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MagnaChip Reports Q420 Revenue Growth of 15.9% Y/Y due to OLEDs and Power ICs
MagnaChip grew revenue and EPS by double and triple digits respectively in Q4, although the company got some help with this achievement. MagnaChip pointed to OLED adoption, 5G, and Power IC as some of the reasons why it can achieve its targets of double-digit CAGR and a gross margin of 30%.
Table 1: MagnaChip Financials
MagnaChip grew revenue and EPS by double and triple digits respectively in Q4, although the company got some help with this achievement. MagnaChip pointed to OLED adoption, 5G, and Power IC as some of the reasons why it can achieve its targets of double-digit CAGR and a gross margin of 30%.
Table 1: MagnaChip Financials
MagnaChip’s Q420 earnings easily beat estimates. Q420 revenue increased by 15.9% Y/Y to $142.6M and non-GAAP net income increased by 160.8% Y/Y to $17.3M. Margins increased by several hundred basis points thanks to an improved product mix.
The Q420. Numbers were influenced by a $264.5M income gain in Q3 due to the sale of the Foundry Services Group and Fab 4 for $350.6M. There was a $47.1M income tax benefit in Q4. Both throw off the GAAP numbers for net income and EPS. The non-GAAP numbers for Q4 were impacted by a $43.9M adjustment for GAAP and cash tax expense difference. Fluctuations in foreign exchange also played a role. The forex gain of $13.3M in Q4 was higher than the gain of $8.99M in Q3, but it was lower than the gain of $21.9M the year before. Note that the numbers for Q4 FY2019 exclude the contributions from discontinued operations. Revenue was actually $200M if those are included. Use that number instead and revenue declined by 28.5% Y/Y. The table below breaks down revenue by segment. All business units contributed to growth. Display solutions grew by 9.6% Y/Y, power solutions by 23.9% Y/Y and foundry services by 33.2% Y/Y.
Table 2: MagnaChip Revenue by Segment
The Q420. Numbers were influenced by a $264.5M income gain in Q3 due to the sale of the Foundry Services Group and Fab 4 for $350.6M. There was a $47.1M income tax benefit in Q4. Both throw off the GAAP numbers for net income and EPS. The non-GAAP numbers for Q4 were impacted by a $43.9M adjustment for GAAP and cash tax expense difference. Fluctuations in foreign exchange also played a role. The forex gain of $13.3M in Q4 was higher than the gain of $8.99M in Q3, but it was lower than the gain of $21.9M the year before. Note that the numbers for Q4 FY2019 exclude the contributions from discontinued operations. Revenue was actually $200M if those are included. Use that number instead and revenue declined by 28.5% Y/Y. The table below breaks down revenue by segment. All business units contributed to growth. Display solutions grew by 9.6% Y/Y, power solutions by 23.9% Y/Y and foundry services by 33.2% Y/Y.
Table 2: MagnaChip Revenue by Segment
MagnaChip benefited from the global rollout of 5G services as it increased demand for 5G smartphones with OLED displays supporting high frame rates. From the Q4 earnings call:
- "Both sequential and year-over-year increase was driven mainly by strong demand in our OLED product, especially for 5G and HFR OLED DDIC. Display revenue in Q4 was $82.7 million up 18.9% from Q3 and up 9.6% year-over-year. Adjusting for the non-auto LCD business, it was up nearly 20% year over year."
- Revenue from 5G and OLED increased as a proportion of overall revenue throughout the year.
- "the momentum in 5G smart phones, especially with high frame rate HFR, or LED DDIC grew stronger in Q4. We were awarded eight new design wins in Q4 and all of them while 5G and HFR models. This revenue from 5G smart phones accounted for about 20% of the total OLED revenue in first half of 2020, 40% in Q3 and it reached approximately 70% in Q4, representing over 40% of our total 2020 OLED revenue."
- MagnaChip saw increased adoption of its chip solutions, especially by OEMs from China. The number of design wins increased greatly.
- OLED design activities hit new records in 2020, we secured a 38 new OLED design wins in 2020 to reach 54 cumulative design wins compared to 21 new design wins and 34 design wins in 2019."
- OLED growth has been mostly driven by smartphones, but that could change in the near future. Applications in the TV and automotive market could drive OLED growth to another level.
- "… the engineering team has been very busy throughout the year engaging with the customer to develop new products in emerging technologies and application such as OLED LED TV, Micro OLED TV and OLED automotive."
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