Q4 2024 Magnachip Semiconductor Corp Earnings Call
Good day and thank you for standing by welcome to the Magna chips Semiconductor Corporation fourth quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one one of your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.
Speaker Change: Be advised that today's conference is being recorded I would now.
Speaker Change: I'd like to hand, the conference over to your Speaker today, Steven Pelayo Investor Relations. Please go ahead great.
Steven Pelayo: Thank you. Hello, everyone. Thank you for joining us to discuss magnitude's financial results for the fourth quarter and full year ended December 31st, 2024. The fourth quarter earnings release that was issued today before the market opened can be found on the company's investor relations website.
Speaker Change: Webcast replays today's call will be archived on our website shortly afterwards. Joining me today are Y.J. Kim, negative chief executive officer, and Shinyun Park, our chief financial officer.
Speaker Change: YG will discuss the company's recent operating performance and business overview and Shin Young will review financial results for the quarter and provide guidance for the first quarter in the year of 2025. It will be a Q&A session following the prepared remarks.
Speaker Change: During the course of this conference call, we may make forward-looking statements about negative business outlook and expectations.
Speaker Change: Our subject to risk and uncertainty that's described in the State Harbor Statement found in our SEC violence.
Speaker Change: Such statements are based upon information available to the company as of the date you're up.
Speaker Change: and our subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements.
Speaker Change: During the call, we will also 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 managed operating performance that may be useful to investors.
Speaker Change: Reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our fourth quarter earnings release in the investor relations section of our website. So with that, I'll now turn the call over to Y.J. Kim, Y.J.
Y.J. Kim: Hello everyone, and thank you for joining us today and welcome to Magnetships' Q4 Warnings Call.
Speaker Change: in addition to sharing Q4A's results, magnitude management and the Board of Directors today announced a new strategy to become a pure play power company.
Speaker Change: Proposing investments on the power of the street and power of the businesses to drive profitability and maximize shareholder value.
Speaker Change: We will host a separate suicide analysis briefing later this morning to provide additional color on our strategy.
Steven Pelayo: As part of this strategy, we also announced today that the management is exploring all possible strategic options for the display of business.
Steven Pelayo: This was an extremely difficult decision for me, the management team and the board of directors when considering both valued customers and employees.
Steven Pelayo: While we have a rich and competitive portfolio of OLED display technology
After a careful review of our business model, we've determined.
Steven Pelayo: that the greatest potential for profitable growth lies with our power solutions business, including power
Steven Pelayo: Achieving profitability is our highest priority and in the best interest of our shareholders and other stakeholders.
Steven Pelayo: As a sign of my own personal commitment to the long-term success of magnitude-to-new strategy, I am voluntarily cutting my current base salary by 20%.
Speaker Change: and Shin Park, LSCFO, has also agreed to a 10% voluntary decrease of our current base salary. Until a such time, a magnitude achieved positive gap operating income for two consecutive quarters.
Speaker Change: I like the display business which primarily is served by a few panel customers.
Speaker Change: Magnetrics, Power, Business, Cadars to a broad array of industries and customers that we believe have most stable, long-term growth prospects.
Speaker Change: We therefore have launched a strategic process for the display business.
Speaker Change: While our goal is to complete this process by end of Q2 2025, the display business will be classified as a discontinued operation, beginning with our Q1 2025 financials.
Speaker Change: Shin Yang will explain this in great dirty detail later in the call.
Speaker Change: As mentioned previously, our utmost short-term goal is a return to profitability. By focusing on the power business, our goal is that magnetist business from continuing operation will achieve.
Speaker Change: Quarterly are just a beta break even by the end of Q4 2025, followed by positive or just operating income in 2006 and positive or just free cash flow in 2027.
Speaker Change: Each of these targets will act as milestone towards achieving a goal in three years to reach a 300 million annual revenue run rate with a 30% gross margin target.
We calling this 3-year objective our 3-3-3 strength.
Thank you. Thank you.
Speaker Change: Nature's power business is now entering a new phase that we call Phase 3.
Speaker Change: During Stage 1 was our initial market entry and foundation period between 2007 and 2012 and probably focused on mobile phones.
