MX - Earnings call transcript Q1 2020 | Magnachip Semiconductor Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Q1 2020 MagnaChip Semiconductor corporate earnings conference call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will a question-and-session. [Operator Instructions]. Please be advised that today's call is being recorded. Instructions]. [Operator

like Bruce conference Relations. Entin, Please ahead, now speaker to Thank hand go Mr. today, Head sir. to would over the your you. I of Investor

Bruce Entin

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

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

Officer. today Chief Shin prepared company's Kim, operations. MagnaChip's the of There will are market Shin recent following continuing Executive operating me a treatment performance Young session provide discontinued for will YJ the and will Chief today's categories YJ accounting our remarks. product of Q&A and discuss and Joining overview Accounting an outlook Young Officer Park, be our and

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

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

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

turn call will Kim. I YJ? YJ over to the now

YJ Kim

conference and Bruce welcome XXXX everyone QX the to call. Thanks on

MagnaChip, manner minimized we our have COVID-XX impacted the seems Korea are whose people At to all, in spread. global lives fortunate to handled out that hearts a by its of have been pandemic. that First go the all those breakout

on started and disruptions seasonal a well executed the global pandemic. softness solid XXXX in We despite MagnaChip results high typical and COVID-XX market caused QX note. by delivered

million call guided between on to profit XX, the recall, margin We in March our our range QX million February foundry guidance revenue XX% revenue $XXX high kept We guidance due on revenue and business. million we $XXX XX $XXX expected and updated to end raised QX $XXX our on gross you stronger earnings between power and OLED million profit to the and weakness despite XX%. low-end of and in our than same. the margin to If to businesses gross the

than more financial as the a how our account Shin provide foundry different reporting definitive overview rules. and discontinued present XX under Accounting Fab signed rules statements agreement X. the our business March the we quarters we accounting we that we business, business previous to sell of operation accounting Fab The Chief Officer, foundry look detailed will a The in power QX, about business now financial on govern Young, operations. for includes in released now continuing in The change business X beginning because display today a the came statements. when and soon

our detect own are the guidance. of and and high at inventories levels do currently a Meantime, for revenue inventories our services non-GAAP term foundry QX quarter in are channels highest in $XXX level That products combined updated hit sales demand. to meet we that excess and our pleased standard from first was revenue the XX end We years met our near basis. on million not

XX.X% XX%. year-over-year standard gross margin was profit and the from guidance Revenue was products the exceeded million, $XX profit which and gross business was end high operations gross combined discontinued range. profit and from up continuing million margin XX.X%, foundry Revenue non-GAAP The from of margin was XX.X%. was the $XXX.X

give Now Fab to an on I to sell would foundry X. the like update agreement you the business and definitive

recall, $XXX.X in was million the includes million transferred $XXX the and X,XXX which liabilities employees approximately with October will $XX to value cash transaction you September, time on track close in severance that remains transaction along approximately million, in If The buyer. frame. be to accrued schedule on the

foundry that we worth rationale to few the delay tied and strategic explicit that be or that cause to a contains QX approval. an cancel worth when noting selling minutes. noting Fab condition results is no further any closing the condition COVID-XX business the about a foundry for definitive discuss there transaction. the It's cannot X regulatory comment Also I agreement will is in

new at Now accounted starting continuing closer XX.X% OLED year-over-year up which was businesses, our be drivers look would business a with $XX.X said the first let's take call XX% about launched XXXX. of and in our X.X% total with expected revenue QX we nine OLED we for million, the smartphones DDIC On OLED, half sequentially. our display QX. in earnings display in February,

increase driver in achieved low or direct Design ago. a OLED smartphones future design wins good aren't estimate a XX than wins definitely typically these QX revenue, a QX were portfolio. for QX and This total XX OLED DDIC is in eight in We period went Now launched helps soft. XXXX year pilot indicator a production. of market revenue seasonally of that a into to ninth same doubling from the smartphones the our always models, we new in from XX explain XXXX indicator Xx the QX of to new but are our period power in more the just Of first X.X% half. appeal

XX size drivers, which of is twice our of in XXXX. have the display portfolio QX OLED now nearly We

us a in drop-off Lastly, maker display QX Korean benefit with our multiple new our was launched brands saw This in by offset QX. serving effort smartphone smartphone the needs drivers to that new the to outbreak, launch of in again QX. in OLED smartphone COVID-XX makers QX the We but decline in market smartphone geography Many as will was signs a will of the China show a from beginning diversification China to benefit due multiple models models is DDICs. us in OLED with recovery.

