MX - Earnings call transcript Q3 2020 | Magnachip Semiconductor Corporation

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Operator

Good day, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to the Quarter Three 2020 MagnaChip Semiconductor Corporation Earnings Conference Call. All lines have been place on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-and answer session. [Operator Instructions] Thank you. pleasure the my Ms. over now is to conference turn to It

Jeong. ahead. please So-Yeon go Ma’am,

So-Yeon Jeong

And you quarter you. financial XXXX. Thank thank results discuss us for MagnaChip's to the third ended XX, everyone September for joining

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

business Joining are review financial and for today YJ Q&A Officer; Financial There Young the Chief Executive results Officer. the guidance a provide be quarter quarter. and session and Young remarks. will fourth discuss me following recent for prepared overview Kim, our will company’s the Chief YJ will Woo, the and MagnaChip’s performance operating

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

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

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

YJ Kim

and related the the X inventory non-GAAP these a negatively together one-time In of U.S. healthy from X with our of in recovery and for of impacted environment. call a per adhering Power our excess backdrop two market your range, the supply one-time the and cents. our and of actively profit impacted was protocols We Gross achieved the by the trade a delayed indeed items, think disruptions about family are margin earnings multiple of sustainable million of caused which of successfully normal Hello, proceeds all by by ahead We and This $XXX.X largely and future business we schedule bottomline. one-time outage cash share MagnaChip QX, delivered guidance X% margin of healthy today. price everyone. expense the million. members the to October solid flow. business as gross Senior sale the the live, two generating fab-lite, impact We lowering $XXX.X high-end pure-play points. the million standard items we This annually. factors, and product results to hope substantial to team slightly our profit on our the of as restrictions the sequential U.S.-China constrained for a export Display’s interest revenue new you been all adapting charge $X.XX These used Huawei. escalated tension of fully Notes and the joining purchase new came above changed Foundry including to X.XXX% X by you global Fab completed X, due and work XXXX achieved continuity pandemic, diluted the well chapter plan. way as COVID-XX at our company for the Thank $XX approximately was Adjusted Fab to Government’s the have well. XXXX, growth, sets percentage safety quarterly that the by redeem internal despite we

I you have look business. let's the with closer LCD Display business, take at we a QX product completely that our business exited in starting remind XXXX. Now the non-auto

Display million, of in non-automotive reference which QX XXXX revenue $XX.X point, was million about $XX.X of included As LCD our a business.

revenue on was the sequentially Our LCD DDIC $XX.X up $XX.X for the XXXX. Display in up revenue million XX% year-over-year. X.X% about recorded quarter, restrictions Government’s Huawei. export our sequentially inventory revenue we year-over-year, customer’s business by million was third million, decision down and and OLED September, adjusting X.X% driven down non-automotive QX charge on excess In based a $X.X the last-minute XX.X% Display U.S.

impact Please Huawei note further not from business don’t the QX that and panel unusual we other have excess Huawei the business. include ban this of guidance our any Our Huawei expect than de-risked customers charge. inventory does

Now, highlight for our key Display let me takeaways three business.

with QX throughout demand, the toXdate. was our call, and starting an for in continued quarter mentioned strong recent which our during to capability in due upswing we last our supply product, The longer lead demand First, times. demand earnings outstripping OLED the

remain diligently excited able strong closely and to market and DDIC position OLED long-term working and overall continue We as of the customer’s the and schedules the to our beyond. trajectory our very of about QX market serve in We confident with to partners are be Foundry one pioneers. our ramp leading growth

smartphone activities OEMs. design a Second, Chinese both by our and driven Korean revenue OEM were and major

key continue remaining well keeps model in the are smartphone very the a customer’s while has market in One that expect flagship that major as is need point a want excited it end the price our that features the OEM momentum October. we XXXX. with about hitting in early consumers Korean and notable consumers being adopted the to achievements we the This display of model new launched that is driver

