Good Afternoon, ladies and gentlemen and welcome to the MagnaChip Semiconductor's Quarterly Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder this conference call is being recorded. I would now like to turn the call over to your host, Robert Pursel, Director of Investor Relations.

Thank you for joining us to discuss MagnaChip's financial results for the first quarter ended March 31, 2016. The first quarter earnings release we filed today and other releases can be found on the company's Investor Relations Web site. 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 Web site for one year. Access information is provided in the earnings press release. Joining me today are YJ Kim, MagnaChip's Chief Executive Officer, and Jonathan Kim, our Chief Financial Officer. YJ will begin the call with a discussion of the company's recent operating performance. Following YJ, Jonathan will provide an overview of our financial results. YJ will then briefly recap the company's overall business strategy as well as provide financial guidance for the second quarter of 2016. There will be a question-and-answer session following today's 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 discussion 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 MagnaChip's operating performance that may be useful. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our first quarter earnings release available on our Web site under the Investor Relations tab at www.magnachip.com. I would now like to turn the call over to YJ Kim. YJ?

Thank you, Robert, and good afternoon to everyone on our Q1 2016 conference call. Q1 is typically a seasonally soft period for MagnaChip. Our revenue of $148 million beat our prior revenue guidance and gross margin of 23% was at the high end of the guidance range. The following factors contributed to our Q1 financial performance. One, exceptionally strong AMOLED driver demand. Two, improved 8 inch factory utilization and product mix. Jonathan will spell out the detailed financial results but I will describe the first quarter this way. We are pushing on the growth pedal as we also continue to control the cost. While we don't offer guidance more than one quarter out, we continue to expect a gradual recovery in the business in second quarter and throughout 2016. I'd like to offer my observation on general business trends and market activity and product strategy beginning with AMOLED which was the key growth driver in Q1. The surge in AMOLED display driver demand in back of Q4 carried over into Q1 and continues to gather momentum. Total AMOLED revenue in Q1 grew 42% sequentially and rose 63% over the prior quarter from mobile application, fueled in large part by end customer demand from smartphone makers in China. The average gross margin of our AMOLED products is higher than MagnaChip's corporate margin. We believe we are the world's second largest supplier of AMOLED display driver ICs for mobile application. We have the design and technology capabilities to deliver a full range of driver ICs to our global customers, including panel makers like Samsung and LG Display. We also are leveraging our strong market position to win targets, gain market share and increase our revenue footprint in growth markets and with new application. As a result, we are confident in our belief…

Thank you, YJ, and good afternoon everyone. MagnaChip reported, on a GAAP basis, revenue of $148 million for the first quarter ended March 31, 2016. A sequential decline of 3% and a decline of 10% year-over-year. As YJ mentioned, revenue in the first quarter came in ahead of our prior guidance of $141 million to $147 million, primarily due to continued strong demand for AMOLED display driver ICs, especially from smartphone makers in China. Gross profit was $34 million or 23.1% of revenue for the first quarter compared to $30 million or 19.6% for the fourth quarter of 2015 and $35 million or 21.2% for the first quarter a year ago. First quarter gross profit was near the high end of our projected range of 21% to 24% due to higher revenue, a better than expected product mix and manufacturing cost efficiencies. We continue to explore opportunities to further control spending and all options are on the table for us to consider. At the same time, we continued to focus on ways to strengthen our balance sheet. We also are devoting considerable attention and financial resources to support revenue growth and a gradual recovery in our business that we expect will develop over the course of this year. As we previously announced, we closed our legacy 6 inch fab at the end of February and completed the final sale of 6 inch equipment to a third party. If you recall, we received an $8.2 million deposit for the full value of the equipment but we needed to complete a decommissioning process of the equipment before the sale could be completed. That decommissioning was completed during Q1 at a cost of approximately $400,000, which netted MagnaChip a gain of approximately $8 million in Q1. We also disclosed today that we have…

Thank you, Jonathan. We are encouraged by our Q1 performance and by the overall tone of the business. AMOLED was clearly a bright spot, China showed strength and the foundry order pipeline continued to show gradual improvement. We have challenges for sure but we now are executing well against a sound strategic plan, on expanded product roadmap, and a forward-looking approach to use external fabs to retain our leadership position with AMOLED. All efforts which will enhance shareholder value. Turning to our forward-looking guidance. For the second quarter of 2016, MagnaChip anticipates revenue will be in the range of $156 million to $162 million, a sequential increase of 5% to 9%, reflecting a gradual recovery in the foundry order pipeline and strong demand for AMOLED display driver IC. Gross profit to be in the range of 21% to 24% as a percent of revenue. I will now turn the call over to Robert. Robert?

Thank you, YJ. So, Mariama, this concludes our prepared remarks. We would now like to open the call for questions.

[Operator Instructions] Your first question comes from the line of Suji De Silva from Topeka. Your line is open.

Congratulations on the progress you've made here. Couple of questions. First of all, on the strategic review process. Can you provide an update there? I didn't hear anything mentioned in the prepared remarks.

Right. So the strategic review committee and the board are still actively involved in reviewing various strategic alternatives and as soon as there is a decision made, we'll make sure to let you know.

Okay. Can you comment on the length of time it's taking at this point, or is that difficult to do?

It is difficult for us to do. I mean these reviews and decisions are being made at the board level and in terms of the visibility at the management level, there's really nothing that we can comment on at this time.