the our XG, this in to activity following up XXXX. XX design XXXX trends see will throughout for business, drives We design expect OLED XX of phones wins our we in momentum. were QX, gain for XG and heat XX-nanometer

accounted drivers XX% for Our QX. our represents six nearly XX-nanometer XX% design display over wins portfolio of driver OLED and in of

powered design for strong devices lowest XX-nanometer see devices Our on continuing are this to which momentum be product why family. we the is market, growing

are gaining win are to We trend. for for smartphones and this XXXHz year capitalize targeted see design this users. more on well-positioned game we Gaming activity popularity smartphones

have have rate the appear refresh important on capability reach We the refresh which game four rates taped a and are XX-nanometer aimed screen. smoother we product display to out at rate XXXHz gamers drivers high-end also XXXHz. Higher smartphones. We another play times, because recently make of to display with XXXHz response faster with

solutions behind smartphone some best smartphones are also OLED world's of important with cameras, these Our feature. an increasingly

on Flexible the OLED design wins way up. are

in package DDICs. from in be number the our is is wins for on We all because This thus using cost wins wins can of are the of is more higher. plastic design margin nearly becoming Of seeing chip profit XXXX. those, good lower, the prevalent. Design design QX tripled packaging us flexible COP with more packaging

for OLED auto.

development go automotive opportunity. OLED XXXX. first auto which kicked into a represents now in We have We OLED promising for the production we long up half products, expect believe to market term

growth. targeted DDIC version released MicroLED, a enhanced an an for represents MicroLED XXXX. TV opportunity of we for production market MicroLED first half have in untapped

to in let's other as The and in offices in communications China power. a were primarily revenue in and our products but business. million of MOSFETs power period to year-over-year, market for due impacted and softness XX.X% performed Power factories sequentially China shut $XX.X outbreak QX. decline Now turn Power IC and in down COVID-XX an due sharp to softness saw declined extended QX, we e-bikes. SuperJunction wireless well in XX.X%

more sequentially to in level to QX XXXX. the products power XX% be news mix of to good on rapidly growing to we QX Power appears spot and is mid-XX% power revenue, QX. the recovery is revenue in the from a market, in power in QX that that by QX double-digit Despite earphone improves. decline expect Under in the bright China for demand Korean in new for premium power FETs the compared percentage product is as products COVID-XX represented The than wireless now battery road ramping grow especially our for OEMs.

segment auto of Two for the electric off in hybrid opportunity. hybrid wins EV growing portfolio adding to vehicle EV segment. a for projects QX, new design and kicked

auto involved in several XX,XXX-hour recall, testing may are you suppliers. stages As we with qualification

ahead. years opportunity represent will expect We our growth in auto segment the power for business the a EV meaningful

offset while Now from group. to wireless XXXX, revenue trends, turning and XX.X% seasonal year-over-year to due the the were from part increased foundry services soft certain has in markets group digital Foundry and communication to including tablet pandemic. also medical services flattish computing macroeconomic like by was consumer was demand devices, QX came respirators from the home for Demand as and segments due thermometers. working declines and the

focus, now intensive, with requires Hence, will Fab with our a scalability. turned it strategic grow continuous at new sell we but could foundry is term. long and and X believe Foundry maximizing have sales value force, in R&D owners. capital aimed that separate a was business shareholder The business the quarter, highly over business cyclical, decision dedicated this and good a which to

Board management products, foundry to financial both. Given made resources, our size it and not believe either but focus our or both and on standard sense more

also foundry From a on value. transform improve an the term the longer products sale X and term the us power allow streamlined financial The of to and pure-play allow goals operational growth to shareholder overall and Fab of maximize exclusive to focused company in display opportunities profitability businesses. business near point and the view, sale set us into

It impact here are on and near Putting next the all financial metrics revenue growth. priorities aside term the profitable focused years. are with we of over few achieving key starts COVID-XX,

to growth and Our R&D goal achieve continued through revenue focused product profitable and number innovation. sustainable robust, is one

gross We cash to will past quarters flow as contribute net four we focus our aim key generating operating cash on for for to and higher the gross increasing have dollars margin flow, goal. done margin is