resonate these as design strong portfolio distinctive smartphone MagnaChip’s the very our wins technology in growth as with and that activities non-captive expect from supplier market have in in market Chinese we customers. design reflects OLED been QX support top revenue advanced major well In XXXX. our in to OEMs addition, as a DDIC position and our QX,

support. empowering our focus continue relentless and We momentum. but least, not XG unparalleled innovation to on through Last customers

the eight and wins We XG models industry are seven DDIC. we XX-nanometer were Frame of High smartphone them Rate, HFR design especially OLED with HFR new using booming were XG process. and In QX, enjoying awarded

recall from the XX% the may In global QX, revenue XG that revenue double about with bodes XG XXXX product of data, about the be You million our global the of and XXX than XXXX. the be market for well smartphone underlying counted emerging more will OLED about strength likely shipment XG half XX% total revenue. in trend to represented XG our XXXX. in to The will it first revenue According OLED in in portfolio. units smartphones

came anticipated, up Fab XX.X% the to $XX.X business. X.X% recovery million, limited and year-over-year. resulting a took and The down Power managed Power utilization our the complete revenue in and X turn product momentum the at growth longer The Power we in which production. Despite capacity full from output let’s QX. than handicap, this remain lower sequential double-digit strong. during market outage we sequentially Now, pipeline The a at achieved

key highlight our for takeaways me Power business. let Now,

Super is TV was First, in continuing our demand, and as both Power markets MOSFET by QX China Korea Power rebound quarter our in IC and demand Korean QX. products and and with personal global Chinese from transportation The the starting and in third TV Junction drove strong applications. for pandemic, in recovering the driven were trend revenue mainly gradually the

the of channel to XX% constraint demand, strong level range. our grow We XX% combination to Driven in our business year-over-year. QX capacity Power became and normal inventory expect below operating by our

the are a We also demand future. more to level balanced the continued channel inventory striving in to to address and replenish the

in newly the underline also a set team wide to up progress sales -- with our of TV, efficiently applications and new a me Let engaged demand making target our we Power under for the the customers To system be in dedicated China and numerous leadership marketing a support growing the and market, focused fast established that we The market team. products wins go-to-market from a function. regional China mobiles. strategy are including optimized with with Chinese range we industrials market directly more China resulted

encouraged Power by in We great are the business. China momentum

Power The generation By product running our Looking we X, will will potential. Fab discrete by a business will Fab up about and set that These our much superior cost. Power with very will X about premium at next-generation carry XXXX, upgrade have ahead, am of and product portfolios. a introduced additional new XX% I with our complete performance take families be place excited time, improved capacity.

Now turning to our long-term plan.

and We growth. are achieve to profitable repositioning MagnaChip sustainable

disclosure we As divestiture to our Analyst -- financials closed rather forma ahead the the pro original did of we future -- of than till schedule, our wait accelerate Day. as decided we

goals our targeting provide key me XXXX. Let by to achieve are we

after the with providing Standard Foundry achieve to the margin, GAAP, total our quarterly of revenue years adjusted will tax XX% years revenue; expected income approximately revenue a topline to in operating including offset four, the the as flow; metrics based to excluding two, margin; Business double-digit to carryforwards due adjusted to XX% below XX% to following consistently reports in two on part. such this exceed X above time. ability in profit transitional at on based Fab cash transitional XX% our service operating the CAGR; three, service next be be the are our cease grow loss certain we of accordance service three are period five, plan rate to We Products Fab be taxable is the a gross OpEx reduce income X XX% Foundry While generate enhance free to; net one, to

consolidated and special XXXX, These to on a Fab our the XXXX, our the or you the in tax of metrics last XXXX CapEx understanding and From seven, expect financial tax outlook excess will X% level below; Our XXXX. value long-term strategies; for and will we structure creation. PP&E, spending we rate free are based is additional by business of and Capital discussed of estimated revenue making for organizational give in we flow X% about quarter, return revenue. cash of generate X investment current better moderate pro to forma we of six,

plan future. to like also the capital We our in further share would near allocation