Fair enough. Thanks. And then the second quarter guidance, I was wondering if you could give us some idea of how that plays out between the different segments. I understand which ones are contributing most of the growth guidance?

Yes. So as we mentioned in the Q1 guidance, I think that the AMOLED is clearly a strong spot. We had the 42% sequential growth and we also alluded earlier in the call today that we expect that product segment to almost double in the year. So, that's one of the key growth area. And then also in the foundry, we saw 14% sequential growth in 8 inch and we think that the foundry will also have a gradual increase in the second quarter.

Okay. That’s helpful. And then specifically on the driver, I wanted to drill down a little bit there. Is the growth in that business is sustainable? Would there be some pause ahead of builds, would you expect with the smartphone ramps that happen with programs?

Yes, so if you look at the IHS data that I also shared today, was a 38% growth on the AMOLED smartphone shipment in 2016 versus 2015 and IHS also forecasted about 23% of CAGR for next four, five years. So, if you look at that versus the smartphone growth rate, is about single-digit CAGR. So, clearly the AMOLED is growing much faster and what I alluded earlier today is that we feel confident that we can meet or exceed the industry growth level of the AMOLED Smartphone, and I think that I also said that in a bright view we could almost double the AMOLED revenue from last year to this year. So, that's what I can qualitatively say.

Okay. That helps. And then on the CapEx side, given that you are outsourcing the AMOLED production. Does that have an effect on your dollar CapEx or your capital intensity pre and post, which would [indiscernible] which will might help cash flow?

I think in our prepared remarks, we did allude to the fact that having this partnership with an outside foundry does help out with our CapEx. However, we also talked about the fact that it does continue to require R&D and you'll see our R&D amounts sort of go back to the amounts that we saw about a year ago, but that number really represents the support for the continued growth and the momentum in the AMOLED products.

Okay. And then my last question on the foundry industry. You guys are doing well in China and gaining customers there. Can you talk about the overall supply demand conditions and perhaps some of the factors that are allowing you to win business with China customers. I know it must be a highly competitive area? Thanks.

Yes, so one of our key strengths is specialty foundry and we offer very competitive analog and mixed signal process. And one of our key strengths is the engineering services and a very quick support and the fact that our foundry, we are only 75% full, we have a room to grow and attract customers who need capacity. So I think, all in all, I think this is helping us to attract new customers.

[Operator Instructions] Your next question comes from the line of Rajvindra Gill from Needham & Co. Your line is open

On the AMOLED business, can you talk a little bit about the content difference, between say TVs and smartphones in terms of the number of drivers versus smartphones and TVs. And along those lines, when do you expect kind of the adoption of AMOLED to kind of switch over or start to pick up in the TV side?

Yes. So you are asking very intelligent questions, Raj. So, you're correct on the TV, you tend to have at least four source drivers and then a controller and a gate driver. On the smartphone, you have one chip that does both source driver, gate and controller. So, the complexity of the mobile AMOLED driver IC is much complicated. So, we have both products that address the smartphone as well as TV and we believe that our technology and design know how on the smartphone, which is much more complicated is world class. And as I mentioned before, we actually have a lot of IPs that goes into the process and we provide them to our external foundry , and using our world class design methodology we can create the die much smaller there anyone at given geometry and we also own the process design kit in those foundries.

And in terms of the growth that you're seeing from the Chinese handset OEMs adopting OLED, can you talk a little bit about the supply chain? How it's gearing up for AMOLED and OLED adoption in terms of which display manufacturers you're working with? Are you kind of diversifying your display supplier base as the demand for OLED from the Chinese OEMs increase?

Well. Yes. So that's a very good question, but if you look at who is making the AMOLED display panel today. I think you know who the answers are. They tend to be located in Korea and they have most of the, probably 99% or the 100% of the supply today. So we will sell our display driver to them and then they will be marketing to all over the world and we will be sending our application engineer to support the end customers bring up into production. So I think that if you follow the AMOLED market, I think that our customers, the AMOLED technology is very advanced and they are a couple of years ahead of any competition.

Would you say that LG is the only OLED TV producer currently and do you sell them in addition to Samsung?

We don't break up all those details but I think both companies have OLED based TV but I think you're correct that LG sells a lot more AMOLED based TVs in the market and they are also more aggressive in selling the TV. So that's of course my observation in the market.

And any idea -- I know you don't disclose the ASPs for the AMOLED DDICs, but you did say they are higher gross margin, if I heard that correctly. Are they significantly higher than your LCD, LED display drivers or how should we think about that?

Well, they are higher than our corporate margin and they are higher than LCDs. So, I don't want to give too specific on how good it is, but it's very decent compared to our corporate margin. And the ASP, again, so you compare the same type of the inch devices, yes, they are higher than the same inch LCD versus the AMOLED.

Just switching gears to the power management side of the business. Understanding history of your company that you're kind of moving up the value stack from MOSFET to IGBT type of transistors. How would you describe now the competitive landscape in your power management business and what's the thought process in terms of the growth rate there?

So what we define our premium products, include the super junction IGBT and the power IC, and our job and our focus is to grow the portion of the business. So far we have got up to 34% and we're making very good progress on the super junction and IGBT and power IC. I think we need more work to bring it up there but that's the effort going on.

There are no further questions at this time. I will now turn the call back over to Robert Pursel.

Thank you, Mariama. So, this concludes our first quarter earnings conference call. Please look for details of our future events on MagnaChip's Investor Relations Web site and thank you for joining us today.

This concludes today's conference call, you may now disconnect.