Good day, and thank you for standing by. Welcome to the Q1 2022 MagnaChip Semiconductor Corporation's earnings conference call. At this time, all participants are on a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during that session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded, and if you require any assistance during the call, please press star zero. I would now like to hand the conference over to your speaker today, Ms. Soyoung Jeong. Ms. Jeong, the floor is yours.
Operator. Thank you everyone for joining us to discuss MagnaChip's financial results for the first quarter ended March 31, 2022. The first quarter earnings release that was filed today after the stock market closed can be found on our investor relations website. A telephone replay of today's call will be available shortly after the completion of the call, and the webcast will be archived on our website for 1 year. Access information is provided in the earnings press release. Joining me today are YJ Kim, MagnaChip's Chief Executive Officer, and Shinyoung Park, our Chief Financial Officer. YJ will discuss the company's recent operating performance and business overview, and Shinyoung will review financial results for the quarter and provide guidance for the second quarter of 2022. 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 MagnaChip'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 filing. During the call, we also will 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 MagnaChip's operating performance that may be useful. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures can be found in our first quarter earnings release available on our website under the Investors section at www.MagnaChip.com. I now will turn the call over to YJ Kim. YJ?
Hello, everyone, and thank you for joining our call today. To begin, I'd like to quickly touch on our Q1 consolidated results and then give an update on some challenges we are seeing in the broader macro environment. After that, I will provide a detailed review of our business segments. In Q1, we reported revenue of $104.1 million in a severely supply-constrained environment. This, along with strong gross profit margin, generated a non-GAAP EPS of $0.28, which was an increase of 27% year-over-year. While it is good to see the healthy bottom line bolstered by improved gross margin, I am still disappointed with these results because it doesn't represent the full potential of this company. As we approach the end of Q1, we are optimistic that we would begin to see incremental improvements in business condition for the rest of the year.
However, the ongoing lockdowns in China have added new challenges to an already stressed supply chain to both of our businesses. We want to take a cautious stance for the near term, despite recent positive momentum, which I will go over in detail. Moving on to a detailed review of our Q1 results by product segment, starting with OLED. Our OLED revenue in Q1 was $26.1 million, down 30.7% sequentially and down 53.1% year-over-year. As expected, severe shortages in 28 nanometer 12-inch wafer capacity, where we produce most of our new OLED products, continued to significantly impact our results. However, we remain focused on supporting our existing customers, winning new business, additional capacity plans to set ourselves up for a strong recovery.
First, our dedicated customer support and engineering teams are working closely with the top tier panel maker in Korea to initiate and support 2 OLED driver IC projects, which we expect to kick off this month. Second, as mentioned last quarter, we successfully broadened our customer base to include a top tier panel maker outside Korea. In Q1, we worked very closely with this customer and successfully taped out the first project in February. This product is expected to greatly contribute to our revenue in the later part of this year. Further, we have engaged in designing discussions for additional new projects with this customer. Third, our additional 28 nanometer manufacturing capacity remains on track to come online in the later part of this year.
While we expect to go through a typical learning curve during the initial phase of production ramp, we expect yields to improve over 2023. In addition, we are in active discussions with our foundry partners regarding a multiyear supply agreement to secure long-term capacity and expect to have an update for you in a couple of months. Finally, in terms of our new business areas, we successfully ramped mass production of our new OLED TV drive IC product line during the quarter, and saw strong revenue growth for the large display OLED TV market. While still small, we are optimistic about the growth potential for this business.
For OLED automotive display applications, we added an additional customer design win during the quarter with a premium European automaker for their center stack display, and the initial mass production is scheduled for the first half of 2023 based on our customer's current plan. In summary, our OLED business is winning new customers and expanding into new applications. With additional supply capacity expected to ramp up in the later part of this year and progress with our LTA supply agreements, we are very optimistic about the growth in our OLED business in the future, particularly when our newly designed products at the leading Korean customer and new major customer outside of Korea are expected to go into full production with our newly added capacity. For Q2, we anticipate our OLED business revenue to be flat to slightly up, primarily as capacity level remained about the same.
