MagnaChip Reports Results for Third Quarter 2020

SEOUL, South Korea, Oct. 29, 2020 /PRNewswire/ -- MagnaChip Semiconductor Corporation (NYSE: MX) ("MagnaChip" or the "Company") today announced financial results for the third quarter of 2020.

"Q3 represented a pivotal chapter of MagnaChip as we successfully closed the sale of the Foundry business and Fab 4 that ultimately resulted in MagnaChip becoming a pure-play Products company with a very healthy balance sheet. Across the company, we are making well-planned moves to realign our resources, sharpen our R&D focus on key priority areas, and improve our operational efficiency," said YJ Kim, MagnaChip's chief executive officer. "During the third quarter, we also delivered solid performance with a 5% sequential revenue growth and a healthy bottom line despite the market disruptions caused by pandemic and geopolitical tension."

"More importantly, the upswing in demand which began in July has continued into the fourth quarter thus far. We are encouraged by the robust growth opportunities ahead of us, which creates a stronger foundation for profitable growth. We continue to push the envelope on enhancing our competitive position through continuous technology advancement, addressable market expansion and strategic customer engagements."

Q3 2020 Financial Highlights






                                                                           
     In thousands of US dollars, except share data



                                                                                                                                     
       
           GAAP



                                                                                                                           Q3 2020           Q2 2020    Q/Q change                Q3 2019            Y/Y change




       
     Revenues


            
            Standard Products Business


            
            Display Solutions                                                                                        69,583             69,176                
         up                                0.6%     90,550       
            down                 23.2%


            
            Power Solutions                                                                                          46,679             39,779                
         up                               17.3%     48,723       
            down                  4.2%


            
            Transitional Fab 3 foundry services(1)                                                                    8,551              9,873                
         down                             13.4%      9,894   
                down                 13.6%



       
     Gross Profit Margin                                                                                                22.9%             27.0%               
         down             
     4.1% pts                 23.6%       
           down   
      0/7% pts



       
     Operating Income                                                                                                   3,223              8,622                
         down                             62.6%     14,336    
           up                       77.5%



       
     Income (loss) from continuing operations                                                                           8,461             11,774                
         down                             28.1%   (14,244)   
           up                      159.4%



       
     Diluted earnings (loss) per common share-(Continuing operations)                                                    0.21               0.28                
         down                             25.0%     (0.41)   
           up                      151.2%



       
     Net Income (Loss)(2)                                                                                             272,962             29,171                
         up                              835.7%    (1,607)   
           up                   17,085.8%



       
     Basic Earnings (Loss) per Common Share                                                                              7.74               0.84                
         up                              821.4%     (0.05)   
           up                   15,580.0%



       
     Diluted Earnings (Loss) per Common Share                                                                            5.89               0.65                
         up                              806.2%     (0.05)   
           up                   11,880.0%








                                                                           
     In thousands of US dollars, except share data


                                                                                                                                   
       
       Non-GAAP(3)



                                                                                                                           Q3 2020           Q2 2020    Q/Q change                Q3 2019            Y/Y change




       
     Adjusted Operating Income                                                                                          8,823             10,125                
         down                             12.9%     14,766       
            down                 40.2%



       
     Adjusted EBITDA                                                                                                   11,731             12,711                
         down                              7.7%     17,404       
            down                 32.6%



       
     Adjusted Net Income                                                                                                5,147              4,753                
         up                                8.3%      8,204       
            down                 37.3%



       
     Adjusted Earnings per Common Share-Diluted                                                                          0.14               0.13                
         up                                7.7%       0.21       
            down                 33.3%

    ---

(1) Following the consummation of the sale of the Foundry Services Group business and Fab 4, and for a period up to three years, the Company will provide transitional foundry services to the buyer for Foundry products manufactured in the Company's fabrication facility located in Gumi ("Transitional Fab 3 Foundry Services"). Management believes that disclosing revenue of the Transitional Fab 3 Foundry Services separately from the standard products business allows investors to better understand the results of our core standard products display solutions and power solutions businesses.

