(PRNewswire) —  MagnaChip Semiconductor Corporation ("MagnaChip" or the "Company") (NYSE: MX), a Korea-based designer and manufacturer of analog and mixed-signal semiconductor platform solutions for  communications, IoT, consumer, industrial and automotive applications, today announced financial results for the first quarter ended March 31, 2017.

Total revenue for the first quarter of 2017 was $161.7 million, up 9.2% as compared to $148.1 million for the first quarter of 2016 and a decline of 10.4% compared to $180.5 million for the fourth quarter of 2016. Total revenue in the first quarter came in at the higher end of the guidance range of $157-163 million provided in February. 

Foundry Services Group revenue in the first quarter of 2017 was $77.5 million, up 29.3% from revenue of $60 million in the first quarter of 2016, and about flat with $77.8 million in the fourth quarter of 2016.

Revenue in the Standard Products Group was $84.2 million in the first quarter, down 4.3% from the first quarter a year ago, and a sequential decline of 17.9% from $102.5 million in the fourth quarter of 2016. 

Total gross profit in the fourth quarter was $41.6 million or 25.7% as compared with gross profit of $34.2 million, or 23.1%, for the first quarter of 2016, and $46.1 million, or 25.5% in the fourth quarter of 2016.  Gross profit margin in the first quarter came in near the top of the guidance range of 24-26% provided in February.

Foundry gross profit margin was 28.5% in the first quarter as compared with 23.8% in the first quarter of 2016 and 30.3% in the fourth quarter of 2016. Standard Products Group
gross profit margin was 23.1% in the first quarter as compared with 23.6% in the first quarter of 2016 and 21.8% in the fourth quarter of 2016.

Net income, on a GAAP basis, for the first quarter of 2017 was $43.7 million or $1.30 per basic share and $1.05 per diluted share as compared with a net income in the first quarter of 2016 of $8.1 million or $0.23 per basic and diluted share and compared with net loss of $49.8 million or $1.42 per basic share in the fourth quarter of 2016.  The net income in the first quarter of 2017 was attributable primarily to a non-cash foreign exchange gain on the Company's intercompany loans.  

Adjusted Net Income, a non-GAAP financial measure, for the first quarter of 2017, totaled $0.5 million or $0.01 per basic share and per basic and diluted share as compared to an Adjusted Net Loss of $2.8 million or $0.08 per basic share in the first quarter of 2016 and an Adjusted Net Income of $1.6 million or $0.05 per basic share and $0.04 per diluted share in the fourth quarter of 2016.

Adjusted EBITDA in the first quarter was $13.1 million as compared with Adjusted EBITDA of $8.0 million in the first quarter of 2016, and $14.1 million in the fourth quarter of 2016, despite a 10.4% decline in total revenue. 

"We continued to make significant operational progress in the first quarter, and clearly demonstrated our ongoing commitment to achieve higher gross margin and overall profitability," said YJ Kim, Chief Executive Officer of MagnaChip. "With a balanced portfolio of standard products and analog foundry services, we are well positioned to increase revenue and capitalize on the analog technology trends driving growth in our target markets." 

During the first quarter, the Company reduced the workforce by approximately 140 positions as part of a previously announced headcount reduction plan.  This plan is expected to cut the workforce by over two times a similar headcount reduction plan in 2016 that affected 169 employees.  Once completed, the workforce reduction will have an expected payback period of less than 1.5 years with an estimated annual cost savings between $23-$27 million.

The Company believes it remains on track to complete the planned workforce reduction within its cash cost range of $29-33 million.  During the first quarter, the Company recorded early termination charges of $11.1 million and made cash payments totaling approximately $10 million in connection with the headcount reduction.  The cash payments were comprised of approximately $4 million related to the early termination charge and the remaining relates to statutory severance. The Company expects to complete or substantially complete the planned workforce reduction by the end of the second quarter and expects to record an additional early termination charge of approximately $1-2 million in the second quarter related to the workforce reduction.

In commenting on the first quarter financial results, Chief Financial Officer Jonathan Kim said, "Gross profit margin as a percentage of revenue was at its highest level in four years, and Adjusted EBITDA increased over 60% from the first quarter a year ago."   Mr. Kim added, "Based on our current view of the business and the projected savings from ongoing cost-cutting actions, we continue to anticipate that our gross profit margin and Adjusted EBITDA will show improvement in 2017."

Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a meaningful understanding of the factors and trends affecting MagnaChip's business and operations and assist in evaluating our core operating performance. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income or as a better indicator of our operating performance than measures that are presented in accordance with GAAP. A reconciliation of GAAP results to non-GAAP results is included in this press release.

Cash and cash equivalents totaled $132.6 million at the end of the first quarter, an increase of $49.3 million from $83.4 million at the end of the fourth quarter of 2016.  The cash figure in the first quarter reflects the successful outcome of a Senior Exchangeable Notes Offering in January, and also includes approximately $17 million in connection with the sale of a building that housed a 6" wafer fab that was closed in February 2016. The proceeds of the sale of the building were released from restricted cash in the first quarter of 2017 after the Company completed certain construction work obligations. Cash outlays during the quarter included, issuance fees and a stock buyback in connection with the Exchangeable Notes Offering, payment of deferred salaries, unusual charges and statutory severance payments related to the on-going workforce reduction, debt interest payments and capital expenditures among others.

 

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