OLED Display Drivers & Power Standard Products Set Revenue Records at MagnaChip
MagnaChip Semiconductor Corporation announced financial results for the second quarter of 2019 including revenue of $205.1 million that exceeded updated guidance of “at least” $194 million provided on June 11; Q2 revenue up 2.7% Year-over-Year (YoY); up 30.4% Quarter-over-Quarter (QoQ). Total gross profit margin of 21.4% compared to updated guidance of “at least” 21%” provided on June 11.
A more detailed breakout includes: Standard Products Group (SPG) revenue of $132 million, up 11.2% YoY, up 31.6% QoQ; Display standard products revenue of $84.3 million, up 7% YoY, up 44.7% QoQ; OLED display driver IC revenue of $73 million up 17.4% YoY, up 50.4% QoQ; Power standard products revenue of $47.7 million, up 19.2% YoY, up 13.5% QoQ; Foundry Services Group (FSG) revenue of $73.1 million, down 9.7% YoY, up 28.1% QoQ.
Third Quarter 2019 Business Outlook
For the third quarter of 2019, MagnaChip anticipates:
- Revenue to be in the range of $220 million to $230 million, up 9.7% at the mid-point of the projected range when compared with revenue of $205.1 million in the second quarter of 2019, and up 9.2% year-on-year when compared to $206 million revenue recorded in the third quarter of 2018. Revenue guidance for the third quarter reflects a current expectation that revenue for both the Standard Products Group and Foundry Services Group will show sequential improvement as compared to Q2 2019.
- Gross profit margin to be in the range of 22% to 24%, as compared to 21.4% in the second quarter of 2019 and 27.1% in the third quarter of 2018. Gross margin guidance for the third quarter primarily reflects the current expectation that fab utilization will show sequential improvement from the second quarter of 2019.
CEO YJ Kim comments on Q2:
"Revenue of $205.1 million increased 30.4% sequentially from Q1, as results in each of our three business lines surpassed expectations in Q2. Our OLED and Power businesses each achieved record revenue, driven by robust customer demand for our low-power display drivers and high-voltage Power standard products. The Foundry business showed resilience in a tough macroeconomic environment, with revenue increasing sharply from Q1.
"At the end of April on our Q1 earnings call, we provided Q2 revenue guidance of $173-181 million, and a range for gross profit margin of 16-18%. When it became evident that we were on track to significantly exceed the high end of the guidance range, we provided an updated guidance on June 11 for revenue of at least $194 million and gross margin of at least 21%.
"Gross profit margin of 21.4% in Q2 met the updated guidance and our total revenue of $205.1 million during the same period significantly exceeded the updated guidance. The better-than-expected revenue performance was due to stronger-than-expected customer demand across the board and throughout the quarter. OLED revenue increased 50.4% sequentially, Power increased 13.5% and Foundry increased 28.1%, all as compared to Q1 2019.
"Our OLED business benefited from the launch of six new OLED smartphones in Asia. We also secured four new design wins. Our 40-nm display driver accounted for the majority of our OLED revenue in Q2 but our industry leading 28-nm display driver now has entered mass production and will be a key revenue driver going forward. The pickup in revenue from the Power business reflected healthy demand from television, industrial and smartphone markets, with our Premium products accounting for over half of Power revenue. The improvement in the Foundry business reflected increased customer demand, primarily for applications in the computer and consumer end markets, and also from smartphones.
"As for the strategic evaluation of the Foundry business and Fab 4, I’m encouraged by where we are in the ongoing process. Our decisions regarding the outcome of the strategic evaluation process will be guided by what the Board and management consider to be the best available path to improve MagnaChip’s profitability and to maximize shareholder value."
CFO Jonathan Kim comments on Q2:
"Gross profit margin of 21.4% met our updated guidance provided in mid-June, and was significantly higher than the guidance range of 16-18% provided at the end of April. The improvement in gross profit margin was due primarily to higher fab utilization as a result of a significant increase in Foundry loading and revenue during Q2, and despite a reserve of $2.2 million related to a legacy display product. Our cash balance increased in Q2 to $123.8 million from $105.8 million in Q1, and inventories declined sequentially. We generated net operating cash flow of $28.8 million in Q2 and $17.2 million in the first half of 2019."