Speaker Change: Phase 2 was our market expansion into consumer home appliances, computing smartphone, e-vide, solar and lighting. Most of these efforts were aimed at a small portion of the performance once again in serving up to 10 kilowatt.
Speaker Change: Many of our greatest success were in 71 kilowatt applications such as TV, smartphones, and e-bikes.
Speaker Change: For Phase 3, we are expanding our addressable markets into larger and higher-performance markets.
Speaker Change: Our Phase 3 strategy is under way now with today's launch of series of next-generation power products, including Gen 5 and Gen 6 LGBT.
Speaker Change: Gen 6 Superjunction Mass Facts, and Gen 8, Medium and Low Vortage Mass Facts
Speaker Change: Respect to release over 40 new generation Phase Repel products in 2025, with 27 new generation products launching in Q4 2025.
Speaker Change: with fully qualified commercial samples available watching Q1. Q1 2025, sorry, launching right now in Q1 2025.
Speaker Change: and without current product pipeline we expect to increase the number of phase 3 new generation power products to approximately 55 that we expect to introduce in to them 26 versus 2025.
Speaker Change: Please expect new generation power products to drive higher revenue per wafer at al-Gumifat. For example, our Gen 6 Superjunction Power Devices not only deliver superior performance compared to the previous generation.
Speaker Change: but will also offer 30% more diaper wafer, therefore each new product, when fully wrapped with
Speaker Change: When fully ramped, we drive meaningfully higher gross margins compared to the previous generation.
Speaker Change: These innovative product families will open new high-value market opportunities for manufacturing such as automotive, industrial, and AR applications.
notably
That's from 37%.
I'll see you next week.
Speaker Change: So up from 37% into 1024, notably we already have ongoing engagement to penetrate automotive markets which expect to reach over 10% of our revenue by 1027.
from let's send 5% of our revenue into done 24.
Speaker Change: To support this transition to higher performance new generation products, we will invest 65 to 70 million over the next three years to upgrade production equipment at our manufacturing facility in Gooming.
Speaker Change: When these new power products and production, we anticipate top-line growth and meaningful bottom-line improvement.
by the end of 2026.
Speaker Change: We expect almost half of our manufacturing capacity in the booming fab will come from these new generation of products.
Speaker Change: We will discuss all of this in greater detail at today's analyst briefing.
Now let's step back and review Q4 and 2024 results
Thank you for watching!
Q4 revenue was 63 million.
Up 24% year over year, and down 5.1% sequentially
Speaker Change: Consolidated Q4 revenue was above the midpoint of a guidance range of 59.0 to 64.0 million.
Speaker Change: Consolidated Q4 growth firm in margin of 25.2% was up 2.5 percentage points, year over year and up 1.9 percentage points.
Speaker Change: Sequentially. The overall gross margin results exceeded our guidance range of 21.5% to 23.5%. Shin Yang will provide more details in our section.
Speaker Change: Revenue in Q4 for our standard products business was 60.7 million, up 47.5% year-over-year, and down 5.1% sequentially. Standard products business gross margin was 26.6% up to 0.2% sequentially.
on a four-year basis.
Consolidated revenue increased 0.3% in calendar 2024 versus 2023.
Speaker Change: Excluding Transitional Foundry Services, our standard product business increased 13% year over year, with MSS up 22.5% and PAS up 10.2%.
Speaker Change: Both of these business line gross rates were in line with our guidance for double digit growth provided at the beginning of 2024.
Now, I provide more details by a business line.
Up 33.2% year-over-year and down 8.7% quarter-over-quarter.
Speaker Change: The year-over-year increase was primarily driven by the expansion of high-end mobility and battery management systems in China, deeper penetration within Korea's smartphone as well as increased market share.
Speaker Change: The sequential decline was mostly due to seasonality in each hour market segment, except in communication where we enjoyed meaningful quarter on quarter growth.
Within standard products, PES represented 51.5% of revenue in 2.4%
Speaker Change: In consumer we achieved high single digit growth driven by strengths in home appliances for broadening array of products, including refrigerators hooked up and a new design win in Q4 for air Purifiers.
