Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to the Q2 2023 Magnachip Semiconductor Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

hand over to today, your like Zhai. Yujia now the to conference speaker I’d ahead. go Please

Yujia Zhai

Thank everyone. financial quarter XXXX. the Magnachip’s joining results second XX, June Hello, ended for for you us to discuss

release second be website webcast shortly on can the replay that The today’s on earnings was today will market found website. after relations investor our call afterwards. issued company’s of close the The archived quarter be

Magnachip’s discuss Joining Financial Chief company’s is me prepared Kim, Executive Chief and will will YJ Park, financial results performance Shinyoung Officer. Shinyoung operating and for YJ and the the third remarks. the be XXXX. will the quarter for the Officer; recent There Magnachip’s Q&A overview, a quarter following today business guidance of provide review session

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

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

release A earnings that in GAAP measures. the the most the measures financial non-GAAP relations may directly be will Magnachip’s intended accepted reconciliation illustrate quarter principles, are we non-GAAP financial investor measures in also with useful. discuss of accounting but non-GAAP not operating comparable our in can generally the measure of measures website. alternative our performance call, second of an to to accordance be are section During found prepared The

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

Young-Joon Kim

call. welcome and us earnings Thank QX you everyone. Hello, joining Magnachip’s today for to

X% Gross utilization from driven down up was financials. XX.X% margin Gumi our QX higher $XX XXX with revenue basis year-over-year and our by million, up sequentially. fab. Starting points at QX, XX.X%, was

by industrial automotive quarter power but panel improvement positives that business from our applications. driven impacted by were offset to Korea challenges Our will am each OLED in our and smartphone I business, be sequential top in the macro I our during sections, of by weaker detail continue pleased to year-over-year results see customer. These revenue

quarter, stock of buyback also which our the of business new I’m program. Board a buyback we long-term During confidence the remaining in $XX.X million, shareholder pleased authorization enhance unwavering our that And approved signifies and $XX commitment our stock completed our today, value. million to

milestone earlier highlights Board approved recommendation separation of Finally, Broadly announced strategic value to our our strategic and into our entities. significant shareholders. this legal quarter, its to business review second Magnachip in the unlock our commitment and Display speaking, that for we separate Power long-term committee separate a represents the for

and the Board have and further flexibility forward aimed team is continue calls. at oversee focus enhancing optionality, January look process Management business XXXX resource We The business upcoming process This updates live are of the distinct to separation completed so accountability, planning earnings currently to at our well and as is working be will XXXX. internal we as on providing enterprise both the through they business, end and transparency, and will strategic businesses. Post-separation, accounting a separating to the systems. of expected in ERP, go

year-over-year Let revenue me QX $X.X came business. in of into our with sequentially. our down Display million, now business segments. provide Beginning updates XX.X% at down each and XX.X%

deliver due global to XX-inch industry panel our affected Korean years the base panel reflect these in large our competitive leader an near-term focus inventory from nanometer the continued remain OLED results that wafers our hurdles, QX from customers Sequentially, second products impact growth sustainable display. all customer. as demand Despite highly to long-term wins. include to and correction on declined two customer expanding achieve ongoing we to major XX decreased supply shortages OLED our smartphone revenue XXXX design half of our Year-over-year, of the last

the At sample revised project to panel in a and changes at global QX, We but aim qualification to X by chip and delivered our year. due shipped DDIC months spec final customer, we OLED second we of the of June. customer, in receive the new our anticipate at few second the end production Tier a end

design-in Additionally, third smartphone which sampled launch. by and the have QX, now been chip evaluated at a the customer, half is first XXXX global for maker we in by has panel stage the evaluation

mid-year new our around customer, global developing to projects. our new project potential to fourth a OLED has revenue began with In Further, we panel continue we the contribute QX, for panel on global XXXX. collaborate DDIC that maker

mass-market work revenue we share drive growth we of smartphone half second chip, market display XXXX low-to-mid-range the OLED the driver, OLED aimed which fifth display to in expect Additionally, of on a beyond. and started at expanding market,

makers the Given of the and of QX’XX, we in smartphone developments, feel panel about our significant designs share additional over production. longer-term these winning already almost It captured smartphone have worldwide panel market confident odds capturing XX% is estimated in Asian China OLED that Asia.

