Q2 2025 Magnachip Semiconductor Corp Earnings Call
Hello and welcome to Magna chip. Semiconductor second quarter 2025 earnings conference call.
After the speaker's presentation, there will be a question and answer session to ask the question during the session. You will need to press star 1 1 on your telephone.
Great, thank you. Hello everyone, thank you for joining us to discuss MagnaChip Semiconductor's financial results for the second quarter ended June 30, 2025. The second quarter earnings release that was issued today after the market closed can be found on the company's investor relations website.
During the course of this conference call, we may make forward-looking statements about Magna chips, business, Outlook and expectations are forward-looking statements and all other statements that are not historical facts, reflect our beliefs and predictions as of today and therefore our subject to risks and uncertainties as described in the safe, harbor statement found in our SEC filing such statements are based upon information available to the company as of the date here of and our 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 discussed 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 magnitudes operating performance. That may be useful to investors. Our reconciliation of the non-gaap financial measures to the most directly comparable. Gaap measures can be found in our second quarter earnings release in their restoration section of our website with that. I'll now turn the call over to YJ Kim YJ
Hello everyone, and thank you for joining us today on manage this. Q2 on this call, we continued in Q2 to execute on our strategic decisions to become a Pew. Play policy company, and we deliver solid results despite ongoing macro challenges. So if you do 25, consider the revenue from continuing operation was 47.6 Million up, 8.1% a year over year and above the midpoint of our guidance range. This was our fixed consecutive quarter of the Year, where your growth
Gross profit margin from continuing. Operation was 20.4% was within our guidance range of 19.5% to 21.5% go down to 0.1%. These points from a year ago and down slightly from q1. The primary to purchasing pressure in China affecting all the generation products. We expect our new generation Power Products will be more competitive and command better pricing. As we roll out these offerings over the course of the next several quarters. As we said before the Catalyst for achieving our financial goals is the successful rollout of our new generation products, including jet 8 Gen 6, super Junction, and igbt and gen 8 medium and low voltage mosfet as well as a full array of Apollo 1 Power Products. We remain committed to our 333
Strategy of achieving $300 million in revenue and 30% Force margin in 3 years. Although the exact timing will depend in large part upon macro factors beyond our control.
She normally provide more color in our section.
We've already launched 28 New Generation products in the first half of 2025 and uh on track to meet our previously stated goals in 2025 for 40 New Generation power analog solution files.
We will start to see initial New Generation product Revenue by the end of 2025, and meaningful impact in the second half of 20126.
We are exploring all options to accelerate our new generation product roadmap and now targeting more than 15 New Generation products. By end of 2025, we expect these new generation, Power Products to drive higher revenue, and given the smaller data sets. Deals 23 to 30% Modi per wafer in our group is fast.
When new generation are fully revamped within a couple of years, these new products are expected to drive higher gross margins compared to the previous generations.
Breaking down the business line.
New high value market opportunities for manager.
In automotive industrial and AI applications. We currently expect these 3 Market opportunity to represent more than 60% of magnitude future product. Mix in 2028 up from with the 1% in 2024. We already have ongoing engagement to penetrate Automotive markets, which you expect to reach over 10% of our Revenue by 2028 from less than 5% in 2024.
Some notable designing and activity. Included in the communication segment. We had 6 new designers up from 1 in 2 to a year ago.
We continue to win power sockets for both Matrix and Flagship AI smartphone models, including multiple newly launched.
Smartphones and also, in upcoming portable AI smartphones.
We also had power design wins for tablets and smart watches applications.
In the Computing segment. We achieved 10 new design wins in Q2 compared to zero in the year ago. Quarter, most of these, these wins are related to PC power applications using our new super Junctions and 6 Plus
Super Dungeons and 6 products are also being adapted into new TV models for 2026 in the consumer segment where we have a 5 new design 1 and 5025 which was equal to the amount from previous uh year ago quarter.
In industrial we secured. 47 additional design work up from 36 into 224. We saw particular strength in China for LED lighting again, leverage and super Johnson and 6. We also expanded into 5G battery management, management systems with our new medium voltage, gen 8 products.