Tvs were relatively flat year on year with notable strength in Korea offset by declines elsewhere overall, the consumer market accounted for 30.
Speaker Change: 75% of <unk> revenue in 2024.
Speaker Change: The communications market represented 15% of <unk> revenue in 2024 and increased more than 50% year over year fueled by design wins for battery FET in mainstream and flagship affordable and AI enabled smartphones in Korea, along with expanding adoption in Wearables tablets.
That's N AI classes. Additionally, we gain traction with multiple brands in China, and Japan for further strengthening our presence in smartphone tablet and wearable markets.
While a relatively smaller contributor at 8% of <unk> revenue the computing market, so more than 25% growth in calendar 2024, driven by demand from China for PC and laptop power adapters.
Speaker Change: Finally, the automotive market was less than 5% of <unk> revenue in 2024, and outperformed the broader automotive market last year declined less than 5%, we strengthened our position in Korea with new design wins, driving greater market penetration, while ramping up production on <unk>.
Speaker Change: Our typical automotive customers in Japan and China.
Speaker Change: Our application span a wide range of vehicle subsea systems with a recent design win for a heater application with a China OEM. This adds to previous wins in power outlets and items that core functionality announced last quarter.
Speaker Change: And in summary.
Speaker Change: Quite sharp decline in Q4 <unk>.
Speaker Change: It was mostly in line with typical seasonal patterns.
Speaker Change: While the sequester our strengths and communications was driven by preparation for new product launches for Q4 2020 for the double digit growth was fairly broad based driven by communications consumer and computing markets, while very slight declines in industrial and automotive.
Speaker Change: Relatively up from their respective markets.
Speaker Change: We had mentioned before we continue to execute on.
Speaker Change: Delivering a new.
Speaker Change: Delivering a strong new pipe product pipeline for power. We believe many of these new products will have similar <unk> to tier one suppliers, which will give us enough where trinity to penetrate new markets and health field I Didnt believe fact capacity created by the phase out of the transitional foundry services.
Speaker Change: We will share more details on our business and the analyst briefing later this morning.
Speaker Change: Turning to MSS Q4 revenue was 17.3.
Speaker Change: $3 million up 102% year over year.
Speaker Change: At five 1% sequentially include.
Speaker Change: Including power.
Speaker Change: S. S represented 28, 5% of our standard products revenue and slightly exceeded the high end of our guidance range of $15 million to $17 million.
Speaker Change: How IC revenue was relatively flat sequentially at $5 4 million and increased 62.
Speaker Change: <unk>, 4% year over year.
Speaker Change: Full year basis total SaaS revenue increased 22, 5% year on year.
Speaker Change: Now I will turn the call over to <unk> to give you more details of our financial performance in the fourth quarter and combined Q1 and full year 2025 guidance.
Speaker Change: Yeah.
Speaker Change: Influenzae and welcome everyone on the clock.
Speaker Change: Chief financial metrics for Q4.
Speaker Change: Total revenue in Q4 was $63 million, which came in above the midpoint of our guidance range.
Speaker Change: The $64 million was up 24% year over year and down five 1% sequentially.
Speaker Change: Revenue from MSS business was $17 $3 million slightly exceeding the high end of our guidance range of $15 million to $17 million.
Speaker Change: 102% year over year, and up 5% sequentially, primarily due to relative strength in automotive.
Speaker Change: It is revenue was $43 $5 million in line with the midpoint of our guidance range of $40 million to $45 million.
Speaker Change: That's up 33, 2% year over year and down eight 7% sequentially, primarily reflecting seasonality.
Speaker Change: Revenue from transitional foundry services was down five 9% sequentially at $223 billion and down from $9 6 million in Q4 2023.
This has been wound down as we've explained previously.
Consolidated gross profit margin in Q4 was 25, 2% exceeding the high end of our guidance range of 21, 5% to 23, 5% up from 22, 7% year over year and up from 23, 3% sequentially.
