MagnaChip Reports Results for Second Quarter 2020
-- GAAP earnings per share of $0.34 from continuing operations
-- Non-GAAP diluted earnings per share from continuing operations of $0.13
-- Cash of $192.8 million highest since IPO in March 2011; net operating cash flow of $36.0 million, which was the 5th straight quarter of positive operating cash flow
-- Revenue from continuing operations of $118.8 million; reflecting approximately $6 million impact from the strategic exit of non-auto LCD DDIC product line during the second quarter
-- Revenue from standard products business of $109.0 million and the Foundry Services Group of $95.8 million
-- Non-GAAP combined revenue of $204.7 million from total operations exceeded high-end of the guidance range
-- Gross profit margin from continuing operations of 27.0%, 460 bps increase Y/Y
-- Gross profit margin from standard products business of 29.5% and the Foundry Services Group of 32.3%
-- Excluding depreciation benefit of $2 million from discontinued operations, non-GAAP combined gross margin from total operations of 29.7% surpassed high-end of guidance range
SEOUL, South Korea and SAN JOSE, Calif., July 30, 2020 /PRNewswire/ -- MagnaChip Semiconductor Corporation (NYSE: MX) ("MagnaChip" or the "Company") today announced financial results for the second quarter of 2020.
"We executed well and delivered an excellent quarter despite market disruptions caused by COVID-19 by achieving key financial metrics above expectations, said YJ Kim, MagnaChip's chief executive officer. In addition to delivering outstanding financial results, our team is making substantial progress with the pending sale of our Foundry Services Group business and Fab 4. Based on the progress we made so far, we now anticipate that the transaction likely will close in the third quarter instead of our previous estimate of the September-October timeframe."
"The new MagnaChip is undergoing a dramatic transformation to accelerate our profitability. While we can't be completely immune to the risk of COVID-19 and macroeconomic conditions, we will continue our relentless execution to deliver a successful close of the pending transaction and strengthen our business foundation for profitable growth."
Q2 2020 Financial Highlights
The following table sets forth certain financial and other information relating to the continuing and discontinued operations. Following the execution of the definitive agreement to sell the Foundry business and Fab 4, the Foundry Services Group has been accounted for as a discontinued operations beginning in the first quarter of 2020.
In thousands of US dollars, except share data |
||||||
Q2 2020 |
Q1 2020 |
Q/Q change |
Q2 2019 |
Y/Y change |
||
Revenues |
||||||
Continuing Operations(1) |
118,828 |
120,473 |
down 1.4 % |
140,885 |
down 15.7 % |
|
Standard Products Business(1) |
108,955 |
110,736 |
down 1.6 % |
132,006 |
down 17.5 % |
|
Foundry Services Group |
95,779 |
86,279 |
up 11.0 % |
73,139 |
up 31.0 % |
|
Non-GAAP Combined Total Revenues(2) |
204,734 |
197,015 |
up 3.9 % |
205,145 |
down 0.2 % |
|
Gross Profit Margin |
||||||
Continuing Operations(1) |
27.0% |
24.2% |
up 2.8 pts |
22.4% |
up 4.6 pts |
|
Standard Products Business(1) |
29.5% |
26.3% |
up 3.2 pts |
24.0% |
up 5.5 pts |
|
Foundry Services Group(3) |
32.3% |
24.0% |
up 8.3 pts |
16.7% |
up 15.6 pts |
|
Non-GAAP Combined Total Gross Profit Margin(2)(3) |
30.8% |
25.3% |
up 5.5 pts |
21.4% |
up 9.4 pts |
|
Net Income (Loss) |
||||||
Continuing Operations |
11,774 |
(31,078) |
up 137.9 % |
(8,490) |
up 238.7 % |
|
Diluted Earnings (Loss) per Common Share |
||||||
Continuing Operations |
0.28 |
(0.89) |
up 131.5% |
(0.25) |
up 212.0% |
|
In thousands of US dollars, except share data |
||||||
Non-GAAP(2) |
||||||
Q2 2020 |
Q1 2020 |
Q/Q change |
Q2 2019 |
Y/Y change |
||
Continuing Operations |
||||||
Adjusted Operating Income |
10,125 |
7,281 |
up 39.1 % |
9,423 |
up 7.4 % |
|
Adjusted Net Income |
4,753 |
1,092 |
up 335.3 % |
3,829 |
up 24.1 % |
|
Adjusted Net Income per Common Share—Diluted |
