PR Newswire | May 10, 2021 06:20AM EDT

05/10 05:20 CDT

Magnachip Reports Results for First Quarter 2021- First quarter revenue of $123.0 million was down 13.9% sequentially and up 2.1% year-over-year (YoY).- Gross profit margin for the first quarter was 27.9%, up 100 bps sequentially and up 370 bps YoY.- GAAP diluted loss per share for the first quarter was $0.19.- Non-GAAP diluted earnings per share was 0.22 cents. SEOUL, South Korea, May 10, 2021

SEOUL, South Korea, May 10, 2021 /PRNewswire/ --Magnachip Semiconductor Corporation (NYSE: MX) ("Magnachip" or the "Company") today announced financial results for the first quarter 2021.

"Magnachip delivered solid quarterly results despite the industry-wide supply constraints. Our revenue came in above the midpoint of the company's Q1 revenue guidance range, driven by strong growth in the Power solutions business. Gross profit margin exceeded the high-end of our expectations due to the improved product mix and higher utilization," said YJ Kim, Magnachip's chief executive officer.

Due to the pending merger with an investment vehicle formed by an affiliate of Wise Road Capital LTD pursuant to a definitive agreement executed on March 25, 2021, Magnachip will not be hosting a quarterly earnings conference call and has suspended the practice of providing forward-looking guidance. Please review the 'Investors' section of the Company's website for the quarterly financial results and SEC filings for the latest updates on the pending transaction.

Q1 2021 Financial Highlights



In thousands of US dollars, except share data

GAAP

Q1 2021 Q4 2020 Q/Q change Q1 2020 Y/Y change

Revenues

Standard Products Business

Display Solutions 58,895 82,705 down 28.8% 77,593 down 24.1%

Power Solutions 54,011 46,861 up 15.3% 33,143 up 63.0%

Transitional Fab 3 Foundry Services^(1) 10,113 13,379 down 24.4% 9,737 up 3.9%

Gross Profit Margin 27.9% 26.9% up 1.0% pts 24.2% up 3.7% pts

Operating Income (Loss) ^(2) (2,091) 9,206 down 122.7% 5,965 down 135.1%

Net Income (Loss) ^(3) (7,473) 66,581 down 111.2% (23,749) up 68.5%

Basic Earnings (Loss) per Common Share (0.19) 1.87 down 110.2% (0.68) up 72.1%

Diluted Earnings (Loss) per Common Share (0.19) 1.45 down 113.1% (0.68) up 72.1%



In thousands of US dollars, except share data

Non-GAAP^(3)

Q1 2021 Q4 2020 Q/Q change Q1 2020 Y/Y change

Adjusted Operating Income 9,971 15,355 down 35.1% 7,281 up 36.9%

Adjusted EBITDA 13,504 18,582 down 27.3% 9,895 up 36.5%

Adjusted Net Income 9,346 17,268 down 45.9% 1,092 up 755.9%

Adjusted Earnings per Common Share-Diluted 0.22 0.40 down 45.0% 0.03 up 633.3%

(1) Following the consummation of the sale of the Foundry Services Groupbusiness and Fab 4 in Q3 2020, and for a period of up to three years, the Company will provide transitional foundry servicesto the buyer for foundry products manufactured in the Company's fabrication facility located in Gumi ("Transitional Fab 3 FoundryServices"). Management believes that disclosing revenue of Transitional Fab 3 Foundry Services separately from the standardproducts business allows investors to better understand the results of our core standard products display solutions and powersolutions businesses.



(2) In Q1 2021, operating loss of $2.1 million included non-recurringprofessional fees and certain transaction related expenses of $9.8 million in connection with a definitive agreement (the "MergerAgreement") that the Company entered into with South Dearborn Limited, an exempted company incorporated in the Cayman Islands withlimited liability ("Parent"), formed by an affiliate of Wise Road Capital LTD, and Michigan Merger Sub, Inc., a Delawarecorporation and a wholly owned subsidiary of the Parent ("Merger Sub"). The Merger Agreement provides that, among other things, MergerSub will be merged with and into the Company (the "Merger"), with the Company continuing its corporate existence as thesurviving corporation in the Merger and becoming a wholly owned subsidiary of Parent.



(3) In Q4 2020, total net income of $66.6 million included one-timerecognition of deferred tax benefits of $43.9 million.