Speaker Change: And this does gross profit margin in Q4 was 41, 8% above the high end of the guidance range of 37, 5% to 45% up from 41, 3% in Q4 2023 and up from 38, 7% in Q3 2024.
Speaker Change: Year over year improvement was primarily attributable to higher automotive and power IC revenue and despite lower than expected mobile disclaimer.
Speaker Change: <unk> gross profit margin in Q4, with 25% above the guidance range of 17% to 19% up from 18, 1% in Q4 2023 and up from 19, 4% in Q3 2024.
Speaker Change: The upside versus guidance yogurt. Your answer question treatment, mostly due to stronger than expected U S dollar against the Korean won.
Speaker Change: Turning now to operating expenses Q4, SG&A was $12 million as compared to $12 $1 million in Q3, 2024, and $12 $1 million in Q4 of 2023.
Speaker Change: Q4, R&D was $13 million as compared to $14 $4 million in Q3, 2024, and $15 $4 million in Q4 last year.
As a reminder, R&D expense fluctuate quarter over quarter due to the timing and number of products in development.
Speaker Change: Yes.
Stock compensation charges, including operating expenses were $2 million in Q4 compared to $1 $8 million in Q3 and about $7 million in Q4 last year. This charges fluctuate every quarter, depending on the timing and size of stockholder questions.
Speaker Change: Q4 operating loss was $15 7 million. This compares to an operating loss of $11 million in Q3, and an operating loss of $15 $9 million in Q4 2020.
Speaker Change: The Q4 2020 for $4 $6 billion plus of recorded a onetime noncash impairment charge associated with a disclaimer in accordance with U S. GAAP.
Speaker Change: In the same period of 2 million was also recorded in all other charges, which represents a one time cumulative question Pat in connection with certain Korea mandated employee benefit.
Speaker Change: On a non-GAAP basis Q4, adjusted operating loss was $7 million compared to an adjusted operating loss of $9 million in Q3, and about just the operating loss of $14 $1 million in Q4 last year.
Speaker Change: Net loss in Q4 was $16 $3 million as compared with a net loss of $9 $6 million in Q3, and a net loss of $6 million in Q4 last year.
Speaker Change: A substantial portion of our net foreign currency gain or loss is associated with the intercompany long term loans, which are denominated in U S dollars and affected by changes in exchange rate between the Korean won and the U S dollar.
Speaker Change: Therefore, the net loss in Q4 2024 on a GAAP basis.
Speaker Change: Comparatively yoga lap year ago, or a quarter ago as the Korean won depreciated relative to the U S. Dollar in Q4 2024.
Speaker Change: As the Korean won appreciated during Q3 2024 in Q4 2023.
Speaker Change: However at this point it is not necessary it rather than measure of our operating performance and if we cannot control the size of the fat and the aforementioned net foreign currency gain or loss of the non cash items.
Speaker Change: Q4, adjusted EBITDA was negative $2 6 million. This compares to a negative $4 $9 million in Q3 and negative $10 million in Q4 last year.
Speaker Change: Our GAAP diluted loss per share in Q4 was 40% as compared with diluted loss per share of <unk> 26 cents in Q3 and diluted loss per share of 16% in Q4 last year.
Speaker Change: Our non-GAAP diluted earnings per share in Q4 was 7%.
Speaker Change: This compares with a non-GAAP diluted loss per share of <unk> 34 in Q3, and non-GAAP diluted loss per share of <unk> 21, and thank you for last year.
Speaker Change: Our weighted average non-GAAP diluted shares outstanding for the quarter were $37 7 million shares and 37 5 million shares in Q3, and $38 8 million shares in Q4 2023.
Speaker Change: Under our $50 million stock buyback program authorized in July 2023, we repurchased in Q4 2020 for approximately 27 million shares for an aggregate purchase price of $2 $9 million, leaving about $24 $6 million remaining authorization as of December 31 2024.
Speaker Change: Switching to the balance sheet.
Speaker Change: We ended Q4 with cash of $138 6 million at the end of Q3, we had a cash of $121 $1 million and $30 million non redeemable short term financial investments, which was transitioned back to cash on November 10 2024.
