Magnachip Semiconductor Corporation (NYSE: MX) reported robust financial results for the third quarter of 2024, with total revenue reaching $66.5 million, an 8.5% increase from the previous year and a 25% sequential rise.
The company is in the process of transitioning to a pure-play standard products business model and expects to maintain double-digit growth through the year. They also announced the hiring of a new Chief Technology Officer to boost product development.
Key Takeaways
- Total revenue of $66.5 million, exceeding the high end of guidance.
- Gross profit margin stood at 23.3%, slightly below the midpoint of the guidance range.
- Standard Product business revenue was $64.0 million, with a gross margin of 24.4%.
- Power Analog Solutions (PAS) revenue increased by 16.1% year-over-year to $47.6 million.
- Mixed Signal Solutions (MSS) segment revenue soared by 54.5% to $16.4 million.
- The company reported a net loss of $9.6 million and plans a $2.5 million share buyback.
- Flat revenue projected for Q4 2024, with a full-year outlook of double-digit growth.
- Transition from LCD to OLED panels in PCs emphasized for power reduction.
- Foundry Services transition to conclude by the end of 2024, with some capacity remaining idle.
- Stable OLED market conditions with no significant macroeconomic impacts.
Company Outlook
- Anticipates continued double-digit growth throughout 2024.
- Q4 2024 revenue expected to be flat sequentially, with MSS projected at $15 million to $17 million and PAS at $42 million to $45 million.
- Full-year revenue forecast between $94 million to $95 million.
- Transitioning Foundry Services to wind down by end of 2024, with a gradual conversion of foundry capacity to power products.
Bearish Highlights
- Gross profit margin slightly below the midpoint of the guidance.
- Net loss reported at $9.6 million for the quarter.
- Foundry revenue expected to decline, with approximately 20% of capacity potentially idle post-2024.
Bullish Highlights
- Strong revenue growth in both PAS and MSS segments.
- New CTO hired to enhance product development capabilities.
- Leadership in OLED and microLED technology maintained.
- Positive outlook on OLED market conditions.
Misses
- Gross profit margin did not meet the midpoint of the guidance range.
- Foundry segment revenue declining, with a complete transition expected by the end of 2024.
Q&A Highlights
- Discussion on the transition of foundry capacity to power products and the potential for idle capacity.
- Emphasis on the ramp-up of two new products for 2025, with improved power consumption.
- Expectation of a carryover effect on gross margins into Q1 2025 due to foundry product manufacturing.
- Stable conditions in the OLED market, with no significant macroeconomic impacts foreseen.
In conclusion, Magnachip Semiconductor Corporation is navigating a period of strategic transition with a focus on enhancing shareholder value and capitalizing on growth opportunities in the standard products market.
Despite a net loss and challenges in the foundry segment, the company's leadership remains confident in their product pipeline and market positioning, particularly in the OLED and microLED segments. Investors are advised to visit the Magnachip Investor Relations website for future updates and events.
InvestingPro Insights
Magnachip Semiconductor Corporation's recent financial results and strategic transition can be further contextualized with insights from InvestingPro. The company's market capitalization stands at $166.12 million, reflecting its current position in the semiconductor industry.
InvestingPro data reveals that Magnachip's revenue for the last twelve months as of Q2 2024 was $214.31 million, with a revenue growth of -14.34% over the same period. This decline aligns with the company's ongoing transition to a pure-play standard products business model, as mentioned in the earnings report. The negative revenue growth is likely a temporary effect of this strategic shift.
An InvestingPro Tip highlights that Magnachip is trading at a low Price / Book multiple of 0.54, which could indicate that the stock is undervalued relative to its assets. This low valuation might be attractive to investors who believe in the company's turnaround potential as it focuses on its standard products business.
Another relevant InvestingPro Tip notes that Magnachip holds more cash than debt on its balance sheet. This strong liquidity position could provide the company with financial flexibility as it navigates its business transition and invests in product development under the new Chief Technology Officer.