With we Automaker. for in regard a targeted automotive two leading our panel to customer Korea, QX production first car of different shipment in OLED chip European our large for began models

to in car initiated the second this the provide of top-tier year revenue quarter-end, we another July, production beyond. also shipment European manufacturer. We Following these three half beginning anticipate to targeted and models in

Automaker second in two for third slated European with mass XXXX. QX, we secured half production with new Further, a design wins

these European design we With now wins car wins, have automakers. models leading targeted cumulative from for five

of our DDIC panel Chinese awaiting OEMs, the alignment with in For such customer our are at large project we and year. the look for smartphone Korea, Smartphone customer’s alignment our by end

Industrials up was markets. due and business. Power to year-over-year in our $XX.X and million, to on strength sequentially Automotive X.X% down XX.X% revenue QX Moving

QX’XX demand quarter we broad bottom we hit on call, believe we the hand. stated our and we progress based. As inventory in improvement saw was in QX in last in The

demand saw and in instance, solar, markets. for lighting For we TVs, a revival

than attributed the applications, industrial, particular. strong Additionally, propelled production our in begin by key customers, in computing activities applications. across home to XX% emerged product QX’XX. are more One leading our new XX% momentum while and of win of we portfolio to new in continued products design design at wins slated was from Korea, QX a and in Notably, robust automotive, maker design-ins appliance and with

ASP products and mix. slightly down on strong, Power Premium XX.X% sequentially remained X.X% product by lower year-over-year increasing

early or we improves to We new voltage channel of announced In four smartphone significantly also MOSFETs loss July, continue that charging power low innovate. using batteries super-short when technology discharging.

ever stronger products summary, In rate this power product Power than business, next-generation in we’re out our rolling design-in/win our year. throughout is and

are Looking some customer improvements base, our further QX. we expect in ahead, and in sequential growth we seeing

about our of business, Display optimistic long-term OLED growth very the In our we’re business.

and about customer strategically we that are in compelling These new new excited our six region. rolling products expanding and aimed months. are We new market we the continue the tapping into additional to collaborate competitive panel OLED in Asian closely with are out at offer rapidly next global the products advantages the

we our your goals. support appreciate we towards as work shareholders for Thank and your patience, to you our

the I will over detail. now financials Shinyoung to to turn call go the over in

Shinyoung Park

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

financial Let’s QX. for start key metrics with

Services Total million. $XX revenue Revenue from million, Foundry X% sequentially down and $X.X revenue was QX Transitional from products in up the business and was million standard was $XX.X XX.X% year-over-year.

million Within million. revenue standard $X.X $XX.X Power products, was and business Display revenue was

our improvement results while in still see are QX. As YJ muted, mentioned, we sequential

QX XX.X% up in QX. was from in XX.X%, margin Gross

improve our Power with business. higher continues QX will in gross gradually We demand expect improve margin XXXX our as to utilization

Power anticipate prior capacity. wind-down to stated our several following We products for for on agreement middle have As over the Foundry Standard Transitional Services Transitional with approximately our in of XX% the begin the of we Services quarters XXXX. calls, are the accounts August our a Key of process Gumi of Foundry Foundry planning end at of capacity XXXX. the next contractual we to converting of around portions idle the end

expenses. in was This $XX.X QX and R&D of and SG&A and combined $XX.X operating XXXX R&D last million. million compares QX $XX.X million to now to in QX SG&A year. Turning

primarily in $X.X was executed $X.X SG&A that million compensation by $X.X compared driven of in charges QX to the operating and in QX million R&D program QX at expenses lower in last we resignation were year. Stock million our voluntary QX. end included and Our