Now let's turn to the power business. I'm excited to report that we achieved the highest revenue in company history in a single quarter, primarily driven by strong demand for our premium power products as well as Battery FETs product. Our power business revenue in Q1 was $64.8 million, up 11.4% sequentially and 20% year over year. These results were driven by very strong demand for our premium products, particularly our Super Junction MOSFET, Power IC, and IGBT product lines, which grew 19.5% sequentially and 25.1% year over year to a record high 53.6% revenue mix. In addition, Battery FETs that support world's leading foldable smartphone, earphones, and tablets demonstrated strong growth.
We are extremely excited about the continued momentum and growth in our power business in key end markets like communication, consumer, industrial, and computing, all driven by the trend in electrification of everything. In our Super Junction MOSFET product line, we are seeing robust demand from TV, PC power and lighting applications due to increasing energy efficiency requirements. In Q1, we had strong traction with new designs in TVs and LED lighting, as well as share gains in laptops and gaming. For Power IC, we began ramping shipment of our boost ICs for SSD for servers and data centers. In our IGBT product line, revenue grew about 60% year-over-year, driven by our entry into renewable energy end market, particularly solar inverter applications.
Our go-to-market strategy, efficient R&D, and timely investment in Fab Three led us to achieve record quarterly revenue once again and also accelerated development and introduction of new products. One notable achievement for the quarter was that we successfully expanded the automotive design pipeline with our new high-performance medium voltage MOSFET product for brushless direct current motor applications. We received a purchase order for our new 40-volt MV MOSFET from a tier one automotive supplier for major car manufacturers and started mass production in April. We also kicked off more MV products for multiple automotive applications. This is an additional win aside from the original automotive power project that we announced previously. Our original automotive power project is progressing well. The qualification and design activities are moving along with the end customer schedule.
We expect the initial mass production to start in the second half of 2023 based on our customer's current plan. During the quarter, we also added another new product to our power supply family with the announcement of high-performance synchronous boost converter that can be used in a variety of applications for SSDs, OLED panels, and Bluetooth speakers. This boost converter provides strong circuit protection capabilities and allows for smaller PCB board form factors in environmentally friendly packages. In summary, we'll continue to execute the growth plan of power business by strengthening Fab Three productivity and introducing new products with superior performance and improved costs, which we expect will further drive healthy growth for many years. For Q2, we expect our power business revenue to be flat to slightly down as a result of back-end capacity constraints due to the China lockdown.
In conclusion, we are expanding our customer base, penetrating new applications, and remain focused on executing our long-term strategy. Despite macro issues and increased uncertainty, which may limit our near-term opportunity, recent developments and critical milestones we have achieved reinforce our confidence and optimism about our long-term growth. Now, I will turn the call over to Shinyoung and come back for the Q&A. Shinyoung?
Thank you, YJ, and welcome to everyone on the call. Let's start with key financial metrics for Q1. Total revenue in Q1 was $104.1 million, down $55.7 million sequentially and down 15.4% year-over-year. Revenue from the standard products business was $94 million, down 5.5% from Q3 and down 16.7% from the same quarter a year ago. Once again, both the sequential and year-over-year decrease was due mainly to a significant decrease in revenue in our display and OLED business driven by the previously mentioned supply shortage. However, our power revenue in Q1 was very strong and achieved a record revenue of $64.8 million, which represented an increase of 11.4% sequentially and 20% year-over-year.
The significant growth was due to strong demand across most product families, particularly our premium products. Gross profit margin in Q1 was 37.5%, up 260 basis points from Q4 and up over 960 basis points from Q1 a year ago. The year-over-year increase was primarily attributable to an improved product mix, combined with an increase in average selling price under a favorable pricing environment. Sequentially, Q1 benefited by approximately 200 basis points from a timing mismatch of lower cost twelve-inch wafers that was purchased in the prior period and sold in Q1. Turning now to operating expenses. Q1 SG&A was $14.2 million, as compared to $13.3 million in Q4, 2021, and $12.6 million in Q1 last year.