It's worth noting that InvestingPro offers 11 additional tips for Magnachip, providing a more comprehensive analysis for investors interested in deeper insights into the company's financial health and market position.
Given the company's current challenges and transition phase, investors might find the InvestingPro Fair Value of $5.19 per share particularly interesting when compared to the previous closing price of $4.48. This suggests potential upside if the company successfully executes its strategic plans and returns to profitability.
Full transcript - MagnaChip Semiconductor Corp (NYSE:MX) Q3 2024:
Operator: Hello, everyone, and thank you for standing by. Welcome to the Third Quarter 2024 Magnachip Semiconductor Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. Now it's my pleasure to turn the call to Steven Pelayo, Head of Investor Relations.
Steven Pelayo: Great. Thank you, Carmen. Hello, everyone. Thank you for joining us to discuss Magnachip's financial results for the third quarter ended September 30, 2024. The third quarter earnings release that was issued today after the market closed can be found on the company's Investor Relations website. The webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are 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 fourth quarter. 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 filings. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. 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 as supplemental measures of Magnachip's operating performance that may be useful to investors. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our third quarter earnings release in the Investor Relations section of our website. With that, I'll now turn the call over to YJ Kim. YJ?
YJ Kim: Hello, everyone, and thank you for joining us today, and welcome to Magnachip's Q3 earnings call. Q3 revenue was $66.5 million, up 8.5% year-over-year and up 25% sequentially. Revenue was at the high end of our guidance range of $61.5 million to $66.5 million. Consolidated Q3 gross profit margin of 23.3% was down 0.3 percentage points year-over-year, but up 1.5 percentage points sequentially. The overall gross margin results was in line with the midpoint of our guidance range of 22.5% to 24.5%. Shinyoung will provide more details in her section. As we wind down and exit the Transitional Foundry Service business, Magnachip will be a pure-play standard products company based on industry-leading mixed signal expertise. Our standard products are comprised of our offerings in the MSS and PAS businesses, which include power ICs, advanced OLED DDICs and discrete power products for industrial, automotive, consumer communications and computing applications. Revenue in Q3 for our Standard Product business was $64.0 million, up 24.0% year-over-year and up 25.9% sequentially. Standard Product business gross margin was 24.4%, up 1.3 percentage points sequentially. We are on track with our guidance given at the beginning of the year for double-digit growth in MSS and PAS for 2024. We will provide 2025 guidance on our Q4 and year-end call as we've done in the past. Now let me provide more detailed comments for each of our Standard Products business lines. In terms of revenue contribution, PAS represented 74.3% of Standard Product revenue in Q3. Reported PAS revenue was $47.6 million, up 16.1% year-over-year and 21.2% quarter-over-quarter. The sequential increase was broad-based, so I'll share some details by application. The Industrial segment continued to see a strong rebound in solar. The issues of excess distributor and customer inventory in China now is behind us in this business segment. In addition to solar inverters, demand for solar pumps are expanding the range of applications we address. The Industrial segment also saw growth from additional design wins in the China lighting market with our sixth-generation Super-Junction devices. Finally, the shift to high-speed e-motors for scooters and motorcycles is leading to an increase in Bill-of-Material content and carries the potential for stronger growth. While a relatively smaller contributor to PAS, the Automotive segment continues to show strength. We are building upon our past success in Korea with additional design wins and production ramps for automotive customers in Japan and China. The end applications continue to vary widely across many subsystems in a vehicle. More recently, we obtained design wins for additional applications such as power outlets and idle/stop/go functionality. The Communication segment showed a slight sequential improvement driven by continued demand for low-voltage MOSFETs for high-end foldables and leading-edge AI smartphones in Korea. We also are seeing incremental design opportunities for tablets, wearables and China smartphones. In Consumer, we saw growth from TV driven by strong seasonal demand from Korea. Further, we continue to see steady demand for our Super-Junction MOSFET and IGBT products in home appliances such as refrigerators and induction cooktops. Additionally, we expect a recent design-in for air purifiers to transition into a design win in Q4. While a relatively small contributor, the Computing segment saw strong growth driven by seasonal demand from China for PC and laptop power adapters. In Q3, we hired a Chief Technology Officer and Assistant GM in PAS. He is a proven expert in the field of power semiconductors with more than 20 years