(2) In the third quarter, total net income of $273.0 million included income from discontinued operations, net of tax, of $264.5 million, primarily attributable to the recognition of $287.1 million as gain on sale of the Foundry Services Group and Fab 4.

(3) Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a meaningful understanding of the factors and trends affecting MagnaChip's business and operations and assist in evaluating our core operating performance. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income from continuing operations or as a better indicator of our operating performance than measures that are presented in accordance with GAAP. A reconciliation of GAAP results to non-GAAP results is included in this press release.

Q4 2020 financial guidance

The COVID-19 global pandemic is still evolving and continues to reduce our forward visibility. While actual results may vary, MagnaChip currently anticipates for Q4 2020:

    --  Revenue to be in the range of $128 million to $136 million, which
        represents approximately 3% to 9% sequential growth, including $10
        million to $11 million of the Transitional Fab 3 Foundry Services.
    --  Gross profit margin to be in the range of 25% to 27%.

Third Quarter 2020 Earnings Conference Call
MagnaChip will host a conference call at 5 p.m. Eastern Time on October 29, 2020. The conference call will be webcast live and also is available by dialing toll-free at 1-844-536-5472. International call-in participants can dial 1-614-999-9318. The conference ID number is 7584769. Participants are encouraged to initiate their calls at least 10 minutes in advance of the 5 p.m. Eastern Time start time to ensure a timely connection. The webcast and earnings release will be accessible at www.magnachip.com. A replay of the conference call will be available the same day and will run for 72 hours. The replay dial-in numbers are 1-404-537-3406 or toll-free at 1-855-859-2056. The access code is 7584769.

Safe Harbor for Forward-Looking Statements
Information in this release regarding MagnaChip's forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include statements about MagnaChip's future operating and financial performance, outlook and business plans, including fourth quarter 2020 revenue and gross profit margin expectations, and the impact of the COVID-19 pandemic and escalated trade tensions on MagnaChip's fourth quarter 2020 and future operating results. All forward-looking statements included in this release are based upon information available to MagnaChip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include the impact of changes in macroeconomic and/or general economic conditions, including those caused by or related to the COVID-19 outbreak, recessions, economic instability and the outbreak of disease; the impact of competitive products and pricing; timely design acceptance by our customers; timely introduction of new products and technologies; ability to ramp new products into volume production; industry wide shifts in supply and demand for semiconductor products; industry and/or company overcapacity; effective and cost efficient utilization of manufacturing capacity; financial stability in foreign markets and the impact of foreign exchange rates; unanticipated costs and expenses or the inability to identify expenses which can be eliminated; compliance with U.S. and international trade and export laws and regulations by us and our distributors; public health issues, including the COVID-19 pandemic; other business interruptions that could disrupt supply or delivery of, or demand for, MagnaChip's products, including uncertainties regarding the impacts of the COVID-19 pandemic that may result in factory closures, reduced workforces, scarcity of raw materials and goods produced in infected areas, as well as reduced consumer and business spending affecting demand for MagnaChip's products due to government and private sector mandatory business closures, travel restrictions or the like to prevent the spread of disease; and other risks detailed from time to time in MagnaChip's filings with the SEC, including our Form 10-K filed on February 21, 2020, our Form 10-Qs filed on May 11, 2020 and August 7, 2020 (all of which including that the impact of the COVID-19 pandemic may also exacerbate the risks discussed therein) and subsequent registration statements, amendments or other reports that we may file from time to time with the Securities and Exchange Commission and/or make available on our website. MagnaChip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

About MagnaChip Semiconductor
MagnaChip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, industrial and automotive applications. The Company provides a broad range of standard products and manufacturing services to customers worldwide. MagnaChip, with more than 40 years of operating history, owns a portfolio of approximately 1,200 registered patents and pending applications, and has extensive engineering, design and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through MagnaChip's website is not a part of, and is not incorporated into, this release.