Speaker Change: The primary cash outflows during the quarter was approximately $7 $4 million of Capex and $2 $9 million of stock buybacks.
Net accounts receivables at the end of the quarter quarter of $28 $4 million and $28 $7 million at the end of Q3 2024.
Speaker Change: Or do you see yourself spending for Q4 was 41 days and compares to 40 days in Q3.
Speaker Change: Our average days in inventory for Q4 was 60 days and compares to 65 days in Q3.
Speaker Change: Inventory at the end of the quarter $235 million and $36 $1 million at the end of Q3 2024.
Speaker Change: Lastly, Q4, Capex was $7 $4 million as noted previously our capex forecast for the full year 2024 was to spend at the higher end of $10 million to $12 million range, we spent $11 $6 million, primarily through our TASC and comes back.
Speaker Change: Now, let me provide financial related comments regarding our strategy to become a pure play power company.
Speaker Change: One effective January one 2025, we transfer the power IC portion of MSS Tobacconist. Your semi companies have limited our existing Korean operating company, where the Tas business line already resigned.
Speaker Change: Together.
Speaker Change: Which is our power is critical and power IC comprise our powerful Liszewski thats fine, which represents magnitude going forward continuing operations.
Speaker Change: Good.
Speaker Change: With our strategy to become a pure play power company, we expect that displayed it needs to be classified as discontinued operations beginning in our Q1 2025 financials are reported separately from our continuing operations that will comprise <unk> alright.
Speaker Change: Yeah.
Speaker Change: As a reminder, we had wound down transitional foundry services by the end of 2024 and do not expect to report such revenue separately, beginning with Q1 2025 financial returns.
Speaker Change: Sorry.
Speaker Change: Well I did mention earlier that we expect over time to keep higher revenue per wafer.
Speaker Change: Mixed at Alkermes.
Speaker Change: To achieve those goals, we currently expect to invest approximately $65 million to $70 million over three years to upgrade that there couldn't be fab.
Speaker Change: In 2025, we expect total capex, including maintenance to be in the range of $26 million to $28 million, which includes approximately $40 million to $50 million to upgrade that can be fat.
Speaker Change: Total capex in 2024 11 $46 million.
Speaker Change: The depreciation costs from the new investment in the cleaning facility wont begin to be fully reflected in our financial statements until 2027.
Speaker Change: At this time, we anticipate that a more robust portfolio of new generation of power products, but that would be partially offsetting that.
Speaker Change: It is important to note that from a cash management standpoint, the capex investment could be will be partially funded through a previously announced $26 $5 million of equipment finance credit agreement.
Speaker Change: This tightest Pittsburgh recruitment purchases are up right now are coming back.
Speaker Change: This new investment it could be it's expected to drive development of a new generation car product portfolio and upgraded new tools to optimize product mix and improved gross profit margin.
Speaker Change: For as a reserve for the strategy changes, we're making we are now targeting quarterly adjusted EBITDA from continuing operations to be breakeven by the end of Q4 2025.
Speaker Change: To achieve this we will explore all available cost reduction initiatives to align our spending levels with a strategy to become a pure play power company, while enabling us to continue to make progress towards our three phase III strategy.
Speaker Change: Now moving to our first quarter and full year 2025 guidance.
Speaker Change: Actual results May vary for Q1 2025 back in as you currently expect consolidated revenue from continuing operations, which includes power discrete and power our ICT Minister and.
Speaker Change: And excludes our global display business to be in the range of $40 million to $47 million down eight 9% sequentially due primarily to seasonality, but up 11, 5% year over year at the midpoint.
Speaker Change: This compares pretty cool that's revenue of $48 $9 billion from Q4, 2024, and $39 $9 million in Q1 2024.
Speaker Change: Consolidated gross profit margin from continuing operations to be in the range of 18, 5% to 25% due to the seasonal sequential decline in revenue and.
Speaker Change: The wind down and transition of larger surface of impacting fab utilization.
Speaker Change: This compares with equivalent gross profit margin of 23, 2% in Q4, 2024, and 17, 6% in Q1 2024.