maximize management value. available Our Board options and are evaluating all to shareholders actively our

the we metrics, that reschedule related more XXXX XX pro Day QX uncertainties forma we COVID around and seems communicated matters. to financial Analyst due it prudent Now our that key to

date the resources, comprehensive ultimately key and successfully We we realign will sharpen investors be priority initiatives. chapter and products and the analysts. share the this well-planned time. strategic our resulted areas to that moves for Foundry we becoming of business pure-play a X a sheet very making first and Across in on operational efficiency. our improve are focus allow with Fab of near balance growth then pivotal The healthy MagnaChip allocation company, R&D the capital will sale represented QX company plan a our our will future. in more closed MagnaChip with believe We for closing, In announced a discussion as rescheduling

More fourth since upswing July in began demand importantly, into is the continuing which the quarter.

opportunities foundation We are a robust us, of for growth growth. the encouraged profitable stronger creates ahead by which

position We continuous engagements. push enhancing envelope through advancement, on addressable customer continue the and our strategic to market competitive expansion technology

I will back Now, the Woo Q&A. and turn Dr. for over come to call the

Young Woo

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

from the QX QX QX due XX.X% up Let’s X.X% down up XXXX. Power The impacted million export the and in business, was demand restrictions and year-over-year $XX.X the standard Driver was customers. The $XXX.X product in a Adjusting million, improvement attributable profit by The China sequential gross about start QX earlier QX. to XX.X% decline same from profit QX decline primarily QX year due sequential with was in key down was from LCD points market. transportation The applications. million, XXXX financial XX.X% two up items percentage down X.X% metrics X.X% shipment QX hit on million, in in XX% X% ago. exit $XXX.X Gross our mainly from quarter-over-quarter a LCD personal it Power QX solid driven negative in to third year-over-year. nil in as points percentage quarter. for collectively into business products business, business OLED were was and was down of strategic that strong down from points revenue that Government’s the $XX.X up revenue and down to QX and Power from translated X.X margin a was XX.X%, unusual X% the accounted year and million, ago. of in year-over-year which basis for Huawei year $XX.X mentioned margin There certain a X.X or QX increase non-auto QX from and revenue year-over-year. also a in XX.X% quarter Total was to the in was Display by YJ the quarter-over-quarter ago. ICs non-auto TV for the down rebound was XX U.S. year-over-year. Display the Revenue our

from total operating $XX.X million, QX in compared $XXX.X to in million QX in from and gain in QX million to to in $XX.X million income million, and same or $X.X operating Adjusted $XX.X down as million in in in million in $X.X $XX.X from million million X compared in a up ago. was negative operations and of income the of R&D as $X up Foundry in ago. the year due million $XX.X QX was included of a from down as Stock in or QX now up Turning and in or Fab million Adjusted in and operations, ago. income was from operating operating in sale in down down to from and million, year. continuing $X.X was for million, SG&A XXXX. and million million were QX in were QX, $XXX increase QX million. $XX.X last business negative QX QX in QX $XX.X expenses year in $XX.X in to million, $XX.X $XX.X This of expenses net sharp income $X.X million million QX charges QX year. million discontinued revenue, from million EBITDA million million expenses QX in QX compensation XX.X% $XX.X QX, compared $X.X net QX QX million $XX.X in down in $XX.X the quarter and ago. QX and recognition tax last year QX from including QX, XX.X% $XX.X from of year was from was $XX.X QX $XX.X a million, a XX% QX was $XX.X primarily Net on of XXXX.