     
                CONTACTS
                :



     
                In the United States:            
     
                In Korea:


     So-Yeon Jeong                                 
     Chankeun Park


     Head of Investor Relations                    
     Director of Public Relations


     Tel. +1-408-712-6151                          
     Tel. +82-2-6903-5223


     
                Investor.relations@magnachip.com 
     
                chankeun.park@magnachip.com


                                                                                                                               
         
               MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                                                                                            CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                                       (In thousands of US dollars, except share data)
                                                                                                                                                         (Unaudited)




                                                                         
           
             Three Months Ended                                                     
              
                Nine Months Ended


                                                             September 30,                                           June 30,                                                      September 30,                                 September 30,     September 30,


                                                                      2020                          2020                         2019                                                          2020                     2019




     Revenues:



     Net sales - standard products business                               $
          116,262                    $
           108,955         $
              139,273                                            $
            335,953        $
              371,543



     Net sales - transitional Fab 3 foundry services                8,551                                               9,873                       9,894                                                       28,161                     25,776



     Total revenues                                               124,813                                             118,828                     149,167                                                      364,114                    397,319



     Cost of sales:



     Cost of sales - standard products business                    87,494                                              76,817                     104,018                                                      245,917                    285,643



     Cost of sales - transitional Fab 3 foundry services            8,731                                               9,873                       9,894                                                       28,341                     25,776



     Total cost of sales                                           96,225                                              86,690                     113,912                                                      274,258                    311,419



     Gross profit                                                  28,588                                              32,138                      35,255                                                       89,856                     85,900



     Gross profit as a percentage of standard products



     business net sales                                             24.7%                                              29.5%                      25.3%                                                       26.8%                     23.1%



     Gross profit as a percentage of total revenues                 22.9%                                              27.0%                      23.6%                                                       24.7%                     21.6%



     Operating expenses:



     Selling, general and administrative expenses                  12,888                                              12,408                      10,686                                                       37,398                     33,817



     Research and development expenses                             12,477                                              11,108                      10,233                                                       34,094                     34,049



     Other charges                                                                                                                                                                                              554



     Total operating expenses                                      25,365                                              23,516                      20,919                                                       72,046                     67,866



     Operating income:                                              3,223                                               8,622                      14,336                                                       17,810                     18,034



     Interest expense                                             (5,485)                                            (5,430)                    (5,539)                                                    (16,522)                  (16,615)



     Foreign currency gain (loss), net                              8,864                                               8,469                    (21,985)                                                    (13,638)                  (44,166)



     Loss on early extinguishment of long-term



     borrowings, net                                                                                                                                                                                                                     (42)



     Other income, net                                                714                                                 791                         678                                                        2,343                      1,816



     Income (loss) from continuing operations before



     income tax expense                                             7,316                                              12,452                    (12,510)                                                    (10,007)                  (40,973)



     Income tax expense (benefit)                                 (1,145)                                                678                       1,734                                                          836                      3,316



     Income (loss) from continuing operations                       8,461                                              11,774                    (14,244)                                                    (10,843)                  (44,289)



     Income (loss) from discontinued operations, net of tax       264,501                                              17,397                      12,637                                                      289,227                      (963)



     Net income (loss)                                                    $
          272,962                     $
           29,171         $
              (1,607)                                           $
            278,384       $
              (45,252)



     Basic earnings (loss) per common share-



     Continuing operations                                                   $
          0.24                       $
           0.34          $
              (0.41)                                            $
            (0.31)        $
              (1.29)



     Discontinued operations                                         7.50                                                0.50                        0.36                                                         8.24                     (0.03)



     Total                                                                   $
          7.74                       $
           0.84          $
              (0.05)                                              $
            7.93         $
              (1.32)



     Diluted earnings (loss) per common share-



     Continuing operations                                                   $
          0.21                       $
           0.28          $
              (0.41)                                            $
            (0.31)        $
              (1.29)