of experience. Prior to joining Magnachip, he worked at Hyundai (OTC:HYMTF) Mobis, where he led the development of IGBT and SiC products for automotive applications. Prior to Hyundai Mobis, he made a significant contribution to the company by entering the Planar MOSFET market for the first time and achieving the largest market share of Super-Junction MOSFETS in Korea. His rich experience and knowledge of power semiconductors, his insight into automotive markets and his ability to develop power semiconductor products will greatly contribute to our company's technology and product roadmaps and overall competitiveness. In summary, the strong sequential growth in Q3 for PAS was ahead of typical seasonal patterns and was driven by leaner distribution channels and design wins for existing and new products. We are continuing to execute in delivering a new strong product pipeline for Power in 2024. We believe many of these new products will have similar performance to Tier 1 suppliers, which will give us an opportunity to penetrate new markets and help fill idle Gumi fab capacity in 2025 created by the phase-out of the Transitional Foundry Services businesses. Turning to MSS. Q3 revenue was $16.4 million, up 54.5% year-over-year and up 41.8% sequentially. The results represented 25.7% of standard product revenue and was near the high end of our guidance range of $14.5 million to $16.5 million. The quarter-over-quarter revenue growth was due to increased demand from OLED DDICs for China smartphone OEMs as well as for automotive and Power IC for OLED IT. During Q3, we continue to make inroads with OLED panel makers and smartphone OEMs focusing on the China market. At a high level, we have several DDIC at different stages of development, customer evaluation and in production. These designs cover the broad smartphone market spectrum from mass-market to premium segments and extend to other display markets like automotive and wearable tech, including smartwatches. In line with our original expectations, we have now moved into production on two smartphone models. More specifically, following the purchase order received in Q2, we started initial production and shipment in Q3 for a QHD+ DDIC for a premium smartphone model from a leading China OEM. We are the primary DDIC supplier for this model, and we expect increased shipment growth to this customer throughout Q4. During Q3, we also received a purchase order as a second source supplier from another leading China smartphone OEM and commence shipments in October. We believe this initial win gives us an opportunity to deepen our relationship and positions us well for future smartphone models. As mentioned in our Q2 call, we began sampling our next-generation DDIC in October. This OLED driver is targeted for mid- to high-end smartphone models in China and incorporates advanced IP, including sub-pixel rendering, SPR, refined color enhancement and brightness uniformity control. Notably, this chip reduces power consumption by more than 20% compared to the previous generation. We expect a China panel maker to begin evaluation in Q4 and move into production in 2025. We plan to introduce this chip to multiple China OLED panel makers to further diversify our customer base next year. Evaluations are underway for a new DDIC targeted at the smartwatch market. We look forward to leveraging this relationship with a China module maker to expand into new high-growth adjacent markets. With regard to our automotive DDIC business, revenue increased for the third quarter in a row. Business was driven primarily by increased demand from a panel maker that supply to multiple automakers in Europe. We also saw DDIC growth for automotive LCD. Our Power IC business, which is including MSS, saw sequential and year-over-year growth, driven primarily by increased demand for OLED IT, tablets and notebooks. We continue to develop new Power IC products for both LCD TV and OLED IT application for potential new customers. In summary, within MSS, we are executing our strategy and making inroads with top-tier panel makers and major smartphone OEMs. Our decision to act locally was the right strategy for our OLED business in China. At the same time, we are also working to drive revenue from adjacent markets in wearable, automotive, TV and IT. For Q4, we currently see flattish revenue sequentially, which is better than typical seasonality in this market. In conclusion, we believe that with the growing trend of AI-enabled smartphones and PCs, power consumption is on the rise. It is crucial to reduce the overall power usage of these systems. The display is a major power consumer and one of the few areas where power can be significantly reduced by switching from LCD to OLED panels. As smartphones incorporate high-performance AI capabilities and adapt larger foldable and flexible displays, the need for power-efficient OLED DDIC has become increasingly important. Our newest and most advanced OLED DDIC offers a power reduction of over 20% compared to the previous generation using the same process technology. Additionally, smartphone OEMs are looking to offset the rising power demands of AI features by utilizing advanced battery FET technologies like those in our PAS segment, alongside the growing use of the OLED screens. I will now turn the call over to Shinyoung to give you more details of our financial performance in the third quarter and provide Q4 guidance. Shinyoung?
