Q2 2026 MagnaChip Semiconductor Corp Earnings Call

July 29, 2026

Operator: Good day, and thank you for standing by. Welcome to the MagnaChip Semiconductor Q2 2026 earnings conference call. At this time, all participants on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please know that today's conference may be recorded. I will now hand the conference over to your first speaker today, Mike Bishop of Investor Relations. Please go ahead.

Operator: Good day, and thank you for standing by. Welcome to the Magnachip Semiconductor Q2 2026 Earnings Conference Call. At this time, all participants on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please know that today's conference may be recorded. I will now hand the conference over to your first speaker today, Mike Bishop of Investor Relations. Please go ahead.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. Please note that today's conference may be recorded. I will now hand the conference over to your first speaker today, Mike Bishop of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you. Hello everyone, and thank you for joining us to discuss MagnaChip's financial results for the second quarter ended June 30, 2026. The second quarter earnings release that was issued today after the market close can be found on the company's investor relations website.

Mike Bishop: Thank you. Hello, everyone, and thank you for joining us to discuss MagnaChip's financial results for the Q2 ended 30 June 2026. The Q2 earnings release that was issued today after the market close can be found on the company's investor relations website. The webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are Camillo Martino, MagnaChip's chairman, recently appointed CEO, Chae Lee, and Shin Young Park, our Chief Financial Officer. We will discuss the company's recent operating performance and business overview, followed by a review of the financial results for the quarter and provide guidance for the Q3 2026. There will be a Q&A session following the prepared remarks. During the course of this conference call, we may make forward-looking statements about MagnaChip's business outlook and expectations.

Mike Bishop: Thank you. Hello, everyone, and thank you for joining us to discuss Magnachip's financial results for the Q2 ended 30 June 2026. The Q2 earnings release that was issued today after the market close can be found on the company's Investor Relations website. The webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are Camillo Martino, Magnachip's Chairman, recently appointed CEO, Chae Lee, and Shinyoung Park, our Chief Financial Officer. We will discuss the company's recent operating performance and business overview, followed by a review of the financial results for the quarter and provide guidance for the Q3 2026. There will be a Q&A session following the prepared remarks. During the course of this conference call, we may make forward-looking statements about Magnachip's business outlook and expectations.

Speaker #2: The webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are Camillo Martino, MagnaChip's Chairman; recently appointed CEO Chay Lee; and Shin Young-Park, our Chief Financial Officer.

Speaker #2: We will discuss the company's recent operating performance and business overview, followed by a review of the financial results for the quarter, and provide guidance for the third quarter of 2026.

Speaker #2: There will be a Q&A session following the prepared remarks. During the course of this conference call, we may look we may make forward-looking statements about MAGNACHIP's business outlook and expectations.

Speaker #2: Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the Safe Harbor Statement found in our SEC filing.

Mike Bishop: Our forward-looking statements, and all other statements that are not historical facts, reflect our beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the safe harbor statement found in our SEC filing. Such statements are based on information available to the company as of the date hereof and are subject to change for future developments. Except as otherwise required by law, the company does not undertake any obligation to update these statements.

Speaker #2: Such statements are based on information available to the company as of the date hereof and are subject to change for future developments. Except as otherwise required by law, the company does not undertake any obligation to update these statements.

Speaker #2: During the call, we'll also discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, but are intended as supplemental measures of MagnaChip's operating performance that may be useful to investors.

Mike Bishop: During the call, we'll also discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles but are intended as supplemental measures of MagnaChip's operating performance that may be useful to investors. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our Q2 earnings release in the investor relations section of our website.

Mike Bishop: During the call, we'll also discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles but are intended as supplemental measures of Magnachip's operating performance that may be useful to investors. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our Q2 earnings release in the investor relations section of our website.

Speaker #2: A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in our second quarter earnings release in the Investor Relations section of our website.

Speaker #2: And with that, I'll now turn the call over to Camillo Martino. Camillo?

Mike Bishop: With that, I'll now turn the call over to Camillo Martino. Camillo?

Speaker #3: Thank you, Mike. And good afternoon, everyone. Before discussing the quarter, I'd like to take a moment to welcome Chay Lee to his first earnings call as Chief Executive Officer of MagnaChip.

Camillo Martino: Thank you, Mike, and good afternoon, everyone. Before discussing Q4, I'd like to take a moment to welcome Chae Lee to his first earnings call as Chief Executive Officer of MagnaChip. On behalf of our board of directors, I want to say how pleased we are to have Chae leading our company. The board conducted an extensive search for this new CEO position, Chae distinguished himself through his deep experience in power semiconductors, his proven track record of building successful businesses, and his vision for where MagnaChip can create value over the longer term. Over the past several months, we've taken important steps to reposition MagnaChip as a pure-play power semiconductor company. We believe Chae is the right leader to build on that foundation, accelerate our product strategy, and strengthen our competitive position through differentiated solutions.