0.13 |
0.03 |
up 333.3 % |
0.11 |
up 18.2 % |
|
In thousands of US dollars |
||||||
GAAP |
||||||
Q2 2020 |
Q1 2020 |
Q/Q change |
Q2 2019 |
Y/Y change |
||
Revenues - Standard Products Business |
||||||
Display Solutions |
69,176 |
77,593 |
down 10.8 % |
84,261 |
down 17.9 % |
|
Power Solutions |
39,779 |
33,143 |
up 20.0 % |
47,745 |
down 16.7 % |
|
(1) Following the consummation of the sale of the Foundry Services Group business and Fab 4, and for a period up to three years, the Company will provide transitional foundry services to the buyer for Foundry products manufactured in the Company's fabrication facility located in Gumi ("Transitional Fab 3 Foundry Services"). For the periods prior to the disposal of the Foundry Services Group business and Fab 4, revenue from the Transitional Fab 3 Foundry Services by the Company to the Foundry Services Group (i.e., discontinued operations) is recorded at cost as part of its continuing operations. Management believes that excluding the revenue of the Transitional Fab 3 Foundry Services from the continuing operations (i.e., revenue from standard products business) allows investors to better understand the results of continuing operations of our core standard products display solutions and power solutions businesses.
(2) 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, as well as providing a meaningful comparison to previous information provided on a basis prior to the discontinued operations classification of the Foundry Services Group. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income from continuing operations 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.
(3) In the second quarter, depreciation and amortization associated with the assets classified as held-for-sale ceased, which resulted in an increase in gross profit from discontinued operations by approximately $2 million.
Q3 2020 financial guidance
On July 20, 2020, our Fab 3 facility in Gumi, South Korea experienced a temporary power outage for approximately 9 hours and 15 minutes as a result of an accident involving branches of a nearby tree falling onto cables connecting one of the electricity pylons that supplies power to the Gumi plant. We are nearly fully operational in our Fab 3 facility as of the date of this earnings report. The accident caused damage to our work-in-process wafers with an estimated total cost of up to approximately $2.3 million. The related impact to our revenue from continuing operations is expected to be negligible. We are currently evaluating potential insurance and other claims that we may have for the above loss and damages.
As we expect to close the pending sale of the Foundry business and Fab 4 in Q3, we will provide a quarterly outlook on continuing operations only. The COVID-19 global pandemic and escalated trade tension are rapidly evolving situations and reduce our forward visibility. While actual results may vary, MagnaChip currently anticipates for Q3 2020:
- Revenue from the continuing operations to be in the range of $118 million to $124 million, including $9.5 million to $10 million of the Transitional Fab 3 Foundry Services at cost
- Gross profit margin from continuing operations to be in the range of 25% to 27%
- Without the estimated power outage impact, gross profit margin from continuing operations would have been in the range of 27% and 29%
Second Quarter 2020 Earnings Conference Call
MagnaChip will host a conference call at 5 p.m. Eastern Time on July 30, 2020. The conference call will be webcast live and also is available by dialing toll-free at 1-844-536-5472. International call-in participants can dial 1-614-999-9318. The conference ID number is 8269223. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. ET start time to ensure a timely connection. The webcast and earnings release will be accessible at www.magnachip.com. A replay of the conference call will be available the same day and will run for 72 hours. The replay dial-in numbers are 1-404-537-3406 or toll-free at 1-855-859-2056. The access code is 8269223.