Within Automotive, we had 1 new designer in China for PTC hero application. And now we got mass production for other key Vehicle Systems such as either stepco, 18, voters, electric oil pumps, and car chargers testing for vehicles, in Japan, the US and Europe.
In power I see we had 2 designers which is the same as the number of win. A year ago quarter we are targeting additional design. Risks for Led drivers for 2226, TV models from multiple TV makers, in Korea.
Now I'll provide more details by business segments, within our analog Solutions, industrial accounting for approximately 35% of Pas, revenue and decline 1.9% year-over-year. Primary due to continued, weakness in ebike and solar inverted, sales driven by, macro economy, and uncertainties and price competition in the e-mobility segment. However, we saw strong sequential and year-over-year growth in higher performance, e-moto application, LED lighting, and 5G battery Management Systems supported by adoption of our new super jumps and then 6 and envy gen 8 products despite the solid growth and E Motors. It was not enough to fully upset the softness and ebike demand.
Consumer, which represented 34% of PS revenue, declined 0.4% year-over-year due to continued weakness in home appliances, mostly offset by year-over-year growth in TV applications. As mentioned before, we are targeting our new generation Super Johnson and the 6 products being adapted for multiple 20126 TV models.
Communications which are padded for 20% of PS Revenue, grew nearly 47% a year over year reflecting increased. Share in both Flagship and mass Market smartphone models in particular, our low voltage, Master revenue for smartphone battery effects, increased 32% year over year and we currently expect to hold the main majority position was created, the leading smartphone manufacturer in 20126, including in their Flagship portable walls Computing, which represent 80% of PS Revenue was up, 45% a year over year during primary by higher PC, power Revenue in Taiwan and China.
In China.
On power, on our power IC business, which represented 11% of Consolidated due to revenue from continuing operations, group 11.1% year-over-year and 10.2% sequentially. The growth was driven by both Ed and OLED power, ACS supported by the introduction of 20, new MID to low-end TV models by our customers for 20125.
Finally, the shutdown of our display business is now virtually complete.
We are benefiting from end of life, income streams and continues to explore monetization opportunities for these display IP assets.
China is a huge market, especially for power semiconductors. We started our "China for China" strategy in early 2024 to address the local market opportunities.
However, Terrace uncertainty, along with competitive price, and pressure on our older generation products in China. Combined to create a challenging environment that will impact our near-term. Outlook in the second half of this year. In view of this, we have been proactive and decided by taking structure actions internally to reduce costs and optimize operational efficiency with the goal to get close to a quarterly adjusted every that break even from
Containing operation by the end of this year. We are also accelerating our R&D and product pipeline, to differentiate our power portfolio, to be compared with the Tier 1 levels to command higher prices and margins. We also are accelerating product development for power devices targeted, specially for China for better. Constructure all of these efforts have to support our long-term financial goals to next month. Share on the value now. I turn the call over to Shia to give you more details about financial performance in the second quarter and provide Q3 and full year 2025 guidance. Thank you AJ, and welcome everyone on the call. Let's start with key financial metrics for Q2.
Total Q2 to consolidate revenue from continuing operations which includes power analog Solutions. Pas and power AC was 47.6 Million which is above the point of guidance range of 45 to 49 million.
This was up 8.1% year-over-year and up 6.5% sequentially on an Apple sample basis.
This compared with equivalent revenue of 44.1 million in Q2 2024 and 44.7 million in q1 2025.
Revenue from Power analog Solutions was 42.3 Million. This was up 7.7% year-over-year and up 6% sequentially.
Revenue from power IC was $5.4 million. This was up 11.1% year-over-year and up 10.2% sequentially.
In Q2 Consolidated growth stock and margin from continuing operations was 20.4% within. Our guidance range of 19.5 to 21.5% down from 202.5% year-over-year and down from 20.9%. Sequentially on an Apple sap,
the year-over-year decline was primarily attributable to an unbeatable product. Mix driven mainly by ASC urgent, particularly in China, the sequential decline was mainly attributable to the timing of certain inventory Reserve associated with a power IC product, coupled with a higher than expected Revenue in Q2 from Poland by a customer due to the uncertainty around turrets.