(4) Non-GAAP financial measures are calculated based on the results fromcontinuing operations. Management believes that non- GAAP financial measures, when viewed in conjunction with GAAPresults, can provide a meaningful understanding of the factors and trends affecting Magnachip's business and operations and assistin evaluating our core operating performance. However, such non-GAAP financial measures have limitations and should not beconsidered as a substitute for net income from continuing operations or as a better indicator of our operating performance thanmeasures that are presented in accordance with GAAP. A reconciliation of GAAP results to non-GAAP results is included inthis press release.

Safe Harborfor 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. 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 possibility that any or all of the conditions precedent to the consummation of the pending merger may not be satisfied or waived; unanticipated difficulties or expenditures relating to the proposed merger; that the merger may not be completed in a timely manner or at all; the diversion of and attention of Magnachip's management on merger-related issues; legal proceedings, judgments or settlements following the announcement of the proposed merger; disruptions of current plans and operations caused by the announcement and pendency of the proposed merger; potential difficulties in employee retention due to the announcement and pendency of the proposed merger; the response of customers, suppliers, business partners and regulators to the announcement of the proposed merger; 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; change or ratification of local or international laws and regulations, including those related to environment, health and safety; 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 March 9, 2021 (including that the impact of the COVID-19 pandemic, trade tensions and supply constraints may also exacerbate the risks discussed therein) 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 to customers worldwide. Magnachip, with more than 40 years of operating history, owns a portfolio of approximately 1,200 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.

CONTACT:

So-Yeon Jeong

Head of Investor Relations

Tel. +1-408-712-6151

Investor.relations@magnachip.com



MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except share data)

(Unaudited)



Three Months Ended

March 31, December 31, March 31,

2021 2020 2020

Revenues:

Net sales - standard products business $ 112,906 $ 129,566 $ 110,736

Net sales - transitional Fab 3 foundry services 10,113 13,379 9,737

Total revenues 123,019 142,945 120,473

Cost of sales:

Cost of sales - standard products business 79,247 92,503 81,606

Cost of sales - transitional Fab 3 foundry services 9,390 11,981 9,737

Total cost of sales 88,637 104,484 91,343

Gross profit 34,382 38,461 29,130

Gross profit as a percentage of standard products

business net sales 29.8% 28.6% 26.3%

Gross profit as a percentage of total revenues 27.9% 26.9% 24.2%

Operating expenses:

Selling, general and administrative expenses 12,634 12,576 12,102

Research and development expenses 13,423 11,604 10,509

Early termination and other charges 10,416 5,075 554

Total operating expenses 36,473 29,255 23,165

Operating income (loss) (2,091) 9,206 5,965

Interest expense (1,041) (1,625) (5,607)

Foreign currency gain (loss), net (4,671) 13,256 (30,971)

Loss on early extinguishment of borrowings, net - (766) -

Other income, net 620 767 838

Income (loss) from continuing operations before

income tax expense (7,183) 20,838 (29,775)

Income tax expense (benefit) 290 (47,064) 1,303

Income (loss) from continuing operations (7,473) 67,902 (31,078)

Income (loss) from discontinued operations, net of tax - (1,321) 7,329

Net income (loss) $ (7,473) $ 66,581 $ (23,749)

Basic earnings (loss) per common share-

Continuing operations $ (0.19) $ 1.91 $ (0.89)

Discontinued operations - (0.04) 0.21

Total $ (0.19) $ 1.87 $ (0.68)

Diluted earnings (loss) per common share-

Continuing operations $ (0.19) $ 1.47 $ (0.89)

Discontinued operations - (0.02) 0.21

Total $ (0.19) $ 1.45 $ (0.68)

Weighted average number of shares-

Basic 40,292,838 35,582,966 34,893,157

Diluted 40,292,838 47,062,903 34,893,157

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)

(Unaudited)

March 31, December 31,

2021 2020

Assets

Current assets

Cash and cash equivalents $ 290,194 $ 279,940

Accounts receivable, net 52,250 64,390

Inventories, net 29,964 39,039

Other receivables 5,649 4,338

Prepaid expenses 9,136 7,332

Hedge collateral 5,250 5,250

Other current assets 2,435 9,321

Total current assets 394,878 409,610

Property, plant and equipment, net 91,014 96,383

Operating lease right-of-use assets 4,592 4,632

Intangible assets, net 2,602 2,727

Long-term prepaid expenses 5,993 4,058

Deferred income taxes 42,906 44,541

Other non-current assets 9,422 9,739

Total assets $ 551,407 $ 571,690

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable $ 43,357 $ 52,164

Other accounts payable 8,261 2,531

Accrued expenses 17,867 16,241

Accrued income taxes 1,224 12,398

Operating lease liabilities 2,352 2,210

Current portion of long-term borrowings, net - 83,479

Other current liabilities 6,558 4,595

Total current liabilities 79,619 173,618

Accrued severance benefits, net 39,070 40,462

Non-current operating lease liabilities 2,240 2,422

Other non-current liabilities 10,131 9,588

Total liabilities 131,060 226,090

Commitments and contingencies

Stockholders' equity

Common stock, $0.01 par value, 150,000,000 shares authorized, 55,469,375 sharesissued and 46,257,413

