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    SEC Form 10-Q filed by Magnachip Semiconductor Corporation

    8/5/25 4:22:32 PM ET
    $MX
    Semiconductors
    Technology
    Get the next $MX alert in real time by email
    Form 10-Q
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us-gaap:AdditionalPaidInCapitalMember 2024-03-31 iso4217:USD xbrli:shares xbrli:pure utr:Year iso4217:KRW iso4217:USD xbrli:shares
     
     
    UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
    Washington, D.C. 20549
     
     
    FORM
    10-Q
     
     
     
    ☒
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended June 30, 2025
    or
     
    ☐
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from
     
     
     
     
    to
     
     
     
     
    .
    Commission File Number:
    001-34791
     
     
     
    LOGO
    Magnachip Semiconductor Corporation
    (Exact name of registrant as specified in its charter)
     
     
     
    Delaware
     
    83-0406195
    (State or other jurisdiction of
    incorporation or organization)
     
    (I.R.S. Employer
    Identification No.)
    c/o Magnachip Semiconductor, Ltd.
    15F, 76 Jikji-daero
    436beon-gil
    ,
    Heungdeok-gu
    Cheongju-si,
    Chungcheongbuk-do,
    Republic of Korea 28581
    (Address of principal executive offices) (Zip Code)
    Registrant’s telephone number, including area code: +82 (2) 6903-3000
     
     
    Securities registered pursuant to Section 12(b) of the Act:
     
    Title of each class
     
    Trading
    Symbol(s)
     
    Name of each exchange
    on which registered
    Common Stock, par value $0.01 per share
     
    MX
     
    New York Stock Exchange
     
     
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
    S-T
    (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
    non-accelerated
    filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
    12b-2
    of the Exchange Act.
     
    Large accelerated filer   ☐    Accelerated filer   ☒
    Non-accelerated
    filer
      ☐    Smaller reporting company   ☒
         Emerging growth company   ☐
    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
    Indicate by check mark whether the registrant is a shell company (as defined in Rule
    12b-2
    of the Exchange Act). ☐ Yes ☒ No
    As of July 31, 2025, the registrant had 35,924,033 shares of common stock outstanding.
     
     
     


    MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

    TABLE OF CONTENTS

     

             Page No.  

    PART I FINANCIAL INFORMATION

         1  

    Item 1.

     

    Interim Consolidated Financial Statements (Unaudited)

         1  
     

    Magnachip Semiconductor Corporation and Subsidiaries Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024

         1  
     

    Magnachip Semiconductor Corporation and Subsidiaries Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024

         2  
     

    Magnachip Semiconductor Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2025 and 2024

         3  
     

    Magnachip Semiconductor Corporation and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024

         4  
     

    Magnachip Semiconductor Corporation and Subsidiaries Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024

         5  
     

    Magnachip Semiconductor Corporation and Subsidiaries Notes to Consolidated Financial Statements

         6  

    Item 2.

     

    Management’s Discussion and Analysis of Financial Condition and Results of Operations

         27  

    Item 3.

     

    [Reserved]

         49  

    Item 4.

     

    Controls and Procedures

         49  

    PART II OTHER INFORMATION

         50  

    Item 1.

     

    Legal Proceedings

         50  

    Item 1A.

     

    Risk Factors

         50  

    Item 2.

     

    Unregistered Sales of Equity Securities and Use of Proceeds

         51  

    Item 3.

     

    Defaults Upon Senior Securities

         51  

    Item 4.

     

    Mine Safety Disclosures

         51  

    Item 5.

     

    Other Information

         52  

    Item 6.

     

    Exhibits

         53  

    SIGNATURES

         54  


    http://fasb.org/us-gaap/2024#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2024#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#OtherAssetsCurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesCurrent
    PART I—FINANCIAL INFORMATION
     
    Item 1.
    Interim Consolidated Financial Statements (Unaudited)
    MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS (Unaudited)
     
        
    June 30,
    2025
       
    December 31,
    2024
     
        
    (In thousands of U.S. dollars, except share data)
     
    Assets
        
    Current assets
        
    Cash and cash equivalents
       $ 113,326     $ 138,610  
    Accounts receivable, net
         28,784       28,402  
    Inventories, net
         37,571       30,535  
    Other receivables
         8,329       4,444  
    Prepaid expenses
         6,518       10,379  
    Hedge collateral (Note 8)
         —        2,080  
    Other current assets (Note 18)
         4,926       4,779  
      
     
     
       
     
     
     
    Total current assets
         199,454       219,229  
    Property, plant and equipment, net
         94,262       81,463  
    Operating lease
    right-of-use
    assets
         2,958       3,107  
    Intangible assets, net
         500       507  
    Long-term prepaid expenses, net
         255       165  
    Deferred income taxes
         57,298       52,889  
    Other
    non-current
    assets
         15,804       21,956  
      
     
     
       
     
     
     
    Total assets
       $ 370,531     $ 379,316  
      
     
     
       
     
     
     
    Liabilities and Stockholders’ Equity
        
    Current liabilities
        
    Accounts payable
       $ 19,448     $ 21,642  
    Other accounts payable
         11,900       10,764  
    Accrued expenses (Note 7)
         8,429       8,648  
    Accrued income taxes
         84       56  
    Operating lease liabilities
         1,572       1,393  
    Other current liabilities
         1,483       3,765  
      
     
     
       
     
     
     
    Total current liabilities
         42,916       46,268  
    Long-term borrowings
         36,508       27,211  
    Accrued severance benefits, net
         14,248       17,094  
    Non-current
    operating lease liabilities
         1,382       1,823  
    Other
    non-current
    liabilities
         5,315       10,123  
      
     
     
       
     
     
     
    Total liabilities
         100,369       102,519  
      
     
     
       
     
     
     
    Commitments and contingencies (Note 18)
        
    Stockholders’ equity
        
    Common stock, $0.01 par value, 150,000,000 shares authorized, 57,581,275 shares issued and 35,954,038 outstanding at June 30, 2025 and 57,498,507 shares issued and 36,912,118 outstanding at December 31, 2024
         575       574  
    Additional
    paid-in
    capital
         280,853       279,423  
    Retained earnings
         236,021       244,576  
    Treasury stock, 21,627,237 shares at June 30, 2025 and 20,586,389 shares at December 31, 2024, respectively
         (229,381 )      (225,883 ) 
    Accumulated other comprehensive loss
         (17,906 )      (21,893 ) 
      
     
     
       
     
     
     
    Total stockholders’ equity
         270,162       276,797  
      
     
     
       
     
     
     
    Total liabilities and stockholders’ equity
       $ 370,531     $ 379,316  
      
     
     
       
     
     
     
    The accompanying notes are an integral part of these consolidated financial statements.
     
    1

    Table of Contents
    MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
     
        
    Three Months Ended
       
    Six Months Ended
     
        
    June 30,
    2025
       
    June 30,
    2024
       
    June 30,
    2025
       
    June 30,
    2024
     
        
    (In thousands of U.S. dollars, except share data)
     
    Revenues:
      
    Net sales – Power solutions business
       $ 47,622     $ 44,064     $ 92,344     $ 83,976  
    Net sales – transitional Fab 3 foundry services
         —        2,336       —        5,862  
      
     
     
       
     
     
       
     
     
       
     
     
     
    Total revenues
         47,622       46,400       92,344       89,838  
    Cost of sales:
            
    Cost of sales – Power solutions business
         37,910       34,157       73,270       67,025  
    Cost of sales – transitional Fab 3 foundry services
         —        2,457       —        6,668  
      
     
     
       
     
     
       
     
     
       
     
     
     
    Total cost of sales
         37,910       36,614       73,270       73,693  
      
     
     
       
     
     
       
     
     
       
     
     
     
    Gross profit
         9,712       9,786       19,074       16,145  
    Operating expenses:
            
    Selling, general and administrative expenses
         9,321       9,735       19,035       19,275  
    Research and development expenses
         6,983       5,774       12,919       11,984  
    Other charges
         846       —        846       —   
      
     
     
       
     
     
       
     
     
       
     
     
     
    Total operating expenses
         17,150       15,509       32,800       31,259  
      
     
     
       
     
     
       
     
     
       
     
     
     
    Operating loss
         (7,438 )      (5,723 )      (13,726 )      (15,114 ) 
    Interest income
         1,324       2,134       2,869       4,275  
    Interest expense
         (402 )      (487 )      (851 )      (672 ) 
    Foreign currency gain (loss), net
         10,810       (3,625 )      10,405       (8,613 ) 
    Other income, net
         56       108       170       152  
      
     
     
       
     
     
       
     
     
       
     
     
     
    Income (Loss) from continuing operations before income tax benefit, net
         4,350       (7,593 )      (1,133 )      (19,972 ) 
    Income tax benefit, net
         (4,136 )      (5,385 )      (4,537 )      (3,480 ) 
      
     
     
       
     
     
       
     
     
       
     
     
     
    Income (Loss) from continuing operations
         8,486       (2,208 )      3,404       (16,492 ) 
    Loss from discontinued operations, net of tax
         (8,163 )      (10,789 )      (11,959 )      (11,922 ) 
      
     
     
       
     
     
       
     
     
       
     
     
     
    Net income (loss)
       $ 323     $ (12,997 )    $ (8,555 )    $ (28,414 ) 
      
     
     
       
     
     
       
     
     
       
     
     
     
    Basic earnings (loss) per common share—
            
    Continuing operations
       $ 0.24     $ (0.06 )    $ 0.09     $ (0.43 ) 
    Discontinued operations
       $ (0.23 )    $ (0.28 )    $ (0.32 )    $ (0.31 ) 
    Total
       $ 0.01     $ (0.34 )    $ (0.23 )    $ (0.74 ) 
    Diluted earnings (loss) per common share—
            
    Continuing operations
       $ 0.23     $ (0.06 )    $ 0.09     $ (0.43 ) 
    Discontinued operations
       $ (0.22 )    $ (0.28 )    $ (0.32 )    $ (0.31 ) 
    Total
       $ 0.01     $ (0.34 )    $ (0.23 )    $ (0.74 ) 
    Weighted average number of shares—
            
    Basic
         36,083,703       38,174,920       36,483,551       38,359,851  
    Diluted
         36,768,647       38,174,920       37,209,622       38,359,851  
    The accompanying notes are an integral part of these consolidated financial statements.
     
    2

    Table of Contents
    MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
     
        
    Three Months Ended
       
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
       
    June 30,
    2025
       
    June 30,
    2024
     
        
    (In thousands of U.S. dollars)
     
    Net income (loss)
       $ 323      $ (12,997 )    $ (8,555 )    $ (28,414 ) 
      
     
     
        
     
     
       
     
     
       
     
     
     
    Other comprehensive income (loss) (Note 15)
             
    Foreign currency translation adjustments
         875        (1,591 )      1,630       (5,088 ) 
    Derivative adjustments
         1,696        (280 )      2,357       (826 ) 
      
     
     
        
     
     
       
     
     
       
     
     
     
    Total other comprehensive income (loss)
         2,571        (1,871 )      3,987       (5,914 ) 
      
     
     
        
     
     
       
     
     
       
     
     
     
    Total comprehensive income (loss)
       $ 2,894      $ (14,868 )    $ (4,568 )    $ (34,328 ) 
      
     
     
        
     
     
       
     
     
       
     
     
     
    The accompanying notes are an integral part of these consolidated financial statements.
     