Q1 R&D was $12 million, as compared to $12.2 million in Q4 2021, and $13.4 million in Q1 last year. Stock compensation charges including operating expenses were $1.6 million in Q1, and the same $1.6 million in Q4 and Q1 2021. In Q1, our operating income was $12.9 million compared to $63.9 million in Q4 last year, and operating loss of $2.1 million in Q1 2021. As a reminder, our Q4 2021 results included net gain of $49.4 million that represented income of $70.2 million from the recognition of a reverse termination fee, net of professional service fees and expenses incurred in connection with the contemplated merger transaction of the company that was terminated in December 2021.
Of the $70.2 million, we received $51 million in cash in December 2021, and $19.2 million was recorded as other receivables on our balance sheet as of March 31, 2022. Subsequently, in April 2022, we received $14.4 million, and the remaining $4.8 million is expected to be received by the end of June 2022. Adjusted operating income in Q1 was $14.5 million, about flat from $14.4 million in Q4 2021, and up from $10 million in Q1 a year ago. Adjusted EBITDA in Q1 was $18.8 million, slightly up from $18.1 million in Q4 last year, and up from $13.5 million in Q1 a year ago.
Net income in Q1 was $9.5 million, as compared with $53.6 million in Q4 2021, and a net loss of $7.5 million in Q1 a year ago. The sharp sequential decrease was due primarily to the recognition of income in Q4 2021 from the $70.2 million reverse termination fee discussed earlier. Our GAAP diluted earnings per share in Q1 was $0.20 as compared with $1.12 in Q4 last year, and loss of $0.19 in Q1 a year ago. Our non-GAAP diluted earnings per share in Q1 was $0.28, down from $0.31 in Q4 last year, but up from twenty-two cents in Q1 last year.
There were 46.7 million shares outstanding in Q1, calculated on a diluted weighted average basis. On December 21, 2021, our board authorized the repurchase of up to $75 million of the company's stock. As an immediate step, we entered into a $37.5 million accelerated stock repurchase agreement with JPMorgan Chase Bank, National Association. On March 14, 2022, we completed the ASR program and repurchased approximately 2 million shares at an average price of $18.51. Now moving to the balance sheet. Cash was $284.9 million at the end of Q1. This compares to $279.5 million at the end of Q4 of 2021, and $290.2 million in Q1 of 2021. Accounts receivable net totaled $51 million, about flat from Q4 last year.
Our days sales outstanding for Q1 was 44 days. Inventories net totaled $36.9 million, a decrease of 6% from Q4 last year. Our average days inventory for Q1 was 51 days. CapEx was $0.9 million in Q1. As disclosed in our previous earnings call, this year, we'll invest about $8 million of special CapEx to further improve factory capacity. Excluding this special CapEx, our normalized CapEx for 2022 is expected to be at approximately $20 million. Now, moving to the second quarter guidance. Our near-term outlook is still being challenged by persisting supply constraints, especially for 28 nanometer, 12-inch wafers.
While actual results may vary, looking into the next quarter, MagnaChip currently expects revenue to be in the range of $100 million-$105 million, including about $9.5 million of transitional Fab three foundry services, and gross profit margin to be in the range of 33%-35%. With that, I'll turn the call over to Soyoung. Soyoung?
Thank you. Thank you, YJ and Shinyoung. Operator, this concludes our prepared remarks, and we'll now open the call for questions.
Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, please press the pound key. Stand by as we compile the Q&A roster. Our first question comes from Suji Desilva of Roth Capital. Your line is open.
Hi, YJ Hi, Shinyoung. Let me start off with some of the recent press about potential OLED driver industry consolidation. I just wanted to get a sense from your perspective, if you can update on MagnaChip's strategic review process, where that might be, you know, post the Wise Road bid that was terminated.
Suji, nice talking to you. You know, unfortunately we don't comment on rumor or the rumor or deals and future deals. Let me put it that way.
Sure. I was trying to understand if you had a process in place that you already articulated, and if that was how that was progressing.
I don't think we have made any other announcement after the Wise Road, so yeah.
Okay, great. Thanks. Switching over to the OLED business, I wanna understand why YJ got-
Suji, I can say that, look, we are focusing on the 3-3-3 strategy as well as the board management committee to protect, enhance our long-term shareholder value. Let me put it that way.