     Discontinued operations                                         5.68                                                0.37                        0.36                                                         8.24                     (0.03)



     Total                                                                   $
          5.89                       $
           0.65          $
              (0.05)                                              $
            7.93         $
              (1.32)



     Weighted average number of shares-



     Basic                                                     35,280,864                                          35,092,312                  34,357,745                                                   35,089,479                 34,266,513



     Diluted                                                   46,581,788                                          46,474,237                  34,357,745                                                   35,089,479                 34,266,513


                                                                                                            
     
               MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                                                                          CONSOLIDATED BALANCE SHEETS
                                                                                                                (In thousands of US dollars, except share data)
                                                                                                                                  (Unaudited)




                                                                                                                                                                               September 30,               December 31,


                                                                                                                                                                                        2020                                    2019




              
                Assets



              Current assets



              Cash and cash equivalents                                                                                                                                                     $
      542,111              $
         151,657



              Accounts receivable, net                                                                                                                                               57,772                 47,447



              Inventories, net                                                                                                                                                       33,631                 41,404



              Other receivables                                                                                                                                                       4,551                 10,200



              Prepaid expenses                                                                                                                                                        8,265                  9,003



              Hedge collateral                                                                                                                                                        9,650                  9,820



              Other current assets                                                                                                                                                    8,338                 10,013



              Current assets held for sale                                                                                                                                                                                99,821



              Total current assets                                                                                                                                                  664,318                379,365



              Property, plant and equipment, net                                                                                                                                     77,489                 73,068



              Operating lease right-of-use assets                                                                                                                                     2,032                  1,876



              Intangible assets, net                                                                                                                                                  2,877                  2,769



              Long-term prepaid expenses                                                                                                                                              2,138                  5,757



              Other non-current assets                                                                                                                                                8,598                  9,059



              Non-current assets held for sale                                                                                                                                                                           123,434



              Total assets                                                                                                                                                                  $
      757,452              $
         595,328



              
                Liabilities and Stockholders' Equity



              Current liabilities



              Accounts payable                                                                                                                                                               $
      40,497               $
         40,376



              Other accounts payable                                                                                                                                                  7,639                  6,410



              Accrued expenses                                                                                                                                                       41,630                 44,799



              Accrued income taxes                                                                                                                                                   14,038                  1,569



              Operating lease liabilities                                                                                                                                             1,390                  1,625



              Current portion of long-term borrowings, net                                                                                                                          306,567



              Other current liabilities                                                                                                                                               7,652                  2,014



              Current liabilities held for sale                                                                                                                                                                           37,040



              Total current liabilities                                                                                                                                             419,413                133,833



              Long-term borrowings, net                                                                                                                                                                                  304,743



              Accrued severance benefits, net                                                                                                                                        51,953                 51,181



              Other non-current liabilities                                                                                                                                           7,782                  9,671



              Non-current liabilities held for sale                                                                                                                                                                      110,881



              Total liabilities                                                                                                                                                     479,148                610,309



              Commitments and contingencies



              Stockholders' equity



              Common stock, $0.01 par value, 150,000,000 shares authorized, 44,595,393 shares issued and
    35,489,720



              outstanding at September 30, 2020 and 43,851,991 shares issued and 34,800,312 outstanding at                                                                              447                    439
    December 31, 2019



              Additional paid-in capital                                                                                                                                            159,840                152,404



              Retained earnings (deficit)                                                                                                                                           220,253               (58,131)



              Treasury stock, 9,105,673 shares at September 30, 2020 and 9,051,679 shares at December 31,                                                                         (107,649)             (107,033)
    2019, respectively



              Accumulated other comprehensive income (loss)                                                                                                                           5,413                (2,660)



              Total stockholders' equity (deficit)                                                                                                                                  278,304               (14,981)



              Total liabilities and stockholders' equity                                                                                                                                    $
      757,452              $
         595,328


                                                                                              
     
          MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                       (In thousands of US dollars)
                                                                                                               (Unaudited)




                                                                                                                    Three Months Ended                                         Nine Months Ended


                                                                                                                                            
              
           September 30,            September 30,  September 30,
                                                                                                                                                                          2020                    2020
                                                                                                                                                                                                                2019



     
                Cash flows from operating activities



     Net income (loss)                                                                                                                                     $
             272,962     $
              278,384               $
        (45,252)



     Adjustments to reconcile net income (loss) to net cash provided by operating activities



     Depreciation and amortization                                                                                                                                      2,854                  13,333                       24,661



     Provision for severance benefits                                                                                                                                   3,971                  14,150                       10,491



     Amortization of debt issuance costs and original issue discount                                                                                                      619                   1,824                        1,712



     Loss (gain) on foreign currency, net                                                                                                                            (19,788)                  6,609                       50,512



     Restructuring and other charges                                                                                                                                      349                     490                          470



     Provision for inventory reserves                                                                                                                                   2,226                   4,079                        9,255



     Stock-based compensation                                                                                                                                           2,046                   4,754                        1,920



     Loss on early extinguishment of long-term borrowings, net                                                                                                                                                                42



     Gain on sale of discontinued operations                                                                                                                        (287,117)              (287,117)



     Others                                                                                                                                                               196                      85                           61



     Changes in operating assets and liabilities



     Accounts receivable, net                                                                                                                                        (16,145)               (16,583)                    (32,812)



     Unbilled accounts receivable, net                                                                                                                                  3,327                  14,260                       14,208



     Inventories                                                                                                                                                       15,450                   1,390                     (15,576)



     Other receivables                                                                                                                                                  6,044                   6,111                      (4,814)



     Other current assets                                                                                                                                               4,396                   9,143                        6,356



     Accounts payable                                                                                                                                                (10,103)                (5,156)                      27,585



     Other accounts payable                                                                                                                                           (2,136)                (8,034)                    (10,074)



     Accrued expenses                                                                                                                                                   1,830                   1,991                        3,831



     Accrued income taxes                                                                                                                                              12,197                  12,546                        (583)



     Other current liabilities                                                                                                                                          1,372                   2,243                      (5,766)



     Other non-current liabilities                                                                                                                                      1,630                   2,868                          808



     Payment of severance benefits                                                                                                                                    (1,616)                (5,888)                     (6,195)



     Others                                                                                                                                                              (88)                     59                        (821)



     Net cash provided by (used in) operating activities                                                                                                              (5,524)                 51,541                       30,019



     
                Cash flows from investing activities



     Proceeds from settlement of hedge collateral                                                                                                                       2,174                   8,029                       12,625



     Payment of hedge collateral                                                                                                                                                             (7,841)                    (17,024)



     Purchase of property, plant and equipment                                                                                                                        (7,511)               (16,353)                    (16,693)



     Payment for intellectual property registration                                                                                                                     (191)                  (664)                       (907)



     Collection of guarantee deposits                                                                                                                                     844                     891                          539



     Payment of guarantee deposits                                                                                                                                       (40)                  (611)                     (1,330)



     Proceeds from sale of discontinued operations                                                                                                                    350,553                 350,553



     Other                                                                                                                                                                  5                      26                          225



     Net cash provided by (used in) investing activities                                                                                                              345,834                 334,030                     (22,565)



     
                Cash flows from financing activities



     Repurchase of long-term borrowings                                                                                                                                                                                  (1,175)



     Proceeds from exercise of stock options                                                                                                                            2,027                   2,690                        1,038



     Acquisition of treasury stock                                                                                                                                                           (1,021)                     (2,588)



     Repayment of financing related to water treatment facility arrangement                                                                                             (135)                  (402)                       (415)



     Repayment of principal portion of lease liabilities                                                                                                                 (46)                  (165)                       (174)



     Net cash provided by (used in) financing activities                                                                                                                1,846                   1,102                      (3,314)