Safe Harbor for Forward-Looking Statements
Information in this release regarding MagnaChip's forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include statements about MagnaChip's future operating and financial performance, outlook and business plans, including third quarter 2020 revenue and gross profit margin expectations, the evaluation and expectation of costs and related revenue impact and timing as a result of the power outage, and the impact of the COVID-19 pandemic and escalated trade tensions on MagnaChip's third quarter 2020 and future operating results. All forward-looking statements included in this release are based upon information available to MagnaChip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include the impact of changes in macroeconomic and/or general economic conditions, including those caused by or related to the COVID-19 outbreak, recessions, economic instability and the outbreak of disease; the impact of competitive products and pricing; timely design acceptance by our customers; timely introduction of new products and technologies; ability to ramp new products into volume production; industry wide shifts in supply and demand for semiconductor products; industry and/or company overcapacity; effective and cost efficient utilization of manufacturing capacity; financial stability in foreign markets and the impact of foreign exchange rates; unanticipated costs and expenses or the inability to identify expenses which can be eliminated; compliance with U.S. and international trade and export laws and regulations by us and our distributors; the risk that the pending sale of our Foundry Services Group business and the Fab 4 facility to Magnus Semiconductor, LLC or one of its wholly owned subsidiaries is not consummated according to our current expectations or at all; public health issues, including the COVID-19 pandemic; other business interruptions that could disrupt supply or delivery of, or demand for, MagnaChip's products, including uncertainties regarding the impacts of the COVID-19 pandemic that may result in factory closures, reduced workforces, scarcity of raw materials and goods produced in infected areas, as well as reduced consumer and business spending affecting demand for MagnaChip's products due to government and private sector mandatory business closures, travel restrictions or the like to prevent the spread of disease; and other risks detailed from time to time in MagnaChip's filings with the SEC, including our Form 10-K filed on February 21, 2020 (including that the impact of the COVID-19 pandemic may also exacerbate the risks discussed therein), our Form 10-Q filed on May 11, 2020 and subsequent registration statements, amendments or other reports that we may file from time to time with the Securities and Exchange Commission and/or make available on our website. MagnaChip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.
About MagnaChip Semiconductor
MagnaChip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, industrial and automotive applications. The Company provides a broad range of standard products and manufacturing services to customers worldwide. MagnaChip, with more than 40 years of operating history, owns a portfolio of approximately 2,950 registered patents and pending applications, and has extensive engineering, design and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through MagnaChip's website is not a part of, and is not incorporated into, this release.
CONTACTS: |
|
In the United States: So-Yeon Jeong Head of Investor Relations Tel. +1-408-712-6151 |
In Korea: Chankeun Park Director, Public Relations Tel. +82-2-6903-5223 |