    3

    Table of Contents
    MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
     
                     
    Additional
    Paid-In

    Capital
                   
    Accumulated
    Other
    Comprehensive
    Loss
           
        
    Common Stock
       
    Retained
    Earnings
       
    Treasury
    Stock
       
    Total
     
    (In thousands of U.S. dollars, except share data)
      
    Shares
       
    Amount
     
    Three Months Ended June 30, 2025:
                   
    Balance at March 31, 2025
         36,675,789     $ 575      $ 280,452     $ 235,698     $ (227,047 )    $ (20,477 )    $ 269,201  
    Stock-based compensation
         —        —         462       —        —        —        462  
    Settlement of restricted stock units
         9,806       0        (61 )      —        —        —        (61 ) 
    Acquisition of treasury stock
         (731,557 )      —         —        —        (2,334 )      —        (2,334 ) 
    Other comprehensive income, net
         —        —         —        —        —        2,571       2,571  
    Net income
         —        —         —        323       —        —        323  
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
    Balance at June 30, 2025
         35,954,038     $ 575      $ 280,853     $ 236,021     $ (229,381 )    $ (17,906 )    $ 270,162  
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
    Three Months Ended June 30, 2024:
                   
    Balance at March 31, 2024
         38,263,642     $ 569      $ 274,156     $ 283,467     $ (217,607 )    $ (18,700 )    $ 321,885  
    Stock-based compensation
         —        —         1,216       —        —        —        1,216  
    Settlement of restricted stock units
         6,996       0        (43 )      —        —        —        (43 ) 
    Acquisition of treasury stock
         (471,156 )      —         —        —        (2,342 )      —        (2,342 ) 
    Other comprehensive loss, net
         —        —         —        —        —        (1,871 )      (1,871 ) 
    Net loss
         —        —         —        (12,997 )      —        —        (12,997 ) 
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
    Balance at June 30, 2024
         37,799,482     $ 569      $ 275,329     $ 270,470     $ (219,949 )    $ (20,571 )    $ 305,848  
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
                     
    Additional
    Paid-In

    Capital
                   
    Accumulated
    Other
    Comprehensive
    Loss
           
        
    Common Stock
       
    Retained
    Earnings
       
    Treasury
    Stock
       
    Total
     
    (In thousands of U.S. dollars, except share data)
      
    Shares
       
    Amount
     
    Six Months Ended June 30, 2025:
                   
    Balance at December 31, 2024
         36,912,118     $ 574      $ 279,423     $ 244,576     $ (225,883 )    $ (21,893 )    $ 276,797  
    Stock-based compensation
         —        —         1,492       —        —        —        1,492  
    Settlement of restricted stock units
         82,768       1        (62 )      —        —        —        (61 ) 
    Acquisition of treasury stock
         (1,040,848 )      —         —        —        (3,498 )      —        (3,498 ) 
    Other comprehensive income, net
         —        —         —        —        —        3,987       3,987  
    Net loss
         —        —         —        (8,555 )      —        —        (8,555 ) 
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
    Balance at June 30, 2025
         35,954,038     $ 575      $ 280,853     $ 236,021     $ (229,381 )    $ (17,906 )    $ 270,162  
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
    Six Months Ended June 30, 2024:
                   
    Balance at December 31, 2023
         38,852,742     $ 569      $ 273,256     $ 298,884     $ (213,454 )    $ (14,657 )    $ 344,598  
    Stock-based compensation
         —        —         2,116       —        —        —        2,116  
    Settlement of restricted stock units
         44,175       0        (43 )      —        —        —        (43 ) 
    Acquisition of treasury stock
         (1,097,435 )      —         —        —        (6,495 )      —        (6,495 ) 
    Other comprehensive loss, net
         —        —         —        —        —        (5,914 )      (5,914 ) 
    Net loss
         —        —         —        (28,414 )      —        —        (28,414 ) 
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
    Balance at June 30, 2024
         37,799,482     $ 569      $ 275,329     $ 270,470     $ (219,949 )    $ (20,571 )    $ 305,848  
      
     
     
       
     
     
        
     
     
       
     
     
       
     
     
       
     
     
       
     
     
     
    The accompanying notes are an integral part of these consolidated financial statements.
     
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    MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
     
        
    Six Months Ended
     
        
    June 30,
    2025
       
    June 30,
    2024
     
        
    (In thousands of U.S. dollars)
     
    Cash flows from operating activities
        
    Net loss
       $ (8,555 )    $ (28,414 ) 
    Adjustments to reconcile net loss to net cash used in operating activities
        
    Depreciation and amortization
         6,661       8,115  
    Provision for severance benefits
         2,175       2,970  
    Loss (gain) on foreign currency, net
         (18,085 )      16,848  
    Provision (reversal) for inventory reserves
         845       (1,024 ) 
    Stock-based compensation
         1,492       2,116  
    Impairment charges
         7,362       —   
    Deferred income taxes
         (649 )      3,158  
    Others, net
         476       426  
    Changes in operating assets and liabilities
        
    Accounts receivable, net
         (4,600 )      (235 ) 
    Inventories
         (4,979 )      (3,449 ) 
    Other receivables
         (5,835 )      601  
    Other current assets
         5,296       896  
    Accounts payable
         2,559       1,944  
    Other accounts payable
         (4,972 )      (6,676 ) 
    Accrued expenses
         (2,022 )      (427 ) 
    Accrued income taxes
         22       (17 ) 
    Other current liabilities
         (546 )      453  
    Other
    non-current
    liabilities
         8       (246 ) 
    Payment of severance benefits
         (9,843 )      (1,362 ) 
    Others, net
         3,389       (761 ) 
      
     
     
       
     
     
     
    Net cash used in operating activities
         (29,801 )      (5,084 ) 
    Cash flows from investing activities
        
    Proceeds from settlement of hedge collateral
         2,237       —   
    Payment of hedge collateral
         —        (612 ) 
    Purchase of property, plant and equipment
         (12,083 )      (1,566 ) 
    Payment for intellectual property registration
         (85 )      (178 ) 
    Collection of guarantee deposits
         2,336       1,138  
    Payment of guarantee deposits
         (297 )      (1,910 ) 
    Purchase of short-term financial instruments
         —        (30,000 ) 
    Others, net
         180       —   
      
     
     
       
     
     
     
    Net cash used in investing activities
         (7,712 )      (33,128 ) 
    Cash flows from financing activities
        
    Proceeds from long-term borrowings
         6,964       30,059  
    Acquisition of treasury stock
         (4,020 )      (6,859 ) 
    Repayment of financing related to water treatment facility arrangement
         (225 )      (238 ) 
    Repayment of principal portion of finance lease liabilities
         (80 )      (69 ) 
      
     
     
       
     
     
     
    Net cash provided by financing activities
         2,639       22,893  
    Effect of exchange rates on cash and cash equivalents
         9,590       (10,306 ) 
      
     
     
       
     
     
     
    Net decrease in cash and cash equivalents
         (25,284 )      (25,625 ) 
    Cash and cash equivalents
        
    Cash and cash equivalents at beginning of period
         138,610       158,092  
      
     
     
       
     
     
     
    Cash and cash equivalents at end of period
       $ 113,326     $ 132,467  
      
     
     
       
     
     
     
    Supplemental cash flow information
        
    Cash paid for interest on long-term borrowings
       $ 613     $ 266  
    Cash refunded for income taxes
       $ (1,168 )    $ (716 ) 
    Non-cash
    investing activities
        
    Property, plant and equipment additions in other accounts payable
       $ 939     $ 1,467  
    The accompanying notes are an integral part of these consolidated financial statements.
     
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    MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (TABULAR DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
    1. Business, Basis of Presentation and Significant Accounting Policies
    Business
    Magnachip Semiconductor Corporation (together with its subsidiaries, the “Company”) is a designer and manufacturer of analog and mixed-signal power semiconductor platform solutions for various applications, including industrial, automotive, communication, consumer and computing.
    The Company develops and manufactures Power discrete products and develops Power integrated circuit (“IC”) products. Power discrete products include metal oxide semiconductor field effect transistors (“MOSFETs”) and insulated-gate bipolar transistors (“IGBTs”) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop personal computers (“PCs”), notebook PCs, tablet PCs, servers, other consumer electronics, as well as automotive and industrial applications such as power suppliers,
    e-bikes,
    solar inverters, LED lighting and motor drives. Power IC products include
    AC-DC/DC-DC
    converters, LED drivers, regulators, power management integrated circuits (“PMICs”) and level shifter for a range of devices, including televisions, wearable devices, notebooks, tablet PCs and others consumer electronics, as well as automotive applications.
    In 2024, the Power IC business was operated by Magnachip Mixed-Signal, Ltd. (“MMS”), which later transferred the business to Magnachip Semiconductor, Ltd. (“MSK”) effective January 1, 2025, pursuant to an intercompany business transfer agreement executed between MMS and MSK. The transfer was based on the mutual understanding that consolidating the Power IC and Power Analog Solutions businesses under a single company would create a more effective framework for expanding and strengthening the Company’s business for Power products.
    Basis of Presentation
    The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). These interim consolidated financial statements include normal recurring adjustments and the elimination of all intercompany accounts and transactions which are, in the opinion of management, necessary to provide a fair statement of the Company’s financial condition and results of operations for the periods presented. These interim consolidated financial statements are presented in accordance with Accounting Standards Codification (“ASC”) 270, “Interim Reporting” and, accordingly, do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements, except for the changes below.
    The Company has reclassified certain prior year amounts to conform to the current year’s presentation for discontinued operations to reflect a plan to shut down the Company’s Display business and transition into a pure-play Power company. The assets and liabilities related to the discontinued Display business have not been reclassified on the consolidated balance sheets as of June 30, 2025. See Note 2 “Discontinued Operations” for additional information. The consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations, but the material items in the operating and investing activities of cash flows relating to discontinued operations are disclosed in Note 2. Unless otherwise stated, information in these notes to consolidated financial statements relates to the Company’s continuing operations and excludes the discontinued operations.
    There have been no material changes to the Company’s significant accounting policies as of and for the six months ended June 30, 2025, except for those related to discontinued operations as described below, as compared to the significant accounting policies described in the Company’s Annual Report on Form
    10-K
    for the fiscal year ended December 31, 2024.
    Recent Accounting Pronouncements Not Yet Adopted
    In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
    2024-03,
    “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic
    220-40):
    Disaggregation of Income Statement Expenses”
    (“ASU 2024-03”).
    Additionally, in January 2025, the FASB issued ASU
    2025-01
    to clarify the effective date of ASU
    2024-03.
    ASU
    2024-03
    requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to purchases of inventory, employee compensation, depreciation, and intangible asset amortization. In addition, public companies will
     
    6

    Table of Contents
    need to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU
    2024-03
    is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the amendments in this update may be applied prospectively or retrospectively. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
    In December 2023, the FASB issued ASU
    No. 2023-09,
    “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”
    (“ASU 2023-09”),
    which intends to enhance the transparency and decision usefulness of income tax disclosures. It requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. ASU
    2023-09
    is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
     
    7

    Table of Contents
    2. Discontinued Operations
    On March 7, 2025, the Company’s Board of Directors authorized a strategy to transition to a pure-play Power company, focusing its investments on the Power Analog Solutions and Power IC businesses to enhance profitability and maximize shareholder value. As part of this strategy, the Company explored all strategic options including a sale, merger, joint venture, licensing, and wind-down for its Display business (Display IC products). However, the Company was not able to consummate a transaction following several months of discussions with several interested parties on terms that the Company’s Board of Directors believed were in the best interests of the Company and its stockholders.
    Accordingly, on April 6, 2025, the Company’s Board of Directors unanimously approved the plan to shut down the Company’s Display business (the “Discontinued Business”), including the liquidation of MMS, the Company’s indirect wholly owned subsidiary that operated the Discontinued Business. As a result, the Display business qualifies as a discontinued operation in accordance with ASC
    205-20.
    The following table summarizes the
    results
    from discontinued operations, net of tax, for the three and six months ended June 30, 2025 and 2024 (in thousands):
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Net sales
       $ 7,730      $ 6,771      $ 17,286      $ 12,400  
    Cost of sales
         4,068        4,956        10,507        7,976  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Gross profit
         3,662        1,815        6,779        4,424  
    Operating expenses:
               
    Selling, general and administrative expenses
         (304 )       1,999        728        3,723  
    Research and development expenses
         2,477        6,917        8,259        11,870  
    Early termination charges
         1,561        —         1,561        —   
    Impairment and other charges
         7,460        —         7,587        —   
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total operating expenses
         11,194        8,916        18,135        15,593  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Operating loss from discontinued operations
         (7,532 )       (7,101 )       (11,356 )       (11,169 ) 
    Interest income
         82        94        208        166  
    Interest expense
         (93 )       (67 )       (187 )       (120 ) 
    Foreign currency gain (loss), net
         (437 )       68        (441 )       55  
    Other income, net
         5        —         5        —   
      
     
     
        
     
     
        
     
     
        
     
     
     
    Loss from discontinued operations before income tax expense
         (7,975 )       (7,006 )       (11,771 )       (11,068 ) 
    Income tax expense, net
         188        3,783        188        854  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Loss from discontinued operations, net of tax
       $ (8,163 )     $ (10,789 )     $ (11,959 )     $ (11,922 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    For the three and six months ended June 30, 2025, the Company recognized the impairment charges of $7,362 thousand, primarily related to certain design tool software contracts in connection with the
    liquidation
    of MMS.
    The following table provides supplemental cash flows information related to discontinued operations (in thousands):
     
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
     
    Significant
    non-cash
    operating activities:
         
    Depreciation and amortization
       $ 12      $ 719  
    Provision for severance benefits
         (243 )       637  
    Stock-based compensation
         (353 )       235  
    Impairment charges
         7,362        —   
    Investing activities:
         
    Capital expenditures
       $ —       $ —   
     
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    Table of Contents
    Although the Company ceased active operations of its Display business, it continues to have limited involvement post-shut down. Specifically, the Company’s Korean subsidiary, MSK, will continue to fulfill remaining customer obligations, including the sale of certain “end of life” (“EOL”) Display products. A small team has been retained to manage this transition and provide ongoing customer support.
    As such, the result of these limited ongoing activities do not qualify for presentation as part of continuing operations and are instead presented as part of discontinued operations. The following table presents the revenue, gross profit and operating expenses related to the Company’s continuing involvement with the Discontinued Business for the periods presented (in thousands):
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30, 2025
     
    Net sales
       $ 2,318      $ 2,318  
    Gross profit
         933        933  
    Operating expenses
         143        143  
    The sale of EOL
    Display
    products and the potential monetization of the intellectual property assets of the Discontinued Business are currently expected to generate cash inflow of approximately $20 million over a period of approximately 2 years from the second half of 2025, depending upon customer demand and monetization efforts of the Display intellectual property assets.
    The total estimated cash cost of the liquidation is approximately $12 to $15 million, which is expected to be offset by the cash inflow that may be generated as described above. The
    one-time
    liquidation cost is expected to consist of statutory severance and other employee-related costs, contract termination charges and other associated costs. Of this estimated total cash cost, the Company paid $6.5 million of statutory severance and other employee-related costs in the second quarter of 2025. Further, the Company originally expected to pay certain contract termination charges in full along with the statutory severance and other employee-related costs, but negotiated with the respective vendors for those contract termination charges totaling $6.5 million to be paid over the duration of the remaining existing contract terms.
     
