Magnachip Semiconductor Corporation

Good day and welcome to Magnet Chip's first quarter 2022 earnings conference call. At this time, all participants are in only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, this call is being recorded. I would like to turn the call over to Yuji Zai, IR representative for Magnet Chip. You may begin.

Good afternoon, everyone. Thank you for joining us to discuss MagnetShip's financial results for the fourth quarter ended December 31st, 2022. The fourth quarter earnings release that was issued today after the stock market closed can be found on the company's investor relations website. The webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are Y.J. Kim, MagnetShip's Chief Executive Officer, and Shin Young Park, our Chief Financial Officer. Y.J. will discuss the company's recent operating performance and business overview, and Shin Young will review financial results for the quarter and provide guidance in the first quarter of 2023. There will be a Q&A session following the prepared remarks. During the course of this conference call, we may make forward-looking statements about Magnetship's business outlook and expectations. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today and therefore are subject to risks and uncertainties as described in the safe harbor statement found in our SEC filings. During the call, We will also discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate an alternative measure of Magnetship's operating performance that may be useful. The reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our fourth quarter earnings release available on our website under the investor relations section at www.magnetship.com. I will now turn the call over to Y.J. Kim. Y.J.?

Hello, everyone. Thank you for joining us today, and welcome to MagnetChip's Q4 2022 earnings call. I will begin today's call with a summary of our Q4 results, as well as our performance for the full year 2022. After that, I will provide a detailed update on each of our business segments before turning the call over to Shin Young to go over our financials in more detail and provide guidance for Q1 2023. Starting with Q4 results, revenue was $61 million, near the high end of our guidance range. Nevertheless, Q4 revenue was low by 44.7% year-over-year and 14.3% sequentially. Gross profit margin was 26.4%, within our guidance range. By business line, display revenue was $7.6 million and power revenue was $46.3 million. As we indicated last quarter, these results were primarily driven by severe wafer shortages in our OLED business, which prevented our new designs at our leading Korean panel customer to hit new key product launch window in the second half of 2022. Our OLED business was also impacted by weak consumer demand in China and globally, which led to an inventory correction by Android smartphone OEMs. In our power business, the record momentum we set in the first half of the year slowed down significantly in Q4 as macro conditions and consumer demand deteriorated, leading to inventory builds across a number of our end markets. Looking back at the full year, total revenue was $337.7 million, and gross profit margin was 30.0%, down 28.8%, and 240 basis points year over year, respectively. By business line, our display business solely contributed to the significant year-over-year decline as revenue was only 71.4 million compared to 205.3 million in 2021. Our power business revenue in 2022 was 230.5 million, up 1.2% year-over-year from 227.8 million. It goes without saying that 2020 too was a very difficult year on many fronts, particularly for our display business. However, we stayed focused and executed on what we could control and achieved key milestones in 2022 that we believe sets the foundation for solid recovery in 2023. In our display business, We successfully won a Tier 1 panel customer outside of Korea, which marked the expansion of our OLED business into international markets. We are currently working with this customer on two OLED DDIC design projects, and I'm happy to report today that our first ship was successfully qualified by this customer in December, and we will begin shipping towards the end of Q1 2023. Furthermore, our second OLED drive IC project with this customer successfully taped out in November are in-house, and we are ahead of schedule to deliver the first sample in this month. and production is expected to begin in the second half of 2023. This second chip offers significant performance and feature improvements over our first chip and alternative products. We are extremely excited about this new chip and multiple prospective smartphone makers are already showing interest for their new smartphones. We also strengthen our global supply chain by qualifying two additional 28-nanometer foundries, one of which was in strategic partnership with our new OLED customer. In total, we now have three 28-nanometer 12-inch OLED foundries qualified, and we anticipate these foundries to increase our wafer allocation by 2 to 4x over the next few years compared to our 2022 levels. Going forward, way for supply