from discontinued was in $X.XX in $X.X and $X.XX earnings operations, from up QX, Our QX ago. per share, negative year a results including up from in QX

per QX, per from in Our $X.XX XXXX. QX operations of in an in down earnings $X.XX was a $X.XX up share from LOSS from share QX per share continuing of and earnings

our up from continuing was net operations and million, and GAAP number diluted of in the QX shares were the due average QX, period. primarily The company’s into There to $X.XX non-GAAP gain share $X.XX dilutive Our year. in basic which non-GAAP outstanding shares was elimination between share of per currency were from QX. earnings notes in was $X.X offset difference two one-time cents of million. between and $X.X $X.XX EPS beginning to expenses cents effect XX.X million XX.X the shares primarily relates outstanding weighted from exchangeable of converted at difference of the as diluted by in the they counts foreign million down in last non-cash the QX of number weighted if including The of the the part elimination of average

filing. million, be Notes. to this tax part $XX offset currently annual Xnd, be XXXX paid tax in on end at XXXX capital X redeemed business In will to to sale XXXX tax, QX. we to to sheet. $XXX.X $XXX.X completed our of million income QX. we in We Cash for price the October fully capital compares gain million net which Fab $XXX.X and end moving of of the our in carryforwards This estimated is balance loss of and cash. million On of approximately the Senior range was at sale some million plan of a use QX transaction. operating corporate the to of the gain Foundry The finalized the Now purchase as QX, $XX

paid redemption, tax U.S., by million the our ultimate following QX XX% proceeds in receivable part on the related Notes. this of payments parent the a QX the Senior timing as we quarter end was As to subsidiary certain a moved Korea withholding the receivable as -- accounts $XX.X The of we XX% increase who from were customers week. of was the QX. the issuer in to the Korean collected was Accounts from in in from the holiday attributable payments from and up fell of company

Inventories at for ability the was days. Fab capacity, Our down XX from caused by QX XX.X% manufacture in days due limited to to full sales the outage. recovery delayed products from primarily were outstanding Power QX, X the the

days $X.X in $X.X average million XX Our in for was inventory to QX. was QX QX, as days. compared CapEx in million

would provide nature voluntary October from to guidance, to help other will for related unable like which that those fourth employees for at this the this program the profitability. we of quarter to of and our this employees estimated are Due all completed, benefits we commenced note moving is under the I an XXth. a to termination resignation Once the voluntary program, amount available severance Before program, enhance time.

QX our evolving still to to moving guidance. Now pandemic is forward The COVID-XX visibility. and global continues reduce

Transitional While turn results to to X Services. to revenue range that, XXX $XX vary, million of profit XX% the So-Yeon. growth, which million Thank approximately $ $XX sequential Fab the XX%. to over Foundry to margin be may you. X% of range represents for of $XXX XXXX, MagnaChip the be million call to QX Gross in anticipates currently actual in the will including million, I With X% to

So-Yeon Jeong

Thank you YJ and Young.

and remarks now questions. prepared we the call for our concludes this Operator, So, will open

Operator

question [Operator from Gill Instructions] And comes Raji Needham. from the line your of first

now Your line open. is

Raji Gill

Thank the uncertain you results on environment. congratulations, despite everyone, and really good

one long-term. questions, short-term, two So, one and

but we how the bit outage. related terms that to the in guidance in Power the Power you've get wanted short-term, the be about of outages after know going in over on be your margin improvement complete a and are thinking you target, driven I quarters in gross forward mix the QX should kind or gross the faced kind thoughts should but price. QX XXXX. improvement of is margins gross next XX% talked I about into gross margin of going margin the showing the several On of to also the an issue an uptick by

for and are the thoughts what margin, puts the takes the on wondering the Just gross near-term?

YJ Kim

Sure. Raji, you. thank

So, yes, no Fab October. know little fourth guidance, all the service transitional or early XX% the the is we includes to Foundry that provided And Power It outage in XX% control got of you control. as was X terms which now margin. quarter Fab X, under has in

margin, obviously, we business the Day, -- higher. fully we the now near-term But unit see So, XXXX, couple more product companies. the forecasts been streamline what at Analyst margin which be where product sharing that is will And by points provided has will we the be company is, rescheduled.

clear providing will then service have X. guideline are still and we So we the transition until some Fab

the give So Analyst Day. detailed breakout we'll more during

Raji Gill

a And in there in and we you as and the lot and that you are growth in Power terms that's electric nice that drivers the in adoption that was of China, by a Korea, what so driven in major seeing in markets What growth XXXX? a was personal reversal. growth about? in fueling rebound of Power in Power, other you're excited How Korea, China vehicles transportation said and XXXX are the is in Power? Are the of think accelerating about do are -- TV

YJ Kim

Yes.