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    3. Inventories
    Inventories as of June 30, 2025 and December 31, 2024 consist of the following (in thousands):
     
        
    June 30,
    2025
        
    December 31,
    2024
     
    Finished goods
       $ 6,747      $ 7,802  
    Semi-finished goods and
    work-in-process
         34,517        26,797  
    Raw materials
         4,660        3,607  
    Materials
    in-transit
         142        61  
    Less: inventory reserve
         (8,495 )       (7,732 ) 
      
     
     
        
     
     
     
    Inventories, net
       $ 37,571      $ 30,535  
      
     
     
        
     
     
     
    Changes in inventory reserve for the three and six months ended June 30, 2025 and 2024 are as follows (in thousands):
     
        
    Three Months
    Ended
        
    Six Months
    Ended
        
    Three Months
    Ended
        
    Six Months
    Ended
     
        
    June 30, 2025
        
    June 30, 2024
     
    Beginning balance
       $ (8,754 )     $ (7,732 )     $ (8,947 )     $ (10,599 ) 
    Change in reserve
               
    Inventory reserve charged to costs of sales
         (1,357 )       (3,656 )       (1,411 )       (2,961 ) 
    Sale of previously reserved inventory
         1,578        2,846        1,466        4,127  
      
     
     
        
     
     
        
     
     
        
     
     
     
         221        (810 )       55        1,166  
    Write off
         538        735        61        327  
    Translation adjustments
         (500 )       (688 )       290        565  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Ending balance
       $ (8,495 )     $ (8,495 )     $ (8,541 )     $ (8,541 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Inventory reserve represents the Company’s best estimate in value lost due to excessive inventory level, physical deterioration, obsolescence, changes in price levels, or other causes based on individual facts and circumstances. Inventory reserve relates to inventory items including finished goods, semi-finished goods,
    work-in-process
    and raw materials. Write off of this reserve is recognized only when the related inventory has been disposed or scrapped.
     
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    4. Property, Plant and Equipment
    Property, plant and equipment as of June 30, 2025 and December 31, 2024 are comprised of the following (in thousands):
     
        
    June 30,
    2025
        
    December 31,
    2024
     
    Buildings and related structures
       $ 23,705      $ 21,873  
    Machinery and equipment
         141,153        126,971  
    Finance lease
    right-of-use
    assets
         622        606  
    Others
         35,896        33,274  
      
     
     
        
     
     
     
         201,376        182,724  
    Less: accumulated depreciation
         (131,561 )       (115,236 ) 
    Land
         12,178        11,237  
    Construction in progress
         12,269        2,738  
      
     
     
        
     
     
     
    Property, plant and equipment, net
       $ 94,262      $ 81,463  
      
     
     
        
     
     
     
    Aggregate depreciation expenses associated with our continuing operations totaled $6,517 thousand and $7,229 thousand for the six months ended June 30, 2025 and 2024, respectively.
    On March 26, 2024, Magnachip Semiconductor, Ltd., a Korean limited liability company (“MSK”) and indirect wholly owned subsidiary of the Company, executed a Standard Credit Agreement (together with its General Terms and Conditions, the “Loan Agreement”) with Korea Development Bank (“KDB”). In connection with the Loan Agreement, on March 26, 2024, MSK entered into a
    Kun-Pledge
    (Mortgage) Agreement (the “Pledge Agreement”) with KDB pursuant to which MSK pledged its real property and buildings located in Gumi, Korea in favor of KDB.
    On December 16, 2024, MSK executed a Standard Credit Agreement (as amended) (together with its General Terms and Conditions, the “Equipment Financing Credit Agreement”) with KDB. In connection with the Equipment Financing Credit Agreement, on December 8, 2024, MSK amended the
    Kun-Pledge
    Agreement (the “Equipment Pledge Agreement”) with KDB, originally executed on or about March 26, 2024, to increase the maximum secured amount and to expand the scope of collateral to include certain machinery and equipment owned by MSK, which are located in its fabrication facility located in Gumi, Korea.
    See “Note 11. Long-Term Borrowings” to these consolidated financial statements below for more information regarding the Loan Agreement.
    5. Intangible Assets
    Intangible assets as of June 30, 2025 and December 31, 2024 are comprised of the following (in thousands):
     
        
    June 30, 2025
     
        
    Gross
    amount
        
    Accumulated
    amortization
        
    Net
    amount
     
    Intellectual property assets
       $ 8,157      $ (7,657 )     $ 500  
      
     
     
        
     
     
        
     
     
     
    Intangible assets
       $ 8,157      $ (7,657 )     $ 500  
      
     
     
        
     
     
        
     
     
     
        
    December 31, 2024
     
        
    Gross
    amount
        
    Accumulated
    amortization
        
    Net
    amount
     
    Intellectual property assets
       $ 7,599      $ (7,092 )     $ 507  
      
     
     
        
     
     
        
     
     
     
    Intangible assets
       $ 7,599      $ (7,092 )     $ 507  
      
     
     
        
     
     
        
     
     
     
    Aggregate amortization expenses associated with our continuing operations totaled $132 thousand and $166 thousand for the six months ended June 30, 2025 and 2024, respectively.
     
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    6. Leases
    The Company has operating and finance leases for buildings and other assets such as vehicles and office equipment. The Company’s leases have remaining lease terms ranging from one year to four years.
    The tables below present financial information related to the Company’s leases.
    Supplemental balance sheets information related to leases as of June 30, 2025 and December 31, 2024 are as follows (in thousands):
     
    Leases
      
    Classification
      
    June 30,
    2025
        
    December 31,
    2024
     
    Assets
            
    Operating lease
      
    Operating lease right-of-use assets
       $ 2,958      $ 3,107  
    Finance lease
      
    Property, plant and equipment, net
         345        390  
         
     
     
        
     
     
     
    Total lease assets
          $ 3,303      $ 3,497  
         
     
     
        
     
     
     
    Liabilities
            
    Current
            
    Operating lease
      
    Operating lease liabilities
       $ 1,572      $ 1,393  
    Finance lease
      
    Other current liabilities
         167        153  
    Non-current
            
    Operating lease
      
    Non-current
    operating lease liabilities
         1,382        1,823  
    Finance lease
      
    Other
    non-current
    liabilities
         233        294  
         
     
     
        
     
     
     
    Total lease liabilities
          $ 3,354      $ 3,663  
         
     
     
        
     
     
     
    The following table presents the weighted average remaining lease term and discount rate:
     
        
    June 30,
    2025
       
    December 31,
    2024
     
    Weighted average remaining lease term
        
    Operating leases
         2.0 years       2.5 years  
    Finance leases
         2.5 years       2.9 years  
    Weighted average discount rate
        
    Operating leases
         6.6 %      6.8 % 
    Finance leases
         7.1 %      7.1 % 
    The components of lease cost from continuing operations included in the Company’s consolidated statements of operations, are as follows (in thousands):
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Operating lease cost
       $ 516      $ 502      $ 1,038      $ 1,010  
    Finance lease cost
               
    Amortization of
    right-of-use
    assets
         37        33        73        68  
    Interest on lease liabilities
         8        9        15        19  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total lease cost
       $ 561      $ 544      $ 1,126      $ 1,097  
      
     
     
        
     
     
        
     
     
        
     
     
     
    The above table does not include an immaterial cost of short-term leases for the three and six months ended June 30, 2025 and 2024.
     
    12

    Table of Contents
    Other lease information associated with continuing operations is as follows (in thousands):
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Cash paid for amounts included in the measurement of lease liabilities
               
    Operating cash flows from operating leases
       $ 491      $ 513      $ 1,151      $ 1,032  
    Operating cash flows from finance leases
         8        9        15        19  
    Financing cash flows from finance leases
         40        34        78        69  
    Non-cash
    transaction amounts of lease liabilities arising from obtaining
    right-of-use
    assets were $1,147 thousand and $627 thousand for the six months ended June 30, 2025 and 2024, respectively.
    The aggregate future lease payments for operating and finance leases as of June 30, 2025 are as follows (in thousands):
     
        
    Operating
    Leases
        
    Finance

    Leases
     
    Remainder of 2025
       $ 849      $ 95  
    2026
         1,575        178  
    2027
         721        143  
    2028
         11        19  
      
     
     
        
     
     
     
    Total future lease payments
         3,156        435  
    Less: Imputed interest
         (202 )       (35 ) 
      
     
     
        
     
     
     
    Present value of future payments
       $ 2,954      $ 400  
      
     
     
        
     
     
     
    7. Accrued Expenses
    Accrued expenses as of June 30, 2025 and December 31, 2024 are comprised of the following (in thousands):
     
        
    June 30,
    2025
        
    December 31,
    2024
     
    Payroll, benefits and related taxes, excluding severance benefits
       $ 6,077      $ 5,518  
    Withholding tax attributable to intercompany interest income
         677        1,419  
    Outside service fees
         1,192        1,221  
    Others
         483        490  
      
     
     
        
     
     
     
    Accrued expenses
       $ 8,429      $ 8,648  
      
     
     
        
     
     
     
     
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    Table of Contents
    8. Derivative Financial Instruments
    The Company’s Korean subsidiary, Magnachip Semiconductor, Ltd., from time to time has entered into zero cost collar contracts to hedge the risk of changes in the functional-currency-equivalent cash flows attributable to currency rate changes on U.S. dollar denominated revenues.
    Details of the zero cost collar contracts as of June 30, 2025 are as follows (in thousands):
     
    Date of transaction
      
    Total notional amount
        
    Month of settlement
     
    July 09, 2024
       $ 9,000        July 2025 to September 2025  
    October 17, 2024
       $ 9,000        October 2025 to December 2025  
    February 03, 2025
       $ 9,000        January 2026 to March 2026  
    Details of the zero cost collar contracts as of December 31, 2024 are as follows (in thousands):
     
    Date of transaction
      
    Total notional amount
        
    Month of settlement
     
    April 05, 2024
       $ 9,000        January 2025 to March 2025  
    July 09, 2024
       $ 18,000        April 2025 to September 2025  
    October 17, 2024
       $ 9,000        October 2025 to December 2025  
    The zero cost collar contracts qualify as cash flow hedges under ASC 815, “Derivatives and Hedging,” since at both the inception of the contracts and on an ongoing basis, the hedging relationship was and is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the contracts.
    The fair values of the Company’s outstanding zero cost collar contracts recorded as assets and liabilities as of June 30, 2025 and December 31, 2024 are as follows (in thousands):
     
    Derivatives designated as hedging instruments:
      
     
      
    June 30,
    2025
     
      
    December 31,
    2024
     
    Assets Derivatives:
            
    Zero cost collars
       Other current assets    $ 354      $ —   
    Liability Derivatives:
            
    Zero cost collars
       Other current liabilities    $ 37      $ 1,956  
    Offsetting of derivative assets and liabilities as of June 30, 2025 is as follows (in thousands):
     
    As of June 30, 2025
      
    Gross amounts of
    recognized
    assets/liabilities
        
    Gross amounts
    offset in the
    balance sheets
        
    Net amounts of
    assets/liabilities
    presented in the
    balance sheets
        
    Gross amounts not offset
    in the balance sheets
        
    Net amount
     
      
    Financial
    instruments
        
    Cash collateral
    pledged
     
    Assets Derivatives:
                     
    Zero cost collars
       $ 354      $ —       $ 354      $ —       $ —       $ 354  
    Liability Derivatives:
                     
    Zero cost collars
       $ 37      $ —       $ 37      $ —       $ —       $ 37  
    Offsetting of derivative assets and liabilities as of December 31, 2024 is as follows (in thousands):
     
    As of December 31, 2024
      
    Gross amounts of
    recognized
    liabilities
        
    Gross amounts
    offset in the
    balance sheets
        
    Net amounts of
    liabilities
    presented in the
    balance sheets
        
    Gross amounts not offset
    in the balance sheets
       
    Net amount
     
      
    Financial
    instruments
        
    Cash collateral
    pledged
     
    Liability Derivatives:
                    
    Zero cost collars
       $ 1,956      $ —       $ 1,956      $ —       $ (1,080 )    $ 876  
    For derivative instruments that are designated and qualify as cash flow hedges, gains or losses on the derivative aside from components excluded from the assessment of effectiveness are reported as a component of accumulated other comprehensive income or loss (“AOCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.
     