Speaker Change: For the full year, 2025, which will set the stage to become a pure play power company. We currently expect consolidated revenue from continuing operations to grow mid to high single digit year over year.
Speaker Change: Compared with revenue of one eight or $85 $8 million in 2024.
Speaker Change: Consolidated gross profit margin from continuing operations between 19, 5% to 21, 5%.
Speaker Change: I think the fact that we have completed the wind down of traditional contract services and new generation power products will just begin production in the second half 2025.
Speaker Change: This included gross profit margin way equal that gross profit margin was 21, 5% in 2024.
Speaker Change: Thank you and now I'll turn the call back over to Y J for his final remarks.
Speaker Change: <unk>.
Speaker Change: <unk> play power strategy, we announced today focus is on shareholder value.
Speaker Change: <unk> is a return to profitability.
Speaker Change: By clearly articulated and transparent sharp at medium term financial targets.
Speaker Change: We see a great market opportunity in power semiconductors, which is greater than 10 times larger than the <unk> market. We have a proven track record in power with design manufacturing and shipping more than 23 billion units during the past 18 years.
Their primary the primary goal of our <unk> III strategy to reach a 300 million annual revenue run rate with 30% gross margin in the next few years.
We are excited about <unk>.
Speaker Change: A larger rollout of a new generation product sampling now through 2026.
Speaker Change: These products address higher valued markets with better products and lower costs.
Speaker Change: We upgrading our gloomy fab to manufacture more of these.
Speaker Change: New generation products. Our plan is to convert the fact to serve 70% of the capacity with new products. These will help optimize our gloomy fast for better profitability.
Speaker Change: As I've said in the past we are focused on maximizing shareholder value and we believe prioritizing a return to profitability by focusing on the power business offers our shareholders. The greatest potential in addition to our medium term or three year goals, we have set very spread.
Speaker Change: Fixed short term milestones after the display business even discontinued.
Speaker Change: These milestones, including achieving from continue operation.
Speaker Change: One quarterly adjusted EBITDA breakeven by the end of Q4 2025, followed by two positive adjusted operating income in 2026, and three positive adjusted free cash flow in 2027.
Steven Pelayo: Now I will turn the call back to Steven Steven Thanks that concludes our prepared remarks now lets open the call for any questions that you may have operator. Please go ahead.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one of your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Our first question comes from the line of <unk> Desilva with Roth Capital. Your line is now open.
Desilva: Hey, good morning, why Jason Young best of luck on the strategic transition here, maybe you could talk first about the power.
Desilva: Segment. The end markets do you think will drive the mid single double.
Desilva: That will most drive the mid high single digit year over year growth of 25, starting point, which end markets do you think would be the most best.
Desilva: Best contributors there.
Desilva: Yes in 2025, I think it's evenly distributed.
Desilva: Two the strength.
Desilva: Hold these and consumer communication and computing, but with the new generation that we just launched 27, new products, we think that will help us grow more into the AI computing area as well as the industrial and automotive.
Speaker Change: Okay. That's helpful and then the.
Desilva: The profitability targets.
Speaker Change: Martin Young maybe what are the drivers of gross margin improvement near term.
Speaker Change: Just to understand from the power business what are the key elements there trending gross margin up towards the 30% long term target.
So for the near term at least for 2025 brigades the annual outlook.
Speaker Change: That's going to be 100 basis points were worth in 2024, and that's mainly because of the fact that we bumped up the transition services the fabs.
Speaker Change: So that's impacting our unit.
Speaker Change: And also our new power generation.
Speaker Change: Just to begin production in the second half of 2025, So that's in New York Tomorrow.
Speaker Change: But the two achieved E L F.
Speaker Change: 333 strategy Youre going to have any new car products.
Y.J. Kim: Now starting in the second half, but more in 2026, and YJ said about half an hour.
Y.J. Kim: Our 2026 revenue coming from the new generation car product. So we're going to increase approaching us yeah yeah.
Y.J. Kim: By the end of next year. So we are going to increase the portion of that and with that he more new generation product distribution and also your realized <unk> fact is that the high high end market targeted product, we can expand our gross margin in the longer term.
