MX - Earnings call transcript Q1 2019 | Magnachip Semiconductor Corporation

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Operator

Good day ladies and gentlemen and welcome to MagnaChip Semiconductor Corps First Quarter 2019 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 be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Investor of Head Entin, Relations. Bruce begin. Sir you may

Bruce Entin

us Thank financial MagnaChip's XX, joining quarter you thank you XXXX. and to results March discuss ended for for first the

in stock we quarter found be of company's site. today release today's first Web the and that Relations telephone The Web will the after releases earnings on information will be webcast call and be the access the release. available The market Investor shortly press year can on call closed earnings after site the the is one completion other provided of filed the replay for archived

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

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

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

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

YJ Kim

war point year. downdraft earnings provided. is market current and trade gradual foundry first out playing conditions second on the primarily soft Revenue demand products set about in standard disappointing, also due weak but for to the million $XX.X standard XXXX. severe year We all the from year stemming time stronger Welcome smartphone uncertainty typical February QX customer uncertainties. products we in of in group. records remain would in X%. of of foundry increased That scenario will from of power was million signals business on a QX notably of our down and customers business and to correction X% macro despite call. OLED a these OLED year first quarter around stabilizing power inventory for product market. half that $XX.X out a exceeded a to of revenue million Foundry line QX was levels but $XXX the both trends conference economy China, a revenue pointed revenue call to and improvement in products the a million XX.X% million ago, from DDICs was as in global General foundry pressure to $XXX.X revenue for guidance market The the the the QX DDIC everyone softening XX% $XXX our China's and of half $XX nearly guidance declined contributed and from by fears ago, weak of under due with million year-over-year seasonal in which of increased seasonality was weakness. the a QX to and QX but is forecasted, be scanner

that in of and was the more also taking to of Fab the business February strategic We business the QX result company. in foundry X decided selective undertaken as new process about be a evaluation foundry by

leveled have several down, worked remain business from will foundry inventories appears customer foundry the weak are being QX, to production. early slowly new in customers are and stage the off China products in While market

worse at now us. is downturn foundry least behind the of the it seems For

of we and Before foundry, me X. topic evaluation process the our Fab involving leave let strategic the address foundry business the

As larger earnings capacity. for We and X the is the our our XX% total foundry company's needs primarily of in of X the accounts QX process our Fab Fab [indiscernible] strategic the wafer of a reminder wafer announced first serves customers. approximately XXXX evaluation release.

experience be advisor. since financial We the track records. named our as work our intend interests are to of legal employees of firms process JPMorgan Weiss process. with the as meaningful it's our regarded we stakeholders when customers because interests We achieved. this Both We manner timely through all evaluation undertook advisor shareholders, to are best the we strategic provide market of milestones and broad Paul to in and our updates and global highly way mindful best the believe of in have a we successful and as intend

So please stay tuned.

Group Now XX% the $XXX.X or SPG in OLED or of of lower mid-range QX production first turning XX% was success in wins using OLED China OLED LCD and the demonstrates a for display in Display leading our X the a Products XX%. in in the Group. Korean of in their the our OLED from XX.X% drivers legacy in million started We brand. OLED and business Standard from XXXX. reducing smartphones as as new of QX awarded represented QX. and to XX% from makers revenue Eight about smartphone represented strategically smartphones launched drivers. of both major display well DDICs takeaways margin ago, DDICs to up SPG growth Standard segment which year quarter our represented QX the power Products compared in were also design OLED as contribution volume

OLED the industry's which efficient most DDICs. most with We process used manufactured also the display for is launched driver, industry's XX-nanometer power advanced technology

manufacturers flexibility smaller, more won electromagnetic to Our design quality the reducing nine DDIC. and at year. XX-nanometer by reality ins flexible, to as expected with OLED in reality and OLED and rigid, as for is our improve have expect bezel-less already begin latest smartphone by augmented accumulated leading XX-nanometer interference hole-type displays. in advanced seizing device smartphone such compared have XX-nanometer such display We the EMI to this display wins types displays our as portfolio of full is virtual with in two XX% now power currently models screen previous design We XX OLED XX% Korea XX by XX%. driver half foldable from generation design production. drive efficient and XX-nanometer The call maximizes and and With revenue and levels second or supports makers the China various Asia applications in

cycle accelerate MagnaChip. and OLED VR If need are will we a where with many has expect AR, a Looking technology. smartphone as for net potential this this ahead, hertz applications deployments XXX believe XG users spurs then the and analysts will we display such to positive aligned as upgrade be XG network well a