Camillo Martino: Thank you, Mi ke, and good afternoon, everyone. Before discussing Q4, I'd like to take a moment to welcome Chae Lee to his first earnings call as Chief Executive Officer of Magnachip. On behalf of our board of directors, I want to say how pleased we are to have Chae leading our company. The board conducted an extensive search for this new CEO position, Chae distinguished himself through his deep experience in power semiconductors, his proven track record of building successful businesses, and his vision for where Magnachip can create value over the longer term. Over the past several months, we've taken important steps to reposition Magnachip as a pure-play power semiconductor company. We believe Chae is the right leader to build on that foundation, accelerate our product strategy, and strengthen our competitive position through differentiated solutions.

Speaker #3: On behalf of our board of directors, I want to say how pleased we are to have Chay leading our company. The board conducted an extensive search for this new CEO position, and Chay distinguished himself through his deep experience in power semiconductors, his proven track record of building successful businesses, and his vision for where MAGNACHIP can create value over the longer term.

Speaker #3: Over the past several months, we've taken important steps to reposition MAGNACHIP as a pure-play power semiconductor company. We believe Chay is the right leader to build on that foundation, accelerate our product strategy, and strengthen our competitive position through differentiated solutions.

Speaker #3: Having known Chay for nearly three years now, and also having worked closely with him for over the past month, I have been impressed by the speed with which he has immersed himself in the business.

Camillo Martino: Having known Chae for nearly three years now, having worked closely with him for over the past month, I have been impressed by the speed with which he has immersed himself in the business, the way he's engaged with our employees and customers, and established clear priorities for the future. The board has great confidence in his leadership, I look forward to continuing working closely with Chae as the chairman of the company. With that, it is my pleasure to introduce MagnaChip's Chief Executive Officer, Chae Lee.

Speaker #3: And also the way he's engaged with our employees and customers, and also established clear priorities for the future. The board has great confidence in his leadership, and I look forward to continue working closely with Chay as the chairman of the company.

Speaker #3: With that, it is my pleasure to introduce MAGNACHIP's chief executive officer, Chay Lee.

Speaker #4: Thank you, Camillo. Good afternoon, everyone. And thank you for joining us today. It is an honor to speak with you for the first time as chief executive officer of MAGNACHIP.

Chae Lee: Thank you, Camillo. Good afternoon, everyone, and thank you for joining us today. It is an honor to speak with you for the first time as Chief Executive Officer of MagnaChip. Although I officially joined the company just a month ago, it feels as though I've been here much longer. During that time, I spent my days listening and learning, meeting with our engineering teams, speaking with employees across the organization, reviewing our technology roadmap, and engaging with customers. What has impressed me the most is the quality of our people. MagnaChip has talented engineers, deep process technology expertise, an efficiently managed manufacturing operation, and longstanding strategic relationships with many market-leading customers. These are important strengths that provide a solid foundation for future growth. At the same time, I recognize that our recent financial performance has not reflected the strength of those assets.

Chae Lee: Thank you, Camillo. Good afternoon, everyone, and thank you for joining us today. It is an honor to speak with you for the first time as Chief Executive Officer of Magnachip. Although I officially joined the company just a month ago, it feels as though I've been here much longer. During that time, I spent my days listening and learning, meeting with our engineering teams, speaking with employees across the organization, reviewing our technology roadmap, and engaging with customers. What has impressed me the most is the quality of our people. Magnachip has talented engineers, deep process technology expertise, an efficiently managed manufacturing operation, and longstanding strategic relationships with many market-leading customers. These are important strengths that provide a solid foundation for future growth. At the same time, I recognize that our recent financial performance has not reflected the strength of those assets.

Speaker #4: Although I joined officially joined the company just a month ago, it feels as though I've been here much longer. During that time, I spent my days listening and learning, meeting with our engineering teams, speaking with employees across the organization, reviewing our technology roadmap, and engaging with customers.

Speaker #4: What has impressed me the most is the quality of our people. MagnaChip has talented engineers, deep process technology expertise, efficiently managed manufacturing operations, and long-standing strategic relationships with many market-leading customers.

Speaker #4: These are important strengths that provide a solid foundation for future growth. At the same time, I recognize that our recent financial performance has now reflected the strength of those assets.

Speaker #4: Our shareholders have been patient, and they rightly expect better execution and improved results. And my focus is to deliver on those results. One of the things that attracted me to MAGNACHIP was the work already underway to reposition the company as a pure-play power semiconductor company.