XXXX. This $X.X to million. loss and in loss operating of operating QX $XX.X operating year. an adjusted compares adjusted million operating and in $XX.X million compared to QX QX QX loss QX operating adjusted last of a basis, income was income operating in of On of was loss an $X.X in million million, $X $XX.X QX non-GAAP million

negative million EBITDA $X.X was in million to QX million. in QX This positive $X.X a $X.X adjusted year. negative and a compares last QX

million in million QX loss in QX a loss compared $X.X QX million of net year. $XX.X in of a $X.X and loss with Net last net as was

diluted per as of Our QX QX $X.XX with in $X.XX compared in and year. QX $X.XX, loss share was diluted loss in last GAAP per share

per share earnings of $X.XX QX per loss $X.XX. QX last This with QX compares non-GAAP loss in diluted and non-GAAP per was share Our diluted in in share $X.XX year. an of

which million as outstanding average diluted weighted Our shares, expanded our reflects XX.X for shares quarter shares repurchased part repurchase the program. share of were

stock or QX amounted the or year shares of end QX to repurchased since approximately million. X.X X.X buyback year, shares $XX Our this to $XX.X million million XXXX in September last Cumulatively, million. we’ve

$X.X end to including from We and million balance the debt of the of resignation ended the and package million. to related QX The Moving quarter $XXX one-time outflows approximately $XX.X during buybacks the payment million, at were program, voluntary of XXXX. of cost million cash sheet. $XXX.X million primary of stock cash down $XX no quarter with the

at million, QX Net accounts quarter $XX increase of XXXX. the end of which represents receivable X.X% totaled the from an

days for QX. sales XX QX days XX outstanding and days was in to Our compares

QX million. at quarter net the This the totaled Inventories, end in $XX.X $XX.X XXXX. compares to million of

for and in QX. days days inventory was Our to days in average XX QX XX compares

in our currently of which Lastly, is XX% forecast We million, level. and QX XX% expect approximately million. about nearly was million lower lower $X.X to from XXXX XXXX the from $X CapEx be $XX our previous CapEx

Now our moving guidance. quarter to third

Services XX.X% million, range results about the currently for revenue the $XX of million to Foundry actual to to expects margin $X profit be XX.X%. to vary, of million be Magnachip $XX range QX, and While gross of in Transitional including may in

I’ll over Yujia. call you. Thank turn now, back the to And Yujia?

Yujia Zhai

section the call today. now for call you questions. concludes Operator, Thank may the prepared open you, Shinyoung. up remarks That our of

Operator

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

Your line is open.

Suji Desilva

welcome and Shinyoung. YJ, Hi, back,

So OLED X the panel about on Tier talking customer. the new business,

that maybe how you've versus bigger have traditional you within that products to size seems quarters. like opportunity had customers? panel to talk your to you business eight want Can Korea I about in to next opportunity, able understand seem ramp to four It multiple You opportunity. the the the

Young-Joon Kim

Yes.

you. thank Suji, So

have now samples. we So three

And of expect one, so go year. in one the towards – year. first as the and to the end evaluation the expect to go if in through the And third go successful, will chip half launch in today, next go and design is already mentioned qualification the the other stage to

of lot three products. now because a getting incurs So we also we are have

So the on ramp will models. each based be

hard year. end back So we say, it pipeline starting the now will of to back towards be OLED the but to are on the ramp the

Suji Desilva

Okay. helpful with panel then in are process at your Where China that customers? their are And this are point? there. wins they Where smartphone process customers? securing where in of they That's the

Young-Joon Kim

that so a we a we design-in lot. Well, promoting stage are more They a the fact already lot then evaluation have encouraged. and have

but type And have the now either enablement have chips sampled about that addition being promoted. the evaluated customers. chips that then three will already before or revenue chips two different started by being enable using in we being of end XXXX next panel the And so we being in is I that months, will the will six said to in, three also another five, coming six

Suji Desilva

Okay. I'm should contract you curious service expect to of comes or business. how to opportunity much opportunity will the the happen How incrementally? kind we opportunity capacity – the as Gumi Power revenue think that about what would offline? over Switching incremental

Shinyoung Park

So our the Services historical XX% and approximately accounts for Transitional Gumi capacity. Foundry of

build to which I margin. our all also being gross absorbed again, fab assuming gap, to lower power Gumi power and product of in that's fixed its cost products us cost, and going approximately So equal, things opportunity manufactured result will gap. nothing mean, increase if the a XX% like will for the have But is other fill our

is job our wafers possible, of power with fill devices. So wafers transitional that will as equipment power Foundry require service converting as to to but also the our Transitional gap soon handle

to is that the conversion minimum Power our smoothly bring up goal more and our in again, business So dip fab. make of