Shinyoung Park: Thank you, YJ, and welcome, everyone, on the call. Let's start with key financial metrics for Q3. Total revenue in Q3 was $66.5 million, which came in at the high end of our guidance range of $61.5 million to $66.5 million. This was up 8.5% year-over-year and up 25% sequentially. Revenue from MSS business was $16.4 million, near the high end of our guidance range of $14.5 million to $16.5 million. This was up 54.5% year-over-year and up 41.8% sequentially. PAS business revenue was $47.6 million, above the midpoint of our guidance range of $45.5 million to $48.5 million. This was up 16.1% year-over-year and up 21.2% sequentially. Revenue from Transitional Foundry Services was flattish sequentially at $2.4 million and down from $9.6 million in Q3 2023 as we continue to wind down this service as we've explained previously. Consolidated gross profit margin in Q3 was 23.3%, slightly below the midpoint of our guidance range of 22.5% to 24.5%, down from 23.6% year-over-year, but up from 21.8% sequentially. MSS gross profit margin in Q3 was 38.7%, above the midpoint of the guidance range of 36.5% to 39.5%, up from 28.8% in Q3 2023 and up from 34.6% in Q2 2024. The year-over-year and sequential improvement was primarily attributable to a favorable product mix. PAS gross profit margin in Q3 was 19.4%, slightly below the midpoint of the guidance range of 18.5% to 20.5%, down from 28.6% in Q3 2023 and slightly lower than the 19.7% in Q2 2024. The year-over-year decline was mainly due to a lower Gumi fab utilization rate from the wind down of Transitional Foundry Services. Turning now to operating expenses. Q3 SG&A was $12.1 million as compared to $11.7 million in Q2 2024 and $12.1 million in Q3 2023, primarily driven by the increase in stock compensation charges that coincide with the timing of the stock grant. Q3 R&D was $14.4 million as compared to $12.7 million in Q2 2024 and $11.6 million in Q3 last year. As a reminder, R&D expense fluctuates quarter-over-quarter due to the timing and number of products in development. Stock compensation charges, including operating expenses were $1.8 million in Q3 compared to $1.1 million in Q2 and $2.1 million in Q3 last year. These charges fluctuate every quarter depending on the timing and size of stock grant. Q3 operating loss was $11 million. This compares to an operating loss of $12.8 million in Q2 and operating loss of $9.2 million in Q3 2023. On a non-GAAP basis, Q3 adjusted operating loss was $9 million compared to adjusted operating loss of $11.6 million in Q2 and adjusted operating loss of $7.1 million in Q3 last year. Net loss in Q3 was $9.6 million as compared with a net loss of $13 million in Q2 and a net loss of $5.2 million in Q3 last year. Q3 adjusted EBITDA was negative $4.9 million. This compares to a negative $7.6 million in Q2 and negative $2.7 million in Q3 last year. Our GAAP diluted loss per share in Q3 was $0.26 as compared with diluted loss per share of $0.34 in Q2 and diluted loss per share of $0.13 in Q3 last year. Our non-GAAP diluted loss per share in Q3 was $0.34. This compares with diluted loss per share of $0.21 in Q2 and diluted loss per share of $0.04 in Q3 last year. Our weighted average diluted shares outstanding for the quarter were 37.5 million shares. Under our $50 million stock buyback program authorized in July 2023, we repurchased in Q3 2024 approximately 0.5 million shares for aggregate purchase price of $2.5 million, leaving about $27.5 million remaining authorization as of September 30, 2024. Moving to the balance sheet. We ended Q3 with cash of $121.1 million and same as last quarter end, we had an additional nonredeemable short-term financial investment of $30 million, which will mature on November 5, 2024. This amount is classified on our balance sheet as short-term financial instruments but will transition back to cash