The company's display business has been classified, as discontinued operations from q1 2025. So, all of the following figures, reflect results from continuing operations.
Due to SG&A of $9.3 million, compared to equivalent SG&A of $9.7 million in Q2 2024, and $9.7 million in Q1 2025.
Due to R&D was 7 million as compared to equivalent R&D of 5.8 million in Q2 2024 and 5.9 million in q1, 2025.
R&B in queue to increase due to the acceleration of R&D efforts while it while developing a family of new generation ihbt and super Junction products to Target more high-value opportunities.
This charge is fluctuated every quarter, depending on the timing and size of stock or grants.
Due to operating loss was 7.4 million. This compares to an equivalent operating loss of 5.7 million in Q2 2024 and an operating loss of 6.3 million in q1 2025.
On a non-gaap basis. The Q2 adjusted operating loss was 5.6 million compared to an equivalent of just the operating loss of 4.7 million in 222224 and an adjusted operating loss of about 5.4 million dollars in q1, 2025.
Income from continuing operations in Q2 was 8.5 million. As compared with an equivalent loss of 2.2 million dollars in Q2 2024 and a loss of 5.21 million in q1 2025.
In Q2, we recognize networking currency, gain of 10.8 million, majority of which was attributable to the non-cash translation game or certain income company, borrowings as a result of FX volatility during the quarter.
We also booked into 2, the income tax benefit of 4.1 million, which was primarily due to the tax loss recognized in Korea in connection with the shutdown of the display business.
Q2 adjusted EBITDA was -$2.1 million. This compares to an equivalent adjusted EBITDA of -$1 million in Q2 2024 and -$2.1 million in Q1 2025.
Q2 get diluted earnings per share was 23 cents as compared with equivalent dilute loss for share of 6 cents in due to 2024 and diluted loss. Per share of 14 cents in q1 2025.
due to non get diluted loss per share with a cent this Compares with equivalent, non-gaap diluted earnings per share of 7 cents in 2 to 2024 and non get diluted loss, for sure of 10 cents, in q1, 2025
The difference between our gaap and non-gaap EPS, in 2 to 2025 was primarily due to the elimination of the non-cash boarding currency, gain of 10.8 million dollars that I explained earlier.
Our rate is ever non-gaap diluted shares outstanding for the quarter, were 36.1 million shares, and 38.5 million shares in 2 to 2024 and 36.9 million shares in 212025.
As part of our stock buyback program authorized in July 2023, we repurchased in Q2 2025 approximately 0.7 million shares for an aggregated purchase price of $2.3 million, leaving about $21.2 million remaining authorization as of June 30, 2025.
Moving to the balance sheet. We ended Q2 with cash of 113.3 million. As compared to 1 3, 2. 7, 2 5,
The two main cash outflow items were $11.9 million of capex, which will be explained separately later, and $6.5 million of one-time liquidation costs relating to the discontinued display business.
Of this estimated total cash cost in Q2, we actually paid 637 and all the employee related costs of 6.5 million.
We originally expected to pay certain contract, termination charges in full along with the statutory Severance and other employee related costs. However, we negotiated with the respective vendors that the total of 6.5 million dollars of contamination. Charges would instead be paid over the remaining existing contract terms of 1 and a half years from 2 to 2025 and that amount was recognized as part of other charges in the discontinued operations managers in Q2 2025.
The company has begun to provide limited support for remaining customer obligations, including the sale of end-of-life (EOL) display products.
Which is being conducted by magnitude. Semiconductor limited. The company is wholly over the subsidiary that operates the power business.
The sale of EOL, displayed products, and the potential monetization of the intellectual property assets of the discontinued. The display business is expected to generate cash inflow of approximately 20 million dollars over a period of approximately 2 years from the second half of 2025.
Poor amount will depend upon the demand from customers and the outcome of the monetization efforts of the display, intellectual property assets.
Meta accounts. Receivable at the end of the quarter totaled, 28.8 million and 28.3 million at the end of 212025
Our days, there is outstanding for Q2 was 47 days and compares to 47 days, in q1, 2025.