Suji Desilva

XX% Shinyoung, prior margin power were up higher the at following XXs, on opportunity about it the is then that, seems in here, where gross high it like peaks, now the when you And than if is above you in the that Or margin this low capacity with recapturing terms versus go difference power that XXs. incremental ramp here Is now to revenue drive of the you back can in it? up? Okay. gross

Shinyoung Park

as be get gross mean switch going level. businesses. some business the in Gumi of of margin fab that new power But to long-term the move the the to from because bring to power equipment to high services the I of the explained from our equipment transitional briefly, it's kind to to I goal like to support the

So the the there's because to power and going be product gap more have process, to some there we'll cost there. observe during

trying you in pointed basis, gross the maximum just in to going So of get experience some explained. to level are dip we the But that on meantime, long-term the out, we're to the margin there. back

Suji Desilva

Thanks. Or Maybe OpEx? quick the going steady to be are from do additional OpEx current ahead? adding last one the Or you you The efficiency to Okay. expect question. Got it. forward? there levels, opportunities it cost will be

Shinyoung Park

QX, we R&D QX. But you full-year to of helping to development like XXXX, due resignation mean YJ R&D explained the the kind many program we're and that's of for go last I in voluntary to the definitely that's down end during new as executed what at the SG&A, the level chips our year's call. saw the similar that of

XXXX. increase see level half some R&D voluntary resignation in second to trying keep SG&A, of we you're that at effect. are program expenses the in reduced the But going So a to from benefited the

Suji Desilva

Very it. Thanks, helpful, got Okay, everybody. Shinyoung.

Operator

from Our next question Martin comes with Instructions] Oppenheimer. [Operator Yang

Martin, Your open. line line open. is your is

You can ask question. your

Martin Yang

hear me? you can Hi,

Operator

you Yes, we can hear now.

Martin Yang

Great.

us OEMs. the details question on are comments customer for compliments? the So you alignment give YJ, you my can alignment smartphone what is Chinese you your its your first of scenarios Korean the potential mean more Can what the by panel clarify with regarding customers? out outcomes And and the maybe different with

Young-Joon Kim

good very question. Yes. Martin,

tend mobile Korean have makers, the different to company. and panel customer, the internal they food then division So type Chinese our three customer, of smartphone

their provided for have XXXX some we them capturing that business high-end chip year our for smartphone. last was Chinese in So to targeted

know, data, very they So in shipment OLED almost have that’s And they’re what research or worldwide five QX working according the XX% is production some China’s as makers. panel on. of to this main they you and market think But I market captured the year. competitive to

think at strategy doing is think the chips there, are but – is on I time, some delay why new panel that many same same with that’s – so global our customer. panel So the I we track. And

Martin Yang

maybe to on panel – that us how is customers the tell question Can you many fourth maker fifth new you and by XXXX? to and relationships. you the customer second customers My panel maker how maybe it. Got your end expect chips expect translates of have to do OLED have, do

Young-Joon Kim

end By of Difficulty] Hello? XXXX Hello? [Technical

Martin Yang

Yes. hear I you. can

Young-Joon Kim

Yes. here. echo some is There

to panel expect or two shipping. get by more customer We three then

Martin Yang

Chinese? all of are are them And

Young-Joon Kim

Hello? Hello?

Operator

hear Yes, you. we can

Young-Joon Kim

Yes.

Okay.

Operator

Martin. Maybe you should ask your again, question

Martin Yang

Sure.

those follow-up the additional are Chinese? second on Just – a customers is, panel my you expecting question

Young-Joon Kim

Yes.

expecting other are future be by open we So our to customer. to be global our chips used current than

Martin Yang

questions. more no have you. I Thank

Operator

over closing to remarks. [Operator call back to any like the Instructions] for this And Yujia I’d I’m not time. questions showing turn at any

Yujia Zhai

for concludes of events That Investor on everyone. call. you, Relations future earnings conference look website. our you. our Take Please details QX care. Thank Magnachip’s Thank

Operator

and today’s presentation. Well, this gentlemen, does ladies conclude

day. You disconnect may and now wonderful have a

Magnachip Semiconductor (MX) 7 Aug 232023 Q2 Earnings call transcript