Good day, ladies and gentlemen, and welcome to the First Quarter 2017 MagnaChip Semiconductor Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder this call is being recorded. I would now like to introduce your host for today’s conference, Mr. Bruce Entin, Director, Investor Relations. Please go ahead, sir.

Thank you for joining us to discuss MagnaChip's financial results for the first quarter ended March 31, 2017. The first quarter earnings release that we filed today after the stock market closed 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 2017. 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, Bruce and good afternoon to everyone on our Q1 2017 conference call. The first quarter marked another step forward for MagnaChip on the path to sustained profitability. We achieved our financial objectives in Q1 and made significant progress against our operational goals. Here are a few highlights. Revenue of $161.7 million was well above the midpoint of our prior guidance and gross margin of 25.7% was just 30 basis points shy of the top end of the range. Both figures easily outpace year ago levels. Adjusted EBITDA increased 63% from the first quarter a year ago. We ended Q1 with over $132 million in cash on the balance sheet, up more than $49 million from the prior quarter. We implemented and made significant progress in our headcount reduction plan that's expected to have a positive impact on labor expenses in SG&A beginning in Q2 and improve gross margin in the second half of this year. Fab utilization inched up into the low 90% range in Q1 as overall foundry revenue grew approximately 30% year-over-year and 8-inch wafer foundry revenue grew more than 50% as compared to the first quarter a year ago. We taped out a 40-nanometer AMOLED display driver IC as planned and expect to sample in this month. We began sampling our 55-nanometer flexible AMOLED display driver IC in Q1 that enables curved edge to edge screens and expect to go into volume production starting in the second half of the year. We secured design wins from Smartphone makes in China and increased wafer starts from our external foundry to meet an anticipated increase in AMOLED demand in the second half of the year. That’s the high level view. Here are the actuals. Total revenue for the first quarter was $161.7 million, up 9.2% as compared…

Thank you, YJ, and welcome to everyone on the call. As YJ said, our primary focus is to improve gross margin, overall profitability and to engage in initiatives to fuel revenue growth. Gross margin of 25.7% and adjusted EBITDA margin of 8.1% in Q1, both were at their highest levels in four years since Q1 2013. Adjusted EBITDA of $13.1 million was just $1 million shy of the Q4 figure of $14.1 million and was up by $5.1 million compared to $8 million in Q1 2016. And as YJ said earlier, we anticipate that gross margin and adjusted EBITDA both will show improvements in 2017. Our goal to improve gross margin and overall profitability is rooted in a financial discipline that drives all decision making about the business and how we manage our P&L and balance sheet. A few events in Q1 illustrate our commitment to improve margins and overall profitability. In Q1, we launched a previously announced headcount reduction program that is expected to reduce the workforce by over two times the size of a similar action in 2016 that affected 159 employees. During the first quarter, the company reduced the workforce by approximately 140 positions. Once completed, the workforce reduction will have an expected payback period of less than 1.5 years with an estimated annual cost savings between $23 million and $27 million. The company believes it remains on track to complete the plan of workforce reduction within the cash cost range of $29 million to $33 million. During the first quarter the company recorded early termination of charges of $11.1 million and made cash payments totaling approximately $10 million in connection with the headcount reduction. The cash payments were comprised of approximately $4 million related to the early termination charge and the remainder relates to statutory severance.…

Thank you, Jonathan. We weathered a significant AMOLED slowdown in Q1 due to the previously disclosed seasonal factors and a timing mismatch but still show significant improvement in several key financial metrics. Now, we have set our sights on increasing gross margin and overall profitability in 2017 and we are confident we will get there based upon cost cutting actions and the introduction of new products with attractive margins. Based on our current view of the business, we believe our revenue in Q1 of $161.7 million is likely at the bottom of the full year and we continue to believe we can achieve modest revenue growth in 2017 over 2016. Challenges remain but our results are among the strongest in years and we continue to see our financial results moving in the right direction. We have a well balanced product line up, a robust product roadmap and a specialized analog foundry business, all of which is tightly aligned with the needs of our global customers and with prevailing industry trends. With that, let's turn now to our forward-looking guidance. For the second quarter of 2017, MagnaChip anticipates revenue to be in the range of $162 million to $168 million or up sequentially nearly 4% at the high end of the range as compared with Q1 2017, and compared to $167.1 million in the second quarter of 2016. Gross profit is anticipated to be in the range of 25% to 27% as compared to 25.7% in the first quarter of 2017 and as compared to 22% in the second quarter of 2016. Now I will turn the call back to Bruce. Bruce?