outstanding at March 31, 2021 and 44,943,854 shares issued and 35,783,347 555 450outstanding at December 31, 2020

Additional paid-in capital 250,829 163,010

Retained earnings 279,361 286,834

Treasury stock, 9,211,962 shares at March 31, 2021 and 9,160,507 shares at (109,407) (108,397)December 31, 2020, respectively

Accumulated other comprehensive income (loss) (991) 3,703

Total stockholders' equity 420,347 345,600

Total liabilities and stockholders' equity $ 551,407 $ 571,690

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)

Three Months Ended

March 31, March 31, 2021 2020

Cash flows from operating activities

Net loss $ (7,473) $ (23,749)

Adjustments to reconcile net loss to net cash provided by operating activities

Depreciation and amortization 3,448 7,935

Provision for severance benefits 1,771 5,071

Amortization of debt issuance costs and original issue discount 261 598

Loss on foreign currency, net 14,873 38,480

Restructuring and other charges 9,504 2,138

Provision for inventory reserves 1,504 570

Stock-based compensation 1,646 885

Deferred income tax assets 30 23

Others, net 124 107

Changes in operating assets and liabilities

Accounts receivable, net 9,794 (10,430)

Unbilled accounts receivable, net - 6,937

Inventories 6,071 (4,863)

Other receivables (1,438) 1,982

Other current assets 5,427 909

Accounts payable (7,701) 1,988

Other accounts payable (2,009) (1,817)

Accrued expenses (3,532 ) (6,611)

Accrued income taxes (10,700) (274)

Other current liabilities 1,087 1,336

Other non-current liabilities 18 1,808

Payment of severance benefits (1,493) (2,080)

Others, net 12 125

Net cash provided by operating activities 21,224 21,068

Cash flows from investing activities

Proceeds from settlement of hedge collateral - 4,239

Payment of hedge collateral - (7,841)

Purchase of property, plant and equipment (1,082) (3,351)

Payment for intellectual property registration (171) (229)

Payment of guarantee deposits (76) -

Others, net (35) 55

Net cash used in investing activities (1,364) (7,127)

Cash flows from financing activities

Proceeds from exercise of stock options 2,538 -

Acquisition of treasury stock (1,540) (1,021)

Repayment of financing related to water treatment facility arrangement (144) (135)

Repayment of principal portion of finance lease liabilities (16) (60)

Net cash provided by (used in) financing activities 838 (1,216)

Effect of exchange rates on cash and cash equivalents (10,444) (7,089)

Net increase in cash and cash equivalents 10,254 5,636

Cash and cash equivalents

Beginning of the period 279,940 151,657

End of the period $ 290,194 $ 157,293

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF OPERATING INCOME TO ADJUSTED OPERATING INCOME

(In thousands of U.S. dollars)

(Unaudited)

Three Months Ended

March 31, December 31, March 31,

2021 2020 2020

Operating income (loss) $ (2,091) $ 9,206 $ 5,965

Adjustments:

Equity-based compensation expense 1,646 1,945 762

Early termination and other charges 10,416 5,075 554

Inventory reserve related to Huawei impact of

downstream trade restrictions - (871) -

Adjusted operating income $ 9,971 $ 15,355 $ 7,281

We present Adjusted Operating Income as a supplemental measure of ourperformance. We define Adjusted Operating Income for the periods indicated asoperating income (loss) adjusted to exclude (i) Equity-based compensationexpense, (ii) Early termination and other charges and (iii) Inventory reserverelated to Huawei impact of downstream trade restrictions.



For the three months ended March 31, 2021, early termination and other chargeseliminate $10,416 thousand, of which $9,831 thousand related to non-recurringprofessional fees and certain transaction related expenses incurred inconnection with the Merger. For the three months ended March 31, 2020, earlytermination and other charges eliminate $554 thousand of non-recurringprofessional service fees and expenses incurred in connection with certaintreasury and finance initiatives.