Well, bigger segments. segment industrial. -- more computing So, the I a today, we communication, say four consumers, for and us. and the the that biggest is industrial consumer can serve that's

are you in a alluded excited some know, penetration that year. come we about SSD should working exceeded and won't also the But half the in next meaningful also on automotive in -- space. second be have that XX,XXX quality we And it revenue. the that's computing before are of as We

automotive be XX% years -- So expect to X% in but to the out. we

as and SuperJunction Fab, battery well the that have medium said we I improved about much will to much to as XXXX, will a set from portfolio by that excited we discrete to IGBT complete before Power new costs. today, have voltages of So that higher performance, as Power

mid-term. near-term, well that very So as the as the excited we are about in

Raji Gill

support goes so mentioned you next with double hand-in-hand momentum Would OLED say you and know, when the on we momentum should of will in expect rates? they rate So OEMs are year? that to you're curious XG the these the than but should doubling, double ‘XX continue phones going accelerate just side, the that kind of you that I adoption with adoption And expect attach of go as frame the we launch to at to into Do these XG benefiting XG of -- from XG more going that terms kind XG high phones OLED phones. would hand-in-hand OLED. say,

YJ Kim

Yes.

think two I So things. are there

next close industry by, the accelerate may from to OLED. OLED, as But for First, to that's as to time and goes to LCD XX%. XX% even be that year you or transition know, going more

So that's our in favor.

XG. of Second, momentum. in Yes, there's great a terms

we The about XX%. on this had third first year, half the XX%, about quarter

than numbers what they In the our fact, at see was then points, year. are the percentage the to least X.Xx industry a by it's this seeing. direction research, we but slightly couple XG less according grow right of And by to market phone

moving by well very the we the all adoption, OLED. LCD as from are the both XG industry So encouraged sign, on to as

So all that help out. should

Raji Gill

you. Thank

Operator

comes Your Capital. ROTH of from Suji question Desilva from next line

Your line now is open.

Suji Desilva

Hi, progress Dr. on here. Congratulations YJ. Woo. Hi, the

calendar the the on here visibility the seeing can recovery the market, you market and shaping So good talk evidence seems how of is year you OLED like or then challenging? early backlog ‘XX. the China XQ still is up, about Are multi-quarter YJ, is a demand demand, smartphone

YJ Kim

the first I so, is as and that, we very guide quarter of the is say But demand one seeing a a Well, at industry can all, we is you only know, more what supply tight. – so time.

think it's market reflection a of the being So strong. I

players like Now, terms It are the market how in there happening. of seems lot the is a competition. of

to trying the socket. are Huawei We win

non-Huawei. a among So business there is improve the

a end who the dozen our the new a to direct well don't as them. don't about -- but also -- have have the -- is yes, not silicon market I’d name dynamics, we good trying customers, as so we customers, say, demand. having so, they're we us, industry For But

the for near that's we what in future. see So

Suji Desilva

about impacting talk that how perhaps trend foldable is and still OLED and early could and or you mix count smartphones you? products Okay. an the to your ’XX that's is the opportunity Great. And for then in

YJ Kim

think excited will new to the multiple that is be TV, the the vendors. the about is and next year second them, TV is of I bringing think, foldable one We're Yes. I -- the application, automotive OLED from more the OLED then there

about particularly and very for be perhaps application foldable long-term be foldable you the excited new there'll produce for asked more about developing the the I'm the So for -- But and mid-term that of high who will in if is the it vendors phone applications. can some foldable the and volume. absolutely mainstream factor new foldable form and

Suji Desilva

Okay. Thanks YJ.