Chae Lee: Our shareholders have been patient, they rightly expect better execution and improved results, my focus is to deliver on those results. One of the things that attracted me to MagnaChip was the work already underway to reposition the company as a pure-play power semiconductor company. I want to thank Camillo, the board, and the management team for the important progress they have made over the past several months. Rather than changing direction, my objective is to build on that foundation and accelerate our pace of innovation and execution. As I think about the future of MagnaChip, one idea stands above all others. Our goal is to transition from being a follower to becoming a leader. I believe we have the capability to drive innovation, launch differentiated technology, and become a stronger player in power semiconductor industry.

Chae Lee: Our shareholders have been patient, they rightly expect better execution and improved results, my focus is to deliver on those results. One of the things that attracted me to Magnachip was the work already underway to reposition the company as a pure-play power semiconductor company. I want to thank Camillo, the board, and the management team for the important progress they have made over the past several months. Rather than changing direction, my objective is to build on that foundation and accelerate our pace of innovation and execution. As I think about the future of Magnachip, one idea stands above all others. Our goal is to transition from being a follower to becoming a leader. I believe we have the capability to drive innovation, launch differentiated technology, and become a stronger player in power semiconductor industry.

Speaker #4: I want to thank Camillo, the board, and the management team for the important progress they have made over the past several months. Rather than changing direction, my objective is to build on that foundation and accelerate our pace of innovation and execution.

Speaker #4: As I think about the future of MAGNACHIP, one idea stands above all others: our goal is to transition from being a follower to becoming a leader.

Speaker #4: I believe we have the capability to drive innovation launch differentiated technology, and become a stronger player in power semiconductor industry. That does not necessarily mean being you know, becoming the largest company in every market we serve.

Chae Lee: That does not necessarily mean becoming the largest company in every market we serve. Rather, it means developing differentiated products that solve meaningful customer problems, creating solutions that customers actively seek out, and competing on innovation instead of price alone. Much of today's power semiconductor market, particularly for legacy products, has become increasingly commoditized. Competing primarily on price is not a sustainable strategy, especially in today's environment. Instead, we intend to focus our resources and product that offer greater differentiation, deliver higher customer value, and generate stronger long-term profitability. Our marketing and engineering organizations are already moving in that direction. While I cannot discuss specific products today, we are actively developing differentiated application-specific solutions that leverage our strength in power semiconductor technology to solve customer problems that are not adequately addressed by standard commodity products.

Speaker #4: Rather, it means developing differentiated products that solve meaningful customer problems, creating solutions that customers actively seek out, and competing on innovation instead of price alone.

Speaker #4: Much of today's power semiconductor market, particularly for legacy products, has become increasingly commoditized. Competing primarily on price is not a sustainable strategy, especially in today's environment.

Speaker #4: Instead, we intend to focus our resources and product that offer greater differentiation deliver higher customer value and generate stronger long-term profitability. Our marketing and engineering organizations are already moving in that direction.

Speaker #4: While I cannot discuss specific products today, we are actively developing differentiated application-specific solutions that leverage our strengths in power semiconductor technology to solve customer problems that are not adequately addressed by standard commodity products.

Speaker #4: There is a renewed sense of purpose throughout the organization, and our teams are energized by the opportunity to develop industry-leading products that create meaningful value for our customers.

Chae Lee: There is a renewed sense of purpose throughout the organization, and our teams are energized by the opportunity to develop industry-leading products that create meaningful value for our customers. Of course, this transformation will not happen overnight, but we are well on our way from being a follower to becoming a leader. To accelerate that journey, last week, we announced a strategic partnership with Navitas Semiconductor that advances two key pillars of our growth strategy: technology expansion and strategic partnerships. Under the agreement, we will license Navitas' proven Gen 6, Gen 4, Gen 5 technology, covering 1,200 volt, 2,300 volt, 3,300 volt, and higher voltage application, while also gaining access to its established silicon carbide supply chain ecosystem. This partnership provides MagnaChip with a capital-efficient path to accelerate our entry into the high voltage and ultra-high voltage silicon carbide market.

Chae Lee: There is a renewed sense of purpose throughout the organization, and our teams are energized by the opportunity to develop industry-leading products that create meaningful value for our customers. Of course, this transformation will not happen overnight, but we are well on our way from being a follower to becoming a leader. To accelerate that journey, last week, we announced a strategic partnership with Navitas Semiconductor that advances two key pillars of our growth strategy: technology expansion and strategic partnerships. Under the agreement, we will license Navitas' proven Gen 6, Gen 4, Gen 5 technology, covering 1,200 volt, 2,300 volt, 3,300 volt, and higher voltage application, while also gaining access to its established silicon carbide supply chain ecosystem. This partnership provides Magnachip with a capital-efficient path to accelerate our entry into the high voltage and ultra-high voltage silicon carbide market.