For the three months ended December 31, 2020, early termination and othercharges eliminate $5,075 thousand, of which $4,422 thousand related to thereduction of workforce under a voluntary resignation program and non-recurringprofessional service fees, and $653 thousand related to non-recurringprofessional fees and certain transaction related expenses incurred inconnection with the Merger.

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME

(In thousands of U.S. dollars, except share data)

(Unaudited)

Three Months Ended

March 31, December 31, March 31,

2021 2020 2020

Income (loss) from continuing operations $ (7,473) $ 67,902 $ (31,078)

Adjustments:

Interest expense, net 420 863 4,930

Income tax expense (benefit) 290 (47,064) 1,303

Depreciation and amortization 3,448 3,148 2,570

EBITDA (3,315) 24,849 (22,275)

Equity-based compensation expense 1,646 1,945 762

Early termination and other charges 10,416 5,075 554

Foreign currency loss (gain), net 4,671 (13,256) 30,971

Derivative valuation loss (gain), net 86 74 (117)

Loss on early extinguishment of borrowings, net - 766 -

Inventory reserve related to Huawei impact of

downstream trade restrictions - (871) -

Adjusted EBITDA $ 13,504 $ 18,582 $ 9,895

Income (loss) from continuing operations $ (7,473) $ 67,902 $ (31,078)

Adjustments:

Equity-based compensation expense 1,646 1,945 762

Early termination and other charges 10,416 5,075 554

Foreign currency loss (gain), net 4,671 (13,256) 30,971

Derivative valuation loss (gain), net 86 74 (117)

Loss on early extinguishment of borrowings, net - 766 -

Inventory reserve related to Huawei impact of

downstream trade restrictions - (871) -

GAAP and cash tax expense difference - (43,874) -

Income tax effect on non-GAAP adjustments - (493) -

Adjusted Net Income $ 9,346 $ 17,268 $ 1,092

Adjusted Net Income per common share-

- Basic $ 0.23 $ 0.49 $ 0.03

- Diluted $ 0.22 $ 0.40 $ 0.03

Weighted average number of shares - basic 40,292,838 35,582,966 34,893,157

Weighted average number of shares - diluted 47,470,416 47,062,903 35,883,200

We present Adjusted EBITDA and Adjusted Net Income as supplemental measures ofour performance. We define Adjusted EBITDA for the periods indicated as EBITDA(as defined below), adjusted to exclude (i) Equity-based compensation expense,(ii) Early termination and other charges, (iii) Foreign currency loss (gain),net, (iv) Derivative valuation loss (gain), net, (v) Loss on earlyextinguishment of borrowings, net and (vi) Inventory reserve related to Huaweiimpact of downstream trade restrictions. EBITDA for the periods indicated isdefined as Income (loss) from continuing operations before interest expense,net, income tax expense (benefit) and depreciation and amortization.



We present Adjusted Net Income by adjusting income (loss) from continuingoperations to eliminate the impact of a number of non-cash expenses and otheritems that may be either one time or recurring that we do not consider to beindicative of our core ongoing operating performance. We believe that AdjustedNet Income is particularly useful because it reflects the impact of our assetbase and capital structure on our operating performance. We define Adjusted NetIncome for the periods as income (loss) from continuing operations, adjusted toexclude (i) Equity-based compensation expense, (ii) Early termination and othercharges, (iii) Foreign currency loss (gain), net, (iv) Derivative valuationloss (gain), net, (v) Loss on early extinguishment of borrowings, net, (vi)Inventory reserve related to Huawei impact of downstream trade restrictions,(vii) GAAP and cash tax expense difference and (viii) Income tax effect onnon-GAAP adjustments.



For the three months ended March 31, 2021, early termination and other chargeseliminate $10,416 thousand, of which $9,831 thousand related to non-recurringprofessional fees and certain transaction related expenses incurred inconnection with the Merger. For the three months ended March 31, 2020, earlytermination and other charges eliminate $554 thousand of non-recurringprofessional service fees and expenses incurred in connection with certaintreasury and finance initiatives.



For the three months ended December 31, 2020, early termination and othercharges eliminate $5,075 thousand, of which $4,422 thousand related to thereduction of workforce under a voluntary resignation program and non-recurringprofessional service fees, and $653 thousand related to non-recurringprofessional fees and certain transaction related expenses incurred inconnection with the Merger.

View original content to download multimedia: http://www.prnewswire.com/news-releases/magnachip-reports-results-for-first-quarter-2021-301287179.html

SOURCE Magnachip Semiconductor Corporation