should not be a constraint on OLED segment revenue. At our leading South Korean panel customer in Q4, we completed qualification of our first OLED chip for an automotive center display and we will begin shipping this quarter. We expect to be used by a leading European luxury automaker. In addition, we taped out a new high-end smartphone drive IC during Q4 and that is expected to begin production in the second half 2023. In our power solutions business, 2020 was a record year and was stronger fundamentally than what our Q4 revenue trend indicates. In 2022, we were awarded a record 209 design-in wins across our entire Power Solutions product portfolio, more than double the number of designs awarded in 2021 and 2020. It was also record year for revenue from our premium products, which grew 10% year-over-year and represented a record 55.9% of Power Solutions revenue up from 51.5% in 2021. This strength helped overall power SPs over 2021 and 2020 levels. Revenue from our super junction MOSFETs and IGBT products also set record highs in 2020 too. IGBT strengths was most notable with revenue growing 52% year-over-year thanks to extremely strong demand from solar inverter manufacturers. We expect this area of our business to continue to remain strong going forward thanks to the transformative clean energy policies globally to combat climate changes. In 2022, we remain focused on R&D and introduced many innovative performance power products across a wide range of applications from smartphones, automotive, solar, consumer products, and industrial. In Q4, we unveiled our first power management chip optimized for OLED IT applications. The newly designed sub PIMIC provides a variable voltage control that enables automated custom refresh rates based on the frame rate. This greatly improves power consumption and enables a smooth and comfortable viewing experience for games and videos. Further, in our power solutions automotive business in Q4, we introduced our eighth generation 150-volt MXT MOSFET for optimized for light electric vehicles, motor controllers, and battery management systems. This MOSFET improves the drain-to-source resistance by over 28%, improves heat dissipation, and can operate in extreme temperature between minus 55 C to up to 175 Celsius. making it suitable to be used in a wide range of XEV applications. Our automotive business saw significant momentum in 2022 and is exiting the year with multiple design projects for leading Asian automakers and is expected to start contributing revenue in 2023. In summary, while 2022 presented many challenges, particularly during the later half of the year, we remain optimistic about the future. Our OLED business is poised for recovery in 2023, with the revenue projected to increase significantly in the second half as we ramp shipments of our four design-in projects with our two leading panel customers. We continue to expect the first half of 2023 to be impacted by elevated inventory levels and a very weak macroeconomic environment, but the reopening of China is a very welcome development and should lead to an improvement in the economy and consumer demand, which will help both our businesses. For our power solutions business, we expect to maintain the momentum of design wins and premium-tier product mix. However, it's important to note that our power business is not immune to the broader economic downturn, which impacts consumer-related applications, and we expect the first half of 2023 to also be challenging. We believe that this will largely be due to macro factors rather than anything specific to fundamentals as the data points I just highlighted that I testament to the competitiveness of our power products. Q1 is also typically our seasonally slowest quarter following holiday shipments and is impacted by slow activity around Chinese New Year's. Looking forward, as channel inventories are consumed and the broader economy recovers, we expect to see a rebound in power revenue. In closing, despite a very challenging 2022, and on anticipated challenging 2023, our team remains committed to, one, introducing new competitive power products and accelerating next-generation products, especially new applications such as automotive. Two, continuing our successful sales momentum or design wins in power to drive business with current and new customers, which will improve our FAP3 utilization as well as margins. Three, accelerate next-generation OLED drive IC for our customers domestically and internationally to hit the volume production by second half 2023. Four, expand our OLED products for international markets to solidify foundation for future growth in 2024. Five, we have initiated a voluntary resignation program where we expect 4-5% of employees may apply for this program without choice to accept or reject the applicants. And finally, I have voluntarily taken a 10% reduction in my salary for 2023 and the rest of the senior management team are also deferring a portion of their base salary until we execute on our commitments. I will turn the call over to Xinyang to go over Q4 results and give our Q1 guidance. Xinyang?