Speaker #4: Of course, this transformation will not happen overnight. But we are well on our way from being a follower to becoming a leader. To accelerate that journey, last week, we announced a strategic partnership with Novatek Semiconductor that advances two key pillars of our growth strategy.

Speaker #4: Technology expansion and strategic partnerships. Under the agreement, we will license Novatek's proven GenSig Gen4, Gen5 technology covering 1,200 volt, 2,300 volt, 3,300 volt, and higher voltage application, while also gaining access to its established silicon carbide supply chain ecosystem.

Speaker #4: This partnership provides MagnaChip with a capital-efficient path to accelerate our entry into the high-voltage silicon carbide market. We plan to pour, qualify, and ultimately manufacture those products in our fab in Korea, leveraging our manufacturing expertise to accelerate commercialization and support long-term growth.

Chae Lee: We plan to port, qualify, and ultimately manufacture those products in our fab in Korea, leveraging our manufacturing expertise to accelerate commercialization and support long-term growth. We believe this partnership will significantly expand our addressable market and strengthen our ability to serve customers in energy and grid infrastructure, industrial electrification, automotive, renewable energy, and other high-power applications. It also positions MagnaChip to participate in some of the fastest-growing and highest-value segments of the silicon carbide power semiconductor market. Strategically, this partnership brings together Navitas' industry-proven silicon carbide technology with MagnaChip's expertise in silicon IGBT and MOSFET technologies and advanced manufacturing capabilities. Together, these complementary strengths create a strong foundation for future innovation across a broad range of power semiconductor solutions, accelerate our technology roadmap, expand our market opportunity, strengthen our competitive position, and create long-term value for our shareholders. Turning now to our quarterly results.

Chae Lee: We plan to port, qualify, and ultimately manufacture those products in our fab in Korea, leveraging our manufacturing expertise to accelerate commercialization and support long-term growth. We believe this partnership will significantly expand our addressable market and strengthen our ability to serve customers in energy and grid infrastructure, industrial electrification, automotive, renewable energy, and other high-power applications. It also positions Magnachip to participate in some of the fastest-growing and highest-value segments of the silicon carbide power semiconductor market. Strategically, this partnership brings together Navitas' industry-proven silicon carbide technology with Magnachip's expertise in silicon IGBT and MOSFET technologies and advanced manufacturing capabilities.

Speaker #4: We believe this partnership will significantly expand our addressable market and strengthen our ability to serve customers in energy, grid infrastructure, industrial electrification, automotive, renewable energy, and other high-power applications.

Speaker #4: It also positions MAGNACHIP to participate in some of the fastest-growing and highest-value segments of the silicon carbide power semiconductor market. Strategically, this partnership brings together Novatek's industries, proven silicon carbide technology with MAGNACHIP's expertise in silicon IGBT and MOSFET technologies, and advanced manufacturing capabilities.

Speaker #4: Together, these complementary strengths create a strong foundation for future innovation across a broad range of power semiconductor solutions, accelerate our technology roadmap, expand our market opportunity, strengthen our competitive position, and create long-term value for our shareholders.

Chae Lee: Together, these complementary strengths create a strong foundation for future innovation across a broad range of power semiconductor solutions, accelerate our technology roadmap, expand our market opportunity, strengthen our competitive position, and create long-term value for our shareholders. Turning now to our quarterly results.

Speaker #4: Turning it now to our quarterly results. Our second quarter performance reflects our heavy dependence on legacy products with limited differentiation. While pricing pressure in our legacy product portfolio will continue for some time, we are also starting to see strength from our recently introduced new generation products that carry higher margins.

Chae Lee: Our Q2 performance reflects our heavy dependence on legacy products with limited differentiation. While pricing pressure in our legacy product portfolio will continue for some time, we are also starting to see strength from our recently introduced new generation products that carry higher margins. While it's still early, we believe this is an encouraging sign that our product strategy is beginning to gain traction. As we look ahead, our priorities are straightforward and remain aligned with the six strategic pillars Camillo described on prior calls. Our highest priority is discipline R&D execution while continuing to develop innovative, differentiated solutions. While we still have significant work ahead, we believe these early results reinforce that we are moving in the right direction. I am excited about the opportunities ahead. MagnaChip has talented people, valuable technology, and a clear opportunity to strengthen its competitive position with differentiated products over time.

Speaker #4: While it's still early, we believe this is an encouraging sign that our product strategy is beginning to gain traction. As we look ahead, our priorities are straightforward and remain aligned with the six strategic pillars Camillo described on prior calls.