Our average days in inventory for Q2 was 81 days and compares to 70 days in q1, 2025 inventories, net. At the end of the quarter quarter to 3 7. 6 2 5
capex as noted earlier was 11.9 million of which 9.4 million was used to upgrade a good me.
For the full year 2025. We now expect our total capex to be in the range of 32 to 34 million, which includes approximately 20 to 22 million dollars capex, upgrade akumi.
the annual forecast for the upgraded capex in 2025, increase from the previously, estimated range of 14.6 million to 20 to 22 million, primarily due to the timing shift of certain equipment purchases,
In Q2 of the 9. 4 7,
For the full year. 2025, we expect approximately 80 to 85% of the 20 to 20 million, upgrade of capex to be funded by the same 26.5 million equipment loan to which an interest rate of less than 3% per month will apply and we and the remainder will be funded by the company's cash.
The loan was part of a previously, disclosed strategy for Magna chip to make a 65 to 70 million investment over 3 years, to upgrade a cammisa,
The depreciation cost related to the kuma upgrade capex, won't begin to be reflected in our financial statements until 2027.
At that time, we anticipate that a more robust portfolio of new generation Power Products will at least partially offset the impact.
This new investment.
In Kumi is expected to drive development of the new generation power product portfolio and upgrading new tools to optimize product, mix and improve growth, stock and margin.
Before we move to the Biden section, let me provide some comments regarding the, the the actions that are being undertaken, by the company, who shut down of the display business.
as we've discussed previously, we are prepared to execute all available cost reduction initiatives to align our spending level, with a strategy to become a Pure play power company and to achieve certain financial goals,
We currently retain a cost structure, which includes some shares functions, and historically have supported both the display and power businesses?
1 of the initiatives being undertaken is headcount reduction, primarily through some shared functions, made redundant through the closing of this display via a voluntary resignation program that we expect to commence and complete by the end of the third quarter.
Due to the voluntary nature of the program. We are unable to provide an exact amount of the related to financial impact at this time.
However, with the execution of this headcount reduction, we target to achieve annual opex savings of $2 to $3 million, with a payback period of 1.5 years.
Now, moving to our third quarter and full year 2025 guidance. While actual research may vary for 2 3, 2025 magnitude currently expects Consolidated revenue from continuing operations, which includes power, analog Solutions, and power. Icy businesses to be in the range of 44 to 48 million down, 3.5% sequentially, and down 13.2% year-over-year and
let me point on a Poland basis, due to Poland by customers in Q2, from the second half of the year, as well as competitive pricing pressure on our older generation products,
This compares with the equivalent revenue of $47.6 million in Q2 2025 and $53 million in Q3 2024.
Consolidated gross profit margin from continuing operations, to be in the range of 18.5 to 20.5% this Compares with equivalent gross, profit margin of 20.4% in Q2 2025 and 22% in Q3 2024.
For the full year 2025, consolidated revenue from continuing operations is now expected to be flattish, compared to our previous forecast of mid- to high-single-digit growth year over year. This adjustment is due to a challenging environment related to Turf, along with uncertainty and pricing pressure on older generation products in China.
5.8 million in in 2024.
Consolidated profit margin from continuing operations between 19 to 20% as compared to our previous forecast of 19.5, to 21.5%
The equivalent gross profit. Margin was 21.5% in 2024.
Thank you. And now I'll turn the call back over to YJ for his final remarks YJ.
In the first half of the year, we made a good programs on our goals to become a Pure Play citizen power, Semiconductor Company.
We expanded our new generation Power Products.
Pipeline and focused on increasing customer adaptions across key, growth markets, including automotive industry and communication.
In 32, in particular, our growth was driven, primarily by strong, proponents is in our communication and Computing businesses with each showing Revenue growth of over 40% a year year. We also benefited modestly by some points by customers due to the uncertainty around terrorists.
Looking to the back half of the year, we faced an uncertain environment due to terrorism and pricing pressure in China. As a result, we currently anticipate a darker second half of the year relative to our prior expectations.