upon maturity. Net accounts receivable at the end of the quarter totaled $28.7 million, which represents a decrease of 8% from Q2 2024. Our days sales outstanding for Q3 was 40 days and compares to 53 days in Q2. Our average days in inventory for Q3 was 65 days and compares to 76 days in Q2. Inventories net at the end of the quarter totaled $36.1 million and $34.8 million in Q2 2024. Lastly, Q3 CapEx was $2.6 million. Our prior CapEx forecast for the full year 2024 was to spend $10 million to $12 million, primarily for our PAS business and Gumi fab. And now we now expect the amount to be closer to the high end of the range. This expectation includes approximately $3.5 million of onetime CapEx for our newly established operating entity in China. Now moving to our fourth quarter and full year 2024 guidance. While actual results may vary, for Q4 2024, Magnachip currently expects consolidated revenue to be in the range of $59 million to $64 million, including approximately $2 million of Transitional Foundry Services. MSS revenue to be in the range of $15 million to $17 million, down 2.7% sequentially, but up 87% year-over-year at the midpoint. This compares with MSS revenue of $16.4 million in Q3 2024 and MSS equivalent revenue of $8.6 million in Q4 2023. PAS revenue to be in the range of $42 million to $45 million, down 8.6% sequentially, but up 33.3% year-over-year at the midpoint. This compares with PAS revenue of $47.6 million in Q3 2024 and PAS equivalent revenue of $32.6 million in Q4 2023. Consolidated gross profit margin to be in the range of 21.5% to 23.5%. MSS gross profit margin to be in the range of 37.5% to 40.5%. This compares with MSS gross profit margin of 38.7% in Q3 2024 and MSS equivalent gross profit margin of 41.3% in Q4 2023. PAS gross profit margin to be in the range of 17% to 19%. This compares with PAS gross profit margin of 19.4% in Q3 2024 and PAS equivalent gross profit margin of 18.1% in Q4 2023. For the full year 2024, we currently expect MSS revenue to grow double digits year-over-year as compared with MSS equivalent revenue of $44.4 million in 2023, consistent with what we communicated throughout the year. PAS revenue to grow double digits year-over-year as compared with PAS equivalent revenue of $151.3 million in 2023, consistent with what we communicated throughout the year. Transitional Foundry Services will be wound down by the end of 2024 as expected. We expect any remaining amounts to be immaterial beyond Q4 2024. Consolidated revenue flattish as compared to our prior expectation of flattish to slightly down. Consolidated gross profit margin between 21% to 22% as compared to our prior expectation of 19% to 22%. This compares with the consolidated gross profit margin of 22.4% in 2023. Thank you. Now I'll turn the call back over to YJ for his final remarks. YJ?
YJ Kim: In conclusion, Magnachip's strategic focus on its core Standard Products business drove a better-than-seasonal Q3 and outlook for Q4. We are on track with our expectations set at the beginning of the year for double-digit growth in both MSS and PAS. As we continue transitioning into a pure-play standard products company, we are focused on leveraging our industry-leading mixed signal expertise applied to Power ICs, advanced OLED DDICs and power discretes. These ongoing efforts position us well for the future. We will provide our outlook for 2025 on the next call, but I am confident that our business strategies are leading us in the right direction. We remain dedicated to enhancing shareholder value in every way possible. Now I will turn the call back to Steven. Steven?
Steven Pelayo: Thank you. This concludes the prepared remarks section of our call today. Operator, you may now open up the call for questions.
Operator: [Operator Instructions] And it comes from the line of Suji Desilva with ROTH Capital. Please proceed.