     Effect of exchange rates on cash and cash equivalents                                                                                                              7,131                   3,781                      (5,237)



     Net increase (decrease) in cash and cash equivalents                                                                                                             349,287                 390,454                      (1,097)



     
                Cash and cash equivalents



     Beginning of the period                                                                                                                                          192,824                 151,657                      132,438



     End of the period                                                                                                                                     $
             542,111     $
              542,111                $
        131,341


                                             
         
                MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                               RECONCILIATION OF OPERATING INCOME TO ADJUSTED OPERATING INCOME
                                                                (In thousands of US dollars)
                                                                         (Unaudited)




                                                                                                                 Three Months Ended                                                                          Nine Months Ended


                                                        September                                           June 30,                       September              September                September
                                                               30,                                                                                 30,                     30,                       30,


                                                              2020                                               2020                              2019                    2020                      2019




     Operating income                           $
              3,223                                                       $
              8,622              $
     14,336               $
      17,810                $
             18,034



     Adjustments:



     Equity-based compensation expense                      2,101                                                                   1,503                    430                    4,366                            1,661



     Inventory reserve related to Huawei                    2,331                                                                                                                 2,331



     Expenses related to Fab 3 power outage                 1,168                                                                                                                 1,168



     Others                                                                                                                                                                        554                              585



     Adjusted operating income                  $
              8,823                                                      $
              10,125              $
     14,766               $
      26,229                $
             20,280

We present Adjusted Operating Income as supplemental measures of our performance. We define Adjusted Operating Income for the periods indicated as operating income adjusted to exclude (i) Equity-based compensation expense, (ii) Inventory reserve related to Huawei, (iii) Expenses related to Fab 3 power outage and (iv) Others. For the three and nine months ended September 30, 2020, inventory reserve related to Huawei eliminates a $2,331 thousand excess and obsolete inventory charge that we recorded in relation to the US Government's export restrictions on Huawei. During the same periods, expenses related to Fab 3 power outage eliminate $1,168 thousand related to the write-off of the damaged work in process wafers and charges for facility recovery. For the nine months ended September 30, 2020, others primarily eliminates non-recurring professional fees and expenses incurred in connection with certain treasury and finance initiatives incurred during the three months ended March 31, 2020. For the nine months ended September 30, 2019, others eliminates a $0.6 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which was borne by us under a negotiated separation agreement during the three months ended March 31, 2019.


                                                                                             
              
                MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                                                                                                RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED NET INCOME
                                                                                                            (In thousands of US dollars, except share data)
                                                                                                                              (Unaudited)




                                                  
     
          Three Months Ended                                                                                    Nine Months Ended


                                                           September               June 30,                                                                           September                        September                      September
                                                                 30,                                                                                                          30,                              30,                              30,


                                                                2020                    2020                                                                                                     2019                           2020                2019




     Income (loss) from continuing operations        $
           8,461                          $
              11,774                                                                   $
            (14,244)              $
          (10,843)                      $
     (44,289)



     Adjustments:



     Interest expense, net                                    4,875                                       4,736                                                                                4,865                         14,541                            14,776



     Income tax expense (benefit)                           (1,145)                                        678                                                                                1,734                            836                             3,316



     Depreciation and amortization                            2,854                                       2,544                                                                                2,601                          7,968                             7,703



     EBITDA                                                  15,045                                      19,732                                                                              (5,044)                        12,502                          (18,494)



     Equity-based compensation expense                        2,101                                       1,503                                                                                  430                          4,366                             1,661



     Foreign currency loss (gain), net                      (8,864)                                    (8,469)                                                                              21,985                         13,638                            44,166



     Derivative valuation loss (gain), net                     (50)                                       (55)                                                                                  33                          (222)                              169



     Loss on early extinguishment of long-term



     borrowings, net                                                                                                                                                                                                                                           42



     Inventory reserve related to Huawei                      2,331                                                                                                                                                         2,331