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    Table of Contents
    Gains and losses on the derivative, representing hedge components excluded from the assessment of effectiveness, are recognized in current earnings.
    The following table summarizes the impact of derivative instruments on the consolidated statements of operations for the three months ended June 30, 2025 and 2024 (in thousands):
     
    Derivatives in ASC
    815 Cash Flow Hedging
    Relationships
      
    Amount of Gain (Loss)
    Recognized in
    AOCI on
    Derivatives
     
     
    Location/Amount of

    Loss

    Reclassified from AOCI

    Into Statement of Operations
     
     
    Location/Amount of Gain (Loss)

    Recognized in

    Statement of Operations on Derivatives
     

      
    Three Months Ended
    June 30,
     
     
     
     
      
    Three Months Ended
    June 30,
     
     
     
     
      
    Three Months Ended
    June 30,
     

    2025
     
      
    2024
     
     
     
     
      
    2025
     
     
    2024
     
     
     
     
      
    2025
     
     
    2024
     
    Zero cost collars
       $ 1,617      $ (807 )      Net sales      $ (79 )    $ (527 )      Other income, net      $ (80 )    $ 85  
      
     
     
        
     
     
          
     
     
       
     
     
          
     
     
       
     
     
     
       $ 1,617      $ (807 )       $ (79 )    $ (527 )       $ (80 )    $ 85  
      
     
     
        
     
     
          
     
     
       
     
     
          
     
     
       
     
     
     
     
    The following table summarizes the impact of derivative instruments on the consolidated statements of operations for the six months ended June 30, 2025 and 2024 (in thousands):
     
    Derivatives in ASC
    815 Cash Flow Hedging
    Relationships
      
    Amount of Gain (Loss)
    Recognized in
    AOCI on
    Derivatives
       
    Location/Amount of

    Loss

    Reclassified from AOCI

    Into Statement of Operations
       
    Location/Amount of Gain (Loss)

    Recognized in

    Statement of Operations on Derivatives
     
        
    Six Months Ended
    June 30,
              
    Six Months Ended
    June 30,
              
    Six Months Ended
    June 30,
     

      
    2025
        
    2024
              
    2025
       
    2024
              
    2025
       
    2024
     
    Zero cost collars
       $ 1,753      $ (1,412 )      Net sales      $ (604 )    $ (586 )      Other income, net      $ (51 )    $ 110  
      
     
     
        
     
     
          
     
     
       
     
     
          
     
     
       
     
     
     
       $ 1,753      $ (1,412 )       $ (604 )    $ (586 )       $ (51 )    $ 110  
      
     
     
        
     
     
          
     
     
       
     
     
          
     
     
       
     
     
     
    As of June 30, 2025, the amount expected to be reclassified from accumulated other comprehensive income into earnings within the next 12 months is $1,391 thousand.
    The Company has set aside a cash deposit to the counterparty, Standard Chartered Bank Korea Limited (“SC”), as required for the zero cost collar contracts. This cash deposit is recorded as hedge collateral on the consolidated balance sheets. Cash deposits as of June 30, 2025 and December 31, 2024 are as follows (in thousands):
     
    Counterparty
      
    June 30,
    2025
        
    December 31,
    2024
     
    SC
       $ —       $ 1,000  
      
     
     
        
     
     
     
    Total
       $ —       $ 1,000  
      
     
     
        
     
     
     
    The Company is required to deposit additional cash collateral with Nomura Financial Investment (Korea) Co., Ltd. (“NFIK”) for any exposure in excess of $500 thousand, but no such exposure existed as of June 30, 2025. As of December 31, 2024, $1,080 thousand of additional cash collateral were required by NFIK and recorded as hedge collateral on the consolidated balance sheet.
    These zero cost collar contracts may be terminated by the counterparties if the Company’s total cash and cash equivalents is less than $30,000 thousand at the end of a fiscal quarter, unless a waiver is obtained.
     
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    Table of Contents
    9. Fair Value Measurements
    Fair Value of Financial Instruments
    As of June 30, 2025, the following table represents the Company’s assets and liabilities measured at fair value on a recurring basis and the basis for that measurement (in thousands):
     
        
    Carrying Value
    June 30, 2025
        
    Fair Value
    Measurement
    June 30, 2025
        
    Quoted Prices in
    Active Markets
    for Identical
    Asset/Liability
    (Level 1)
        
    Significant
    Other
    Observable
    Inputs
    (Level 2)
        
    Significant
    Unobservable
    Inputs
    (Level 3)
     
    Assets:
                  
    Derivative assets
    (other current assets)
       $ 354      $ 354        —       $ 354        —   
    Liabilities:
                  
    Derivative liabilities
    (other current liabilities)
       $ 37      $ 37        —       $ 37        —   
    As of December 31, 2024, the following table represents the Company’s liabilities measured at fair value on a recurring basis and the basis for that measurement (in thousands):
     
        
    Carrying Value
    December 31, 2024
        
    Fair Value
    Measurement
    December 31, 2024
        
    Quoted Prices in
    Active Markets
    for Identical
    Liability (Level 1)
        
    Significant
    Other
    Observable
    Inputs
    (Level 2)
        
    Significant
    Unobservable
    Inputs
    (Level 3)
     
    Liabilities:
                  
    Derivative liabilities
    (other current liabilities)
       $ 1,956      $ 1,956        —       $ 1,956        —   
    Items not reflected in the table above include cash equivalents, accounts receivable, other receivables, accounts payable, and other accounts payable, fair value of which approximate carrying values due to the short-term nature of these instruments. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs. The carrying value of the Company’s outstanding Term Loan and CAPEX Loan approximates its fair value because its interest rate reflects the market rate for the respective periods. The fair value of this debt is categorized within Level 2 of the fair value hierarchy.
     
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    Table of Contents
    10. Accrued Severance Benefits
    The majority of accrued severance benefits are for employees in the Company’s Korean subsidiaries. Pursuant to the Employee Retirement Benefit Security Act of Korea, eligible employees and executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of June 30, 2025, 96% of all employees of the Company were eligible for severance benefits.
    Changes in accrued severance benefits are as follows (in thousands):
     
        
    Three Months Ended
        
    Six Months Ended
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30, 2025
        
    June 30, 2024
     
    Beginning balance
       $ 46,886      $ 45,594      $ 44,484      $ 45,932  
    Provisions
         661        2,175        1,565        2,970  
    Severance payments
         (9,518 )       (9,843 )       (478 )       (1,362 ) 
    Translation adjustments
         3,552        3,655        (1,373 )       (3,342 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
         41,581        41,581        44,198        44,198  
    Less: Cumulative contributions to severance insurance deposit accounts
         (27,313 )       (27,313 )       (28,412 )       (28,412 ) 
    The National Pension Fund
         (20 )       (20 )       (27 )       (27 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Accrued severance benefits, net
       $ 14,248      $ 14,248      $ 15,759      $ 15,759  
      
     
     
        
     
     
        
     
     
        
     
     
     
    The severance benefits funded through the Company’s National Pension Fund have been and will be used exclusively for payment of severance benefits to eligible employees. These amounts have been deducted from the accrued severance benefit balance.
    Beginning in July 2018, the Company contributes to certain severance insurance deposit accounts a certain percentage of severance benefits that are accrued for eligible employees for their services from January 1, 2018 pursuant to Employee Retirement Benefit Security Act of Korea. These accounts consist of time deposits and other guaranteed principal and interest, and are maintained at insurance companies, banks or security companies for the benefit of employees. The Company deducts the contributions made to these severance insurance deposit accounts from its accrued severance benefits.
    The Company is liable to pay the following future benefits to its
    non-executive
    employees upon their normal retirement age (in thousands):
     
        
    Severance benefit
     
    2026
       $ 98  
    2027
       $ 557  
    2028
       $ 110  
    2029
       $ 2,287  
    2030
       $ 2,727  
    2031 – 2036
       $ 17,914  
    The above amounts were determined based on the
    non-executive
    employees’ current salary rates and the number of service years that will be accumulated upon their retirement dates. These amounts do not include amounts that might be paid to
    non-executive
    employees that will cease working with the Company before their normal retirement ages.
    Korea’s mandatory retirement age is 60 years of age or older under the Employment Promotion for the Aged Act. The Company sets the retirement age of employees at 60.
     
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    Table of Contents
    11. Long-Term Borrowings
    Term Loan
    On March 26, 2024, Magnachip Semiconductor, Ltd., a Korean limited liability company (“MSK”) and indirect wholly owned subsidiary of the Company, executed a Standard Credit Agreement (together with its General Terms and Conditions, the “Loan Agreement”) with Korea Development Bank (“KDB”). In connection with the Loan Agreement, on March 26, 2024, MSK entered into a
    Kun-Pledge
    (Mortgage) Agreement (the “Pledge Agreement”) with KDB pursuant to which MSK pledged its real property and buildings located in Gumi, Korea (“Fab 3 properties”) in favor of KDB.
    The Loan Agreement provides for a working capital term loan (the “Term Loan”) of KRW 40,000,000,000 (approximately $29,835 thousand based on the KRW/USD exchange rate of 1,340.7:1 as of March 26, 2024 as quoted by KEB Hana Bank), which was funded in full to MSK on March 26, 2024.
    The Term Loan bears interest at a variable rate equal to the
    3-month
    CD rate quoted by KDB, plus 1.21%, which rate is adjusted quarterly. The initial interest rate on the Term Loan was 4.86% per annum. The Term Loan requires monthly interest-only payments and matures on March 26, 2027, at which time the full principal balance will be due and payable. All obligations of MSK under the Loan Agreement and the Term Loan are secured by the Fab 3 properties pursuant to the Pledge Agreement.
    As of June 30, 2025, approximately $29,490 thousand aggregate principal amount of the Term Loan was outstanding.
    CAPEX Loans
    On December 16, 2024, MSK executed a Standard Credit Agreement (as amended) (together with its General Terms and Conditions, the “Equipment Financing Credit Agreement”) with KDB. In connection with the Equipment Financing Credit Agreement, on December 8, 2024, MSK also amended the
    Kun-Pledge
    Agreement (the “Equipment Pledge Agreement”) with KDB, originally executed on or about March 26, 2024, to increase the maximum secured amount and to expand the scope of collateral to include certain machinery and equipment owned by MSK, which are located in its fabrication facility located in Gumi, Korea (“Fab 3 machinery and equipment”).
    The Equipment Financing Credit Agreement provides for loans for MSK’s capital expenditures (the “CAPEX Loans”) up to an aggregate of KRW 38,000,000,000 ($26,523 thousand based on the KRW/USD exchange rate of 1,432.7:1 as of December 16, 2024 as quoted by KEB Hana Bank), which will be funded directly to capital expenditure supply vendors by KDB upon the submission of a request form by MSK with the necessary evidence such as purchase agreement, invoice and other documentation, as applicable.
    The CAPEX Loans will bear interest at a fixed rate quoted by the treasury bond market yield (a six-year Korea treasury bill rate). CAPEX Loans mature in ten years from the initial loan disbursement date (the “Maturity Date”), with an initial
    two-year
    (measured from the first loan disbursement date) interest-only payment period during which only interest is paid monthly, followed by eight years of amortizing payments where the principal is repaid in equal installments every three months and interest is paid monthly. The Equipment Financing Credit Agreement contains customary representations of MSK in connection with the execution of the agreement and with each borrowing of CAPEX Loans and customary terms and conditions for a secured equipment financing loan of this type in Korea. All obligations of MSK under the Equipment Financing Credit Agreement and CAPEX Loans are secured by certain Fab 3 machinery and equipment pursuant to the Equipment Pledge Agreement.
    As of June 30, 2025, approximately $7,018 thousand aggregate principal amount of the CAPEX Loans was outstanding, which bears interest at 2.68% per annum and matures on June 26, 2035.
    12. Foreign
    Currency
    Gain (Loss), Net
    Net foreign currency gain or loss includes
    non-cash
    translation gain or loss associated with intercompany balances. A substantial portion of the Company’s net foreign currency gain or loss is
    non-cash
    translation gain or loss associated with intercompany long-term loans to MSK, the Company’s Korean subsidiary. The loans are denominated in U.S. dollars and are affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of June 30, 2025 and December 31, 2024, the outstanding intercompany loan balances including accrued interest between MSK and the Dutch subsidiary were $241,695 thousand and $257,670 thousand, respectively. The Korean won to U.S. dollar exchange rates were 1,356.4:1 and 1,470.0:1 using the first base rate as of June 30, 2025 and December 31, 2024, respectively, as quoted by the KEB Hana Bank.
     