Thank you, IJ, and welcome to everyone on the call. Let's start with key financial metrics for Q4. Total revenue in Q4 was $61 million, down 14.3% sequentially, and down 44.7% year-over-year. Revenue from the Standard Products business was $53.8 million, down 14.2% from Q3, and down 45.9% year-over-year. As YJ already mentioned, both the sequential and year-over-year decrease were mainly attributable to the supply constraints for wafers in our OLED business, and slow demand for Chinese and Korean top-tier smartphone models as a result of the global downturn in the smartphone market. Revenue from our power business was $46.3 million, down 18% sequentially, and down 20.5% year-over-year. The sequential decline accelerated from last quarter, driven by deteriorating consumer demand for TV, smartphones, e-bike, and computing applications. Gross profit margin in Q4 was 26.4%, down from 35% in Q4 2021, but up from 24.2% in Q3 2022. The lower gross profit margin year-over-year was mainly due to unfavorable mix from lower display revenue as well as lower utilization rate of our factory. The 220 basis point sequential improvement was primarily due to the absence of material inventory reserves or write-offs during the quarter. As a reminder, we recorded a $3.3 million scrap charge in Q3 related to demand weakness as a result of elevated smartphone inventories. Looking forward, we have reduced production at our factory in response to industry-wide slowdown and inventory correction. As a result, our Q123 gross profit margin will be further impacted by lower utilization, as well as higher manufacturing input costs, such as electricity and wages. We expect gross profit margin to recover as volume and utilization improves in the second half. Turning now to operating expenses. Q4 SG&A was $12.6 million as compared to $11.4 million in Q3 2022 and $13.3 million in Q4 last year. Q4 R&D was $13.7 million as compared to $13.3 million in Q3 2022 and $12.2 million in Q4 last year. Stock compensation charges including operating expenses were $1.5 million in Q4 compared to $0.8 million in Q3 and $1.6 million in Q4 2021. Note that our Q3 SG&A was lower due to adjustments in Q3 to reduce then year-to-date accruals related to performance-based stock compensation. Q4 operating loss was $10.1 million. This compares to an operating loss of $10 million in Q3 and an operating income of $63.9 million in Q4 2021. As a reminder, our Q4 2021 operating income benefited from $49.4 million of net termination fees related to our merger deal with Wise Road that was terminated in December 2021. On a non-GET basis, Q4 adjusted operating loss was $8.6 million, compared to adjusted operating loss of $6.6 million in Q3 and adjusted operating income of $14.4 million in Q4 last year. Q4 adjusted EBITDA was negative $4.8 million. This compares to negative $3 million in Q3 and a positive $18.1 million in Q4 a year ago. For the full year 2022, we recognize a tax expense of $5.2 million due mainly to realized foreign currency gains recognized at our operating entity in Korea as a result of FX volatility during the year and a decrease in the Korean subsidiary's deferred tax assets as a result of a change in corporate income tax rates, which was announced in December 2022. Net income in Q4 was $3 million as compared with net loss of $17.2 million in Q3 and a net income of $53.6 million in Q4 a year ago. Our get diluted earnings per share in Q4 was $0.07 as compared with a loss per share of $0.38 in Q3 and earnings per share of $1.12 in Q4 last year. Our non-get diluted loss per share in Q4 was $0.36. This compares with non-GIP diluted earnings per share of $0.02 in Q3 and $0.29 in Q4 last year. Our diluted shares outstanding for the quarter were about 44.1 million shares, which reflects shares repurchased as part of our expanded share repurchase program that we announced in mid-September. We continue to exercise the buyback that was authorized by the Board. Moving to the balance sheet. Our cash balance at the end of Q4 was $225.5 million, down from $250.8 million at the end of Q3. The primary cash outflows in Q4 was planned capex of $11.6 million, $8.9 million spent on stock buybacks, and $7.9 million of annual contribution of statutory severance to certain external deposit accounts to comply with the local labor rules. We expect to continue to draw down on our cash driven primarily by continuation of our buyback program and an LTA prepayment to secure wafers at our leading foundry partner and normal CapEx. Based on our forecast, we anticipate our cash may reach as low as $160 million during 2023 if we execute the LTA. Net accounts receivable at the end of the quarter totalled $35.4 million, a decrease of 3.8% from Q3. Our day sales outstanding for Q4 was 53 days and 47 days in Q3. Inventories net totalled $39.9 million, compared to $37.3 million in Q3. Our average days in inventory for Q4 was 82 days and 64 days for Q3. Higher average days in inventory for Q4 compared to Q3 was due mainly to a lower cost of sales, which decreased about 17% quarter over quarter. Regarding our CapEx plan, as I mentioned earlier, Q4 CapEx was $11.6 million. And for the full year 2022, we spent $23.4 million in line with our previous estimate of $23.5 million that we provided last quarter. For 2023, we now anticipate CapEx to be approximately $10 million, which is nearly 60% lower from the 2022 level. In regards to our capital structure, in Q4, we repurchased approximately 9 million worth of stock or approximately 900,000 shares and continue to be active in the market with approximately 37 million remaining in our buyback program at the end of Q4. We ended the year with 225.5 million cash and zero debt. The solid balance sheet allows us to confidently navigate any further economic downturns that may arise during this period of uncertainty. Before moving to the first quarter guidance, I would like to note that we just commenced a voluntary resignation program and expect to complete it by the end of the first quarter. Due to the voluntary nature of this program, we are unable to provide an exact amount of the related financial impact at this time. However, under the assumption that about 4 to 5% of our employees apply for this program, We expect to have annual cost savings up to $3 million, with a quarter cash cost of approximately $8.5 million to $12 million, about 35% to 40% of which relates to statutory severance. Now moving to our first quarter guidance. While actual results may vary, for Q1, Magnesia currently expects revenue to be in the range of $55 million to $59 million, including about $5 million of transitional factory foundry services, gross profit margin to be in the range of 21% to 23%. Thank you, and I'll now turn the call back over to YJ for closing remarks.