Suji Desilva: Congrats on the progress here. Start off maybe with the gross margin. Can you talk about what drives the recovery to target here? Is it MSS utilization? Is it utilization for PAS? And kind of what's the time frame, I guess, for new products getting rolled into the foundry capacity that's -- the foundry usage that's being taken off?
Shinyoung Park: So you're talking about probably the PAS gross margin because you talked about the utilization rate --
Suji Desilva: Correct.
Shinyoung Park: -- capacity?
Suji Desilva: Yes.
Shinyoung Park: Yes. So the power margin, I mean, if you look at our -- the Transitional Foundry revenue kind of size, it used to be kind of $10 million per quarter, came down to $5 million. Like this quarter, we had $2.4 million of foundry. We're going to have $2 million next quarter as well. So it's going to be almost kind of it's going to be wound down by the end of this this year, 2024. Going into 2025, we'll have to convert that portion for the power product. So I said, depending on the product mix, we used to use approximately 1/3 of our capacity for the foundry product. We can probably do a little better and like for the efficiency and kind of use some of the equipment for the power products. So maybe 20% can be idle after 2024. So we are doing the conversion like gradually. So I mean, that conversion will not going to happen overnight. So kind of switching that for the power product and fill that with the new product of PAS product, it will going to take -- I mean, take some time. So it will not going to happen like in Q1, but it will take some quarters. So it's kind of happening throughout the 2024.
Suji Desilva: And then switching over to the MSS business. The time -- like the ramp-up in '25, YJ, would that be 1Q would be a seasonal impact? Or are you having program ramps with your two China customers and perhaps more that would kind of offset that? Would it be steady growth from here? Or is it lumpy with programs? Any color on MSS outlook would be helpful.
YJ Kim: Yes. So we said we are going to guide '25 next earnings call but the two - repeat, what we said we have two products they're going to production this first quarter. That's going to an increase throughout this quarter. And we also said that we have new product that 20% less power than previous generation. We just sampled, we expect to go into production '25. We expect to use a chip to multiple panel market to makers. So beyond that we don't have crystal ball in '25 to give outlook at the moment. But we can say we are very positioned well and we'll be in the right direction. Our product pipeline is improving in both PAS as well as MSS. And we -- that's going to also help fill the Gumi fab. And we are currently cautiously optimistic, but not guiding 2025.
Suji Desilva: And then one last quick question. When you talk about your two customers, I think you talked about one of them you're the primary DDIC vendor and the other one, you're a second source, if I heard that right. I'm just curious what kind of share difference that can imply as those models ramp up?
YJ Kim: The primary, and that's really good. It's a major. And then the secondary means you are second. So you have a much less share. So that's typically how it's done.
Suji Desilva: Thanks YJ. Thanks Shinyoung.
Operator: Thank you so much. [Operator Instructions] Our next question is from Nic Doyle with Needham & Company. Please proceed.
Nicolas Doyle: Hi, guys. I'll echo the congrats on specifically the first year-over-year revenue growth in a long time. I guess on gross margins also, we're getting a bit of a surprise, $2 million in the foundry revenue next quarter. So does that kind of push out this gross margin bottom to 2Q '25? I mean I understand you're not guiding into '25, but we are kind of thinking the transition would really accelerate in 4Q and hopefully finish around 1Q, maybe into 2Q, but that kind of shaped a 1Q bottom for gross margin. So maybe anything else you could tell us about that?
Shinyoung Park: So the foundry -- I mean, we've given them the end-of-life, I mean, the notice, and they've given that to their customers as well. Some of our clients' customers, I mean, they are kind of using our product for their automotive applications. So they were kind of giving our customers their end-of-life orders, the last time purchase orders rather slowly or more cautiously. So we thought initially, we are going to have probably almost zero revenue in Q4, but we are going to see some kind of $2 million-ish revenue in Q4. But beyond that, it's not going to be material. So we're going to manage that our utilization rate, I mean, along with our power product demand and also we can -- we're going to manufacture the foundry product in Q4. But in terms of the gross margin impact, I mean, depending on when we are going to load those wafers into our fab, we may have a slightly kind of carryover effect in Q1 2025. But 2025, Q1 is usually a seasonally soft quarter anyway for us. So we'll have to see the other kind of factors that's impacting gross margin, but we will see.