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||||||||
(In thousands of US dollars, except share data) |
|||||||||||||||||||||
(Unaudited) |
|||||||||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||||||||
June 30, 2020 |
March 31, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||||||
Revenues: |
|||||||||||||||||||||
Net sales – standard products business |
$ |
108,955 |
$ |
110,736 |
$ |
132,006 |
$ |
219,691 |
$ |
232,270 |
|||||||||||
Net sales – transitional Fab 3 foundry services |
9,873 |
9,737 |
8,879 |
19,610 |
15,882 |
||||||||||||||||
Total revenues |
118,828 |
120,473 |
140,885 |
239,301 |
248,152 |
||||||||||||||||
Cost of sales: |
|||||||||||||||||||||
Cost of sales – standard products business |
76,817 |
81,606 |
100,384 |
158,423 |
181,625 |
||||||||||||||||
Cost of sales – transitional Fab 3 foundry services |
9,873 |
9,737 |
8,879 |
19,610 |
15,882 |
||||||||||||||||
Total cost of sales |
86,690 |
91,343 |
109,263 |
178,033 |
197,507 |
||||||||||||||||
Gross profit |
32,138 |
29,130 |
31,622 |
61,268 |
50,645 |
||||||||||||||||
Gross profit as a percentage of standard products business net sales |
29.5 |
% |
26.3 |
% |
24.0 |
% |
27.9 |
% |
21.8 |
% |
|||||||||||
Gross profit as a percentage of total revenues |
27.0 |
% |
24.2 |
% |
22.4 |
% |
25.6 |
% |
20.4 |
% |
|||||||||||
Operating expenses: |
|||||||||||||||||||||
Selling, general and administrative expenses |
12,408 |
12,102 |
11,095 |
24,510 |
23,131 |
||||||||||||||||
Research and development expenses |
11,108 |
10,509 |
11,772 |
21,617 |
23,816 |
||||||||||||||||
Other charges |
— |
554 |
— |
554 |
— |
||||||||||||||||
Total operating expenses |
23,516 |
23,165 |
22,867 |
46,681 |
46,947 |
||||||||||||||||
Operating income: |
8,622 |
5,965 |
8,755 |
14,587 |
3,698 |
||||||||||||||||
Interest expense |
(5,430) |
(5,607) |
(5,439) |
(11,037) |
(11,076) |
||||||||||||||||
Foreign currency gain (loss), net |
8,469 |
(30,971) |
(11,571) |
(22,502) |
(22,181) |
||||||||||||||||
Loss on early extinguishment of long-term borrowings, net |
— |
— |
— |
— |
(42) |
||||||||||||||||
Other income, net |
791 |
838 |
551 |
1,629 |
1,138 |
||||||||||||||||
Income (loss) from continuing operations before income tax expense |
12,452 |
(29,775) |
(7,704) |
(17,323) |
(28,463) |
||||||||||||||||
Income tax expense |
678 |
1,303 |
786 |
1,981 |
1,582 |
||||||||||||||||
Income (loss) from continuing operations |
11,774 |
(31,078) |
(8,490) |
(19,304) |
(30,045) |
||||||||||||||||
Income (loss) from discontinued operations, net of tax |
17,397 |
7,329 |
(1,030) |
24,726 |
(13,600) |
||||||||||||||||
Net income (loss) |
$ |
29,171 |
$ |
(23,749) |
$ |
(9,520) |
$ |
5,422 |
$ |
(43,645) |
|||||||||||
Basic earnings (loss) per common share— |
|||||||||||||||||||||
Continuing operations |
$ |
0.34 |
$ |
(0.89) |
$ |
(0.25) |
$ |
(0.55) |
$ |
(0.88) |
|||||||||||
Discontinued operations |
0.50 |
0.21 |
(0.03) |
0.71 |
(0.40) |
||||||||||||||||
Total |
$ |
0.84 |
$ |
(0.68) |
$ |
(0.28) |
$ |
0.16 |
$ |
(1.28) |
|||||||||||
Diluted earnings (loss) per common share— |
|||||||||||||||||||||
Continuing operations |
$ |
0.28 |
$ |
(0.89) |
$ |
(0.25) |
$ |
(0.55) |
$ |
(0.88) |
|||||||||||
Discontinued operations |
0.37 |
0.21 |
(0.03) |
0.71 |
(0.40) |
||||||||||||||||
Total |
$ |
0.65 |
$ |
(0.68) |
$ |
(0.28) |
$ |
0.16 |
$ |
(1.28) |
|||||||||||
Weighted average number of shares— |
|||||||||||||||||||||
Basic |
35,092,312 |
34,893,157 |
34,245,127 |
34,992,734 |
34,220,141 |
||||||||||||||||
Diluted |
46,474,237 |
34,893,157 |
34,245,127 |
34,992,734 |
34,220,141 |
||||||||||||||||
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||