panel kicked definition off a project Korea to display market. a TV OLED Turning the We've tail-end OLED reach of for supplier of components TV market. production But are we a with years. extending several ultra XXXX. DDIC initial been the into a QX, develop to major scheduled for high TV for OLED fast in our the LCD now television market growing In major displays into maker the we new now for

and working lifetimes. TV's response high offer time, LCD product ratio luminescence, also large the a LED developing are fast on Micro micro very potential contrast excellent long next driver TVs. for for We generation

the develop Lastly, initiative our a HiDeep OLED during the and microelectronics, form display to fingerprint technologies. Melfas MagnaChip interface optimize position with QX, to marketplace. ELAN first to functionality platform solutions will are Each an partners, human competitive three in we've also standardize smart based stylus of upon and range announced. innovative collaborate we touch, with improve OLED the products and ecosystem in solutions of goal wide the

for and standard power of beyond DDICs, automotive also IoT market power console automotive. mobile our collaboration to devices ideal products applications voltage motors into intend products. be smartphone side numbers new but vehicles We because an extend electric applications consume infotainment, especially are also believe the and high We huge electric attractive for and OLED will including mirrors

ago a XX% revenue of with to XXXX. the business. quarter in power QX of of let's power the increased a compared in Revenue XX% year that XX% accounted nearly product of from review nearly from first and QX power premium Speaking segment, as products standard turn for

fab lithium in battery protect batteries smartphones. power standard ion product helps Our

We and Korea are in working on China. makers smartphone nearly different battery-related a projects for dozen

have the battery maker. We share one for fab the market Korean leading number at smartphone a

in that to one-high design voltage to full on continue make a wins for two XXXX. the automotive products in also power to go through standard that we auto awarded in five a power We came heels automotive manufacturer new of as expect of applications major and qualification sector designs being XXXX discrete won we development shipment inroads QX started the

to devices We XXXX. expect production on these begin in

XXXX X% will sharp of to account automotive mainly revenue XXXX believe that the XX% continue our discrete approximately power in in to growth due in market. electric expected vehicle We the sector for and

like I'd seems to half product and in for year particularly revenue to revenue products about DDIC fueled sequentially grow XX% double revenue QX, improvement possible. is QX but by increase second Korea. a for digits Foundry for sequentially. currently in business anticipated year. our full the customer from our the OLED outlook QX. gradual strong expected growth from power Revenue share Now to smartphones standard flattish OLED is QX current expect standard and robust to We the expected DDICs in demand be is by now in of China

On full foundry. revenue with points cautiously as in we current view in decline to call of the more digit now weakness earnings year. will mid-single QX are percentage likely said than Turning optimistic no our our XXXX, we despite by that February, in XXXX compared

to While our quarter units, three year of that vary remain may XXXX. business each distribution cautiously by for optimistic we revenue this continue of for

Q&A. to the back turn I'll for the Jonathan call over Jonathan? come and Now,

Jonathan Kim

and the everyone Thank welcome you call. YJ to on

period offset then foundry by Let's $XXX.X million part and million in in of year correction declined in primarily X.X% and do to market same to from ago Products. Foundry recap conditions $XXX.X Standard million due uncertainties. in inventory an million ago of due revenue QX metrics. from in of softening customers a revenue increase global $XX.X business a segment XX.X% the stemming from by declined brief a QX year revenue by from revenue $XX.X decline profitability in a Revenue discuss macroeconomic

strategic the of a of by selective and the As about mentioned Fab Revenue business previously, a premium increase primarily applications. our more in a from Korean our of margin we MOSFETs as an reduction and high-end as and LCD was foundry due were Chinese a such million XX.X% decline up X. $XXX.X of to introduction new the and Group year display products Standard evaluation IGBTs QX, Products XX.X% This and driver down million in business OLEDs new was ICs the totaled part smartphones business. primarily industrial The of million result offset due by from increase in and was strategic increase $X.X XXXX. a ago to manufacturers ago. QX to TV in related lower XX% power OLED from demand revenue higher in This $XX.X LCD also for QX business mobile year QX for

mid utilization profit we drop within our Gross with QX for foundry compared in QX million compared gradual margin high was Turning year in million factors the XX.X% Notably XX% of The X.X% QX $X.X XXXX this now XX% Total in year services negotiations in metrics. to mid our was utilization stabilized Standard and gross QX affected gross margin high range margin due XXXX. was to fab Group down in Products margin legacy in QX Standard the for impacted $XX.X ago. an the both XX%. profitability trend fab believe show during those utilization million gross QX by in was a Gross XX% Gross profit call. group QX Group. in the of QX gross will raw year. in in in XX.X% ago. Products for the group $XX.X A in to flat wafer We was down foundry to XX% range in elsewhere expected to second a from ago. and in QX compared of costs was on of wafer XX.X% company Products compared the Group in display to Standard QX to services as guidance to to with XX.X% a a fab margin following expect was related improvement to Total to XX.X% margin modest product. inventory vendors. described the profit reserve significant Gross XXXX costs to half improvement QX year profit