Thank you, Sinyoung. Before we begin Q&A, I'd like to close today by thanking all of our shareholders for their continued support during these challenging times. I'd also like to reiterate my earlier comments about our recovery plan for 2023 and beyond. We remain firmly committed to setting the business back on a solid foundation for growth this year, and we will execute it by, one, introducing new competitive power products and accelerating next generation products, especially in new applications such as automotive, two, Continuing our success sales momentum design wins in power to drive business with current and new customers, which will improve our Fab 3 utilization as well as margins. Three, accelerate next generation OLED drive ICs for our customers domestically and internationally to hit the volume production by second half of 2023. And finally, We will further expand new OLED products for international markets to solidify foundation for future growth in 2024. With that, I'll turn the call back over to Uzziah.

Thanks, Y.J. So that concludes the prepared remarks section of the earnings call. Operator, please begin the Q&A section.

Thank you. If you'd like to ask a question, please press star 1-1. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 11 again. Again, that's star 11 to ask a question. I'm not showing any questions at this time. I'd like to turn the call back over to Yuji Zai for closing remarks.

Hey, operator, can you just screen again for questions?

I do see some of our covering analysts on the line. I'd like to ask a question.

Please press star 1-1. Thank you. And our first question comes from Martin Yang with Oppenheimer. Your line is open.

Hi. Thanks for taking the question, and good morning. I'd like to maybe ask your expectations for key customer ramp in 2023. It has the current challenges in near-term effect or outlook for a key customer ramp. And, you know, that's my first question.

Hi, Martin. Thank you. So I'm assuming that you're asking for a new international customer and how the ramp works. for the OLED. So yes, we said that the first ship has been qualified last December. And we expect the initial production to begin towards the end of this quarter. We just got our second ship for this customer in-house. And we expect to ship within this month. And so that's ahead of schedule. And we expect that to go to production towards second half. So the first chip is targeted for the full HD+. Second chip is full HD+, and beyond. But second chip has much robust capabilities, which we'll talk about once the chips start to shipping. So with those, we expect the majority of the shipments and the big curve to come on second half of this year.

Got it. And is there any way for you to quantify the number of designs or just overall missed opportunities for OLED due to capacity constraints? So when I say missed opportunities or missed designs, those are things you would have realized in calendar 2030.

Well, so, you know, we don't, you know, report the smartphone vendor design wins, but the, you know, we expect to disclose more of that once the smartphones start to introduce their new product lines. And so I think it's more towards the second half heavily. We are shipping some volumes based on the current design wins and current products. And so that's the curve you should look at.

Got it. Last question from me is, you know, do you expect to see any lingering effect on your 2024, meaning any design activities that will result in 2024 shipments are being disrupted?

We are, you know, shipping new products as we speak so we believe that revenue will hit in second half as well as early 24 and we will be working on new products to hit the samples in second half this year that should go into 2024 in addition to some of the product that We'll be shipping in second half this year.

Got it. I have no more questions. Thank you, YJ. Thank you.

Thank you. Our next question comes from Raji Gill with Needham. Your line is open.

Hi. for Raji Gill. I just had a question about auto. How do we think about the auto opportunity in calendar 23 and then hopefully 24? Could you be a little more specific on the opportunity with the design ones that you talked about on the call earlier? Thanks.

Sure. Thank you. So in the automotive, this year is, I would say, the embark stage year for us in both OLED and power. We are start shipping the first OLED automotive parts this quarter. And we also expect to ship power this quarter as well, and we had several design-ins going in to last year end, and we expect about four to five automotive power to ship this year. The revenue is not huge, you know, but what's nice about automotive is, you know, it's a long design cycle, even in OLED maybe five years, And the ASP and margin typically much better than the regular smartphone usage. So we are going to work on incrementally adding these automotive opportunities, and I think that's going to be gradual over the next few years.

Thank you. And then are you really focusing just on the Asian market here, or are you also trying to expand internationally in auto as well?

Obviously, Asia is close to our home coverage. But like OLED, the major automakers are both Europe and Asia for our market. On the power side, it's more in Asia and automakers. That's how we're going to start out, and we'll try to cover globally with the success of our design wins.

Thank you.

Thank you. There are no further questions at this time. I'll turn the call back over to Yuzi for closing remarks.

Thanks, Operator. This concludes our Q4 earnings conference call. Please look for details for our future events on MagnetTripsInvestorRelations.com. Thank you and take care, everyone.