(In thousands of US dollars, except share data) |
||||||||
(Unaudited) |
||||||||
June 30, 2020 |
December 31, 2019 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
192,824 |
$ |
151,657 |
||||
Accounts receivable, net |
48,548 |
47,447 |
||||||
Inventories, net |
45,511 |
41,404 |
||||||
Other receivables |
10,406 |
10,200 |
||||||
Prepaid expenses |
8,598 |
9,003 |
||||||
Hedge collateral |
11,740 |
9,820 |
||||||
Other current assets |
7,405 |
10,013 |
||||||
Current assets held for sale |
205,086 |
99,821 |
||||||
Total current assets |
530,118 |
379,365 |
||||||
Property, plant and equipment, net |
69,110 |
73,068 |
||||||
Operating lease right-of-use assets |
1,182 |
1,876 |
||||||
Intangible assets, net |
2,590 |
2,769 |
||||||
Long-term prepaid expenses |
2,936 |
5,757 |
||||||
Other non-current assets |
9,212 |
9,059 |
||||||
Non-current assets held for sale |
— |
123,434 |
||||||
Total assets |
$ |
615,148 |
$ |
595,328 |
||||
Liabilities and Stockholders' Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ |
42,366 |
$ |
40,376 |
||||
Other accounts payable |
4,049 |
6,410 |
||||||
Accrued expenses |
45,735 |
44,799 |
||||||
Operating lease liabilities |
1,053 |
1,625 |
||||||
Current portion of long-term borrowings, net |
82,706 |
— |
||||||
Other current liabilities |
5,481 |
3,583 |
||||||
Current liabilities held for sale |
146,569 |
37,040 |
||||||
Total current liabilities |
327,959 |
133,833 |
||||||
Long-term borrowings, net |
223,242 |
304,743 |
||||||
Accrued severance benefits, net |
49,927 |
51,181 |
||||||
Other non-current liabilities |
7,845 |
9,671 |
||||||
Non-current liabilities held for sale |
— |
110,881 |
||||||
Total liabilities |
608,973 |
610,309 |
||||||
Commitments and contingencies |
||||||||
Stockholders' equity |
||||||||
Common stock, $0.01 par value, 150,000,000 shares authorized, 44,248,706 shares issued and 35,143,033 outstanding at June 30, 2020 and 43,851,991 shares issued and 34,800,312 outstanding at December 31, 2019 |
443 |
439 |
||||||
Additional paid-in capital |
155,591 |
152,404 |
||||||
Accumulated deficit |
(52,709) |
(58,131) |
||||||
Treasury stock, 9,105,673 shares at June 30, 2020 and 9,051,679 shares at December 31, 2019, respectively |
(107,649) |
(107,033) |
||||||
Accumulated other comprehensive income (loss) |
10,499 |
(2,660) |
||||||
Total stockholders' equity (deficit) |
6,175 |
(14,981) |
||||||
Total liabilities and stockholders' equity |
$ |
615,148 |
$ |
595,328 |
||||
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
|||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||||||||
(In thousands of US dollars) |
|||||||||||||
(Unaudited) |
|||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||
June 30, 2020 |
June 30, 2020 |
June 30, 2019 |
|||||||||||
Cash flows from operating activities |
|||||||||||||
Net income (loss) |
$ |
29,171 |
$ |
5,422 |
$ |
(43,645) |
|||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
|||||||||||||
Depreciation and amortization |
2,544 |
10,479 |
16,505 |
||||||||||
Provision for severance benefits |
5,108 |
10,179 |
6,406 |
||||||||||
Amortization of debt issuance costs and original issue discount |
607 |
1,205 |
1,134 |
||||||||||
Loss (gain) on foreign currency, net |
(12,083) |
26,397 |
24,609 |
||||||||||
Restructuring and other charges |
141 |
141 |
732 |
||||||||||
Provision for inventory reserves |
1,463 |
2,033 |
8,940 |
||||||||||
Stock-based compensation |
1,643 |
2,528 |
1,441 |
||||||||||
Loss on early extinguishment of long-term borrowings, net |
— |
— |
42 |
||||||||||
Other |
(218) |
(111) |
(494) |
||||||||||
Changes in operating assets and liabilities |
|||||||||||||
Accounts receivable, net |