Y.J. Kim: Okay. That's helpful. Maybe one last question.
Y.J. Kim: The cash balance on the balance sheet and the use of the proceeds I know youre going to be use of the cash and then potential proceeds on the restructuring I know youre going to have capex needs. The next few years, but are there any of your thoughts on the use of the cash perhaps buybacks or other.
Y.J. Kim: Inorganic activity any color there would be helpful.
Speaker Change: Yes, Susan very good so as you saw today, we announced that we are going to spend 65 million to $70 million upgrading our facility in gumi, and that's where we got on <unk>.
Speaker Change: Virtually support a quick transition to make the new products and that's one of the key area of our spending to.
Speaker Change: To improve the profitability and product mix.
Speaker Change: You see that 65 to 70 million spending we're going to be spent and invested in over three years not like three years.
Speaker Change: In 2025, and also as I may actually have a $26.
Speaker Change: $26 5 million of Jefferies. Your line is open with the bank in Korea, which is actually an interest rate isn't that that 4% and 10 year maturity. So with a three year interest only and that all of our tightened payment. Afterwards, so that we can actually partially fund the hour intended investment it could meet that and that's what's going to manage our cash balance.
Speaker Change: <unk>.
Speaker Change: Okay alright. Thanks.
Speaker Change: Thank you.
Speaker Change: A reminder to ask a question at this time. Please press star one one oriented Touchtone telephone. Our next question comes from the line of Nicholas Doyle with Needham. Your line is now open.
Nicholas Doyle: Hey, guys. Thanks for letting me ask a question.
Speaker Change: Struggling a bit with the calendar 'twenty five gross margin guide is gumi fab headwind a bit stronger in <unk> or maybe even further into 2025 or is that.
Speaker Change: The greater impact from the Underutilization or is that the power IC business just operates a lower margin versus display I mean, I know you talked about these new products ramping and that impacts as well, but any more color would be helpful. Thanks.
Speaker Change: Probably like if you look at 2024, we still have $10 6 million up to <unk> certain of such revenue, which should be tried using our equipment.
Speaker Change: Although that foundry services revenue I mean, the portion has negative margin that was actually helping to share the fixed cost in Abercrombie fab now we've wound down that business completely by the end of Q4 last year that means about 20% of our <unk> fab and the facility is actually idle.
Speaker Change: That portion has to be converted but as we explained previous I mean that during the call. We are going to do that not only to just increase capacity, we're going to upgrade the committed facility to support a more to support the higher.
Speaker Change: New generation power protocols for so that let me transition will take time and that's what we're going to invest in companies that we work through the years.
Speaker Change: Under utilization from the phase out of Chinese module surfaces, and also the new par product.
Speaker Change: <unk> began the production in the second half of 2025, we're going to impact 2025 gross margin for the whole company.
Uh huh.
Speaker Change: So the the first of half life.
Speaker Change: Youre getting the board impact first half, obviously, because we were going to get the benefit from the new generation power products, starting in the second half youre going to see a little improvement in the second half, but the first half youre going to see both impact that couple impacting their utilization rate might get added.
Speaker Change: Firstly do you guys think about it.
Speaker Change: Our deal flow.
Speaker Change: Okay that makes sense and what kind of opex level do you assume to get to that positive adjusted EBITDA by <unk> 25.
Steve.
Speaker Change: Uh huh.
Speaker Change: So for the Opex I mean do you need to you know that we actually assure circuits and the overhead functions supported both display and power together. So there are there's got to be some efficiency in there too, but roughly speaking that guy.
Speaker Change: Probably 35% to 40% of our Opex was tied to the display business.
Speaker Change: And the other thing I think you asked about Powerpc power IC power IC is not made in <unk>, it's a pure fabless and power IC.
Speaker Change: Typically has around 40% gross margin, which is a much.
Speaker Change: Much better.
Gross margin product line.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you.
Our next question comes from the line of Martin Yang with Opco. Your line is now open.
Speaker Change: Okay. Thank you for taking my question first.
Speaker Change: First question on power, especially when you look at.
Speaker Change: Your approach to.
Speaker Change: The markets are like.