This concludes the program. You may now disconnect. Everyone, have a great day. Thank you. you Thank you. Thank you. Thank you. Good day and welcome to Magnetip's first quarter 2022 earnings conference call. At this time, all participants are in only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, this call is being recorded. I would like to turn the call over to Yuji Zai, IR Representative for Magnet Chip. You may begin.

Good afternoon, everyone. Thank you for joining us to discuss Magnet Chip's financial results for the fourth quarter ended December 31st, 2022. The fourth quarter earnings release that was issued today after the stock market closed can be found on the company's investor relations website. The webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are Y.J. Kim, Magnet Chip's Chief Executive Officer, and Xinyang Park, our Chief Financial Officer. YJ will discuss the company's recent operating performance and business overview, and Xinyang will review financial results for the quarter and provide guidance in the first quarter of 2023. There will be a Q&A session following the prepared remarks. During the course of this conference call, you may make forward-looking statements about Magnetship's business outlook and expectations. However, forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the safe harbor statement found in our SEC filings. During the call, we will also discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate an alternative measure of Magnetship's operating performance that may be useful. The reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our fourth quarter earnings release available on our website under the investor relations section at www.magnetchef.com. I will now turn the call over to Y.J. Kim. Y.J.?

Hello, everyone. Thank you for joining us today, and welcome to MagnetChef's Q4 2022 earnings call. I will begin today's call with a summary of our Q4 results, as well as our performance for the full year 2022. After that, I will provide a detailed update on each of our business segments before turning the call over to Xinyang to go over our financials in more detail and provide guidance for Q1 2023. Starting with Q4 results, revenue was $61 million, near the high end of our guidance range. Nevertheless, Q4 revenue was low by 44.7%, year-over-year and 14.3% sequentially. Gross profit margin was 26.4% within our guidance range. By business line, display revenue was $7.6 million and power revenue was $46.3 million. As we indicated last quarter, these results were primarily driven by severe wafer shortages in our OLED business which prevented our new designs at our leading Korean panel customer to hit new key product launch window in the second half of 2022. Our OLED business was also impacted by weak consumer demand in China and globally, which led to an inventory correction by Android smartphone OEMs. In our power business, the record momentum we set in the first half of the year slowed down, significantly in Q4 as macro conditions and consumer demand deteriorated, leading to inventory builds across a number of our end markets. Looking back at the full year, total revenue was $337.7 million, and gross profit margin was 30.0%, down 28.8%, and 240 basis points year-over-year. respectively. By business line, our display business solely contributed to the significant year-over-year decline as revenue was only 71.4 million compared to 205.3 million in 2021. Our power business revenue in 2022 was 230.5 million, up 1.2% year-over-year from 227.8 million. It goes without saying that 2022 was a very difficult year on many fronts, particularly for our display business. However, we stayed focused and executed on what we could control and achieved key milestones in 2022 that we believe sets the foundation for solid recovery in 2023. In our display business, We successfully won a Tier 1 panel customer outside of Korea, which marked the expansion of our OLED business into international markets. We are currently working with this customer on two OLED DDIC design projects, and I'm happy to report today that our first trip was successfully qualified by this customer in December and we will begin shipping towards the end of Q1 2023. Furthermore, our second OLED drive IC project with this customer successfully taped out in November are in-house and we are ahead of schedule to deliver the first sample in this month and production is expected to begin in the second half of 2023. This second chip offers significant performance and feature improvements over our first chip and alternative products. We are extremely excited about this new chip and multiple prospective smartphone makers are already showing interest for their new smartphones. We also strengthen our global supply chain by qualifying two additional 28nm foundries one of which was in strategic partnership with our new OLED customer. In total, we now have three 28-nanometer 12-inch OLED foundries qualified, and we anticipate these foundries to increase our wafer allocation by 2 to 4x over the next few years compared to our 2022 levels. Going forward, wafer supply