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    Table of Contents
    13. Income
    Taxes
    The Company and its subsidiaries file income tax returns in Korea, Japan, Taiwan, the U.S. and in various other jurisdictions. The Company is subject to income or
    non-income
    tax examinations by tax authorities of these jurisdictions for all open tax years.
    For the three and six months ended June 30, 2025, the Company recorded an income tax benefit of $4,136 thousand and $4,537 thousand, primarily related to its primary operating entity in Korea based on the estimated taxable loss for the respective period, including loss recognized in connection with the shutdown of the discontinued Display business during the second quarter of 2025.
    For the three and six months ended June 30, 2024, the Company recorded an income tax benefit of $5,385 thousand and $3,480 thousand, primarily due to the estimated taxable loss for the respective period from its primary operating entity in Korea for continuing operations.
    On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes permanent extensions of most expiring Tax Cuts and Jobs Act provisions and international tax changes. The Company is still evaluating the potential impacts of the OBBBA on its consolidated financial statements.
     
    19

    Table of Contents
    14. Geographic and
    Other
    Information
    The Company operates within a single operating segment, Power solutions business, and also separately reports transitional Fab 3 foundry services revenue and cost of sales.
    The Chief Executive Officer, as the chief operating decision maker (“CODM”), organizes the Company and measures performance of two business lines of Power Analog Solutions and Power IC in the Power solutions business at the level of revenue and gross profit margin by comparing actual results against previously forecasted targets.
    The Company’s CODM does not evaluate the performance of each business line using any information, such as asset or liability.
    Revenues for the three months ended June 30, 2024 from its previous product categories have been reclassified in order to conform to the current period presentation as follows (in thousands):
     
           Power
    Analog
    Solutions
         Power IC      Discontinued
    Operations
         Total  
    Mixed-Signal Solutions
       $ 11,595      $ —     $ 4,824      $ 6,771      $ 11,595  
    Power Analog Solutions
         39,240        39,240        —         —         39,240  
      
     
     
        
     
     
        
     
     
        
     
     
        
     
     
     
       $ 50,835      $ 39,240      $ 4,824      $ 6,771      $ 50,835  
      
     
     
        
     
     
        
     
     
        
     
     
        
     
     
     
    Revenues for the six months ended June 30, 2024 from its previous product categories have been reclassified in order to conform to the current period presentation as follows (in thousands):
     
           Power
    Analog
    Solutions
         Power IC      Discontinued
    Operations
         Total  
    Mixed-Signal Solutions
       $ 20,601      $ —     $ 8,201      $ 12,400      $ 20,601  
    Power Analog Solutions
         75,775        75,775        —         —         75,775  
      
     
     
        
     
     
        
     
     
        
     
     
        
     
     
     
       $ 96,376      $ 75,775      $ 8,201      $ 12,400      $ 96,376  
      
     
     
        
     
     
        
     
     
        
     
     
        
     
     
     
    The following sets forth information relating to the operating segment, Power solutions business, as well as the transitional Fab 3 foundry services (in thousands). For financial information below gross profit, including operating income and expenses as well as other income and expenses, please refer to the Company’s consolidated statement of operations.
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Revenues
               
    Power solutions business
               
    Power Analog Solutions
       $ 42,261      $ 39,240      $ 82,118      $ 75,775  
    Power IC
         5,361        4,824        10,226        8,201  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total Power solutions business
         47,622        44,064        92,344        83,976  
    Transitional Fab 3 foundry services
         —         2,336        —         5,862  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total revenues
       $ 47,622      $ 46,400      $ 92,344      $ 89,838  
      
     
     
        
     
     
        
     
     
        
     
     
     
     
    20

    Table of Contents
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Cost of Sales
               
    Power solutions business
               
    Power Analog Solutions
       $ 34,552      $ 31,525      $ 67,309      $ 62,426  
    Power IC
         3,358        2,632        5,961        4,599  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total Power solutions business
         37,910        34,157        73,270        67,025  
    Transitional Fab 3 foundry services
         —         2,457        —         6,668  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total cost of sales
       $ 37,910      $ 36,614      $ 73,270      $ 73,693  
      
     
     
        
     
     
        
     
     
        
     
     
     
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Gross Profit
               
    Power solutions business
               
    Power Analog Solutions
       $ 7,709      $ 7,715      $ 14,809      $ 13,349  
    Power IC
         2,003        2,192        4,265        3,602  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total Power solutions business
         9,712        9,907        19,074        16,951  
    Transitional Fab 3 foundry services
         —         (121 )       —         (806 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total gross profit
       $ 9,712      $ 9,786      $ 19,074      $ 16,145  
      
     
     
        
     
     
        
     
     
        
     
     
     
    The
    following
    is a summary of net sales – Power solutions business by geographic region, based on the location to which the products are billed (in thousands):
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Korea
       $ 22,721      $ 19,883      $ 44,437      $ 36,974  
    Asia Pacific (other than Korea)
         22,445        22,601        43,437        43,690  
    United States
         1,470        308        2,652        646  
    Europe
         986        1,272        1,818        2,666  
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total
       $ 47,622      $ 44,064      $ 92,344      $ 83,976  
      
     
     
        
     
     
        
     
     
        
     
     
     
    For the three months ended June 30, 2025 and 2024, of the Company’s net sales – Power solutions business in Asia Pacific (other than Korea), net sales – Power solutions business in China and Hong Kong together represented 80.8% and 85.1%, respectively, and net sales – Power solutions business in Taiwan represented 10.7% and 7.8%, respectively. For the six months ended June 30, 2025 and 2024, of the Company’s net sales – Power solutions business in Asia Pacific (other than Korea), net sales – Power solutions business in China and Hong Kong represented 81.9% and 83.3%, respectively, and net sales – Power solutions business in Taiwan represented 11.0% and 9.8%, respectively.
    Net sales from the Company’s top ten largest customers in the Power solutions business accounted for 74.4% and 74.0% for the
    three
    months ended June 30, 2025 and 2024, respectively, and 74.0% and 72.6% for the six months ended June 30, 2025 and 2024, respectively.
    For the three months ended June 30, 2025, the Company had one customer that represented
    29.4
    % of net sales – Power solutions business. For the six months ended June 30, 2025, the Company had one customer that represented
    31.1
    % of its net sales – Power solutions business. For the three months ended June 30, 2024, the Company had two customers that represented
    24.7
    % and
    10.3
    % of its net sales – Power solutions business, respectively. For the six months ended June 30, 2024, the Company had three customers that represented
    26.3
    %,
    10.2
    % and
    10.1
    % of its net sales – Power solutions business, respectively.
    As of June 30, 2025, one customer of the Company’s Power solutions business accounted for 42.3% of its accounts receivable – Power solutions business. As of December 31, 2024, one customer of the Company’s Power solutions business accounted for 42.3% of its accounts receivable – Power solutions business.
     
    21

    Table of Contents
    15. Accumulated Other Comprehensive Loss
    Accumulated other comprehensive loss consists of the following as of June 30, 2025 and December 31, 2024, respectively (in thousands):
     
        
    June 30,
    2025
        
    December 31,
    2024
     
    Foreign currency translation adjustments
       $ (19,297 )     $ (20,927 ) 
    Derivative adjustments
         1,391        (966 ) 
      
     
     
        
     
     
     
    Total
       $ (17,906 )     $ (21,893 ) 
      
     
     
        
     
     
     
    Changes in accumulated other comprehensive loss for the three months ended June 30, 2025 and 2024 are as follows (in thousands):
     
    Three Months Ended June 30, 2025
      
    Foreign
    currency
    translation
    adjustments
        
    Derivative
    adjustments
        
    Total
     
    Beginning balance
       $ (20,172 )     $ (305 )     $ (20,477 ) 
      
     
     
        
     
     
        
     
     
     
    Other comprehensive income before reclassifications
         260        1,617        1,877  
    Amounts reclassified from accumulated other comprehensive loss
         615        79        694  
      
     
     
        
     
     
        
     
     
     
    Net current-period other comprehensive income
         875        1,696        2,571  
      
     
     
        
     
     
        
     
     
     
    Ending balance
       $ (19,297 )     $ 1,391      $ (17,906 ) 
      
     
     
        
     
     
        
     
     
     
    Three Months Ended June 30, 2024
      
    Foreign
    currency
    translation
    adjustments
        
    Derivative
    adjustments
        
    Total
     
    Beginning balance
       $ (18,845 )     $ 145      $ (18,700 ) 
      
     
     
        
     
     
        
     
     
     
    Other comprehensive loss before reclassifications
         (1,591 )       (807 )       (2,398 ) 
    Amounts reclassified from accumulated other comprehensive loss
         —         527        527  
      
     
     
        
     
     
        
     
     
     
    Net current-period other comprehensive loss
         (1,591 )       (280 )       (1,871 ) 
      
     
     
        
     
     
        
     
     
     
    Ending balance
       $ (20,436 )     $ (135 )     $ (20,571 ) 
      
     
     
        
     
     
        
     
     
     
    Changes in accumulated other comprehensive loss for the six months ended June 30, 2025 and 2024 are as follows (in thousands):
     
    Six Months Ended June 30, 2025
      
    Foreign
    currency
    translation
    adjustments
        
    Derivative
    adjustments
        
    Total
     
    Beginning balance
       $ (20,927 )     $ (966 )     $ (21,893 ) 
      
     
     
        
     
     
        
     
     
     
    Other comprehensive income before reclassifications
         1,015        1,753        2,768  
    Amounts reclassified from accumulated other comprehensive loss
         615        604        1,219  
      
     
     
        
     
     
        
     
     
     
    Net current-period other comprehensive income
         1,630        2,357        3,987  
      
     
     
        
     
     
        
     
     
     
    Ending balance
       $ (19,297 )     $ 1,391      $ (17,906 ) 
      
     
     
        
     
     
        
     
     
     
     
    22

    Table of Contents
    Six Months Ended June 30, 2024
      
    Foreign
    currency
    translation
    adjustments
        
    Derivative
    adjustments
        
    Total
     
    Beginning balance
       $ (15,348 )     $ 691      $ (14,657 ) 
      
     
     
        
     
     
        
     
     
     
    Other comprehensive loss before reclassifications
         (5,088 )       (1,412 )       (6,500 ) 
    Amounts reclassified from accumulated other comprehensive loss
         —         586        586  
      
     
     
        
     
     
        
     
     
     
    Net current-period other comprehensive loss
         (5,088 )       (826 )       (5,914 ) 
      
     
     
        
     
     
        
     
     
     
    Ending balance
       $ (20,436 )     $ (135 )     $ (20,571 ) 
      
     
     
        
     
     
        
     
     
     
    During the three and six months ended June 30, 2025, the Company reclassified a $615 thousand of cumulative translation adjustment (CTA) from accumulated other comprehensive loss into loss in connection with the liquidation of MMS, the Company’s indirect wholly owned foreign subsidiary.
    16. Stock Repurchase
    Stock Repurchase Program
    On July 19, 2023, the Board of Directors authorized a $50 million stock buyback program. Purchases have been and will be made in the open market or in privately negotiated transactions, depending upon market conditions and other factors.
    From August 2023 to December 2023, the Company repurchased 1,730,173 shares of its common stock in the open market for an aggregate purchase price of $13.6 million and a weighted average price per share of $7.84 under the stock repurchase program.
    From January 2024 to December 2024, the Company repurchased 2,349,811 shares of its common stock in the open market for an aggregate purchase price of $11.8 million and a weighted average price per share of $5.04 under the stock repurchase program.
    During the first half of 2025, the Company repurchased 1,025,669 shares of its common stock in the open market for an aggregate purchase price of $3.4 million and a weighted average price per share of $3.32 under the stock repurchase program.
     
