Magnachip Semiconductor : Q1 2025 Prepared Remarks (1da1a9)

Published: 2025-05-12 17:25:16 ET MX

Published on 05/12/2025 at 17:25

Steven Pelayo

Hello everyone. Thank you for joining us to discuss Magnachip's financial results for the first quarter ended March 31, 2025. The first quarter earnings release that was issued today after the market close 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 second 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 first quarter earnings release in the investor relations section of our website. With that, I now will turn the call over to YJ Kim. YJ?

YJ Kim

Hello everyone and thank you for joining us today and welcome to Magnachip's Q1 earnings call.

As a reminder, on April 8th we announced that after a thorough review, our Board of Directors unanimously approved a plan to shutdown the Company's Display business by the end of Q2, though we will continue to evaluate opportunities to monetize Display assets.

The Company had previously announced its intention to explore all strategic options for the Display business and to classify the Display business as discontinued operations when it reports Q1 results in order to focus as a pure-play Power semiconductor company. Shinyoung will provide details in her section.

As a result, the Power Analog Solutions and Power IC businesses, which accounted for $186 million in revenue in 2024, represent Magnachip's going-forward continuing operations. Our strategic pivot to focus exclusively on Power Analog Solutions and Power IC businesses is designed to drive a structural improvement in operational efficiency and position the Company for a return to sustainable profitability.

Navigating an unpredictable macroeconomic landscape will likely pose challenges for our industry. We have a very small amount, less than $2.5 million, in direct shipment to the US but we are monitoring the tariff situation closely. However, our aim is still to attain a quarterly Adjusted EBITDA* break-even from continuing operations by the end of this year. We also believe that reaching this goal will pave the way for achieving positive adjusted operating income* in 2026 and positive adjusted free cash flow* in 2027. Each of these targets will act as milestones towards achieving a goal in three years to reach a $300 million annual revenue run-rate with a 30% gross profit margin target. We call this our 3-3-3 strategy.

Turning to Q1 results, consolidated Q1 revenue from continuing operations, which includes Power Analog Solutions and Power IC and excludes our former Display business, was $44.7 million, up 12.1% year-over-year, and down 8.5% sequentially on an apples-to-apples basis. Consolidated Q1 revenue from continuing operations was in line with the mid-point of our guidance range of $42 to $47 million.

Consolidated Q1 gross profit margin from continuing operations of 20.9% was up 3.3 percentage points year-over-year but down 2.3 percentage points sequentially. Consolidated Q1 gross profit margin from continuing operations exceeded the high-end of our guidance range of 18.5% to 20.5%. Shinyoung will provide more details in her section.

Q1 was the fourth consecutive quarter of year-over-year growth from continuing operations driven by Power Analog Solutions growth in Communications and Automotive markets, as well as strength in Power IC.

We released 27 new generation Power Analog Solutions products in Q1 that are fully qualified and ready for commercial sampling. These innovative product families open new high-value market opportunities for Magnachip,

such as automotive, industrial, and A.I. applications. We currently expect these three market opportunities to represent more than 60% of Magnachip's future product mix in 2028, up from 37% in 2024. We already have ongoing engagements to penetrate Automotive markets which we expect to reach over 10% of our revenue by 2028, from less than 5% in 2024.

In Q1, we saw Power Analog Solutions design wins across multiple end markets and regions, including Korea, China, USA, and Taiwan. Many of these design wins were from our new generation products.

As part of our pivot to a pure play on power, we will be sharing additional metrics each quarter such as the number of design wins. We define a design win as receiving a purchase order for a new application.

We achieved 50 design wins in Q1, up 13.6% from the 44 wins achieved in the year ago quarter.

The Industrial business had 25 design wins, up from 22 in Q1 2024 and representing 50% of the total. Other notable design win activity included the Computing business which had eleven design wins in the March quarter, nearly double the six achieved in Q1 2024, and the Automotive business had five design wins, up from two in the year ago period.

From an application perspective:

our new generation Gen 6 Super Junction products had design wins in the China lighting market, a PC power and computing application in Taiwan, and a TV mainboard application in Korea;

our new generation low voltage Gen 8 MOSFETs had a design win for a new flagship foldable smartphone in Korea; and,

our prior generation medium voltage and Super Junction products had design wins in the Industrial market for e-scooters and an Automotive power charger application from Taiwanese suppliers, and an Automotive electric oil pump for vehicles targeted for the European market.

In Power IC, we secured design wins in Q1 with leading notebook manufacturers in China and Korea, as well as additional wins for LCD TV and monitors in Korea.

We currently plan to launch a total of more than 50 new Power products including 40 new-generation Power Analog Solutions products in 2025 and more than 55 additional new generation products in 2026. We expect these new generation Power products to drive higher revenue and, given the smaller die sizes, yield 20-30% more die per wafer in our Gumi fab. When fully ramped, these new products are expected to drive higher gross margins compared to the previous generations.

Now I'll provide more details by business line:

Power Analog Solutions business revenue of $39.9 million, was up 9.1% year-over-year, and down 8.3% quarter-over-quarter. Power Analog Solutions represented nearly 90% of Q1 consolidated revenue from continuing operations. The sequential decline was mostly due to seasonality in each of our major segments, except in Communications where we enjoyed quarter-on-quarter growth. The year-over-year increase was primarily driven by the Communications market and more specifically deeper penetration in smartphone end customer in Korea. While a smaller portion overall, the automotive business showed strong growth and had new design wins in the European and American end customer automotive markets.

Disclaimer

MagnaChip Semiconductor Corporation published this content on May 12, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 12, 2025 at 21:24 UTC.