We mean. will run lean and

we Operating double discipline. streamlined and targeted standard from OpEx a exercise rightsize financial company, will income product As current levels. to

double to is next comp few excludes to Our operating years. which above for longer goal stock-based the term in XX% income, adjusted

We largely of this we approximately which expenses, losses. gains will in balance and or $XX By million currency by from income net million, improve sheet. the foreign interest time impact next will $XX should year, non-cash delever strengthen the freed be excluding

Day Fab EBITDA on information after detailed we we Adjusted our goal without business Analyst go made the and to as foundry be and and Fab achievable sale X. forma provide the foundry X. pro We will the models business more of close margin to This hold more percentage increase. forward plan an financial

help make Now Many work separate we whom let Each began workforce at areas our our and me the take in a in investors fabs use about of in disinfect are pandemic. we that asked protect are where we cross and dealing workers and steps how majority COVID-XX have MagnaChip. few avoid managing all require how to vast We serious to view Korea. we our us the employees of to February entrances gather to contamination. employees, in office day, it fab comments tend with

to We have for employees. employee cafeteria the in partitions plexiglass spaces protected also installed create

employees and any taken an mask wear and employee Forehead social time each enters or hands temperatures and are fabs face a of distancing. sanitized practice our offices are

teams In have home ultra-fine to in have Semi-HEPA particles critical a of our functions and avoid system alternating to out capable for implemented filtering or office, we at filter days we whole those work air management. sidelining Seoul upgraded

ongoing serve leave paid all care for extraordinary sent area for provided in our during their severely the employees packages fab to home. to that a our I this customers have We them period. affected their employees were and thank dedication

Turning now chain. supply our to

at now are our at separate assembly generation Our our Korea Both manufacture Korea new operating operating foundries a levels. two subcontractors external China location normal and been drivers. China levels operational. used test in sub-contractors display have XX OLED now displays vulnerabilities. Fab fully hold and normal as is are in in Likewise, to and of operating so outside We months as also monitor in closely inventory to and Korea The have unexpected potential only manufacturing link, been events. we supply X X an to normal facilities two levels. prepare it to at for strong its continue To-date, extra chain weakest will Fab mitigate our foundries

prepared business business created our outlook. are to now significant today have has to now than press challenges, confront for to release and visibility refer Please Turning financial QX reduced ever our guidance. them. we issued the better but COVID-XX we before

transformation position report to emphasize I years over business growth. are forward continue up, to profitable we progress and sum to will shared earlier I our sustainable To would you look plan. undertaking and few the business our the with priorities deliver us better execute we our next like as that to

and Now I to Shin will come Shin over turn back Young? for Young the call Q&A.

Shin Young Park

YJ. you Thank

the Let's accounting review continuing for discontinued and treatment operations. the

very EPS As past. combined in basis. see earnings on is the quarter prudent at the have in foundry look we close look financial what way you different to statements can reported you calculate need our to release, first that Until X, business and a Fab the non-GAAP our non-GAAP the from sale of we it

foundry and foundry belong as that beginning assumptions held The in the and and is discontinued and foundry standard business this foundry the To Fab are X the group for balance our as this foundry OpEx and the sheet. services do mainly of have are a shown separately on business the that services the out X. allocation business we assets quarter and liabilities does group carving results for business. products What operational accounted from we applied liabilities the sale this essentially is those certain operation our and to between Fab to carve-out, relating assets for

approximately we adjustment instance, is be the allocation a any of for of to applicable. an as of as If through For list employees to the the used payroll transferred employees a make X,XXX change we closing, list to will cost. there basis

our of located and Fab in of certain provide business will transitional sale thereafter, period foundry and the buyer manufactured foundry which the in Fab Gumi, services X of is we consummation to Korea. fabrication a products the for Following foundry time facility for X,

foundry For the transitional discontinued the to at of to revenue Fab prior recorded are cost derived in both services foundry by continuing services the group period closing, from margin. businesses, providing resulting in X no and we

the reserves sales businesses transition foundry this X from cost Fab of are costs on together. will accounting Fab when of called new are operations statements eliminated and see of foundry of sales such, and Because sales As services transitional the treatment, net services. you combined X lines two

that extrapolate as expenses between continuing not shared would mind XXX% rules Keep operations general accounting shared the get level that This discontinued of it would in be into and to accounting from dictate for foundry the in lumped expenses qualify accurate I are why overhead continuing reporting the reasonably into continuing operations operations discontinued to direct expenses this bucket. of under corporate future. services overhead, is like the entity. discontinued the as inclusion ongoing that of in note segregated not group rules. are services corporate operating Indirect that the such general operations cost incurred are included operations by part expenses,

