Q3 2024 Magnachip Semiconductor Corp Earnings Call

Hello, everyone and thank you for standing by welcome to the third quarter 2020 for Magna ship Semiconductor Corporation earnings Conference call at.

Kevin will provide more details.

Sure.

We wind down and exit the transitional foundry services business Mega Chip will be a pure play standard products company based on industry, leading mixed signal expertise our standard products.

Comprised of offerings in the MSS and <unk> businesses, which include how ICT advance OLED Division.

And discrete power products for industrial automotive consumer communications and computing applications.

Revenue in Q3 for our standard product business was 64.0 million.

<unk> point, 24.0% year over year, and up 25, 9% sequentially.

Standard product business gross margin was 24 four.

<unk> percent up one three percentage points sequentially.

We are on track with our guidance given at the beginning of the year for the double digit growth in MSS and P. S. For 2024, we will provide 2025 guidance on our Q4 and year end call as we've done in the past.

Now, let me provide more detailed comments for each of our standard products business lines.

In terms of revenue contribution P. S represented 74, 3%.

With typical seasonal patterns and was driven by a leaner distribution channels and design wins for existing and new products. We.

We are continuing to execute and delivering a new.

Strong product pipeline for power in 2024, we believe many of these new products will have similar performance to tier one suppliers, which you would give us an opportunity to penetrate new markets and help fill idle boomy fab capacity in 2025 created by the phase out of the transitional.

Reis services businesses.

Yeah.

Turning to MSS.

Q3 revenue was $16 4 million or 54, 5% year over year and up 41.8% sequentially. The result represented.

25, 7% of standard product revenue and was near the high end of our guidance range of 14, 5% up 14, five to $16 $5 million.

The quarter over quarter revenue growth was due to increased demand from.

OLED DDI for China's smartphone Oems as well as for automotive.

And how I T for OLED.

During Q3, we continued to make inroads with OLED panel makers and smartphone Oems is focusing on the China market at a high level. We have several of the EIC at different stages of development customer evaluation and in production. These designs covered a broad smartphone market.

Yes.

I will now turn the call over to <unk> to give you more details of our financial performance in the third quarter and provide Q4 guidance Shin young.

Thank you Jay and welcome everyone on the call.

The other key financial metrics for Chesapeake.

Total revenue in Q3 was $66 $5 million, which came in at the high end of our guidance range of 61.5 to $66 $5 million. This was up eight 5% year over year and up 25% sequentially.

Revenue from MSS business was $16 $4 million near the high end of our guidance range of 14, 5% to $16 5 million.

This was up 54, 5% year over year and up 41, 8% sequentially.

P. S business revenue was $47 $6 million above the midpoint of our guidance range of $45 five to $48 $5 million. This was up 16, 1% year over year and up 21, 2% sequentially.

Revenue from traditional Fondue services was flattish sequentially at $2 $4 million and down from $9 $6 million in Q3 2023, as we continue to wind down this service as we've explained previously.

Consolidated gross profit margin in Q3 was 23, 3% slightly below the midpoint of our guidance range of 22, 5% to 24, 5%.

Down from 23, 6% year over year, but up from 21, 8% sequentially.

<unk> gross profit margin in Q3 was $38, 7% above the midpoint of the guidance range of 36, 5% to 39, 5%.

Up from 28, 8% in Q3, 2023 and up from 34, 6% in Q2 2024.

P S revenue to grow double digits year over year as compared with peers equivalent revenue of $151 $3 million in 2023, consistent with what we communicated throughout the year.

Transitional foundry services will be wound down by the end of 2024 as expected we expect any remaining amounts to be much real beyond Q4 2024.

Consolidated revenue flattish as compared to our prior expectation of flattish to slightly down consolidated gross profit margin between 21% to 22% as compared to our prior expectation of 19% to <unk>, 22%. This.

This compares with the consolidated gross profit margin of 22, 4% in 2023.

Speaker Change: Thank you now I'll turn the call back over to <unk> for his final remarks YJ.

YJ: In conclusion literature strategic focus on each core standard products business drove a better than seasonal Q3 and outlook for Q4.

YJ: We are on track with our expectations set at the beginning of the year for double digit growth in both MSS and Pis.

YJ: We continue transitioning into a pure play standup products company we are.

