Magnachip Semiconductor Corporation Q2 FY2025 earnings call

• Continued the strategic pivot to become a pure-play power semiconductor company in Q2 despite ongoing macro challenges. - In Q2 2025, consolidated revenue from continuing operation was $47.6 million, up 8.1% year-over-year and above the midpoint of the guidance range. - Gross profit margin from continuing operation was 20.4% within the guidance range of 19.5% to 21.5%, but down from the previous year. - Launched 28 new generation products in the first half of 2025 and aimed to have over 50 new generation products by the end of 2025. - Achieved 71 total design wins in Q2, up 61% from Q2 of the previous year, with 23 design wins for new products in automotive, industrial, and AI applications. - The shutdown of the Display business was nearly complete, and the company was exploring monetization opportunities for Display IP assets. - Accelerated R&D for new generation IGBT and Super Junction products, expecting initial new generation product revenue by the end of 2025 and meaningful impact in the second half of 2026.

Consolidated revenue from continuing operation in Q2 2025 was $47.6 million, up 8.1% year-over-year. Power Analog Solutions (PAS) revenue was $42.3 million, up 7.7% year-over-year and 6% quarter-over-quarter, accounting for nearly 90% of total revenue. Power IC revenue was $5.4 million, up 11.1% year-over-year and 10.2% sequentially, making up 11% of consolidated Q2 revenue from continuing operations. Within PAS, Industrial, representing approximately 35% of PAS revenue, declined 1.9% year-over-year; Consumer, at ~34% of PAS revenue, decreased 0.4% year-over-year; Communications, around 20% of PAS revenue, grew nearly 47% year-over-year; Computing, ~8% of PAS revenue, rose 45% year-over-year; Automotive, ~2% of PAS revenue, dropped 25% year-over-year.

• For Q3 2025, Magnachip currently expects consolidated revenue from continuing operations, including Power Analog Solutions and Power IC businesses, to be in the range of $44 million to $48 million, down 3.5% sequentially and 13.2% year-over-year at the midpoint. - Q3 consolidated gross profit margin from continuing operations is expected to be in the range of 18.5% to 20.5%. - For full year 2025, consolidated revenue from continuing operations is expected to be flattish compared to the previous mid- to high-single-digit growth forecast due to tariff uncertainty and pricing pressure on older generation products in China. - Full year 2025 consolidated gross profit margin from continuing operations is expected to be between 19% to 20%.

• Tariff uncertainty in China poses a risk to the near-term outlook. - Competitive pricing pressure on older generation products in China impacts the company's financial performance. - Macro factors beyond the company's control affect the timing of achieving its financial goals.

Q: The pull-ins you saw in the first half, some customers had tariff impact, I'm wondering if that's flowing through in the second half all the way to the next few quarters and whether you've largely seen the impact of that near term, you talked about one large customer. So curious how much that effect is lingering versus pricing pressure and other elements of the revenue?

A: Yes. We mentioned the magnitude of estimated pull-in in the prior time, we saw maybe about $2 million. And we saw some little more in the later part of the Q2, especially in the TV-related area. So we think that's already taken care of in terms of pull-in.

Q: Just wondering if you can talk about where you're seeing strength in the communications, like which application is driving strength in the communications end market?

A: Yes, Nick. So if you look at our remarks today, we had more design wins in the communication. So from 1 to 5 models we had and we are seeing the trends from the new models that launched in 2025. So that's from mid-range to flagship AI smartphones and then the new launched AI foldable phones, and that's where we saw growth. And also in the computing area, we had more design wins, and that also contributed to the more design win. And then we are also seeing a good pipeline for the AI server as well.

Q: And then if I could just ask about the OpEx and the EBITDA breakeven. I mean, you're saying you're targeting hopeful breakeven by the end of the year. Does that mean you can really take down OpEx $1 million to $2 million by the end of the year, kind of to be determined based on the voluntary employee dynamic?

A: Thanks, Nick. So I mean that's why we still target to get close to adjusted EBITDA breakeven in Q4 2025. So we are executing this voluntary resignation program. We are going to do that launch and execute it by the end of Q3. So you're going to see the impact in Q4 for sure. But our currently estimated range is like $2 million to $3 million OpEx reduction, like that's on an annual basis. So if you kind of divide it by 4, just roughly that kind of $0.5 million to $0.75 million kind of the reduction in OpEx and mainly should coming from the SG&A