Earlier this month, MagnaChip Semiconductor Corporation posted its first-quarter earnings, which revealed it increased its adjusted revenue by 25.2 percent from last year. The company also improved its net income by 52.7 percent and grew its available cash to its highest level since 2012.
However, the South Korean manufacturer predicts a softening in its second-quarter sales due to the impact of COVID-19.
MagnaChip’s Robust Q1 Results
In the first three months of 2020, MagnaChip generated $197 million in adjusted sales, up from the $157.3 million it made in Q1 2019. It is worth noting the firm’s recently sold foundry unit brought in $9.37 million of that total. Still, even when factoring out the company’s discontinued services, its first-quarter adjusted revenue results increased 12.3 percent annually.
The manufacturer also posted adjusted net income of $1.1 million, or $0.03 per share, versus -$9.7 million, or -$0.28 per share in Q1 2019. As such, the firm’s decision to strategically reduce its footprint seems prudent.
The corporation’s success in the March quarter is due to a significant upswing in sales of its OLED display drivers. The company made $69.7 million from its panels last period, a new quarterly record for the 17-year-old component maker. That segment of its business saw a 43.6 percent surge in revenue due to 8 new smartphones launching with its parts in Q1.
MagnaChip also exited the prior quarter with $157.3 million in cash and equivalents, up from $151.7 million in Q4 2019. In addition, the corporation reported free cash flow of $17.7 million, its fourth consecutive quarter of positive capital generation.
Like most businesses, the South Korean chipmaker is uncertain of what its second-quarter performance will be because of the coronavirus pandemic’s impact.
The firm explained while it has resolved the Chinese supply chain issues it had in the first quarter, COVID-19 has made demand for its products difficult to predict. As such, the corporation offered a broad revenue range of $191 million to $203 million, down either 7.38 or 1.03 percent from 2019. The company declined to provide a by segment forecast but stated it expects an increase in power solutions sales.
MagnaChip also detailed some measures it has taken to mitigate the outbreak’s impact on its operations. The corporation initiated enhanced cleaning routines at its facilities and now requires its staffers to wear personal protective equipment and observe social distancing guidelines. The firm also increased inventory and production capabilities in its Korean and Chinese factories to avoid shortages and delays.
While COVID-19’s impact remains challenging to quantify, MagnaChip’s strong performance in Q1 and robust liquidity indicate it is on solid footing.