Our focus on leveraging our industry, leading mixed signal expertise apply to policies advanced worthy DVD Ics and power discrete.

YJ: These ongoing efforts position us well for the future.

We will provide our outlook for 2025 on the next call, but I am confident that our business strategies are leading us in the right direction.

We remain dedicated to enhancing share holder value in every way possible now I will turn the call back to Steven Steven.

YJ: Yes.

That's impacting gross margin, but the award.

Speaker Change: Thanks, and just as a follow up.

Steven: I guess what drove the.

YJ: Uh huh.

Speaker Change: Uptick in R&D spending in the third quarter and kind of do we expect that level going forward.

Just trying to figure out you know what drove the larger than expected EPS, Miss our lower EPS and I think that might be one of the big parts.

So for the R&D, I would say that spread or a quarterly location, so it'd be that fluctuate quarter over quarter, depending on the timing and the number of products in development for both business lines M S N and parse.

So you look speaker, but like when I connect when I gave out the guidance for the full year 2024, Opex SG&A R&D together without stock based.

Charges, we said initially even 10 million, but we lowered that to 95 million ish like when we had our call last time and I think we still we can finish 2024 with $94 million to $95 million range. So the Q3 was kind of rather a kind of quarterly distribution, depending on the timing of the development, but again before the annual expectation.

And we still stand by our previous comment that it's going to be between $94 million to $95 million.

And also.

Yes February our question about EPS and that person, that's literally kind of mechanics of how we calculate the quarterly.

The income tax provision versus benefit so we have to apply to annual ETR rate to the quarterly pretax income or a loss. So we actually that means we took a little bigger income tax benefit in the first half and then we had to take the income tax expense provision in Q3, but again and that really doesn't change our can add.

A patient with annual guidance. So the annual the we still think that we were gonna see some 2 million ish of income tax benefit so that income tax benefit extend whole kind of fluctuation that's impacting our EPS on a quarterly basis.

Thank you.

Speaker Change: Thank you.

Our next question comes from the line of Martin Young with Oppenheimer. Please proceed.

Speaker Change: Yeah.

Good morning. Thank you for taking my question. My first question is on.

All our customers as we are getting to your Q.

Are you seeing any macro factors affecting your customers.

Speaker Change: Our.

YJ: And that leads you to believe the market could trend to fully.

Comparing to a few quarters ago are you seeing any fundamental.

YJ: Improvement.

Curation of OLED markets in China.

YJ: So.

For the fourth quarter, we don't see any.

For our businesses, so products and customers, we don't see any much difference in Q3.

In Q4, and we I think we guided.

So based on our quarterly quota visibility and we are guiding better than seasonality than our.

YJ: Previous.

YJ: A few years.

Speaker Change: Got it.

Speaker Change: And then also on an end market can you maybe comment.

YJ: How you think about <unk>.

YJ: <unk> display technologies.

Micro OLED.

Micro Michael one of them.

Micro OLED VR devices.

In a market that looks it looks attractive to you.

Speaker Change: And do you already have programs targeting those markets. Thank you.

Speaker Change: We've been disclosing that.

As a leader in the micro OLED TV from the leading TV manufacturer. So thats. The only announce product then that's the production product that we're shipping.

We haven't mentioned.

Mentioned anything about the micro Leds for virtual reality at the moment.

Thank you Roger and my last question is on gross margin.

YJ: Yes.

Is there anything additional you can share with us.

Product mix that contributed to the <unk>.

Movement in our gross margin.

So the legislation that we I think we had a more automotive OLED.

Speaker Change: On the product and also the power IC groups out there kind of in the second round out of the NSF fee decline they tend to have a higher gross margin. So depending on how much we have like on the generated revenue from the oil is in the automotive and also at the power IC and the mobile OLED.

What I meant by the product mix, so because of increasing the automotive only the impulse I see that kind of it breaking out our gross margin.

Thank you Sheila that's it for me.

Thank you so much and with that I will turn the call back to.

Speaker Change: Steven Lam for his final comments.

YJ: Okay.

Okay. Thank you. This concludes our Q3 earnings conference call.

Please look for details of our future events on magnitude <unk> Investor Relations website, Thank you and take care.

Speaker Change: Thank you all who are participating in today's conference and you may now disconnect.

YJ: Okay.

YJ:

YJ: [music].