should not be a constraint on OLED segment revenue. At our leading South Korean panel customer in Q4, we completed qualification of our first OLED chip for an automotive center display and we will begin shipping this quarter. We expect to be used by a leading European luxury automaker. In addition, we taped out a new high-end smartphone drive IC during Q4 and that is expected to begin production in the second half 2023. In our power solutions business, 2020 was a record year and was stronger fundamentally than what our Q4 revenue trend indicates. In 2022, we were awarded a record 209 designing wins across our entire power solution product portfolio. more than double the number of designs awarded in 2021 and 2020. It was also record year for revenue from our premium products, which grew 10% year-over-year and represented a record 55.9% of Power Solutions revenue, up from 51.5% in 2021. This strength helped overall Power SPs 2021 and 2020 levels. Revenue from our super junction MOSFETs and IGBT products also set record highs in 2020 too. IGBT strength was most notable with revenue growing 52% year-over-year thanks to extremely strong demand from solar inverter manufacturers. We expect this area of our business to continue to remain strong going forward thanks to the transformative clean energy policies globally to combat climate changes. In 2022, we remain focused on R&D and introduce many innovative performance power products across a wide range of applications from smartphones, automotive, solar, consumer products, and industrial. we unveiled our first power management chip optimized for OLED IT applications. The newly designed sub PIMIC provides a variable voltage control that enables automated custom refresh rates based on the frame rate. This greatly improves power consumption and enables a smooth and comfortable viewing experience for games and videos. Further, in our power solutions automotive business in Q4, we introduced our 8th generation 150-volt MXT MOSFET for optimized for light electric vehicles, motor controllers, and battery management systems. This MOSFET improves the drain-to-source resistance by over 28%. improves heat dissipation, and can operate in extreme temperature between minus 55 C to up to 175 Celsius, making it suitable to be used in a wide range of XEV applications. Our automotive business saw significant momentum in 2022 and is exiting the year with multiple design projects for leading Asian automakers and is expected to start contributing revenue in 2023. In summary, while 2022 presented many challenges, particularly during the later half of the year, we remain optimistic about the future. Our OLED business is poised for recovery in 2023, with the revenue projected to increase significantly in the second half as we ramped shipments of our four design-in projects with our two leading panel customers. We continue to expect the first half of 2023 to be impacted by elevated inventory levels and a very weak macro environment, but the reopening of China is a very welcome development and should lead to an improvement in the economy and consumer demand, which will help both our businesses. For our power solutions business, we expect to maintain the momentum of design wins and premium-tier product mix. However, it's important to note that our power business is not immune to the broader economic downturn, which impacts consumer-related applications, and we expect the first half of 2023 to also be challenging. We believe that this will largely be due to macro factors rather than Anything specific to fundamentals of the data points, I just highlighted that a testament to the competitiveness of our power products. Q1 is also typically our seasonally slowest quarter following holiday shipments and is impacted by slow activity around Chinese New Year's. Looking forward, as channel inventories are consumed and the broader economy recovers, we expect to see a rebound in power revenue. In closing, despite a very challenging 2022 and an anticipated challenging 2023, our team remains committed to, one, introducing new competitive power products and accelerating next-generation products, especially new applications such as automotives. Two, continuing our successful sales momentum, our design wins in power to drive business with current and new customers, which will improve our FAP3 utilization as well as margins. Three, accelerate next-generation OLED drive IC for our customers domestically and internationally to hit the volume production by second half 2023. Four, expand our OLED products. for international markets to solidify foundation for future growth in 2024. Five, we have initiated a voluntary resignation program where we expect four to five percent of employees may apply for this program without choice to accept or reject the applicants. And finally, I have voluntarily taken a 10% reduction in my salary for 2023, and the rest of the senior management team are also deferring a portion of their base salary until we execute on our commitments. Now, I will turn the call over to Xinyang to go over Q4 results and give our Q1 guidance. Xinyang?