Speaker #4: Our highest priority is disciplined R&D execution while continuing to develop innovative, differentiated solutions. While we still have significant work ahead, we believe these early results reinforce that we are moving in the right direction.

Chae Lee: Our highest priority is discipline R&D execution while continuing to develop innovative, differentiated solutions. While we still have significant work ahead, we believe these early results reinforce that we are moving in the right direction. I am excited about the opportunities ahead. Magnachip has talented people, valuable technology, and a clear opportunity to strengthen its competitive position with differentiated products over time.

Speaker #4: I am excited about the opportunities ahead. MAGNACHIP has talented people, valuable technology, and a clear opportunity to strengthen its competitive position with differentiated products over time.

Speaker #4: While there is important work ahead, I am confident we are building the right foundation for the company's next chapter and for creating sustainable, long-term value for our shareholders.

Chae Lee: While there is important work ahead, I am confident we are building the right foundation for the company's next chapter and for creating sustainable long-term value for our shareholders. With that, I'll turn the call over to our Chief Financial Officer, Shin Young Park, to review our financial results and provide current quarter outlook.

Speaker #4: With that, I'll turn the call over to our chief financial officer, Shin Young-Park, to review our financial results and provide current quarter outlook.

Speaker #1: Thank you, Chair, and welcome, everyone. Let me begin with our key financial results for Q2. Total Q2 consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC, was $44.7 million, within the guidance range of $44.5 to $48.5 million.

Shin Young Park: Thank you, Chae, and welcome everyone. Let me begin with our key financial results for Q2. Total Q2 consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC, was $44.7 million, within the guidance range of $44.5 to $48.5 million. Revenue was down 6.1% year over year and down 3.3% sequentially, compared with $47.6 million in Q2 2025 and $46.2 million in Q1 2026. Year over year revenue decline was primarily driven by weaker demand for our legacy products, resulting from intensified pricing competition. Sequentially, revenue declined mainly due to seasonal softness in the communication segment. As we noted last quarter, Q1 revenue was stronger than typical seasonality, benefiting from a one-time sales incentive program that reduced channel inventory levels. In Q2, consolidated gross profit margin from continuing operations improved to 19.3%, exceeding the high end of our guidance range of 17% to 19%.

Shinyoung Park: Thank you, Chae, and welcome everyone. Let me begin with our key financial results for Q2. Total Q2 consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC, was $44.7 million, within the guidance range of $44.5 to $48.5 million. Revenue was down 6.1% year over year and down 3.3% sequentially, compared with $47.6 million in Q2 2025 and $46.2 million in Q1 2026. Year over year revenue decline was primarily driven by weaker demand for our legacy products, resulting from intensified pricing competition. Sequentially, revenue declined mainly due to seasonal softness in the communication segment. As we noted last quarter, Q1 revenue was stronger than typical seasonality, benefiting from a one-time sales incentive program that reduced channel inventory levels. In Q2, consolidated gross profit margin from continuing operations improved to 19.3%, exceeding the high end of our guidance range of 17% to 19%.

Speaker #1: Revenue was down 6.1% year over year and down 3.3% sequentially, compared with 47.6 million dollars in Q2 2025 and 46.2 million dollars in Q1 2026.

Speaker #1: Year over year revenue decline was primarily driven by recurring demand for our legacy products, resulting from intensified pricing competition. Sequentially, revenue declined mainly due to seasonal softness in the communication segment.

Speaker #1: As we noted last quarter, Q1 revenue was stronger than typical seasonality, benefiting from a one-time sales incentive program that reduced channel inventory levels. In Q2, consolidated gross profit margin from continuing operations improved to 19.3%, exceeding the high end of our guidance range of 17 to 19%.

Shin Young Park: This compares with 20.4% in Q2 2025 and 15.6% in Q1 2026. The year over year decline in gross profit margin was primarily attributable to an unfavorable product mix, driven mainly by ASP erosion, particularly in China. Sequentially, gross profit margin improved primarily due to the one quarter lag benefit from higher utilization rate in Q1 2026. Moving to operating expenses. SG&A expense was $8.67 million in Q2, compared with $9 million in Q2 2025 and $7.7 million in Q1 2026. Stock-based compensation included in SG&A was $0.8 million in Q2, compared with $0.8 million in Q2 2025 and $0.6 million in Q1 2026. R&D expense was $7.9 million in Q2, compared with $6.5 million in Q2 2025 and $6.7 million in Q1 2026. The year over year and sequential increase primarily reflects the timing of continued investment in our new generation product development activities.