    23

    Table of Contents
    17. Earnings (Loss) Per Share
    The following table illustrates the computation of basic and diluted earnings (loss) per common share for the three and six months ended June 30, 2025 and 2024:
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
        
    (In thousands of U.S. dollars, except share data)
     
    Basic earnings (loss) per common share
               
    Income (Loss) from continuing operations
       $ 8,486      $ (2,208 )     $ 3,404      $ (16,492 ) 
    Loss from discontinued operations, net of tax
         (8,163 )       (10,789 )       (11,959 )       (11,922 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Net income (loss)
       $ 323      $ (12,997 )     $ (8,555 )     $ (28,414 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Basic weighted average common stock outstanding
         36,083,703        38,174,920        36,483,551        38,359,851  
    Basic earnings (loss) per common share
               
    Continuing operations
       $ 0.24      $ (0.06 )     $ 0.09      $ (0.43 ) 
    Discontinued operations
         (0.23 )       (0.28 )       (0.32 )       (0.31 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total
       $ 0.01      $ (0.34 )     $ (0.23 )     $ (0.74 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Diluted earnings (loss) per common share
               
    Income (Loss) from continuing operations
       $ 8,486      $ (2,208 )     $ 3,404      $ (16,492 ) 
    Loss from discontinued operations, net of tax
         (8,163 )       (10,789 )       (11,959 )       (11,922 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Net income (loss)
       $ 323      $ (12,997 )     $ (8,555 )     $ (28,414 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Basic weighted average common stock outstanding
         36,083,703        38,174,920        36,483,551        38,359,851  
    Net effect of dilutive equity awards
         684,944        —         726,071        —   
      
     
     
        
     
     
        
     
     
        
     
     
     
    Diluted weighted average common stock outstanding
         36,768,647        38,174,920        37,209,622        38,359,851  
    Diluted earnings (loss) per common share
               
    Continuing operations
       $ 0.23      $ (0.06 )     $ 0.09      $ (0.43 ) 
    Discontinued operations
         (0.22 )       (0.28 )       (0.32 )       (0.31 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Total
       $ 0.01      $ (0.34 )     $ (0.23 )     $ (0.74 ) 
      
     
     
        
     
     
        
     
     
        
     
     
     
    Diluted earnings (loss) per common share adjusts basic earnings (loss) per common share for the potentially dilutive impact of stock options and restricted stock units. As the Company has reported loss from continuing operations for the three and six months ended June 30, 2024, all potentially dilutive securities are antidilutive and accordingly not considered, therefore basic loss per common share equals diluted loss per common share.
    The following outstanding instruments were excluded from the computation of diluted earnings (loss) per common share, as they have an anti-dilutive effect on the calculation:
     
        
    Three Months Ended
        
    Six Months Ended
     
        
    June 30,
    2025
        
    June 30,
    2024
        
    June 30,
    2025
        
    June 30,
    2024
     
    Options
         464,065        757,158        464,065        757,158  
    Restricted Stock Units
         —         2,476,131        —         2,476,131  
     
    24

    Table of Contents
    18.
    Commitments
    and Contingencies
    Advances to Suppliers
    The Company, from time to time, may make advances in form of prepayments or deposits to suppliers, including external foundries, to meet its planned production. The Company recorded advances of $565 thousand and $2,294 thousand as other current assets as of June 30, 2025 and December 31, 2024, respectively.
    19. Subsequent Events
    Derivative contracts
    In July 2025, the Company and NFIK entered into derivative contracts of zero cost collars for the period from April 2026 to September 2026. The total notional amounts are $18,000 thousand.
    Stock Repurchase
    In July 2025, the Company repurchased 30,005 shares of its common stock in the open market for an aggregate purchase price of $0.1 million and a weighted average price per share of $3.92 under the stock repurchase program.
     
    25


    FORWARD LOOKING STATEMENTS

    This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended, that involve risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.

    These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in this section, in “Part II: Item 1A. Risk Factors” herein and in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2024 filed on March 14, 2025 (“2024 Form 10-K”).

    All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information or future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

    Statements made in this Report, unless the context otherwise requires, that include the use of the terms “we,” “us,” “our” and “Magnachip” refer to Magnachip Semiconductor Corporation and its consolidated subsidiaries. The term “Korea” refers to the Republic of Korea or South Korea.

     

    26


    Item 2.

    Management’s Discussion and Analysis of Financial Condition and Results of Operations

    The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and the related notes included elsewhere in this Report.

    Overview

    We are a designer and manufacturer of analog and mixed-signal power semiconductor platform solutions for various applications, including industrial, automotive, communication, consumer and computing. We have a proven record with approximately 45 years of operating history, a portfolio of approximately 1,000 registered patents and pending applications and extensive engineering and manufacturing process expertise.

    We develop and manufacture Power discrete products and develop Power integrated circuit (“IC”) products. Power discrete products include metal oxide semiconductor field effect transistors (“MOSFETs”) and insulated-gate bipolar transistors (“IGBTs”) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop personal computers (“PCs”), notebook PCs, tablet PCs, servers, other consumer electronics, as well as automotive and industrial applications such as power suppliers, e-bikes, solar inverters, LED lighting and motor drives. Power IC products include AC-DC/DC-DC converters, LED drivers, regulators, power management integrated circuits (“PMICs”) and level shifter for a range of devices, including televisions, wearable devices, notebooks, tablet PCs and others consumer electronics, as well as automotive applications.

    In 2024, the Power IC business was operated by Magnachip Mixed-Signal, Ltd. (“MMS”), which later transferred the business to Magnachip Semiconductor, Ltd. (“MSK”) effective January 1, 2025, pursuant to an intercompany business transfer agreement executed between MMS and MSK. The transfer was based on the mutual understanding that consolidating the Power IC and Power Analog Solutions businesses under a single company would create a more effective framework for expanding and strengthening the Company’s business for Power products. We refer to the Power Analog Solutions and Power IC businesses collectively as the Power solutions business.

    On March 7, 2025, our Board of Directors authorized a strategy to transition into a pure-play Power company, focusing its investments on the Power Analog Solutions and Power IC businesses to enhance profitability and maximize shareholder value. As part of this strategy, we explored all strategic options including a sale, merger, joint venture, licensing, and wind-down for its Display business (Display IC products). However, we were not able to consummate any transaction following several months of discussions with several interested parties on terms that our Board of Directors believed were in the best interests of the Company and our stockholders.

    Accordingly, on April 6, 2025, our Board of Directors unanimously approved the plan to shut down our Display business (the “Discontinued Business”), including the liquidation of MMS, our indirect wholly owned subsidiary that operated the Discontinued Business. For additional information regarding the announcement of our plan to shut down display business, see the Company’s Current Report on Form 8-K filed on April 8, 2025. As a result of the Discontinued Business and the cessation of transitional Fab 3 foundry services, our results from continuing operations in future periods will consist solely of the Power solutions business.

    Our wide variety of analog and mixed-signal power semiconductor products combined with our mature technology platform allow us to address multiple high-growth end markets and rapidly develop and introduce new products and services in response to market demands. Our design center in Korea and global manufacturing operations place us at the core of the global electronics device supply chain. We believe this enables us to quickly and efficiently respond to our customers’ needs, and allows us to better serve and capture additional demand from existing and new customers. Certain of our Power IC products are produced using an external foundry. Through a strategic cooperation with an external foundry, we manage to ensure outsourcing wafers at competitive price and produce quality products.

    To maintain and increase our profitability, we must accurately forecast trends in demand for electronics devices that incorporate semiconductor products we produce. We must understand our customers’ needs as well as the likely end market trends and demand in the markets they serve. We must also invest in relevant research and development activities and purchase necessary materials on a timely basis to meet our customers’ demand while maintaining our target margins and cash flow.

    The semiconductor markets in which we participate are highly competitive. The prices of our products tend to decrease regularly over their useful lives, and such price decreases can be significant as new generations of products are introduced by us or our competitors. We strive to offset the impact of declining selling prices for existing products through cost reductions and the introduction of new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to mitigate the risk of losses from product obsolescence.

     

    27


    Demand for our products and services is driven by overall demand for industrial, automotive, communication, consumer and computing products and can be adversely affected by periods of weak consumer and enterprise spending or by market share losses by our customers. In order to mitigate the impact of market volatility on our business, we continually strive to diversify our portfolio of products, customers, and target applications. We also expect that new competitors will emerge in these markets that may place increased pressure on the pricing for our products and services. While we believe we are well positioned competitively to compete in these markets and against these new competitors as a result of our long operating history, existing manufacturing capacity and our worldwide customer base, if we are not effective in competing in these markets, our operating results may be adversely affected.

    Net sales for our Power Analog Solutions and Power IC business are driven by design wins in which we are selected by an electronics original equipment manufacturer (“OEM”) or other potential customer to supply its demand for a particular product. A customer will often have more than one supplier designed into multi-source components for a particular product line. Once we have design wins and the products enter into mass production, we often specify the pricing of a particular product for a set period of time, with periodic discussions and renegotiations of pricing with our customers. In any given period, our net sales depend heavily upon the end-market demand for the goods in which our products are used, the inventory levels maintained by our customers and, in some cases, allocation of demand for components for a particular product among selected qualified suppliers.

    In contrast to completely fabless semiconductor companies, our internal manufacturing capacity provides us with greater control over certain manufacturing costs and the ability to implement process and production improvements for our internally manufactured products, which can favorably impact gross profit margins. Our internal manufacturing capacity also allows for better control over delivery schedules, improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation on these internally manufactured products. However, having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity that results in lower gross profit margins, particularly during downturns in the semiconductor industry.

    Our Power Analog Solutions and Power IC business requires investments in capital equipment. Analog and mixed-signal manufacturing facilities and processes are typically distinguished by the design and process implementation expertise rather than the use of the most advanced equipment. Many of these processes also tend to migrate more slowly to smaller geometries due to technological barriers and increased costs. For example, some of our products use high-voltage technology that requires larger geometries and that may not migrate to smaller geometries for several years, if at all. As a result, our manufacturing base and strategy do not require substantial investment in leading edge process equipment for those products, allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments. In addition, we are less likely to experience significant industry overcapacity, which can cause product prices to decline significantly. In general, we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time. In addition, we outsource manufacturing of Power IC products which do require advanced technology and 8-inch wafer capacity. We believe this balanced capital investment strategy enables us to optimize our capital investments and facilitates more diversified product and service offerings.

    By outsourcing manufacturing of Power IC products to an external foundry, we have been able to adapt dynamically to changing customer requirements and address growing markets without substantial capital investments by us. However, relying on an external foundry exposes us to the risk of being unable to secure manufacturing capacity, particularly during the global shortage of foundry services. Although we work to diversify the sourcing of external manufacturing, if these efforts are at any time unsuccessful, our ability to deliver products to our customers may be negatively impacted, which would adversely affect our relationship with customers and opportunities to secure new design-wins.

    Our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors. Additionally, we must innovate to remain ahead of, or at least rapidly adapt to, technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services. We believe that our established relationships and close collaboration with leading customers enhance our awareness of new product opportunities, market and technology trends and improve our ability to adapt and grow successfully.

     

    28


    Recent Developments

    Shut-Down of Display business

    On March 7, 2025, our Board of Directors authorized a strategy to transition to a pure-play Power company, focusing its investments on the Power Analog Solutions and Power IC businesses to enhance profitability and maximize shareholder value. As part of this strategy, we explored all strategic options including a sale, merger, joint venture, licensing, and wind-down for its Display business (Display IC products). However, we were not able to consummate a transaction following several months of discussions with several interested parties on terms that our Board of Directors believed were in the best interests of the Company and our stockholders.

    Accordingly, on April 6, 2025, our Board of Directors unanimously approved the plan to shut down our Display business (the “Discontinued Business”) by the end of the second quarter of 2025, including the liquidation of MMS, our indirect wholly owned subsidiary that operated the Discontinued Business. For additional information regarding the announcement of our plan to shut down display business, see the Company’s Current Report on Form 8-K filed on April 8, 2025.

    Although we shut down our Display business, we continue to provide limited support for remaining customer obligations including the sale of “end of life” (“EOL”) Display products, which is being conducted by MSK. We have retained a small team to continue to support customers with respect to EOL Display products. The sale of EOL Display products and the potential monetization of the intellectual property assets of the Discontinued Business are currently expected to generate cash inflow of approximately $20 million over a period of approximately 2 years from the second half of 2025, depending upon customer demand and monetization efforts of the Display intellectual property assets.

    The total estimated cash cost of the liquidation is approximately $12 to $15 million, which is expected to be offset by the cash inflow that may be generated as described above. The one-time liquidation cost is expected to consist of statutory severance and other employee-related costs, contract termination charges and other associated costs. Of this estimated total cash cost, we paid $6.5 million of statutory severance and other employee-related costs in the second quarter of 2025. Further, we originally expected to pay certain contract termination charges in full along with the statutory severance and other employee-related costs, but negotiated with the respective vendors for those contract termination charges totaling $6.5 million to be paid over the duration of the remaining existing contract terms.

    CAPEX Loans

    On December 16, 2024, MSK executed a Standard Credit Agreement (as amended) (together with its General Terms and Conditions, the “Equipment Financing Credit Agreement”) with Korea Development Bank (“KDB”). In connection with the Equipment Financing Credit Agreement, on December 8, 2024, MSK amended the Kun-Pledge Agreement (the “Equipment Pledge Agreement”) with KDB, originally executed on or about March 26, 2024, to increase the maximum secured amount and to expand the scope of collateral to include certain machinery and equipment owned by MSK, which are located in its fabrication facility located in Gumi, Korea (“Fab 3 machinery and equipment”).