9,992 |
(438) |
(20,974) |
||||||||||
Unbilled accounts receivable, net |
3,996 |
10,933 |
6,201 |
||||||||||
Inventories |
(9,197) |
(14,060) |
(7,351) |
||||||||||
Other receivables |
(1,915) |
67 |
(2,969) |
||||||||||
Other current assets |
3,838 |
4,747 |
5,929 |
||||||||||
Accounts payable |
2,959 |
4,947 |
32,137 |
||||||||||
Other accounts payable |
(4,325) |
(5,898) |
(3,960) |
||||||||||
Accrued expenses |
4,878 |
161 |
2,880 |
||||||||||
Other current liabilities |
158 |
1,220 |
(7,491) |
||||||||||
Other non-current liabilities |
(570) |
1,238 |
1,716 |
||||||||||
Payment of severance benefits |
(2,192) |
(4,272) |
(4,579) |
||||||||||
Other |
(1) |
147 |
(54) |
||||||||||
Net cash provided by operating activities |
35,997 |
57,065 |
17,155 |
||||||||||
Cash flows from investing activities |
|||||||||||||
Proceeds from settlement of hedge collateral |
1,616 |
5,855 |
4,627 |
||||||||||
Payment of hedge collateral |
— |
(7,841) |
(8,395) |
||||||||||
Purchase of property, plant and equipment |
(5,491) |
(8,842) |
(15,000) |
||||||||||
Payment for intellectual property registration |
(244) |
(473) |
(642) |
||||||||||
Collection of guarantee deposits |
— |
47 |
388 |
||||||||||
Payment of guarantee deposits |
(571) |
(571) |
(1,330) |
||||||||||
Other |
13 |
21 |
193 |
||||||||||
Net cash used in investing activities |
(4,677) |
(11,804) |
(20,159) |
||||||||||
Cash flows from financing activities |
|||||||||||||
Repurchase of long-term borrowings |
— |
— |
(1,175) |
||||||||||
Proceeds from exercise of stock options |
663 |
663 |
149 |
||||||||||
Acquisition of treasury stock |
— |
(1,021) |
(2,588) |
||||||||||
Repayment of financing related to water treatment facility arrangement |
(132) |
(267) |
(281) |
||||||||||
Repayment of principal portion of lease liabilities |
(59) |
(119) |
(118) |
||||||||||
Net cash provided by (used in) financing activities |
472 |
(744) |
(4,013) |
||||||||||
Effect of exchange rates on cash and cash equivalents |
3,739 |
(3,350) |
(1,668) |
||||||||||
Net increase (decrease) in cash and cash equivalents |
35,531 |
41,167 |
(8,685) |
||||||||||
Cash and cash equivalents |
|||||||||||||
Beginning of the period |
157,293 |
151,657 |
132,438 |
||||||||||
End of the period |
$ |
192,824 |
192,824 |
123,753 |
|||||||||
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||||||
RECONCILIATION OF OPERATING INCOME TO ADJUSTED OPERATING INCOME |
|||||||||||||||||||||||||
(In thousands of US dollars) |
|||||||||||||||||||||||||
(Unaudited) |
|||||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||||||||||||
June 30, 2020 |
March 31, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
|||||||||||||||||||||
Operating income |
$ |
8,622 |
$ |
5,965 |
$ |
8,755 |
$ |
14,587 |
$ |
3,698 |
|||||||||||||||
Adjustments: |
|||||||||||||||||||||||||
Equity-based compensation expense |
1,503 |
762 |
668 |
2,265 |
1,231 |
||||||||||||||||||||
Others |
— |
554 |
— |
554 |
585 |
||||||||||||||||||||
Adjusted Operating Income |
$ |
10,125 |
$ |
7,281 |
$ |
9,423 |
$ |
17,406 |
$ |
5,514 |
|||||||||||||||
We present Adjusted Operating Income as supplemental measures of our performance. We define Adjusted Operating Income for the periods indicated as operating income adjusted to exclude (i) Equity-based compensation expense and (ii) Others. Others include non-recurring professional fees and expenses incurred in connection with certain treasury and finance initiatives for the three months ended March 31, 2020, and a $0.6 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which is borne by us under a negotiated separation agreement for the three months ended March 31, 2019.
