Magnachip Semiconductor Corp. Q3 FY2025 earnings call

• Reposition product portfolio to be more competitive by fast tracking new-generation product development, with 30 new-generation products released in the first 9 months of 2025 and at least 20 more expected in Q4 2025. - Rightsize OpEx structure for a pure-play power business by initiating OpEx cost reduction programs, including workforce streamlining, expected to generate $2.5 million of annualized OpEx savings, with headcount reduced by over 20% by end of 2025. - Conserve cash by reducing CapEx investments, with Gumi fab upgrade CapEx reduced to $30-35 million through 2027 from previously forecasted $65-70 million. - Increase transparency with shareholders and explore strategic alternatives. - Signed a strategic licensing agreement with Hyundai Mobis regarding IGBT technology, expecting initial revenue in 2027.

For the third quarter, total consolidated revenue from continuing operations was $45.9 million, which was about the midpoint of the guidance range. Revenue from Power Analog Solutions was $41.5 million, down 12.7% year-over-year and 1.7% sequentially, primarily due to competitive pricing pressure on older generation products, especially in China. Revenue from Power IC was $4.4 million, down 18.9% year-over-year and 18% sequentially, with the sequential decline mainly due to customer pull-ins in Q2. The Communications segment saw significant strength with revenue increasing 34% QOQ and 95% YOY.

• Q4 2025 consolidated revenue from continuing operations expected to be in the range of $38.5 million to $42.5 million, down 11.9% sequentially and 17.1% YOY at midpoint, due to a $2.5 million onetime incentive program. Gross profit margin expected to be 8%-10% due to the onetime incentive and lower fab utilization. - Full-year 2025 consolidated revenue expected to be down 3.8% YOY at midpoint of Q4 guidance, gross profit margin expected to be between 17%-18%, with the Q4 onetime incentive expected to have a ~100 basis point negative impact on full-year gross profit margin. - Expect Q1 2026 top line revenue to sequentially grow by double digits.

• Pricing pressure on legacy products, especially intense in China, leading to some business being walked away from. - Lower fab utilization due to pricing pressure and higher inventory levels in China. - Challenges in ramping new-generation products to meaningfully contribute to financial results in a timely manner. - Uncertainties related to executing on strategic alternatives and the time required to turn around the company's financials.

Q: About the incentives and 1Q guidance, should we think of the $2.5 million incentive as a one-quarter impact and Q1 growth as a positive sign?

A: Camillo noted the $2.5 million impact is for Q4 to move channel inventory, and expects Q1 2026 revenue to grow sequentially double digits. Shin Young added it's a one-time expense to make the channel price competitive.

Q: Could you elaborate on the Hyundai Mobis agreement and future product end markets?

A: Camillo said they've been working with Hyundai Mobis on IGBT technology for years, the licensing agreement allows use of the technology for industrial markets, with revenue expected to start in 2027, and they're excited about the relationship but cautious on further details due to confidentiality.

Q: About the sustainability of the communication segment's strength?

A: Camillo mentioned a strong relationship with key customers in Korea, regained competitiveness with new products, and emphasized the 50 new-generation products launched in 2025 and the upcoming product roadmap as key to future success