Okay. Do appreciate that, YJ. Okay. Switching over to the OLED business, obviously understanding the supply constraint here, but can we talk about the potential for the new non-Korean customers? Should we be conservative on that one, or can the win base there potentially have that revenue run rate move toward a size similar to your existing customers? Any thoughts on how that could shape up for you would be helpful intermediate term.
First of all, let me, you know, say that the. You know, we are having a very key positive momentum, first with our existing customer, and we have dedicated support team and engineering team. As I mentioned today, with the top tier Korean maker, we are starting two new projects, we will kick off this month. Additionally, on your question on the outside Korea customer, we actually successfully taped out the new product, and we expect to go production towards the later part of the year. We see a great future with these two customers. In addition to that, we are also producing OLED TV products for other Korean makers. We are diversifying customers, and we are diversifying our product portfolio.
We expect to grow with that kind of a momentum.
Okay. That's very helpful. Then on the gross margin side, the product gross margin, I believe, topped 40% for the first time. I know there was some one-time elements, but can you clarify what you meant when you said there was a favorable pricing environment this quarter?
I mean, this quarter particularly, Suji, that 200 basis points represent a one-time timing benefit that we enjoyed this quarter at a low cost because we lower-cost 12-inch wafers that we purchased in the prior period, but we actually sold at a higher price in Q1 2022. Our, I guess, pricing strategy is to pass this type of increased cost to our customers, but this may not happen all the time, or the timing may not be aligned all the time. That's one-time benefit that we actually had in this quarter.
I understand, Shinyoung Park. The pricing comment was related to the one-time comment. Then just to look ahead, I think even if I adjust for the 200 basis points, the guidance is for a slight gross margin decline. Can you talk about the dynamics here of the gross margin quarter to quarter?
The gross margin, like, I mean, can vary by quarter by quarter, and definitely product mix has an impact on it. I mean, Q1 definitely has product mix. Q2, looking into all those pricing and the product mix and some, I mean, the manufacturing cost variables and all that, we considered everything. Now based on the information we are having, the Q2, that's the guidance that we are actually estimating, the gross margin in Q2.
Okay. Lastly, YJ, I know capacity is obviously one of the big factors here. Can you talk about the potential for these LTAs, long-term agreements, and what supply agreements? And how much capacity there's the potential to secure? Obviously, everybody's fighting for the same capacity. If you could walk us through some of the opportunity and strategy there, that'd be helpful to understand as you're approaching these discussions.
Sure. We do have MOU with currently with multiple foundry makers that are 12-inch and the 20 nanometer. We are in the midst of transitioning into the actual LTA for the long term. We will update the market in the next few months, as I said today. We also have the new 20 nanometer foundry coming from new foundry towards the later part of the year that will give additional 20 nanometer capacity. We are pretty excited about the going into production when these new products for the Korean customer as well as outside Korean customer going to full production when the additional capacity comes online starting later part of the year.
Okay. That sounds like a source of optimism. Thanks, Shinyoung Park. Thanks, YJ, for the color.
Thank you.
Thank you.
Thank you. Our next question comes from Rajvindra Gill of Needham & Company. Your line is open.
Yes, thank you for taking my questions. Just YJ, I think in the last quarter, remind me again, you had mentioned, you know, pretty significant ramp in Q4 to hit some of your growth targets. Yeah, I wonder if you could kinda update us there if you still expect that to happen.
Yeah.
The supply sustainability in Q1. Any update there in terms of anticipated ramp in Q4 as we get more capacity for 20 nanometer OLED?
Thank you for asking. Things are changing rapidly, right? Since late March, you know, you had the Shenzhen lockdown. Now you have a Shanghai lockdown that's about 5-6 weeks, and the Ukrainian war. That is creating some uncertainties globally as well as in the China market as well as especially affecting the supply chain. As you know, we have a back-end for the power as well as potential 12-inch foundry in there. You know, it's very hard to pinpoint how the rest of the year will pan out. We are now back to guiding one quarter at a time.
