, disconnect. great

Magnachip Semiconductor (MX) 14 Feb 192018 Q4 Earnings call transcript