Shinyoung Park: This compares with 20.4% in Q2 2025 and 15.6% in Q1 2026. The year over year decline in gross profit margin was primarily attributable to an unfavorable product mix, driven mainly by ASP erosion, particularly in China. Sequentially, gross profit margin improved primarily due to the one quarter lag benefit from higher utilization rate in Q1 2026. Moving to operating expenses. SG&A expense was $8.67 million in Q2, compared with $9 million in Q2 2025 and $7.7 million in Q1 2026. Stock-based compensation included in SG&A was $0.8 million in Q2, compared with $0.8 million in Q2 2025 and $0.6 million in Q1 2026. R&D expense was $7.9 million in Q2, compared with $6.5 million in Q2 2025 and $6.7 million in Q1 2026. The year over year and sequential increase primarily reflects the timing of continued investment in our new generation product development activities.

Speaker #1: This compares with 20.4% in Q2 2025 and 15.6% in Q1 2026. The year over year decline in gross profit margin was primarily attributable to an unfavorable product mix, driven mainly by ASB erosion, particularly in China.

Speaker #1: Sequentially, gross profit margin improved primarily due to the one-quarter lag benefit from higher utilization rate in Q1 2026. Moving to operating expenses. As G&A expense was 8.7 million dollars in Q2, compared with 9 million dollars in Q2 2025 and 7.7 million dollars in Q1 2026, stock-based compensation included in SG&A was 0.8 million dollars in Q2, compared with 0.8 million dollars in Q2 2025 and 0.6 million dollars in Q1 2026.

Speaker #1: R&D expense was 7.9 million dollars in Q2, compared with 6.5 million dollars in Q2 2025 and 6.7 million dollars in Q1 2026. The year over year and sequential increase primarily reflects the timing of continued investment in our new generation product development activities.

Speaker #1: As we mentioned on our prior earnings call, we remain on track to deliver our target of 55 new generation products in 2026. Before turning to our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our second quarter earnings release.

Shin Young Park: As we mentioned on our prior earnings call, we remain on track to deliver our target of 55 new generation products in 2026. Before turning to our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our Q2 earnings release. Our non-GAAP results are as follows. Adjusted operating loss was $7 million in Q2, compared with a loss of $4.8 million in Q2 2025 and a loss of $6.5 million in Q1 2026. Adjusted EBITDA was -$4.2 million in Q2, compared with -$1.5 million in Q2 2025 and -$3.6 million in Q1 2026. The quarter over quarter decline in our non-GAAP results was primarily driven by higher operating expenses such as SG&A and R&D expenses, as discussed earlier.

Shinyoung Park: As we mentioned on our prior earnings call, we remain on track to deliver our target of 55 new generation products in 2026. Before turning to our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our Q2 earnings release. Our non-GAAP results are as follows. Adjusted operating loss was $7 million in Q2, compared with a loss of $4.8 million in Q2 2025 and a loss of $6.5 million in Q1 2026. Adjusted EBITDA was -$4.2 million in Q2, compared with -$1.5 million in Q2 2025 and -$3.6 million in Q1 2026. The quarter over quarter decline in our non-GAAP results was primarily driven by higher operating expenses such as SG&A and R&D expenses, as discussed earlier.

Speaker #1: Our non-GAAP results are as follows. Adjusted operating loss was 7 million dollars in Q2, compared with a loss of 4.8 million dollars in Q2 2025 and a loss of 6.5 million dollars in Q1 2026.

Speaker #1: Adjusted EBITDA was negative $4.2 million in Q2, compared with negative $1.5 million in Q2 2025 and negative $3.6 million in Q1 2026.

Speaker #1: The quarter over quarter decline in our non-GAAP results was primarily driven by higher operating expenses such as SG&A and R&D expenses, as discussed earlier.

Shin Young Park: Q2 non-GAAP diluted loss per share was $0.13, compared to a loss per share of $0.05 in Q2 2025 and a loss per share of $0.11 in Q1 2026. Weighted average non-GAAP diluted shares outstanding for the quarter were 36.5 million, compared to 36.1 million in Q2 2025 and 36.4 million in Q1 2026. Moving to the balance sheet. We ended Q2 with cash of $83.9 million, compared to $94.6 million at the end of Q1. The decrease was primarily driven by operating cash outflows and $1.3 million of capital expenditures. At the end of Q2, total borrowings were $41.5 million, including $15.6 million of the equipment loan. During the quarter, we established a $50 million at-the-market offering program, which provides us with additional financial flexibility if and when we choose to utilize it in the future. Moving to our Q3 2026 guidance.

Shinyoung Park: Q2 non-GAAP diluted loss per share was $0.13, compared to a loss per share of $0.05 in Q2 2025 and a loss per share of $0.11 in Q1 2026. Weighted average non-GAAP diluted shares outstanding for the quarter were 36.5 million, compared to 36.1 million in Q2 2025 and 36.4 million in Q1 2026. Moving to the balance sheet. We ended Q2 with cash of $83.9 million, compared to $94.6 million at the end of Q1. The decrease was primarily driven by operating cash outflows and $1.3 million of capital expenditures.