    The Equipment Financing Credit Agreement provides for loans for MSK’s capital expenditures (the “CAPEX Loans”) up to an aggregate of KRW 38,000,000,000 ($26.5 million based on the KRW/USD exchange rate of 1,432.7:1 as of December 16, 2024 as quoted by KEB Hana Bank), which will be funded directly to capital expenditure supply vendors by KDB upon the submission of a request form by MSK with the necessary evidence such as purchase agreement, invoice and other documentation, as applicable.

    The CAPEX Loans will bear interest at a fixed rate quoted by the treasury bond market yield (a six-year Korea treasury bill rate). CAPEX Loans mature in ten years from the initial loan disbursement date, with an initial two-year (measured from the first loan disbursement date) interest-only payment period during which only interest is paid monthly, followed by eight years of amortizing payments where the principal is repaid in equal installments every three months and interest is paid monthly. The Equipment Financing Credit Agreement contains customary representations of MSK in connection with the execution of the agreement and with each borrowing of CAPEX Loans and customary terms and conditions for a secured equipment financing loan of this type in Korea. All obligations of MSK under the Equipment Financing Credit Agreement and CAPEX Loans are secured by certain Fab 3 machinery and equipment pursuant to the Equipment Pledge Agreement.

    As of June 30, 2025, approximately $7.0 million aggregate principal amount of the CAPEX Loans was outstanding, which bears interest at 2.68% per annum and matures on June 26, 2035.

     

    29


    Macroeconomic Industry Conditions

    The semiconductor industry continues to face a number of macroeconomic challenges, including rising inflation, increased interest rates, supply chain disruptions, inventory corrections, shifting customer and end-user demand, fluctuations in currency rates, and geopolitical tensions, including without limitation ongoing conflicts involving Russia and Ukraine, sustained military action and conflicts in the Middle East, and trade conflicts or trade wars (especially those between the United States and China) including those arising directly or indirectly from tariffs recently imposed by the United States, any one or more of which may cause (if they have not already caused) volatility and unpredictability in the supply chain or market for semiconductor products and end-user demand. The length and severity of these macroeconomic events and their overall impact on our business, results of operations and financial condition remain uncertain.

    Developments in Export Control Regulations

    On October 7, 2022, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce published changes to U.S. export control regulations (U.S. Export Regulations), including new restrictions on Chinese entities’ ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. Further, on October 12, 2022, a new rule went into effect requiring U.S. persons to obtain a license prior to engaging in certain activities that could “support” certain end-uses and end-users, including those related to weapons of mass destruction. Additionally, on October 21, 2022, BIS brought into effect a series of new Foreign Direct Product (FDP) rules and various new controls on advanced computing items, significantly expanding the scope of items that are subject to export control under the U.S. Export Regulations. More recently, on October 25, 2023, BIS published additional rules, which went into effect on November 17, 2023 to expand, clarify, and correct the rules published in October 2022. A further corrected and clarified version of these rules went into effect on April 4, 2024. On January 16, 2025, BIS published amendments and clarifications of the U.S. Export Regulations which further tightened controls of advanced computing items. Based on our understanding of the U.S. Export Regulations and related rules currently in effect, we do not anticipate that they will have a material impact on our current business, but we will continue reviewing and assessing these rules and regulations and their potential impact on our business. Additional changes to the U.S. Export Regulations are expected, such as recently proposed rule changes that may expand restrictions on export transactions involving end users or end uses with military connections; but the scope or timing of such changes is uncertain. We will continue to monitor such developments, including potential additional trade restrictions, and other regulatory or policy changes by the U.S. and foreign governments.

     

    30


    Explanation and Reconciliation of Non-U.S. GAAP Measures

    Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss)

    We use the terms Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) (including on a per share basis) in this Report. Adjusted EBITDA, as we define it, is a non-U.S. GAAP measure. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) equity-based compensation expense, (ii) foreign currency loss (gain), net, (iii) derivative valuation loss (gain), net and (iv) other charges. EBITDA for the periods indicated is defined as net income (loss) before interest income, interest expense, income tax benefit, net and depreciation and amortization.

    See the footnotes to the table below for further information regarding these items. We present Adjusted EBITDA as a supplemental measure of our performance because:

     

      •  

    we believe that Adjusted EBITDA, by eliminating the impact of a number of items that we do not consider to be indicative of our core ongoing operating performance, provides a more comparable measure of our operating performance from period-to-period and may be a better indicator of future performance;

     

      •  

    we believe that Adjusted EBITDA is commonly requested and used by securities analysts, investors and other interested parties in the evaluation of a company as an enterprise level performance measure that eliminates the effects of financing, income taxes and the accounting effects of capital spending, as well as other one time or recurring items described above; and

     

      •  

    we believe that Adjusted EBITDA is useful for investors, among other reasons, to assess a company’s period-to-period core operating performance and to understand and assess the manner in which management analyzes operating performance.

    We use Adjusted EBITDA in a number of ways, including:

     

      •  

    for planning purposes, including the preparation of our annual operating budget;

     

      •  

    to evaluate the effectiveness of our enterprise level business strategies;

     

      •  

    in communications with our Board of Directors concerning our consolidated financial performance; and

     

      •  

    in certain of our compensation plans as a performance measure for determining incentive compensation payments.

    We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Adjusted EBITDA is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to income (loss) from continuing operations or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity. A reconciliation of income (loss) to Adjusted EBITDA from continuing operations is as follows:

     

         Three Months
    Ended
    June 30,
    2025
         Six Months
    Ended
    June 30,
    2025
         Three Months
    Ended
    June 30,
    2024
         Six Months
    Ended
    June 30,
    2024
     
         (Dollars in millions)  

    Income (Loss) from continuing operations

       $ 8.5      $ 3.4      $ (2.2 )     $ (16.5 ) 

    Interest income

         (1.3 )       (2.9 )       (2.1 )       (4.3 ) 

    Interest expense

         0.4        0.9        0.5        0.7  

    Income tax benefit, net

         (4.1 )       (4.5 )       (5.4 )       (3.5 ) 

    Depreciation and amortization

         3.4        6.6        3.7        7.4  
      

     

     

        

     

     

        

     

     

        

     

     

     

    EBITDA from continuing operations

       $ 6.8      $ 3.5      $ (5.6 )     $ (16.2 ) 

    Adjustments:

               

    Equity-based compensation expense(a)

         1.0        1.8        1.1        1.9  

    Foreign currency loss (gain), net(b)

         (10.8 )       (10.4 )       3.6        8.6  

    Derivative valuation loss (gain), net(c)

         0.1        0.1        (0.1 )       (0.1 ) 

    Other charges(d)

         0.8        0.8        —         —   
      

     

     

        

     

     

        

     

     

        

     

     

     

    Adjusted EBITDA from continuing operations

       $ (2.1 )     $ (4.2 )     $ (1.0 )     $ (5.8 ) 
      

     

     

        

     

     

        

     

     

        

     

     

     
     
    (a)

    This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.

     

    31


    (b)

    This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results.

    (c)

    This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.

    (d)

    For the three and six months ended June 30, 2025, this adjustment eliminates $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals. As this adjustment meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if this adjustment is excluded.

    Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

     

      •  

    Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

     

      •  

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

     

      •  

    Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

     

      •  

    although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

     

      •  

    Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;

     

      •  

    Adjusted EBITDA does not reflect the costs of holding certain assets and liabilities in foreign currencies; and

     

      •  

    other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

    Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally.

     

    32


    We present Adjusted Operating Income (Loss) as supplemental measures of our performance. We prepare Adjusted Operating Income (Loss) by adjusting operating income (loss) to eliminate the impact of equity-based compensation expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Operating Income (Loss) is useful to investors to provide a supplemental way to understand our underlying operating performance and allows investors to monitor and understand changes in our ability to generate income (loss) from ongoing business operations.

    Adjusted Operating Income (Loss) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to operating income (loss) or any other performance measure derived in accordance with U.S. GAAP. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Operating Income (Loss) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income (Loss), you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. We define Adjusted Operating Income (Loss) for the periods indicated as operating income (loss) adjusted to exclude (i) equity-based compensation expense and (ii) other charges.

    The following table summarizes the adjustments to operating loss that we make in order to calculate Adjusted Operating Loss for the periods indicated:

     

         Three Months
    Ended
    June 30,
    2025
         Six Months
    Ended
    June 30,
    2025
         Three Months
    Ended
    June 30,
    2024
         Six Months
    Ended
    June 30,
    2024
     
         (Dollars in millions)  

    Operating loss

       $ (7.4 )     $ (13.7 )     $ (5.7 )     $ (15.1 ) 

    Adjustments:

               

    Equity-based compensation expense(a)

         1.0        1.8        1.1        1.9  

    Other charges(b)

         0.8        0.8        —         —   
      

     

     

        

     

     

        

     

     

        

     

     

     

    Adjusted Operating Loss

       $ (5.6 )     $ (11.0 )     $ (4.7 )     $ (13.2 ) 
      

     

     

        

     

     

        

     

     

        

     

     

     
     
    (a)

    This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.

    (b)

    For the three and six months ended June 30, 2025, this adjustment eliminates $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals. As this adjustment meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if this adjustment is excluded.

     

    33


    We present Adjusted Net Income (Loss) (including on a per share basis) as a further supplemental measure of our performance. We prepare Adjusted Net Income (Loss) (including on a per share basis) by adjusting net income (loss) to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income (Loss) (including on a per share basis) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We present Adjusted Net Income (Loss) (including on a per share basis) for a number of reasons, including:

     

      •  

    we use Adjusted Net Income (Loss) (including on a per share basis) in communications with our Board of Directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period; and

     

      •  

    we believe that reporting Adjusted Net Income (Loss) (including on a per share basis) is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below, such as foreign currency gains and losses, which are out of our control and can vary significantly from period to period.

    Adjusted Net Income (Loss) (including on a per share basis) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to income (loss) from continuing operations or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Net Income (Loss) (including on a per share basis) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Net Income (Loss) (including on a per share basis), you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. We define Adjusted Net Income (Loss) (including on a per share basis); for the periods indicated as net income (loss), adjusted to exclude (i) equity-based compensation expense, (ii) foreign currency loss (gain), net, (iii) derivative valuation loss (gain), net, (iv) other charges and (v) income tax effect on non-GAAP adjustments.

    The following table summarizes the adjustments to income (loss) from continuing operations that we make in order to calculate Adjusted Income (Loss) (including on a per share basis) from continuing operations for the periods indicated:

     

         Three Months
    Ended
    June 30,
    2025
         Six Months
    Ended
    June 30,
    2025
         Three Months
    Ended
    June 30,
    2024
         Six Months
    Ended
    June 30,
    2024
     
         (Dollars in millions, except per share data)  

    Income (Loss) from continuing operations

       $ 8.5      $ 3.4      $ (2.2 )     $ (16.5 ) 

    Adjustments:

               

    Equity-based compensation expense(a)

         1.0        1.8        1.1        1.9  

    Foreign currency loss (gain), net(b)

         (10.8 )       (10.4 )       3.6        8.6  

    Derivative valuation loss (gain), net(c)

         0.1        0.1        (0.1 )       (0.1 ) 

    Other charges(d)

         0.8        0.8        —         —   

    Income tax effect on non-GAAP adjustments(e)

         (2.3 )       (2.3 )       0.2        (1.2 ) 
      

     

     

        

     

     

        

     

     

        

     

     

     

    Adjusted Income (Loss) from continuing operations

       $ (2.7 )     $ (6.5 )     $ 2.6      $ (7.3 ) 
      

     

     

        

     

     

        

     

     

        

     

     

     

    Reported earnings (loss) per share – basic

       $ 0.24      $ 0.09      $ (0.06 )     $ (0.43 ) 

    Reported earnings (loss) per share – diluted

       $ 0.23      $ 0.09      $ (0.06 )     $ (0.43 ) 

    Weighted average number of shares – basic

         36,083,703        36,483,551        38,174,920        38,359,851  

    Weighted average number of shares – diluted

         36,768,647        37,209,622        38,174,920        38,359,851  

    Adjusted earnings (loss) per share – basic

       $ (0.08 )     $ (0.18 )     $ 0.07      $ (0.19 ) 

    Adjusted earnings (loss) per share – diluted

       $ (0.08 )     $ (0.18 )     $ 0.07      $ (0.19 ) 

    Weighted average number of shares – basic

         36,083,703        36,483,551        38,174,920        38,359,851  

    Weighted average number of shares – diluted

         36,083,703        36,483,551        38,529,789        38,359,851  
     
    (a)

    This adjustment eliminates the impact of non-cash equity-based compensation expenses. Although we expect to incur non-cash equity-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.

     

    34


    (b)

    This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results.

    (c)

    This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.