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
||||||||||||||||||||||
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME (LOSS) |
||||||||||||||||||||||
(In thousands of US dollars, except share data) |
||||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||
June 30, 2020 |
March 31, 2020 |
June 30, 2019 |
June 30, 2020 |
June 30, 2019 |
||||||||||||||||||
Income (loss) from continuing operations |
$ |
11,774 |
$ |
(31,078) |
$ |
(8,490) |
(19,304) |
(30,045) |
||||||||||||||
Adjustments: |
||||||||||||||||||||||
Interest expense, net |
4,736 |
4,930 |
4,852 |
9,666 |
9,911 |
|||||||||||||||||
Income tax expense |
678 |
1,303 |
786 |
1,981 |
1,582 |
|||||||||||||||||
Depreciation and amortization |
2,544 |
2,570 |
2,551 |
5,114 |
5,102 |
|||||||||||||||||
EBITDA |
19,732 |
(22,275) |
(301) |
(2,543) |
(13,450) |
|||||||||||||||||
Equity-based compensation expense |
1,503 |
762 |
668 |
2,265 |
1,231 |
|||||||||||||||||
Foreign currency loss (gain), net |
(8,469) |
30,971 |
11,571 |
22,502 |
22,181 |
|||||||||||||||||
Derivative valuation loss (gain), net |
(55) |
(117) |
80 |
(172) |
136 |
|||||||||||||||||
Loss on early extinguishment of long-term borrowings, net |
— |
— |
— |
— |
42 |
|||||||||||||||||
Others |
— |
554 |
— |
554 |
585 |
|||||||||||||||||
Adjusted EBITDA |
12,711 |
9,895 |
12,018 |
22,606 |
10,725 |
|||||||||||||||||
Income (loss) from continuing operations |
$ |
11,774 |
$ |
(31,078) |
$ |
(8,490) |
$ |
(19,304) |
$ |
(30,045) |
||||||||||||
Adjustments: |
||||||||||||||||||||||
Equity-based compensation expense |
1,503 |
762 |
668 |
2,265 |
1,231 |
|||||||||||||||||
Foreign currency loss (gain), net |
(8,469) |
30,971 |
11,571 |
22,502 |
22,181 |
|||||||||||||||||
Derivative valuation loss (gain), net |
(55) |
(117) |
80 |
(172) |
136 |
|||||||||||||||||
Loss on early extinguishment of long-term borrowings, net |
— |
— |
— |
— |
42 |
|||||||||||||||||
Others |
— |
554 |
— |
554 |
585 |
|||||||||||||||||
Adjusted Net Income (Loss) |
$ |
4,753 |
$ |
1,092 |
$ |
3,829 |
$ |
5,845 |
$ |
(5,870) |
||||||||||||
Adjusted Net Income (Loss) per common share— |
||||||||||||||||||||||
- Basic |
$ |
0.14 |
$ |
0.03 |
$ |
0.11 |
$ |
0.17 |
$ |
(0.17) |
||||||||||||
- Diluted |
$ |
0.13 |
$ |
0.03 |
$ |
0.11 |
$ |
0.16 |
$ |
(0.17) |
||||||||||||
Weighted average number of shares – basic |
35,092,312 |
34,893,157 |
34,245,127 |
34,992,734 |
34,220,141 |
|||||||||||||||||
Weighted average number of shares – diluted |
36,330,083 |
35,883,200 |
34,965,562 |
36,248,039 |
34,220,141 |
|||||||||||||||||
We present Adjusted EBITDA and Adjusted Net Income (Loss) as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Loss on early extinguishment of long-term borrowings, net and (v) Others. Others include non-recurring professional fees and expenses incurred in connection with certain treasury and finance initiatives for the three months ended March 31, 2020, and a $0.6 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which is borne by us under a negotiated separation agreement for the three months ended March 31, 2019. EBITDA for the periods indicated is defined as Income (loss) from continuing operations before interest expense, net, income tax expense and depreciation and amortization. We prepare Adjusted Net Income (Loss) by adjusting income (loss) from continuing operations to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income (Loss) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income (Loss) for the periods as income (loss) from continuing operations, adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Loss on early extinguishment of long-term borrowings, net and (v) Others. Others include non-recurring professional fees and expenses incurred in connection with certain treasury and finance initiatives for the three months ended March 31, 2020, and a $0.6 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which is borne by us under a negotiated separation agreement for the three months ended March 31, 2019.
MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES |
|||||||||||||
RECONCILIATION OF NON-GAAP COMBINED RESULTS OF OPERATIONS |
|||||||||||||
(In thousands of US dollars) |
|||||||||||||
(Unaudited) |
|||||||||||||
Three Months Ended June 30, 2020 |
|||||||||||||
Continuing Operations |
Discontinued Operations |
Combined |
|||||||||||
Standard |
Transitional |
Foundry |
Transitional |
||||||||||
Fab 3 |
Fab 3 |
||||||||||||
Combined results of operations (non-GAAP): |
products |
foundry |
Services |
foundry |
|||||||||
business |
services |
Group |
services |
||||||||||
Net sales |
$ 108,955 |
$9,873 |
$95,779 |
$ |
(9,873) |
$204,734 |
|||||||
Gross profit margin |
29.5% |
— |
32.3% |
— |
30.8% |
||||||||
Three Months Ended June 30, 2019 |
|||||||||||||
Continuing Operations |
Discontinued Operations |
Combined |
|||||||||||
Standard |
Transitional |
Foundry |
Transitional |
||||||||||
Fab 3 |
Fab 3 |
||||||||||||
Combined results of operations (non-GAAP): |
products |
foundry |
Services |
foundry |
|||||||||
business |
services |
Group |
services |
||||||||||
Net sales |
$132,006 |
$8,879 |
$73,139 |
$ |
(8,879) |
$205,145 |
|||||||
Gross profit margin |
24.0% |
— |
16.7% |
— |
21.4% |
||||||||
Six Months Ended June 30, 2020 |
|||||||||||||
Continuing Operations |
Discontinued Operations |
Combined |
|||||||||||
Standard |
Transitional |
Foundry |
Transitional |
||||||||||
Fab 3 |
Fab 3 |
||||||||||||
Combined results of operations (non-GAAP): |
products |
foundry |
Services |
foundry |
|||||||||
business |
services |
Group |
services |
||||||||||
Net sales |
$219,691 |
$19,610 |
$182,058 |
$ |
(19,610) |
$401,749 |
|||||||
Gross profit margin |
27.9% |
— |
28.3% |
— |
28.1% |
||||||||
Six Months Ended June 30, 2019 |
|||||||||||||
Continuing Operations |
Discontinued Operations |
Combined |
|||||||||||
Standard |
Transitional |
Foundry |
Transitional |
||||||||||
Fab 3 |
Fab 3 |
||||||||||||
Combined results of operations (non-GAAP): |
products |
foundry |
Services |
foundry |
|||||||||
business |
services |
Group |
services |
||||||||||
Net sales |
$232,270 |
$15,882 |
$130,255 |
$ |
(15,882) |
$362,525 |
|||||||
Gross profit margin |
21.8% |
— |
12.2% |
— |
18.4% |
||||||||
SOURCE MagnaChip Semiconductor Corporation
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