In business fab factor. related was a a revenue lower LCD addition, of utilization lower also in reduction strategic contributing in our to part margin

of SG&A XX.X% now claim or operating was on settle a compared was flattish SG&A or payment one-time development $XX.X control. be in was $XX.X% R&D with XXXX to expenses revenue are million activities. a XX.X% compared million QX in of normalized and OLED $XX.X revenue $XX or Turning year-over-year R&D in than or lower about as increase in excluding million year customer. basis XXXX. to to to expected flat million ago. on QX in $XX.X as continue QX. we as a to a was focus a SG&A to related The Both XXXX cost to prior XX.X%

primarily caused QX in balance gross primarily was certain anticipated customers balance will to QX dollars million the in We cash from to as totaled Turning due end increase to now $XXX.X increase and million $XXX.X mainly drop significant payments the profit products. in the in in related up the on collected due due payments $XX was totaled XX.X% the million and attributable as in decline by fab of increase We of a utilization. $XX.X Accounts anticipated profit QX OLED million XXXX. CapEx end the million of a million were in of in $X.X as during weekend from in timing customer XXXX. to week provide XX% QX. to power compared demand of an at XXXX $XX.X XXXX QX anticipate standard XXXX $XX.X an was to in compared to a gross Inventories the CapEx quarter $XX.X made paid sheet, Over increase XXXX. fell CapEx cash cash meet our will from receivable dollars. million in than an that, lower first With a for significant QX million a increase primarily here's million. on expenditures portion for QX normalized approximately QX. the basis deployed guidance for requirement of was and which but basis was QX XXXX, for a on CapEx capital QX XXXX normalized our be in in $XX XXXX XX.X% QX

with that, improvement sequential compared up business first Bruce. recorded compared the foundry second the reflects flattish XXXX. to the the With quarter quarter second XX% standard revenue be second to revenue $XXX in in and XX% Revenue in revenue of $XXX.X of stabilized. as guidance XX% double-digit the show product has to will million and expectation range anticipates of XX.X% MagnaChip XXXX, profit when revenue first the margin will be margin XXXX million fab XXXX. that Gross XX.X% the million XXXX in guidance of of to million the foundry second QX Gross of to back compared to of I'll be the the to utilization range quarter call of $XXX as turn range For with Bruce? projected the as in midpoint $XXX.X in in that of year-on-year expectation the compared quarter the and an quarter XX.X% down reflects XXXX. revenue the quarter when for

Bruce Entin

Thank you, Jonathan.

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

Operator

comes Our sir. ROTH Desilva from Capital. of from Instructions] Yes [Operator first the question line Suji

may You begin.

Suji Desilva

Hi, YJ. on the Congratulations recovery. Jon. Hi,

guys targeting are and You for here stabilization foundry.

win and how expand versus the forward? shaping XX-nanometer here I'm move that position bunch how and of it have on the you wins the share on your will will of but footprint curious up a for profile, OLED sort So the things it have sustain side, and are current that or you pipeline going looks

YJ Kim

Suji. Thank Hi, you.

mentioned another came did XX-nanometer today, in QX, One in have far. one wins OLED we just up you as April. design So we two to so

design have to continue progress and So, wins. we

device As months we few sample ago. ago month that you or a a just know

production AR, begin that design design to it we the with about improves expect more and things is also our critical industry, efficient, in XX-nanometer is the is -- to and quality XX-nanometer the XX% we'll ultra has power this need before of definition and in What's We And by do this hope application high see foldable what second to half smartphone power year. you I said on like that. wins. most see EMI lowest think VR like to the this big what the the reduce which

are to new see that that good we we that's going design So excited we have platform going a win forward. generate

Suji Desilva

some driver of on Do impacting initial to then, you this exposed China that seeing is you, OLED of are And a at ramps? new sort of your the newer down few situation the you phones existing and position. Okay. that, find that how's program smartphone are that the point inventory after months working

YJ Kim

than QX, actually you So stronger a OLED our had obviously we if at sales. expected look

translates to models we new or smartphones, being had we launched. that what in there phones nine QX. So eight new are said about that is Then launched

provides So platform. the good new there on rigid momentum price the still point the XX-nanometer for phones and is very