Speaker #1: Q2 non-GAAP diluted loss per share was $0.13, compared to a loss per share of $0.05 in Q2 2025 and a loss per share of $0.11 in Q1 2026.

Speaker #1: Weighted average non-GAAP diluted shares outstanding for the quarter were 36.5 million, compared to 36.1 million in Q2 2025 and 36.4 million in Q1 2026.

Speaker #1: Moving to the balance sheet. We ended Q2 with cash of $83.9 million, compared to $94.6 million at the end of Q1. The decrease was primarily driven by operating cash outflows and $1.3 million of capital expenditures.

Speaker #1: At the end of Q2, total borrowings were $41.5 million, including $15.6 million of equipment loan. During the quarter, we established a $50 million at-the-market offering program, which provides us with additional financial flexibility if and when we choose to utilize it in the future.

Shinyoung Park: At the end of Q2, total borrowings were $41.5 million, including $15.6 million of the equipment loan. During the quarter, we established a $50 million at-the-market offering program, which provides us with additional financial flexibility if and when we choose to utilize it in the future. Moving to our Q3 2026 guidance.

Speaker #1: Now, moving to our third quarter 2026 guidance. While actual results may vary, for Q3 2026, we currently expect consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC businesses, to be in the range of $41.5 million to $45.5 million, a decrease of 2.7% sequentially and down 5.2% year over year at the midpoint.

Shin Young Park: While actual results may vary, for Q3 2026, we currently expect consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC businesses, to be in the range of $41.5 million to $45.5 million, a decrease of 2.7% sequentially and down 5.2% year-over-year at the midpoint. This compares with $44.7 million in Q2 2026 and $45.9 million in Q3 2025. Consolidated gross profit margin from continuing operations to be in the range of 17% to 19%, compared with 19.3% in Q2 2026 and 18.6% in Q3 2025. The sequential decline is primarily due to an unfavorable product mix. I would like to provide some additional context behind our Q3 guidance. We continue to see healthy demand for our low-voltage battery FET product line for mobile products. Nevertheless, we expect Q3 revenue to decline sequentially due to three near-term factors.

Shinyoung Park: While actual results may vary, for Q3 2026, we currently expect consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC businesses, to be in the range of $41.5 million to $45.5 million, a decrease of 2.7% sequentially and down 5.2% year-over-year at the midpoint. This compares with $44.7 million in Q2 2026 and $45.9 million in Q3 2025. Consolidated gross profit margin from continuing operations to be in the range of 17% to 19%, compared with 19.3% in Q2 2026 and 18.6% in Q3 2025. The sequential decline is primarily due to an unfavorable product mix.

Speaker #1: This compares with $44.7 million in Q2 2026 and $45.9 million in Q3 2025. Consolidated gross profit margin from continuing operations is expected to be in the range of 17% to 19%, compared with 19.3% in Q2 2026 and 18.6% in Q3 2025.

Speaker #1: The sequential decline is primarily due to an unfavorable product mix. I would like to provide some additional context behind our Q3 guidance. We continue to see healthy demand for our low-voltage, battery-fed product line for mobile products.

Shinyoung Park: I would like to provide some additional context behind our Q3 guidance. We continue to see healthy demand for our low-voltage battery FET product line for mobile products. Nevertheless, we expect Q3 revenue to decline sequentially due to three near-term factors.

Speaker #1: Nevertheless, we expect third quarter revenue to decline sequentially due to three near-term factors. Firstly, packaging constraints in our supply chain are limiting our ability to fully satisfy demand.

Shin Young Park: Firstly, packaging constraints in our supply chain that are limiting our ability to fully satisfy demand. Secondly, our customers' volumes in certain custom applications are lower than their earlier plans. Finally, an unfavorable product mix resulting from continued pricing pressure on our legacy products. While these factors will affect our Q3 results, we remain focused on executing our multi-year portfolio transformation and increasing the contribution from differentiated new generation products, which we believe will strengthen our competitive position and support improved financial performance over time. We continue to expect new generation products to contribute at least 10% of our revenue in Q4 2026, compared with approximately 2% for full year 2025. Looking ahead, the lower fab utilization in Q3 resulting from the planned electrical substation upgrade expected to have a one quarter lag effect on gross margin.

