• Total Revenue: $53.2 million, down 12.8% year-over-year, up 8.4% sequentially.
• Consolidated Gross Profit Margin: 21.8%, down 0.4 percentage points year-over-year, up 3.5 percentage points sequentially.
• MSS Revenue: $11.6 million, down 6.2% year-over-year, up 28.7% sequentially.
• PAS Revenue: $39.2 million, up 0.6% year-over-year, up 7.4% sequentially.
• Operating Loss: $12.8 million, compared to $13.5 million in Q1 and $10.7 million in Q2 2023.
• Net Loss: $13 million, compared to $15.4 million in Q1 and $3.9 million in Q2 2023.
• Adjusted EBITDA: Negative $7.6 million, compared to negative $8.4 million in Q1 and negative $3.6 million in Q2 2023.
• Cash: $132.5 million at the end of Q2.
• Q3 Revenue Guidance: $61.5 million to $66.5 million.
• Q3 MSS Revenue Guidance: $14.5 million to $16.5 million.
• Q3 PAS Revenue Guidance: $45.5 million to $48.5 million.
• Q3 Consolidated Gross Profit Margin Guidance: 22.5% to 24.5%.

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

Release Date: July 31, 2024

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

Positive Points

• Q2 revenue of $53.2 million was above the midpoint of the guidance range, showing sequential growth of 8.4%.
• MSS revenue increased by 28.7% sequentially, driven by demand from OLED DDICs for China smartphone OEMs and automotive sectors.
• The company launched a new subsidiary in China, aiming to expand its display driver IC and Power IC businesses.
• Magnachip secured a purchase commitment for a premium OLED smartphone design win, expected to contribute to revenue by the end of the year.
• The company is developing next-generation OLED driver designs with significant power efficiency improvements, targeting high-growth markets like smartphones and wearables.

Negative Points

• Q2 revenue was down 12.8% year-over-year, indicating challenges in maintaining growth.
• Consolidated gross profit margin decreased year-over-year from 22.2% to 21.8%, reflecting pressure on profitability.
• MSS gross profit margin declined from 36.0% in Q2 2023 to 34.6% in Q2 2024, impacted by unfavorable product mix.
• The company reported a net loss of $13 million for Q2, compared to a net loss of $3.9 million in Q2 2023.
• Revenue from traditional foundry services continued to decline, contributing to lower overall revenue.

Q & A Highlights

Q: Can you discuss the progress and pipeline for OLED business growth, including the number of products and customer models involved? A: We have multiple design engagements and products in development, with four models set for production in the coming quarters, including three smartphones and one smartwatch. We sampled two new products in Q2, one for next-generation OLED smartphones and one for smartwatches. These products feature advanced IP, such as sub-pixel rendering and color enhancements, and are expected to be broadly sampled to multiple panel makers.

Q: What are the drivers for gross margin improvement, and what is the target for 2025? A: The decline in gross margin is mainly due to the phase-out of Transitional Foundry Services. However, we expect improvement from product mix, inventory reserve reversals, and favorable FX impacts. For 2025, filling idle capacity in the Gumi fab with new products is a priority, which should help improve margins.

Q: What is Bing Lu's role and priority in China? A: Bing Lu, as Co-President of MTC, is responsible for sales, marketing, and business operations in China, focusing on OLED driver IC and power IC.

Q: Can you elaborate on the power savings of your new DDIC products and their impact on overall smartphone power consumption? A: Our next-generation OLED DDICs offer 20% power savings, which is crucial for high-end smartphones with AI integration that consume more power. This power reduction is significant for offsetting increased power demands in these devices.

Q: What accounts for the slight change in the fiscal year revenue target despite improved inventory levels? A: While we see strong growth in the power segment, seasonality affects the fourth quarter. The December quarter is typically low for us, which impacts the overall revenue outlook.

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