So I a think phenomenon. we of have that kind

Suji Desilva

Okay. taken And another sustainable you've here your with path amount there that from in is current level that forward million, guidance? a business, then, step display on level or the that [nano-LED] is under some [ph] XX action in just that the comprehended down is

YJ Kim

I this For around think assume is million it's to or for good to safe -- think that not now, safe it's year. XX level I

Suji Desilva

customers. on that typical foundry all conditions given you taking in for is question under the quarter actions state might can And operating you're utilization the now you target think similar? us the versus what then we you're Okay. What's side, activity, this what's that the gave experiencing utilization the about steady or one the be

YJ Kim

we but throughout said think see improvement we we half. second today I can think I -- a that gradual don't number, exact remarked say as

to hope the utilization. we keep increasing So

Suji Desilva

Okay. Thanks Fair enough. right. All guys.

YJ Kim

you. Thank

Operator

line moment. the Ari from our And Shusterman. question you. comes of Thank next One

Ari Shusterman

Congrats Jonathan. the YJ. quarter. good Hey, Hey, on

strategic bidding you business for it. Do you most it you you SK to of on to -- less are there considering guys rumor have Can been is your evaluation? have this And your foundry likely I also for stabilized think a guess well? as part just Hynix comment going business, part. as buying -- you has the that Do this recently or since one So, any sell considering information? that

YJ Kim

X-inch operational Well, why I and our doing think review improve financial maximize But these there's shareholder that look rumors, this foundry of a evaluation a can't team you continue questions really asset couple and the and of I'm our generate it to tends and operation strategic speculation expect strategic on fair is we to specialty the are sure business amount you'd performance and business. I is And of we understand there. our value a but comment fab interest. internally efficiencies

Ari Shusterman

Yes. of you. past sort unit Do Thank you. the half Okay. of the guys terms in to of And transitioning that? few market. stabilization China in and orders like anything or you Any just over on update that months any see in smartphone second XXXX? Thank

YJ Kim

the Could saying what's second I in smartphone understand question? for the your China? you Are outlook half,

Ari Shusterman

Correct.

YJ Kim

one to obviously QX, Well, we Okay. a we grow by what quarter know. DDIC you did guide time XX%. we say looking And as are OLED at that is

said on also overall Standard about feel revenue Products Group good OLED. growing and the the year We on we

more give next when color call will we second I So on go half. the to the earnings

Ari Shusterman

Thank Okay. you.

YJ Kim

you. Thank

Operator

Citi. comes Atif [Operator question you. Malik next from of from Instructions] Our Thank line the

You may begin.

Atif Malik

in that there U.S.-China buying component the in your is for maker I of on pull that in OLED of job taking smartphone any forward questions of speculation in business some be YJ components a kind one Hi. could makers market. the Thanks question There the in China. them environment. of seeing some and for my Are Chinese some situation. tough handset that tariff demand particular is good have a handset light a of you

YJ Kim

that question. have multiple from of I well. comments we continue we know what a wins Atif, grow new maker, the from Huawei And with thank as kind as was vendor. mean who wins and six these well I in strong. you. as have think of but That's about the in interesting said, knows, But Chinese design comes number also revenue a concern you in we heard very to industry we as But China smartphone growing design I far new designs has growth as I success. think been with so

beyond but that speculate. I So, cannot

Atif Malik

a you an started asking mix to it's And second How second the for Jonathan different the your and Understood. utilization display, question good see pointed improving and year? margins. not coming half cost as the the in parts the out. power The that now I'm on margins of wafer but year, about the of standards, then, to we just pricing think gross moving outlook should directionally the between wafers in come foundries for the half down for of gross down.

Jonathan Kim

Atif, for question. you that thank

of year really we that we impacted And and are business. and also by business going that in half QX foundry to discussed utilization to mentioned As be we've the related the the first stabilizing. primarily decline see

second as And gross the will should half, products we the And -- the so recovering cost we are an margin well. utilization to as improvement see in in also we fixed as the improves, decreased. allocation be

And impact the up. be of so, margin therefore, will gross trending

gross continue increase directionally, our to margin will in second So, the half.

Atif Malik

Thank you.

Operator

to And for you. I'd time. like the remarks. back Mr. to at turn no Entin this Bruce further showing I'm closing questions call Thank

Bruce Entin

Thank Victor. Okay. you,

our earnings call. today. concludes Please Investor Web for site. our this you Relations conference MagnaChip's XXXX details on future Thank us So for events joining look quarter first of

Operator

And Everyone today's have This a the does great you Ladies disconnect. for conference. you program. thank participating conclude all and may gentlemen, in day.

Magnachip Semiconductor (MX) 30 Apr 192019 Q1 Earnings call transcript