Thank you, IJ, and welcome to everyone on the call. Let's start with key financial metrics for Q4. Total revenue in Q4 was $61 million, down 14.3% sequentially, and down 44.7% year-over-year. Revenue from the Standard Products business was $53.8 million, down 14.2% from Q3, and down 45.9% year-over-year. As YJ already mentioned, both the sequential and year-over-year decrease were mainly attributable to the supply constraints for wafers in our OLED business and slow demand for Chinese and Korean top-tier smartphone models as a result of the global downturn in the smartphone market. Revenue from our power business was $46.3 million, down 18% sequentially and down 20.5% year-over-year. The sequential decline accelerated from last quarter, driven by deteriorating consumer demand for TV, smartphones, e-bike, and computing applications. Gross profit margin in Q4 was 26.4%, down from 35% in Q4 2021, but up from 24.2% in Q3 2022. The lower gross profit margin year-over-year was mainly due to unfavorable mix from lower display revenue as well as lower utilization rate of our factory. The 220 basis point sequential improvement was primarily due to the absence of material inventory reserves or write-offs during the quarter. As a reminder, we recorded a $3.3 million scrap charge in Q3 related to demand weakness as a result of elevated smartphone inventories. Looking forward, we have reduced production at our factory in response to industry-wide slowdown and inventory correction. As a result, our Q123 gross profit margin will be further impacted by lower utilization as well as higher manufacturing input costs such as electricity and wages. We expect gross profit margin to recover as volume and utilization improves in the second half. Turning now to operating expenses, Q4 SG&A was $12.6 million as compared to $11.4 million in Q3 2022. and $13.3 million in Q4 last year. Q4 R&D was $13.7 million as compared to $13.3 million in Q3 2022 and $12.2 million in Q4 last year. Stock compensation charges including operating expenses were $1.5 million in Q4 compared to $0.8 million in Q3 and $1.6 million in Q4 2021. Note that our Q3 SG&A was lower due to adjustments in Q3 to reduce then year-to-date accruals related to performance-based stock compensation. Q4 operating loss was $10.1 million. This compares to an operating loss of $10 million in Q3 and an operating income of $63.9 million in Q4 2021. As a reminder, our Q4 2021 operating income benefited from $49.4 million of net termination fees related to our merger deal with Wise Road that was terminated in December 2021. On a non-GET basis, Q4 adjusted operating loss was $8.6 million compared to adjusted operating loss of $6.6 million in Q3 and adjusted operating income of $14.4 million in Q4 last year. Q4 adjusted EBITDA was negative $4.8 million. This compares to negative $3 million in Q3 and a positive $18.1 million in Q4 a year ago. For the full year 2022, we recognize a tax expense of $5.2 million due mainly to realize foreign currency gains recognized at our operating entity in Korea as a result of FX volatility during the year and a decrease in the Korean subsidiary's deferred tax assets as a result of a change in corporate income tax rates, which was announced in December 2022. Net income in Q4 was $3 million, as compared with net loss of $17.2 million in Q3, and a net income of $53.6 million in Q4 a year ago. Our GAAP diluted earnings per share in Q4 was 7 cents, as compared with a loss per share of $0.38 in Q3 and earnings per share of $1.12 in Q4 last year. Our non-GAAP diluted loss per share in Q4 was $0.36. This compares with non-GAAP diluted earnings per share of $0.02 in Q3 and $0.29 in Q4 last year. Our diluted shares outstanding for the quarter were about 44.1 million shares which reflects shares repurchased as part of our expanded share repurchase program that we announced in mid-September. We continue to exercise the buyback that was authorized by the Board. Moving to the balance sheet. Our cash balance at the end of Q4 was $225.5 million, down from $250.8 million at the end of Q3. The primary cash outflows in Q4 was planned capex of $11.6 million, $8.9 million spent on stock buybacks, and $7.9 million of annual contribution of statutory severance to certain external deposit accounts to comply with the local labor rules. We expect to continue to draw down on our cash driven primarily by continuation of our buyback program. and an LTA prepayment to secure wafers at our leading foundry partner and normal CapEx. Based on our forecast, we anticipate our cash may reach as low as $160 million during 2023 if we execute the LTA. Net accounts receivable at the end of the quarter totalled $35.4 million, a decrease of 3.8% from Q3. Our day sales outstanding for Q4 was 53 days and 47 days in Q3. Inventories net totaled $39.9 million compared to $37.3 million in Q3. Our average days in inventory for Q4 was 82 days and 64 days for Q3. Higher average days in inventory for Q4 compared to Q3 was due mainly to a lower cost of sales which decreased about 17% quarter over quarter. Regarding our CapEx plan, as I mentioned earlier, Q4 CapEx was $11.6 million, and for the full year 2022, we spent $23.4 million, in line with our previous estimate of $23.5 million that we provided last quarter. For 2023, we now anticipate CapEx to be approximately $10 million, which is nearly 60% lower from the 2022 level. In regards to our capital structure, in Q4, we repurchased approximately 9 million worth of stock or approximately 900,000 shares and continue to be active in the market with approximately 37 million remaining in our buyback program at the end of Q4. We ended the year with 225.5 million cash and zero debt. The solid balance sheet allows us to confidently navigate any further economic downturns that may arise during this period of uncertainty. Before moving to the first quarter guidance, I would like to note that we just commenced a voluntary resignation program and expect to complete it by the end of the first quarter. Due to the voluntary nature of this program, we are unable to provide an exact amount of the related financial impact at this time. However, under the assumption that about 4% to 5% of our employees apply for this program, we expect to have annual cost savings up to $3 million, with a total cash cost of approximately $8.5 million to $12 million, about 35% to 40% of which relates to statutory severance. Now moving to our first quarter guidance. While actual results may vary, for Q1, Magnesia currently expects revenue to be in the range of $55 million to $59 million, including about $5 million of transitional factory foundry services, gross profit margin to be in the range of 21% to 23%. Thank you, and I'll now turn the call back over to YJ for closing remarks.