Once we get the better visibility, we will provide more colors. But in terms of talking more long term, you know, despite these macro issues, you know, on the OLED side, we are winning new customers and expanding into new applications. We are very optimistic about the growth on OLED business. Once these new projects, whether it's a Korea new customer project or the outside Korea, when we go production, we're gonna ramp up with the new capacity that I just mentioned to Suji. In terms of power, we have continued to execute our power plan through the Fab Three productivity as well as our external foundry. We are rolling out new generation products as we speak. We are very optimistic about the growth.
Let me put it that way.
Got it. Yeah, I appreciate the low volatility around the macro. Just any sense, do you think, you know, you'll still be able to grow this year, overall revenue, you know, in light of these kinda macro concerns, but also on the flip side, the anticipated ramp with the new 20 nanometer capacity?
As I said, it's very hard to pinpoint for the rest of the year how it'll pan out, but I can say that once we have the new foundry capacity with new product goes into production, that's gonna ramp. You know, once we have better visibility, we will guide you more and give you better colors.
Got it. Okay. Then, you know, on the gross margin side, you know, you mentioned that you're kinda incurring some of the costs associated with. You know, with the 28-nanometer and that the yields are suboptimal, but they'll start to improve in 2023 as you get the volume. So, how do we think about the margins kind of throughout the year? Are we expecting that you're gonna be covering, you know, some of that fixed cost or still as you ramp 20-nanometer and the yields are low, that the margin should be kind of within this range, or are there other drivers that can maybe bring it down?
Yeah. You know, again, we are guiding one quarter at a time. You know, I think we already factored in the yield assumption curve.
Mm-hmm.
I think, you know, it's you know I think conservatively is what you should look at initially, but we should be able to go up the yield curve, especially towards next year.
Yeah. Appreciate it. Thank you.
Yeah.
Thank you. Again, to ask a question, please press star one on your telephone. Our next question comes from Martin Yang of Oppenheimer. Your line is open. Pardon me, Mr. Yang, if your phone is on mute, please unmute your line.
Thanks for the reminder. I was on mute. Thank you for taking my question. My first question is about the display segment trajectory, revenue trajectory in the second quarter. Can you maybe provide us with more details regarding either pricing or volume expectations for display?
Yeah. As I mentioned earlier today, we expect the OLED to be flat to up this second quarter. Again, it's limited by the supply constraints. That's all I can comment.
Got it. My next question is about your potential opportunities for medium- to large-size OLED display, particularly for IT and automotive applications. I think you highlighted auto, but, you know, where are you positioned for potential adoption for notebooks monitors in the longer term?
Martin, that's a very good question. In the auto, we now have three design wins, and we said that some of the product will go into production starting the first half of 2023 to the three end-customer European automakers. On the IT side, we do see some trend going into the IT. There we have opportunities, not only the OLED driver IC, but also our PMIC. We are working on that. Once we have a production schedule that we can pinpoint, then we will also share with you.
Got it. Thank you. My final question is on your design with your non-Korean panel maker customers. Assuming everything goes to a satisfactory yield, will those products, let's say shipping by the end of the year or early next year, will they have similar gross margins to pre-pandemic products? How do the gross margin profiles compare for that customer versus other customers?
Yeah, we expect, you know, based on the current forecast that we will go production by later part of this year. You know, well, the foundry will go through a yield learning curve on the 20-nanometer and OLED process. We're being a little cautious, but I think we can update in, you know, a near future. We can give you more clear guidance on the gross margin. I mean, we look favorably going into next year. We will have more pinpoint outlook in the near future.
Got it. Thank you, YJ.
Thank you. Speaker, I see no further questions in the queue. I will turn it back over to you for closing remarks.
Thank you. This concludes our first quarter 2022 earnings conference call. Please look for details of our future events on MagnaChip's investor relations website. Before we end the call, I'd like to officially announce that I will be transitioning out of my role as investor relations advisor for MagnaChip. It's been an honor working with this great management team and representing such a wonderful company. Going forward, the Blueshirt Group will serve as MagnaChip's investor relations advisors, and you can find a primary IR lead, Yujia Zhai, and his contact information at the bottom of our earnings press release. Thank you and take care.
This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.