Nicolas Doyle: And just as a follow-up, I guess, what drove the uptick in R&D spending in the third quarter? And kind of do we expect that level going forward? I'm just trying to figure out what drove the larger-than-expected EPS miss or lower EPS. And I think that might be one of the big parts.
Shinyoung Park: Yes. So for the R&D, I would say it's rather a quarterly fluctuation. So did that fluctuate quarter-over-quarter depending on the timing and the number of products in development for both business lines, MSS and PAS. So it looks bigger, but like when I kind of -- when I gave out the guidance for the full year 2024, the OpEx, SG&A, R&D together without stock-based charges, we said initially $100 million, but we lowered that to $95 million-ish like when we had a call last time. And I think we still we can finish 2024 with $94 million to $95 million range. So the Q3 was kind of rather a kind of quarterly distribution depending on the timing of the development. But again, for the annual expectation, we still stand by our previous comment that it's going to be between $94 million to $95 million. And also -- yes. For your question about EPS, that's literally kind of mechanics of how we calculate the quarterly, the income tax provision versus benefit. So we have to apply the annual ETR rate to the quarterly pretax income or loss. So we actually -- that means we took a little bigger income tax benefit in the first half, and then we had to take the income tax expense provision in Q3. But again, that really doesn't change our kind of the expectation for the annual guidance. So the annually, we still think that we are going to see some kind of $2 million-ish of income tax benefit. So that income tax benefit expense whole kind of fluctuation kind of that's impacting our EPS on a quarterly basis.
Nicolas Doyle: Thank you.
Operator: Our next question comes from the line of Martin Yang with Oppenheimer. Please proceed.
Martin Yang: Good morning. Thank you for taking my question. My first question is on your OLED customers. As we get into 4Q, are you seeing any macro factors affecting your customers that are -- that leads you to believe the market could trend differently comparing to a few quarters ago? Are you seeing any fundamental improvement deterioration on OLED markets in China?
YJ Kim: So for the fourth quarter, we don't see any -- for our businesses, our products and customers, we don't see any much difference in Q3 and Q4. And we -- I think we guided based on our quarterly -- quarter visibility, and we are guiding better than seasonality than our previous few years.
Martin Yang: And then also on OLED market, can you maybe comment on how you think about some of the emerging display technologies like microOLED and -- microOLED and microLED for AR/VR devices? Is that a market that looks attractive to you? And do you already have programs targeting those markets? Thank you.
YJ Kim: We've been disclosing that we are a leader in the microLED TV from the leading TV manufacturer. So that's the only announced product, and that's the production product that we're shipping. We haven't mentioned anything about the microLED for virtual reality at the moment.
Martin Yang: My last question is on gross margin for MSS. So is there anything additional you can share with us other than product mix that contributed to the improvement for our gross margin?
Shinyoung Park: So the -- because YJ mentioned that we had more automotive OLED, the product and also the Power IC, both of those kind of the segment out of the MSS business line, they tend to have a higher gross margin. So depending on like how much we have like from the generated revenue from the OLED, automotive and also the Power IC and the mobile OLED, that's what I meant by the product mix. So because of the increase in the automotive OLED and Power IC, that's kind of boosting of our MSS gross margin.
Martin Yang: Got it. Thank you, Shinyoung. That's it for me.
Operator: Thank you so much. And with that, I will turn the call back to Steven Pelayo for his final comments.
Steven Pelayo: Okay. Thank you. This concludes our Q3 earnings conference call. Please look for details of our future events on Magnachip's Investor Relations website. Thank you, and take care.
Operator: Thank you all for participating in today's conference. You may now disconnect.
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