Speaker Change: Industrial with AI and you need to talk about is it.
Speaker Change: Does it require you to take a new go to market strategy. How do you go about attacking those.
Speaker Change: Higher value customer base for our segments.
Speaker Change: Yes so.
Speaker Change: As I explained.
Speaker Change: Initially when we came out this power business 18 years ago.
Speaker Change: We address less than 100 watt applications.
Speaker Change: And with the new generation and second generation, we went up to 10.
Speaker Change: Can kill a lot or mostly thousand watt, where we became number one in now at target accounts now.
Speaker Change: Now with the new generation Super Junction and N. Gen. Eight N V MOSFET, the the product to about 30% to 40% better proposal is than the previous generation yet the cost is.
Speaker Change: We can produce 30% more die per wafer so that drives higher dollar per wafer or lower cost and higher <unk>.
Speaker Change: So with that we will be able to penetrate into more high valued application in the AI server to high.
Speaker Change: High end industrial market like.
Speaker Change: Energy storage system, Tu automotive inverter, where you can get much better ASP and margins. So that's our strategy and we just introduced 27 new products.
Speaker Change: And full commercial.
Speaker Change: Quantified samples are available now so our goal is to hit production by the end of this year with those products.
Okay. Thanks Richard.
Speaker Change: The next question is on your display business.
Speaker Change: When you look at it.
Speaker Change: Different strategic alternatives.
Speaker Change: Because this is different from <unk>.
Speaker Change: Initial.
Speaker Change: The company does it open you too.
Speaker Change: Different sets of potential buyers or.
Speaker Change: Partners, but to explore.
Speaker Change: Great business.
Speaker Change: So I feel good solutions.
Speaker Change: So we are looking at every option possible. So as you said the scale of the business or certain assets to the joint venture to partnership to even wind down. So we're looking at all options and we're going to do it make sure of that.
Speaker Change: Our customers are.
Speaker Change: Happy advanced seamless transition as well as we abide with any regulation of Korea or U S.
Speaker Change: Regulations.
Speaker Change: Got it last question from me is can you maybe talk a little bit more about the timing of decision any any context, you could give us a wide now.
Speaker Change: The timing.
Speaker Change: As we said it was very extreme decision for me personally and also to the board and the management, but you know.
Speaker Change: The it is best that we hit the profitability, that's our number one goal and thats the highest priority.
Speaker Change: At the best interest of our shareholders and stakeholders.
Speaker Change: The power business has a broader range of industry and customers and more stable and we already have more than 200 customers in Asia, whereas the display as you know, it's a really huge.
Speaker Change: Panel maker as a customer so and.
Speaker Change: Depending on their situation, it's it's very hard to control the fate of your revenue ramp so with that we made the prudent decision to go with the be held pure play company, where we're going to restore.
Speaker Change: The profitability path as soon as possible as well as broad perspective to grow and also you saw we announced 65 million to $70 million investment. So I think we cannot afford to invest that kind of in two businesses, we wouldn't do that and move.
Speaker Change: We see and where are we going to turnaround more to quicker profitability is our business and more opportunities.
Speaker Change: Makes sense. Thank you.
Speaker Change: Thank you.
Steven Pelayo: Thank you and I'm currently showing no further questions at this time I'd like to hand, the call back over to Steven Pelayo for closing remarks.
Speaker Change: Hey, Thank you. This concludes our Q4 earnings conference call. Following today's earnings call. We are hosting an analyst briefing, where YJ Shin young and other members of management will share more details on todays announcement on March 17th and 18th we will be attending the 37th annual Roth Conference in Dana point, California for one on one investor meetings attended.
Speaker Change: Conference is by invitation only for interested investors. Please contact your respective sales representative to register and schedule one on one meetings with the management team.
Speaker Change: Our prepared remarks.
For our call today, operator, you may now pardon me.
Speaker Change: Our remarks that said we look forward.
Speaker Change: To meet with you for future events and you can find details on those on magnitude <unk> Investor Relations website, Thank you and take care of.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Yes.
Speaker Change: [music].
Speaker Change: Yes.