     Expenses related to Fab 3 power outage                   1,168                                                                                                                                                         1,168



     Others                                                                                                                                                                                                                  554                               585



     Adjusted EBITDA                                         11,731                                      12,711                                                                               17,404                         34,337                            28,129



     Income (loss) from continuing operations        $
           8,461          $
          11,774                            $
              (14,244)                                       $
            (10,843)              $
          (44,289)



     Adjustments:



     Equity-based compensation expense                        2,101                                       1,503                                                                                  430                          4,366                             1,661



     Foreign currency loss (gain), net                      (8,864)                                    (8,469)                                                                              21,985                         13,638                            44,166



     Derivative valuation loss (gain), net                     (50)                                       (55)                                                                                  33                          (222)                              169



     Loss on early extinguishment of long-term



     borrowings, net                                                                                                                                                                                                                                           42



     Inventory reserve related to Huawei                      2,331                                                                                                                                                         2,331



     Expenses related to Fab 3 power outage                   1,168                                                                                                                                                         1,168



     Others                                                                                                                                                                                                                  554                               585



     Adjusted Net Income                             $
           5,147           $
          4,753                               $
              8,204                                          $
            10,992                $
            2,334



     Adjusted Net Income per common share-



     - Basic                                          $
           0.15            $
          0.14                                $
              0.24                                            $
            0.31                 $
            0.07



     - Diluted                                        $
           0.14            $
          0.13                                $
              0.21                                            $
            0.30                 $
            0.07



     Weighted average number of shares - basic           35,280,864                                  35,092,312                                                                           34,357,745                     35,089,479                        34,266,513



     Weighted average number of shares - diluted         46,581,788                                  36,330,083                                                                           45,516,245                     36,151,622                        34,955,722

We present Adjusted EBITDA and Adjusted Net Income as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Loss on early extinguishment of long-term borrowings, net, (v) Inventory reserve related to Huawei, (vi) Expenses related to Fab 3 power outage and (vii) Others. For the three and nine months ended September 30, 2020, inventory reserve related to Huawei eliminates a $2,331 thousand excess and obsolete inventory charge that we recorded in relation to the US Government's export restrictions on Huawei. During the same periods, expenses related to Fab 3 power outage eliminate $1,168 thousand related to the write-off of the damaged work in process wafers and charges for facility recovery. For the nine months ended September 30, 2020, others primarily eliminates non-recurring professional fees and expenses incurred in connection with certain treasury and finance initiatives incurred during the three months ended March 31, 2020. For the nine months ended September 30, 2019, others eliminates a $0.6 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which was borne by us under a negotiated separation agreement during the three months ended March 31, 2019. EBITDA for the periods indicated is defined as Income (loss) from continuing operations before interest expense, net, income tax expense (benefit) and depreciation and amortization.

We prepare Adjusted Net Income by adjusting income (loss) from continuing operations to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income for the periods as income (loss) from continuing operations, adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Loss on early extinguishment of long-term borrowings, net, (v) Inventory reserve related to Huawei, (vi) Expenses related to Fab 3 power outage and (vii) Others. For the three and nine months ended September 30, 2020, inventory reserve related to Huawei eliminates a $2,331 thousand excess and obsolete inventory charge that we recorded in relation to the US Government's export restrictions on Huawei. During the same periods, expenses related to Fab 3 power outage eliminate $1,168 thousand related to the write-off of the damaged work in process wafers and charges for facility recovery. For the nine months ended September 30, 2020, others primarily eliminates non-recurring professional fees and expenses incurred in connection with certain treasury and finance initiatives incurred during the three months ended March 31, 2020. For the nine months ended September 30, 2019, others eliminates a $0.6 million legal settlement charge related to dispute with a prior customer and a legal expense related to the indemnification of a former employee, which was borne by us under a negotiated separation agreement during the three months ended March 31, 2019.

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SOURCE MagnaChip Semiconductor Corporation