instead not ongoing expected ongoing are the in the operations that discontinued expenses included and costs to after to Generally, results and date reporting disclosure should continue entity of the entity. should allocated be in be

services will legal be rightsized. transfer to as services services group. allocated our to be the These debt expenses the be foundry obligations. expenses audit, types fees overall professional allocated for foundry cannot group do the consulting, we of not For for third-party cannot Interest instance, company

none intercompany As continuing loss currency are loans our absorbed of term transferred P&L. related the operations gain long our or either, in foreign

the our denominated to reminder, rate and Dutch or and by term a exchange affected currency in between associated gain which the of net is Won Dollar. subsidiary, with a Korean loans changes intercompany long our Dollars our As U.S. in by loss substantial is Korean portion foreign the are subsidiary U.S.

operations, with net depreciated the year yardstick a Dollar. loss business basis a have non-cash on relevant net Korean the a standard ago this otherwise or U.S. appear loss as Fab compared measure to products foreign of to aforementioned for XXXX continuing known necessarily deepened X, not as of the GAAP But plus relative the Won Therefore, business QX is because is financial our item. performance a gain currency from

Bruce? back to call the turn will I that, Bruce. With

Bruce Entin

and YJ you, Thank Young. Shin

prepared the to like questions. that, So open concludes Crystal, call our for remarks. this now we With

Operator

[Operator Instructions].

De question from Capital. the comes of first The ROTH Silva line Suji from

open. question. is your Please line ask Your

Suji De Silva

execution a environment. on congratulations Hello. YJ, in challenging Young, Shin the

YJ Kim

Thank you.

Suji De Silva

a little Yes. There's static.

Let know can well. hear if me me you

market, So the demand, Anything, in there helpful. you since the China the trends? seeing May, terms April, would any color YJ, early are what smartphone maybe March, quarter closed, of late be week-to-week

YJ Kim

expecting the today, mean XX. in launch wins. is heard you uptick As first new that I the we We product design nine in doubled there to were of are reason half. Part activities

in pleased very win So design report to QX. we are our

wins. design win are we about in we new excited QX. to some continue that more We of And launched the phones

QX. products nine we to expected in be to new have So will launch

And that one and market. through think the is think are to we is So revenue the the I innovation recovering. that's seeing also way what product we market recover in

Suji De Silva

Okay. seeing impact Are benefit? COVID, emphasizing OEMs And of Are of the weaker, the mix? with maybe XG OLED you are the you providers smartphone upgrades smartphone that market increase being in seeing in any environment? any market, this perhaps overall service the OLED and

YJ Kim

just I what the you XG XX said, out of were mean smartphones. today, QX, if for we wins even look in design targeted XX

see And if product the nine we is because our XX. fact, has XG increased you the on definitely to it momentum. uptick XX, in legacy, So include, portfolio from

the number So we of have portfolio. the doubled

So to the there I OLED. the is that momentum going think

Suji De Silva

the to the to going to power Would you recovery and the you portfolio further inorganic premium the stay here the sense makes more? improve say high seeing are grow product then Is would growth And mix be year? here? of even the segment, out Okay. segment plays And here. increase continue power and effort premium the how that rest

YJ Kim

Yes.

non-premium will there be Our the and well. also more margins. portfolio demand the is the improving product as the recovers, on laser as market focus But

both in grow So we to revenue. segments terms of expect

Suji De Silva

I am forward, last the understand have we makes can for overall allocated So OpEx, the Maybe of that going OpEx? given that go-forward Young. what to terms will you of standard portion to Shin the of sense. understand, trying perhaps rate products versus question be The sort non-GAAP Well, Okay. OpEx? in run

Shin Young Park

That's gave first but flattish last quarter the half like last right. year, don't Understood. repeat be of earnings The for I We of can the second with OpEx would OpEx actually we the whole year's. half XXXX comment that the call. forecast for

the and if stay to And the to split really would should business. as use object between are your XXXX of discontinued QX going that not proxy hold So products also, I see true. you of the standard kind

Suji De Silva

rate right? Is that sense, that So makes Shin Young. run

Shin Young Park

not I mean, standard Yes. use object if I would no, you ratio, yes.