Shinyoung Park: Firstly, packaging constraints in our supply chain that are limiting our ability to fully satisfy demand. Secondly, our customers' volumes in certain custom applications are lower than their earlier plans. Finally, an unfavorable product mix resulting from continued pricing pressure on our legacy products. While these factors will affect our Q3 results, we remain focused on executing our multi-year portfolio transformation and increasing the contribution from differentiated new generation products, which we believe will strengthen our competitive position and support improved financial performance over time. We continue to expect new generation products to contribute at least 10% of our revenue in Q4 2026, compared with approximately 2% for full-year 2025. Looking ahead, the lower fab utilization in Q3 resulting from the planned electrical substation upgrade expected to have a one quarter lag effect on gross margin.

Speaker #1: Secondly, our customers' volumes in certain custom applications are lower than their earlier plans. And finally, an unfavorable product mix resulting from continued pricing pressure on our legacy products.

Speaker #1: While these factors will affect our third quarter result, we remain focused on executing our multi-year portfolio transformation and increasing the contribution from differentiated new generation products, which we believe will strengthen our competitive position and support improved financial performance over time.

Speaker #1: We continue to expect new generation products to contribute at least 10% of our revenue in fourth quarter of 2026, compared with approximately 2% for full year 2025.

Speaker #1: Looking ahead, the lower-fab utilization in Q3 resulting from the planned electrical substation upgrade expected to have a one-quarter lag effect on gross margin. As a result, we currently expect Q4 gross margin to decline slightly from Q3.

Shin Young Park: As a result, we currently expect Q4 gross margin to decline slightly from Q3. Thank you. I'll turn the call over to Chae for his final remarks. Chae?

Shinyoung Park: As a result, we currently expect Q4 gross margin to decline slightly from Q3. Thank you. I'll turn the call over to Chae for his final remarks. Chae?

Speaker #1: Thank you. I'll now turn the call over to Chet for his final remarks. Chet?

Speaker #2: Thank you, Shin Yeo. The financial results we reported today reflect the company that is still in the early stages of our transition. While we deliver results within our guidance, there is still a significant work ahead to improve our financial performance.

Chae Lee: Thank you, Shin Young. The financial results we reported today reflect a company that is still in the early stages of our transition. While we deliver results within our guidance, there is still significant work ahead to improve our financial performance. We are not satisfied with where we are today, although I am encouraged by what I have seen during my first month at MagnaChip and our recent partnerships with Navitas. We have a talented team, a focused strategy, and a product roadmap that I believe can ultimately lead the industry. Our priorities are clear: execute with discipline, develop differentiated products that create greater value for our customers, and steadily improve our financial performance. We understand that ultimately we will be judged by our results, and we are committed to earning the confidence of our shareholders through consistent execution.

Chae Lee: Thank you, Shin Young. The financial results we reported today reflect a company that is still in the early stages of our transition. While we deliver results within our guidance, there is still significant work ahead to improve our financial performance. We are not satisfied with where we are today, although I am encouraged by what I have seen during my first month at Magnachip and our recent partnerships with Navitas. We have a talented team, a focused strategy, and a product roadmap that I believe can ultimately lead the industry. Our priorities are clear: execute with discipline, develop differentiated products that create greater value for our customers, and steadily improve our financial performance. We understand that ultimately we will be judged by our results, and we are committed to earning the confidence of our shareholders through consistent execution.

Speaker #2: We are not satisfied with where we are today. Although I am encouraged by what I have seen, during my first month at MAGNACHIP and our recent partnerships with Navitas.

Speaker #2: We have a talented team, a focused strategy, and a product roadmap that I believe can ultimately lead the industry. I prioritize our career. Execute with discipline.

Speaker #2: Develop differentiated products that create greater value for our customers and steadily improve our financial performance. We understand that ultimately we will be judged by our results.

Speaker #2: And we are committed to earning the confidence of our shareholders through consistent execution. With that, operator, we would now be happy to take your questions.

Chae Lee: With that, operator, we would now be happy to take your questions.

Operator: Thank you. As a reminder, to ask a question at this time, please press star one one on your touch-tone telephone. We'll give it a moment to compile the Q&A roster. It appears there are no questions in the queue at this time. I will now turn the call back over to Mike Bishop.

Speaker #3: Thank you. And as a reminder, to ask a question at this time, please press *11 on your touchtone telephone. We'll give it a moment to compile the Q&A roster.

Speaker #3: And it appears there are no questions in the queue at this time. I will now turn the call back over to Mike Bishop.

Speaker #4: Thank you, everyone, for supporting our call today and for participating on our call. We appreciate your support. And with that, this concludes the call.

Mike Bishop: Thank you everyone for participating on our call today. We appreciate your support. With that, this concludes the call. Operator?

Speaker #4: Operator?

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Q2 2026 MagnaChip Semiconductor Corp Earnings Call

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