While headwinds are impacting our near-term. Aloe, we are being proactive and decisive taking structural actions to optimize operation efficiency while continuing to invest in R&D and capex to support. Our long-term 333, Financial strategy as we share. Today we are accelerating the development of a full array of new generation products to drive future growth. And we expect to see initial Revenue contribution by year end, gaining momentum and having a material impact. In the second half of 2026, this exhalation will allow us to roll up more feature-rich differentiated and higher margin products more quickly.
We remain committed to maximizing, shareholder value, and prioritizing a return to profitability. Now, I kind of call back to Stephen C.
Okay, that concludes our prepared remarks. Now let's open up the call for questions that you may have.
Please go ahead. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star, 1 1 1, on your telephone, then wait, for your name to be announced to withdraw your question. Please press star 1. Again, please stand by while we compare the Q&A roster.
Our first question comes from the line of suji D Silva with Roth Capital Yin is open.
Young. Um the Portuguese you saw in the first half, some customers of the Tif impact, I'm wondering if that's flowing through in the second half. Um all the way you know, to the next few quarters or whether you largely see the impact of that, you know near-term. We talked about 1 large customers. So here's how much that affected lingering versus pricing threats for another element of the revenue.
Yeah. So
We?
Estimate the pull in, in the fire time we saw maybe, uh, about 2 million. And, uh, I think some of that, uh, came in into the first half and, uh, that we saw some little more in the, uh, later part of the 222, uh, especially in the TV and TV, uh, related area. So we we think, um, that's already to took care of, uh, in terms of pulling
Okay, great. And then on the gross margin, um, the wrap down, um, that you're seeing. Once you take into account, is that primarily pricing now at the point? Where are you adjusting utilization for the current environment? And I imagine inventory there.
The origin is impacting our second half, and that's how you are kind of seeing ourselves can all look in the second half of 2025.
Gotcha. All right. Thanks. Thanks Roger.
Thank you.
As a reminder, ladies and gentlemen, that's *#11* to ask a question.
Our next question comes from Milan of Nick Doyle with medium and Company. Nick yolen is open
Yes, thanks for taking my questions. Um just wondering if you can talk about where you're seeing strength in the communications like which applications driving strength in the communications and Market. Thank you.
Yes. Uh, Nick, uh, so if you look at our remarks today, uh, we had more design wins, um, in the uh, uh,
Communication. So, uh, from 1 to 5 models, we have. And so we are seeing these trends from the new model that launched in 2025. Uh, so that, uh, from mid-range to flagship AI to my phone, and then the new launch, the AI photo booth phones. And that's where we sell growth. And also in the computing area, uh, we had more design wins, and that also contributes to the more, um, design win. And then we are also seeing, uh, good pipeline for the AI, uh, server as well.
Okay. And then if I could just ask out to Opex and the IBA break even I mean you're you're saying you're targeting hopeful break even by the end of the year. Does that mean you can really take down Opex you know 1 to 2 million by the end of the year kind of
You know, to be determined based on the um voluntary employee. Um Dynamic. Thanks.
Yeah, thanks Nick. So I mean that's why we we still Target to get close to a just a, even in Q4 2025. So we are executing this voluntary resolution program. We're 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 to 3 million dollar Opex reduction like that's kind of annual basis. So if you kind of divide it by 4 just roughly, that's kind of a half million to like, 0.7 by the the million kind of the reduction in in Opex and mainly should coming from the sgna.
Thank you.
Thank you.
Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Stephen for closing remarks.
Okay, thank you before we conclude, I just want to give everyone a quick reminder uh, on our upcoming investor conference on August 20th, we will present at the 6th annual nem, virtual semiconductor and semi 1-on-1 conference attendance at the conference is By Invitation Only, we're interested in institutional investors, please contact your respective sales, representative to register and schedule 1-on-1 meetings with the management team. Uh, please look for details of our future events on magnet ships. Investor relations website with that. This concludes our Q2 earnings conference call. Thank you, and take care.
Ladies and gentlemen, you may now disconnect. Thank you for your participation.