YJ Kim

Thank you.

Operator

question of line Your Lopez Group. the Jon next Vertical comes from from

Your line open. is now

Jon Lopez

Hi. hear Thanks me so much. Can Okay? you

YJ Kim

Yes.

Jon Lopez

have I a couple. Terrific.

guidance, just first QX The QX from is, production goes out latent QX selling XXXX? is are any the clarification you impact other In from costs outage in words, in on going a product QX? that there the has to higher one for theoretically that away

YJ Kim

good So very that's question.

higher due high outage Power Power had the QX will that a as will the the full. [ph], they we cost a have was in the very a that some products WIP that in have Fab will fourth be ship the to of that But quarter utilization quarter. will fourth in So utilization high

there be some the will in to Power of yeah, quarter answer that So, the on your question, first devices.

Jon Lopez

you. Got

XXXX? as we probably right? work that largely But in should into Helpful. itself to next is year? into resolve Okay. start Sorry, out go early This itself early that theory, should

YJ Kim

shipment, the, ideal that parts and call, be QX the if the should made we what it should -- later, conceptual in thing. have mid-October the By Yes.

Jon Lopez

Perfect.

want Okay. -- you QX even your Perfect. to second Huawei year-to-date? to exposure Thanks. mind I would My or calendar quantifying perhaps in question, just

YJ Kim

Sorry.

As did say the them. the sell I we for actually the the end on was that down inventory said don't only because customer customer write-off sell But to We before, million. we we to don't exposure by $X.X panel. one-time those break

Jon Lopez

you. Got other two have ones. I quick Okay.

obviously look guiding This the the The seasonally. I unusual guidance differently given but specifically, stronger different I quarter, not a be like XXXX, know would year, that's usually fourth whole in much kind end my suppose stronger calendar what question very seasonality an at than seems Display we bunch is, think of strong, play if for you're of us this you is it about first a I ways. to one, of But just might correct, have any would how kind year? assuming if

YJ Kim

I So, down low. and has high is you're correct QX the go been QX think, us seasonality about typically seasonality, we for a slightly

patterns. unusual is this So

-- it's seasonality that then. you're ’XX, for happens normal what than we'll But doing the company. correct we're better much see the So

Jon Lopez

Okay. concern Got you reasonable you. particular, amount just the a for about footprint. minute wondering if in pretty we’ll very up My obviously [ph], in on And last dynamics one, pretty the we're market. as a X-inch is, thing I'm Power picking a the about one potential talked sanctions spec of sizable

talk continue? pick of I'm for you for set those the driving the to developments might minute about and kind customers? you you up So market development Could extent you, I wondering, like ask the specifically are what existing seeing to opportunity just opportunities that guess a I for either expand with customers look that new should or

YJ Kim

separate things think I so in there -- Well, are two there. diff

But There in most made Fab some First will we don't X. discrete devices, a that are SMIC made the terms the Fab X. the think, stuff I PMIC. still be of in -- if you in make assume more I were SMIC, it, all, factor the our to of of have

tend as the would the Power better we IC. devices we internally, -- as well but on and IP have But a in to that any that think, make on we I discrete -- have our product portfolio, count thing. our So, rate, business

going product. I to and that based So, our we're and feel grow competitiveness our next-generation on really about good

to the going win how business. that's So we're

that thing mentioned or us. SMIC the in help but hurt shouldn't us, So fact,

Jon Lopez

you. Got

really appreciate I for Thanks help. the Okay. it.

YJ Kim

Thank you.

Operator

would no like further [Operator Instructions] turn call question back to And Ms. the there over now to at I time. are this

So-Yeon remarks. some Jeong for closing

So-Yeon Jeong

for of joining concludes Investor MagnaChip’s look This XXXX our you for details our you. quarter Please conference Thank Good-bye. future website. Thank on events Relations call. third today. earnings us

Magnachip Semiconductor (MX) 1 Nov 202020 Q3 Earnings call transcript