Magnachip Reports Results for Third Quarter 2024

Financial Highlights

• Q3 consolidated revenue was $66.5 million, at the high-end of guidance range of $61.5-66.5 million.
  • Q3 standard product business revenue was up 25.9% sequentially.
• Q3 consolidated gross profit margin of 23.3% was in-line with the mid-point of guidance range of 22.5-24.5%.
  • Q3 standard product business gross profit margin was 24.4%, up 1.3 percentage points sequentially.
• Ended Q3 with cash of $121.1 million; and an additional non-redeemable short-term financial investment of $30 million.
• Repurchased approximately 0.5 million shares for aggregate purchase price of $2.5 million during the quarter.

Operational Highlights

• Broad-based sequential revenue growth in our PAS business was driven by leaner distribution channels and better-than-typical seasonality. Relative strength was more evident in industrial, computing, and consumer applications. Automotive continues to show strength with additional design wins in Japan and China.
• Started initial DDIC production and shipments for a premium smartphone model from a leading China OEM.
• Received a purchase order from a second leading China smartphone OEM and commenced shipments in October 2024.
• Began sampling our new OLED driver designed with next-generation IP, including sub-pixel rendering (SPR), refined color enhancement, color filter, brightness uniformity control and more than 20% reduction in power consumption than previous generation.
• Power IC revenue increased sequentially, driven primarily by demand for LCD TVs and OLED IT in tablets and notebooks.

Magnachip Semiconductor Corporation (NYSE: MX) (“Magnachip” or the “Company”) today announced financial results for the third quarter 2024.

YJ Kim, Magnachip’s CEO, commented, “Our Q3 revenue was at the high-end of guidance driven by broad-based growth in our Standard Product businesses, which is comprised of our MSS and PAS businesses. Standard Product revenue increased 25.9% sequentially and 24% year-over-year. Our discrete Power business benefited from leaner inventory in distribution channels as well as new product designs wins resulting in better-than-seasonal growth. In MSS, the strong sequential growth was due to increased demand for products targeted for China smartphone OEMs, automotive displays, and OLED IT.”

YJ Kim added, “Looking ahead, we expect our Standard Product business revenue in Q4 will modestly decline sequentially, which is better than typical seasonality experienced in past years. We reiterate our full-year guidance for double-digit growth in both MSS and PAS businesses in 2024.”

Q3 2024 Financial Highlights

Q4 and Full-year 2024 Financial Guidance

Beginning in Q1 of 2024, the Company began reporting results under its newly organized businesses: MSS (Mixed-Signal Solutions) and PAS (Power Analog Solutions). While actual results may vary, Magnachip currently expects the following:

For Q4 2024:

• Consolidated revenue to be in the range of $59.0 to $64.0 million, including approximately $2.0 million of Transitional Foundry Services.
  • MSS revenue to be in the range of $15 to $17 million, down 2.7% sequentially but up 87% year-over-year at the mid-point. 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 to $45 million, down 8.6% sequentially but up 33.3% year-over-year at the mid-point. 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 revenue 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.

Q3 2024 Earnings Conference Call

Magnachip will host a corresponding conference call at 2:00 p.m. PT / 5:00 p.m. ET on Wednesday, October 30, 2024, to discuss its financial results. In advance of the conference call, all participants must use the following link to complete the online registration process. Upon registering, each participant will receive access details for this event including the dial-in numbers, a PIN number, and an e-mail with detailed instructions to join the conference call. A live and archived webcast of the conference call and a copy of earnings release will be accessible from the ‘Investors’ section of the Company’s website at www.magnachip.com.

Online registration: https://register.vevent.com/register/BId4ac9a385dd74e4f813c5964a3ac6546

Safe Harbor for Forward-Looking Statements

Information in this release regarding Magnachip’s forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include expectations about estimated historical or future operating results and financial performance, outlook and business plans, including fourth quarter and full year 2024 revenue and gross profit margin expectations, future growth and revenue opportunities from new and existing products and customers, the timing and extent of future revenue contributions by our products and businesses, and the impact of market conditions associated with inflation and higher interest rates, geopolitical conflicts between Russia-Ukraine and between Israel-Hamas, sustained military action and conflict in the Red Sea, and trade tensions between the U.S. and China, on Magnachip’s fourth quarter and full year 2024 and future operating results. All forward-looking statements included in this release are based upon information available to Magnachip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include, among others: the impact of changes in macroeconomic conditions, including those caused by or related to inflation, potential recessions or other deteriorations, economic instability or civil unrest; the geopolitical conflicts between Russia-Ukraine and between Israel-Hamas, sustained military action and conflict in the Red Sea, and trade tensions between the U.S. and China; manufacturing capacity constraints or supply chain disruptions that may impact our ability to deliver our products or affect the price of components, which may lead to an increase in our costs and impact demand for our products from customers who are similarly affected by such capacity constraints or disruptions; the impact of competitive products and pricing; timely acceptance of our designs by customers; timely introduction of new products and technologies; our ability to ramp new products into volume production; industry-wide shifts in supply and demand for semiconductor products; overcapacity within the industry or at Magnachip; effective and cost-efficient utilization of manufacturing capacity; financial stability in foreign markets and the impact of foreign exchange rates; unanticipated costs and expenses or the inability to identify expenses that can be eliminated; compliance with U.S. and international trade and export laws and regulations by us, our customers and our distributors; change to or ratification of local or international laws and regulations, including those related to environment, health and safety; public health issues, other business interruptions that could disrupt supply or delivery of, or demand for, Magnachip’s products; and other risks detailed from time to time in Magnachip’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including our Form 10-K filed on March 8, 2024, and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website. Magnachip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

About Magnachip Semiconductor

Magnachip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communication, Internet of Things (“IoT”), consumer, computing, industrial and automotive applications. The Company provides a broad range of standard products to customers worldwide. Magnachip, with more than 40 years of operating history, owns a portfolio of approximately 1,050 registered patents and pending applications, and has extensive engineering, design, and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through Magnachip's website is not a part of, and is not incorporated into, this release.

We present Adjusted Operating Loss as a supplemental measure of our performance. We define Adjusted Operating Loss for the periods indicated as operating loss adjusted to exclude (i) Equity-based compensation expense and (ii) Early termination and other charges.

For the nine months ended September 30, 2023, we recorded in our consolidated statement of operations $8,449 thousand of termination related charges in connection with the voluntary resignation program that we offered to certain employees during the first quarter of 2023. During the same period, we also recorded $802 thousand of one-time employee incentives.

We present Adjusted EBITDA and Adjusted Net Loss as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net and (iv) Early termination and other charges. EBITDA for the periods indicated is defined as net loss before interest income, interest expense, income tax expense (benefit) and depreciation and amortization.

We prepare Adjusted Net Loss by adjusting net loss to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Loss is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Loss for the periods as net loss, adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign currency loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Early termination and other charges and (v) Income tax effect on non-GAAP adjustments.

For the nine months ended September 30, 2023, we recorded in our consolidated statement of operations $8,449 thousand of termination related charges in connection with the voluntary resignation program that we offered to certain employees during the first quarter of 2023. During the same period, we also recorded $802 thousand of one-time employee incentives.

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