Suji De Silva

that. the appreciate on the I color. Understood. again, Thanks congratulations for And Thanks. progress.

YJ Kim

Thank you.

Operator

[Operator Instructions].

Your the next from Needham. Rajvi line of question from Gill comes

line Your is open.

Rajvi Gill

Yes. Thanks.

You might on getting have logistics. on of touched of on terms a lot the issues call, but call this, this in there's

the So think If you you YJ, operating about next time repeat operating talked in of just I of income, frame? you all adjusted margin, what part talk the repeat years. -- about, the the few double can those this that? the expense the reduction, you What will gross it, are Can XX% interest in income can the numbers?

YJ Kim

Sure.

issues. I some hearing had Sorry,

the So income. on operating

to operating target current So from income, we double levels.

adjusted long for income, is few to comp double excludes next XX% the stock-based operating in goal which Our term years. the about to

So said that's we exactly. what

Rajvi Gill

income now? double --? I said the foundry mean and it the What's operating it's apples is current now You oranges. What years. ex from

YJ Kim

It's apple-to-apple about X% on base.

Rajvi Gill

the yes, to on so XX% well, a about gross for, gross gross be what margin XX% margin you of Is guided go-forward basis? this going margin? And to kind Okay.

YJ Kim

base. combined a For

Rajvi Gill

the margin combined, and What for OLED gross XX% and basis? go is and which gross Is power power. for margin a forward for For power? the implies a that OLED about on display

YJ Kim

those pro provided the We today haven't forma. details on

Rajvi Gill

Okay.

OpEx of this $XXX.X for the was million foundry. excluding QX million the $XX.X revenue and And so

how how the is to $X.X of long million modeling segments going rate model In transitional as And standalone of that that terms and $XXX be growth two forward? we that? I for top the X do whatever Fab revenue the be? the for should is And going million service, of on business our

YJ Kim

Yes.

than don't special a quarter up, because you a situation. know, So as more we give

next on more a model. the year, there than on next the the transition this on you more But for similar expect forecast But Analyst the how more think give portion. the plays curve will of that will on a out but I service few could on years. we Day years, ongoing to we be you years Analyst couple depth have model, give few for Day

Rajvi Gill

going for date Day when And be? set a the Have is it? to Analyst you

YJ Kim

close be Yes. X we We Fab said have And frame. that September, the going the transaction. after of X to Fab said we will it's transaction, October it time

Rajvi Gill

sorry, And then also, you I go thought. mentioned your am ahead. Finish

YJ Kim

important will thing, that thing you strengthen other sheet. and delever the balance is the gave And we we

this you non-cash gains expenses, by income be which income of by interest operating to in is $XX we the as million, or foreign are approximately time going freed top of will this the So impact largely $XX And interest next should year, excluding currency losses. improve the that million we from generate. net expense on know,

Rajvi Gill

Right.

Does So over transfer special when that's income few into number? years, any company? kind to are X,XXX or savings operating of are doing the about, next it of the the comp, essentially of is include the employees this XX% factored I you that majority projecting purpose you additional guess, also stock-based the the ex the

YJ Kim

completed after the the in transaction saving that we next is are and to additional going execute years. improvement and few This is

are all an about So even as that Because X%. we said adjusted I basis, today, apple-to-apple, in. that's on before, baked

a other So lot perform to of we shareholder value. there be maximize to improvement is going going are to

Operator

further I back conference time, this am showing no sir. the speaker. at I like to turn would [Operator the to Instructions]. questions

Bruce Entin

Okay.

Please look for details Investor website. of So quarter thank first on events earnings you, Crystal. XXXX call. conference future concludes MagnaChip's This our Relations

to we would like Before I end, welcome Ms.

of you. XX-year Relations. Silicon forward IR as Valley, she is She who IR Investor an replaces all veteran in me Silicon to pro in looks of Valley a meeting Head and Jeong, So-Yeon

thanks time home working his cheering over time side-by-side be the from sidelines. YJ, past and at I me, the MagnaChip and less five more enjoyed ride the have had will time, a with As of years. to the my for I Board. spending on great airplanes for everyone on team honor and

you. thank us Operator, today. Thank you for joining

Operator

Ladies Thank concludes call. conference participating. you this gentlemen, for and today's

disconnect. now may You

Magnachip Semiconductor (MX) 10 May 202020 Q1 Earnings call transcript