• Total Revenue: $66.5 million, up 8.5% year over year and up 25% sequentially.
• Gross Profit Margin: 23.3%, down 0.3 percentage points year over year, up 1.5 percentage points sequentially.
• Standard Product Business Revenue: $64.0 million, up 24.0% year over year and up 25.9% sequentially.
• Power Solutions (PAS) Revenue: $47.6 million, up 16.1% year over year and up 21.2% sequentially.
• MagnaChip Semiconductor Solutions (MSS) Revenue: $16.4 million, up 54.5% year over year and up 41.8% sequentially.
• Operating Loss: $11 million, compared to $12.8 million in Q2 2024 and $9.2 million in Q3 2023.
• Net Loss: $9.6 million, compared to $13 million in Q2 2024 and $5.2 million in Q3 2023.
• Adjusted EBITDA: Negative $4.9 million, compared to negative $7.6 million in Q2 2024 and negative $2.7 million in Q3 2023.
• Cash and Short-term Financial Investments: $151.1 million, including $121.1 million in cash and $30 million in short-term financial investments.
• Q4 Revenue Guidance: $59 million to $64 million.
• Q4 Gross Margin Guidance: 21.5% to 23.5%.

• Warning! GuruFocus has detected 3 Warning Signs with MX.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• MagnaChip Semiconductor Corp (NYSE:MX) reported Q3 revenue of $66.5 million, up 8.5% year over year and 25% sequentially, reaching the high end of their guidance.
• The company's standard product business revenue increased by 24% year over year and 25.9% sequentially, indicating strong growth in this segment.
• MagnaChip is on track for double-digit growth in both MSS and PAS for 2024, aligning with their strategic goals.
• The company has successfully moved into production on two smartphone models, with one being a premium model for a leading China OEM.
• MagnaChip hired a new Chief Technology Officer with over 20 years of experience, expected to enhance their technology and product roadmaps.

Negative Points

• Consolidated gross profit margin in Q3 was 23.3%, slightly below the midpoint of their guidance range and down from 23.6% year over year.
• The PAS gross profit margin declined to 19.4% from 28.6% in Q3 2023, primarily due to lower utilization rates from the winddown of transitional foundry services.
• Q3 operating loss was $11 million, an increase from the operating loss of $9.2 million in Q3 2023.
• Net loss in Q3 was $9.6 million, compared to a net loss of $5.2 million in Q3 last year.
• The company anticipates a sequential decline in Q4 revenue, with guidance set between $59 million to $64 million, reflecting a potential slowdown.

Q & A Highlights

Q: Can you discuss what drives the recovery in gross margins and the timeframe for new products being rolled into the foundry capacity? A: The recovery in gross margins is primarily driven by the transition from foundry services to power products. The foundry services, which used to contribute significantly to revenue, are being wound down. The conversion to power products will not happen overnight and will take place gradually throughout 2025. (Shinyoung Park, CFO)

Q: Regarding the MSS business, will there be steady growth or is it expected to be lumpy with program ramps? A: We have two products going into production in Q4, with a new product offering 20% less power consumption expected to go into production in 2025. We are optimistic about our product pipeline, which is improving in both the PAS and MSS segments. (Young-Joon Kim, CEO)

Q: What is the impact of the $2 million foundry revenue expected next quarter on gross margins? A: The foundry revenue will not be material beyond Q4 2024. The impact on gross margins will depend on when we load those wafers into our fab, with a potential carry-over effect into Q1 2025. However, Q1 is typically a seasonally soft quarter. (Shinyoung Park, CFO)

Q: What drove the uptick in R&D spending in Q3, and should we expect this level going forward? A: The increase in R&D spending was due to quarterly fluctuations based on the timing and number of products in development. We expect to finish 2024 with total operating expenses between $94 million to $95 million, consistent with previous guidance. (Shinyoung Park, CFO)

Q: Are there any macro factors affecting your OLED customers in China that could change market trends? A: For Q4, we do not see any significant changes in market trends for our products and customers compared to Q3. We are guiding better than seasonal expectations based on our visibility. (Young-Joon Kim, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.