Thank you, Sinyoung. Before we begin Q&A, I'd like to close today by thanking all of our shareholders for their continued support during these challenging times. I'd also like to reiterate my earlier comments about our recovery plan for 2023 and beyond. We remain firmly committed to setting the business back on a solid foundation for growth this year, and we will execute it by, one, introducing new competitive power products, and accelerating next-generation products, especially in new applications such as automotive. Two, continuing our success sales momentum design wins in power to drive business with current and new customers, which will improve our FAP3 utilization as well as margins. Three, Accelerate next-generation OLED drive ICs for our customers domestically and internationally to hit the volume production by second half of 2023. And finally, we will further expand new OLED products for international markets to solidify foundation for future growth in 2024. With that, I'll turn the call back over to Uzziah.

Thanks, YJ. So that concludes the prepared remarks section of the attorney's call. Operator, please begin the hearing.

Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again. Again, that's star 1-1 to ask a question. I'm not showing any questions at this time. I'd like to turn the call back over to UG's I for closing remarks.

Hey, operator, can you just screen again for questions?

I do see some of our covering analysts on the line.

If you'd like to ask a question, please press star 1-1. Thank you. And our first question comes from Martin Yang with Oppenheimer. Your line is open.

Hi, thanks for taking the question and good morning. I'd like to maybe ask your expectations for key customer ramp in 2023. It has the current challenges in near-term effect or outlook for a key customer run, and that's my first question.

Hi, Martin. Thank you. So I'm assuming that you're asking for a new international customer and how they ran for the OLED. So, yes, we said that the first ship has been qualified last December, and we expect the initial production to begin towards the end of this quarter. We just got our second chip for this customer in-house. And we expect to ship within this month. And so that's ahead of schedule. And we expect that to go to production towards second half. So the first chip is targeted for the full HD+. Second chip is full HD+, and beyond. But second chip has much robust capabilities. which we'll talk about once the chips start to shipping. So with those, we expect the majority of the shipments and the big curve to come on second half of this year.

Got it. And is there any way for you to quantify the number of designs or just overall missed opportunities for OLED due to capacity constraints. So what are some missed opportunities or missed designs or things you would have realized in calendar 23?

Well, so, you know, we don't, you know, report the smartphone vendor design wins, but the, you know, we expect to disclose more of that once the smartphone starts to introduce their new product lines. And so I think it's more towards the second half heavily. We are shipping some volumes based on the current design wins and current products. And so that's the curve you should look at.

Got it. Last question from me is, you know, do you expect to see any lingering effect on your 2024, meaning any design activities that will result in 2024 shipments are being disrupted?

We are, you know, shipping new products as we speak. So we believe that Revenue will hit in second half as well as early 24, and we will be working on new products to hit the samples in second half this year that should go into 2024, in addition to some of the products that we'll be shipping in second half this year.

Got it. I have no more questions. Thank you, Y.J. Thank you.

Thank you. Our next question comes from Raji Gill with Needham. Your line is open.

Hi. for Raji Gill. I just had a question about auto. How do we think about the auto opportunity in calendar 23 and then hopefully 24? Could you be a little more specific on the opportunity with the design ones that you talked about on the call earlier? Thanks.

Sure. Thank you. So in the automotive, this year is, I would say, the embark stage year for us in both OLED and power. We are start shipping the first OLED automotive parts this quarter. And we also expect to ship power this quarter as well. And we had several design-ins going in. to last year end and we expect about four to five automotive power to ship this year. The revenue is not huge, you know, but what's nice about automotive is, you know, it's a long design cycle, even in OLED maybe five years. And the ASP and margin typically much better than the regular smartphone usage. So we are going to work on incrementally adding these automotive opportunities, and I think that's going to be gradual over the next few years.

Thank you. And then are you really focusing just on the Asian market here, or are you also trying to expand internationally in auto as well?

Well, obviously the Asia is a close to our home coverage. Uh, so, but, uh, like OLED, uh, the major auto makers, uh, both, uh, uh, Europe in Asia, uh, for our market. On the power side, it's more in Asia and automakers. So that's how we're going to start out, and we'll try to cover globally with the success of our design wins.

Thank you.

Thank you. There are no further questions at this time. I'll turn the call back over to Yuzi for closing remarks.

Thanks, operator. This concludes our you for an earnings conference call. Please look for details for our future events on Magnet Trip's investor relations website. Thank you and take care, everyone.

This concludes the program. You may now disconnect. Everyone, have a great day.