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

[Operator Instructions] Our first question is from the line of Rajvindra Gill of Needham & Company. Your line is open.

This is [Robin Martins] [ph] on behalf of Raji. Just one quick housekeeping item. Did you mention that the headcount reduction program will be completed in the second quarter, in the next quarter?

That is correct. We anticipate the headcount reduction to be completed by end of the second quarter and we are on track to save between $23 million to $27 million per year.

Okay. Great. And then also you are guiding towards 25% to 27% in gross margins for the next quarter. How do we think about margins going forward in terms of the mix between the foundry business and then also the display and power solutions businesses?

So as we mentioned, we are focused on the overall profitability of the company and so you may have some puts and takes and ups and downs within the segment but the company's overall focus is to make sure that we are executing on strategy to improve our business as well as our profitability for the company.

Great. And then just one more from me before I step back in the queue. In terms of AMOLED, you spoke towards the product mismatch being over in the second half of this year and a ramp in the third quarter and more so in the fourth quarter. So you have a breakdown on what percentage of -- what you are foreseeing in that business line due to current design wins that are already in place.

Yes. So you are asking a very good question. So I think that we already disclosed two new products. One was the 55 nanometer flexible AMOLED display driver IC that allows curved edge to edge design. That we sampled in Q1. And we just taped out the 40 nanometer this quarter. We are going to sample this month on the 40 nanometer. That’s going to prevail with a very nice compelling feature. So I have spoken only two, there will be others. So all these, we expect these two definitely will have impact in the second half ramp and there will be other one or two that will go into production. So we see that there will be a sequential growth in the Q3 nicely and then the set up nicely to Q4 and then set very nicely getting into 2018.

Okay. And the 40 nanometer, is that also flexible display or have you not disclosed that yet?

Since we haven't sampled, we have not disclosed that. And so we probably can do it more of this description in the next call.

Thank you. Our next question is from Suji De Silva of ROTH Capital. Your line is open.

Congratulations on the progress you are making here. In terms of the guidance for Q2 '17, can you give us a sense of how that looks by segment, qualitatively if you can give us specifics there.

Thanks for the question, Suji. As you know we only provide our guidance for revenue and gross margins for the overall company one quarter out at a time. As I discussed earlier, there could be some ups and downs within the segments but for the overall year, we said that we are going to see improvements. And when you look at history, we have been executing on our strategy as well as the profitability of the company. Things have been trending nicely and we certainly think that the company is moving in a good direction.

Okay. Fair enough there. And then as the AMOLED business moves to an external foundry, can you talk about what that will do to your internal utilization trend near term and then does the foundry business backfill that or can you tell us how that will play out near term?

Yes. So Suji, I think as a key point here is that the company now has a dual strategy to grow. So we have external foundry where we can continue to grow our AMOLED revenue and all the new products right now is based on external 12-inch whether it's 55 flexible or the 40 nanometer. So we are going to continue to grow that revenue. And then internally as the legacy 110 nanometer moves up slowly or towards the second half, then that gives more room for us to fill the fab with foundry or more power products so forth. So it gives a lot of multiple choices, whatever that makes sense to increase our overall corporate gross margin and profitability.

Okay. Great. And then last question on the AMOLED business. Can you talk about the competitive landscape and your position as a merchant supplier here? Do you think your share will be where it is now? Do you think it can expand and the features that differentiate you guys from the competition that’s out there. Thanks.

Yes. So first of all, we really haven't seen any non-captive competition in our marketplace so we can't really comment on others but let me put it this way. We are working with the top two panel makers in the world and they happen to be in Korea. And as you know, based on the analyst and industry expectation that these two top OLED panel makers to provide the overwhelming majority of OLED panels for the next two years. So we like our position in the market. We have been in this business for ten years and also the AMOLED and ASIC. Which means that you have to really work with the actual panel makers because in many cases you need to have the IP integrate into your ASIC. We are the second largest AMOLED supplier in the world. We are probably the biggest merchant supplier other than the captive IC makers. So we have many built-in advantages and as we said, we have already been sampling the 55 AMOLED flexible drivers that allows curved screen edge to edge. We just taped out 40 nanometer. We are going to sample that part this month. That’s going to have a compelling feature. So I think we like our position in the market.

Thank you. And I am not showing any further questions. I would like to turn the call back over to management for any further remarks.

Thank you, Christy. So this concludes our first quarter earnings conference call. Please look for details of our future events on our MagnaChip investor relations Web site. Thank you for joining us today.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a great day.