MagnaChip improves revenue by 5 percent sequentially in Q3

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MagnaChip sells foundry subsidiary to consortium for $435 million.
Image: MagnaChip

MagnaChip Semiconductor Corporation’s third-quarter financial results revealed the firm grew its revenue by 5 percent sequentially. The company also announced it closed the sale of its Fab 4 foundry, which gave its net income a major boost.

Despite ongoing market volatility, the chipmaker anticipates its business will continue to grow in the current quarter.

MagnaChip’s Q3 Results

In the period prior, the South Korean component manufacturer made $124.8 million in sales. In addition to topping the $118.8 million it made in Q2, the firm exceeded the high end of the revenue range it offered in August. Its intake also surpassed Wall Street’s consensus revenue estimate of $121 million.

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MagnaChip quarter-over-quarter growth is largely due to increased sales of its power solutions products. The segment made $46.6 million in the September ending period, up 17.3 percent from Q2. Its core display business also experienced an uptick of 0.6 percent, which translates to a $407,000 sequential improvement.

The corporation reported $272.9 million in profit, a figure that incorporates the proceeds of its manufacturing facility sale. The chipmaker earned $8.5 million in net income from its continuing operations, a significant improvement on the $1.6 million loss it posted in the same time frame last year.

Post-Reorganization Outlook

For Q4, MagnaChip forecasts gross income of $120 million to $136 million.

If the firm hits the mid-point of its guidance, it will better its sales by 2.56 percent from Q3. In a press release, the company noted a surge in demand that began this summer has continued into the current period. It also admitted that factors like the U.S.-China trade war and the coronavirus pandemic severely limit its near-term visibility.

With the headwinds it is currently facing, the corporation slightly positive outlook makes sense.

On an annual basis, MagnaChip’s forecast appears less optimistic. It would need to beat its outlook by 47 percent to be equal with its 2019 holiday season intake. But with its recent reorganization and current market volatility, year-over-year comparisons are not a good key performance indicator. Its status should be evaluated quarterly until it has established a new earnings baseline.

Having improved its revenue in two consecutive quarters, the chipmaker appears to be in good shape. It also used the proceeds of its foundry sale to redeem 6.625 percent of its 2021 senior notes. That move will reduce its annual expenses by $16 million from now on. Plus, the firm now has $542.1 million in cash on hand, which should sustain it through its transitional period.

MagnaChip’s assiduous leadership and mounting sales momentum should result in the company starting a bright new chapter next year.

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