    (d)

    For the three and six months ended June 30, 2025, this adjustment eliminates $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals. As this adjustment meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if this adjustment is excluded.

    (e)

    For the six months ended June 30, 2025 and 2024, income tax effect on non-GAAP adjustments were calculated by calculating the tax expense of each jurisdiction with or without the non-GAAP adjustments. For the six months ended June 30, 2025, income tax effect on non-GAAP adjustments related to our Korean subsidiary was negative $2.3 million. For six months ended June 30, 2024, income tax effect on non-GAAP adjustments related to our Korean subsidiary and the U.S. parent entity were negative $1.7 million and positive $0.5 million, respectively.

    We believe that all adjustments to income (loss) from continuing operations used to calculate Adjusted Net Income (Loss) from continuing operations was applied consistently to the periods presented.

    Adjusted Net Income (Loss) has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

     

      •  

    Adjusted Net Income (Loss) does not reflect changes in, or cash requirements for, our working capital needs;

     

      •  

    Adjusted Net Income (Loss) does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;

     

      •  

    Adjusted Net Income (Loss) does not reflect the costs of holding certain assets and liabilities in foreign currencies; and

     

      •  

    Other companies in our industry may calculate Adjusted Net Income (Loss) differently than we do, limiting its usefulness as a comparative measure.

    Because of these limitations, Adjusted Net Income (Loss) should not be considered as a measure of profitability of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted Net Income (Loss) only as a supplement.

     

    35


    Factors Affecting Our Results of Operations

    Net Sales. We derive substantially all of our sales (net of sales returns and allowances) from our Power solutions business. Our product inventory is primarily located in Korea and is available for drop shipment globally. Outside of Korea, we maintain limited product inventory, and our sales representatives generally relay orders to our fabrication facility in Korea for fulfillment. We have strategically located our sales offices near concentrations of major customers. Our sales offices are located in Korea, Japan, Taiwan and Greater China. Our network of authorized agents and distributors is in the United States, Europe and the Asia Pacific region.

    We recognize revenue when a customer obtains control of the product, which is generally upon product shipment, delivery at the customer’s location or upon customer acceptance, depending on the terms of the arrangement. For the six months ended June 30, 2025 and 2024, we sold products to 163 and 135 customers, respectively, and our net sales to our ten largest customers represented 74% and 73% of our net sales – Power solutions business, respectively.

    Gross Profit. Our overall gross profit generally fluctuates as a result of changes in overall sales volumes and in the average selling prices of our products and services. Other factors that influence our gross profit include changes in product mix, the introduction of new products and services and subsequent generations of existing products and services, shifts in the utilization of our manufacturing facility and the yields achieved by our manufacturing operations, changes in material, labor and other manufacturing costs including outsourced manufacturing expenses, and variation in depreciation expense.

    Average Selling Prices (“ASP”). Average selling prices for our products tend to be highest at the time of introduction of new products which utilize the latest technology and tend to decrease over time as such products mature in the market and are replaced by next generation products. We strive to offset the impact of declining selling prices for existing products through our product development activities and by introducing new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to preclude losses from product and productive capacity obsolescence.

    Material Costs. Our material costs consist of costs of raw materials, such as silicon wafers, chemicals, gases and tape and packaging supplies. We use processes that require specialized raw materials, such as silicon wafers, that are generally available from a limited number of suppliers. If demand increases or supplies decrease, the costs of our raw materials could increase significantly.

    Labor Costs. A significant portion of our employees are located in Korea. Under Korean labor laws, most employees and certain executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of June 30, 2025, 96% of our employees were eligible for severance benefits.

    Depreciation Expense. We periodically evaluate the carrying values of long-lived assets, including property, plant and equipment and intangible assets, as well as the related depreciation periods. We depreciated our property, plant and equipment using the straight-line method over the estimated useful lives of our assets. Depreciation rates vary from 30-40 years on buildings to 3-12 years for certain equipment and assets. Our evaluation of carrying values is based on various analyses including cash flow and profitability projections. If our projections indicate that future undiscounted cash flows are not sufficient to recover the carrying value of the related long-lived assets, the carrying value of the assets is impaired and will be reduced, with the reduction charged to expense so that the carrying value is equal to fair value.

    Selling Expenses. We sell our products worldwide through a direct sales force as well as a network of sales agents and representatives to OEMs, including major branded customers and contract manufacturers, and indirectly through distributors. Selling expenses consist primarily of the personnel costs for the members of our direct sales force, a network of sales representatives and other costs of distribution. Personnel costs include base salary, benefits and incentive compensation.

    General and Administrative Expenses. General and administrative expenses consist of the costs of various corporate operations, including finance, legal, human resources and other administrative functions. These expenses primarily consist of payroll-related expenses, consulting and other professional fees and office facility-related expenses.

    Research and Development. The rapid technological change and product obsolescence that characterize our industry require us to make continuous investments in research and development. Product development time frames vary but, in general, we incur research and development costs one to two years before generating sales from the associated new products. These expenses include personnel costs for members of our engineering workforce, cost of photomasks, silicon wafers and other non-recurring engineering charges related to product design. Additionally, we develop base line process technology through experimentation and through the design and use of characterization wafers that help achieve commercially feasible yields for new products. The majority of research and development expenses of our Power IC business are material and design-related costs for Power IC products. Power IC uses standard BCD process technologies which can be sourced from multiple foundries. The majority of research and development expenses of our Power discrete business are certain equipment, material and design-related costs for Power discrete products.

     

    36


    Impact of Foreign Currency Exchange Rates on Reported Results of Operations. Historically, a portion of our revenues and cost of sales and greater than the majority of our operating expenses have been denominated in non-U.S. currencies, principally the Korean won, and we expect that this will remain true in the future. Because we report our results of operations in U.S. dollars converted from our non-U.S. revenues and expenses based on monthly average exchange rates, changes in the exchange rate between the Korean won and the U.S. dollar could materially impact our reported results of operations and distort period to period comparisons. In particular, because of the difference in the amount of our consolidated revenues and expenses that are in U.S. dollars relative to Korean won, depreciation in the U.S. dollar relative to the Korean won could result in a material increase in reported costs relative to revenues, and therefore could cause our profit margins and operating income to appear to decline materially, particularly relative to prior periods. The converse is true if the U.S. dollar were to appreciate relative to the Korean won. Moreover, our foreign currency gain or loss would be affected by changes in the exchange rate between the Korean won and the U.S. dollar as a substantial portion of non-cash translation gain or loss is associated with the intercompany long-term loans to one of our Korean subsidiaries, Magnachip Semiconductor, Ltd. or MSK, which is denominated in U.S. dollars. As of June 30, 2025, the outstanding intercompany loan balance including accrued interest between MSK and our Dutch subsidiary was $241.7 million. As a result of such foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our stock could be adversely affected.

    From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. Our Korean subsidiary, Magnachip Semiconductor, Ltd., enters into foreign currency zero cost collar contracts in order to mitigate a portion of the impact of U.S. dollar-Korean won exchange rate fluctuations on our operating results. Obligations under these foreign currency zero cost collar contracts must be cash collateralized if our exposure exceeds certain specified thresholds. These zero cost collar contracts may be terminated by a counterparty in a number of circumstances, including if our total cash and cash equivalents is less than $30.0 million at the end of a fiscal quarter unless a waiver is obtained from the counterparty. We cannot assure that any hedging technique we implement will be effective. If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on our results of operations.

    Foreign Currency Gain or Loss. Foreign currency translation gains or losses on transactions by us or our subsidiaries in a currency other than our or our subsidiaries’ functional currency are included in foreign currency gain (loss), net in our consolidated statements of operations. A substantial portion of this net foreign currency gain or loss relates to non-cash translation gain or loss related to the principal balance of intercompany balances at our Korean subsidiary, Magnachip Semiconductor, Ltd., that are denominated in U.S. dollars. This gain or loss results from fluctuations in the exchange rate between the Korean won and U.S. dollar.

    Income Taxes. We record our income taxes in each of the tax jurisdictions in which we operate. This process involves using an asset and liability approach whereby deferred tax assets and liabilities are recorded for differences in the financial reporting bases and tax basis of our assets and liabilities. We exercise significant management judgment in determining our provision for income taxes, deferred tax assets and liabilities. We assess whether it is more likely than not that the deferred tax assets existing at the period-end will be realized in future periods. In such assessment, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. In the event we were to determine that we would be able to realize the deferred income tax assets in the future in excess of their net recorded amount, we would adjust the valuation allowance, which would reduce the provision for income taxes.

    We are subject to income-or non-income-based tax examinations by tax authorities of the U.S., Korea and multiple other foreign jurisdictions for all open tax years. Significant estimates and judgments are required in determining our worldwide provision for income-or non-income based taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a result.

    Capital Expenditures. We primarily invest in manufacturing equipment, software design tools and other tangible assets mainly for fabrication facility maintenance, capacity expansion and technology improvement. Capacity expansions and technology improvements typically occur in anticipation of increases in demand. We typically pay for capital expenditures in partial installments with portions due on order, delivery and final acceptance. Our capital expenditures mainly include our payments for the purchase of property, plant and equipment.

    Inventories. We monitor our inventory levels in light of product development changes and market expectations. We may be required to take additional charges for quantities in excess of demand, cost in excess of market value and product age. Our analysis may take into consideration historical usage, expected demand, anticipated sales price, new product development schedules, the effect new products might have on the sales of existing products, product age, customer design activity, customer concentration and other factors. These forecasts require us to estimate our ability to predict demand for current and future products and compare those estimates with our current inventory levels and inventory purchase commitments. Our forecasts for our inventory may differ from actual inventory use.

     

    37


    Results of Operations – Comparison of Three Months Ended June 30, 2025 and 2024

    The following table sets forth consolidated results of operations for the three months ended June 30, 2025 and 2024:

     

         Three Months Ended
    June 30, 2025
        Three Months Ended
    June 30, 2024
           
         Amount     % of
    Total Revenues
        Amount     % of
    Total Revenues
        Change
    Amount
     
         (Dollars in millions)  

    Revenues

              

    Net sales – Power solutions business

       $ 47.6       100.0 %    $ 44.1       95.0 %    $ 3.6  

    Net sales – transitional Fab 3 foundry services

         —        —        2.3       5.0       (2.3 ) 
      

     

     

         

     

     

         

     

     

     

    Total revenues

         47.6       100.0       46.4       100.0       1.2  

    Cost of sales

              

    Cost of sales – Power solutions business

         37.9       79.6       34.2       73.6       3.8  

    Cost of sales – transitional Fab 3 foundry services

         —        —        2.5       5.3       (2.5 ) 
      

     

     

         

     

     

         

     

     

     

    Total cost of sales

         37.9       79.6       36.6       78.9       1.3  
      

     

     

         

     

     

         

     

     

     

    Gross profit

         9.7       20.4       9.8       21.1       (0.1 ) 

    Selling, general and administrative expenses

         9.3       19.6       9.7       21.0       (0.4 ) 

    Research and development expenses

         7.0       14.7       5.8       12.4       1.2  

    Other charges

         0.8       1.8       —        —        0.8  
      

     

     

         

     

     

         

     

     

     

    Operating loss

         (7.4 )      (15.6 )      (5.7 )      (12.3 )      (1.7 ) 

    Interest income

         1.3       2.8       2.1       4.6       (0.8 ) 

    Interest expense

         (0.4 )      (0.8 )      (0.5 )      (1.0 )      0.1  

    Foreign currency gain (loss), net

         10.8       22.7       (3.6 )      (7.8 )      14.4  

    Other income, net

         0.1       0.1       0.1       0.2       (0.1 ) 
      

     

     

         

     

     

         

     

     

     
         11.8       24.8       (1.9 )      (4.0 )      13.7  
      

     

     

         

     

     

         

     

     

     

    Income (Loss) from continuing operations before income tax benefit, net

         4.4       9.1       (7.6 )      (16.4 )      11.9  

    Income tax benefit, net

         (4.1 )      (8.7 )      (5.4 )      (11.6 )      1.2  
      

     

     

         

     

     

         

     

     

     

    Income (Loss) from continuing operations

         8.5       17.8       (2.2 )      (4.8 )      10.7  

    Loss from discontinued operations, net of tax

         (8.2 )      (17.1 )      (10.8 )      (23.3 )      2.6  
      

     

     

         

     

     

         

     

     

     

    Net income (loss)

       $ 0.3       0.7     $ (13.0 )      (28.0 )    $ 13.3  
      

     

     

         

     

     

         

     

     

     

     

         Three Months Ended
    June 30, 2025
        Three Months Ended
    June 30, 2024
           
         Amount      % of
    Total Revenues
        Amount      % of
    Total Revenues
        Change
    Amount
     
         (Dollars in millions)  

    Revenues

                

    Net sales – Power solutions business

                

    Power Analog Solutions

       $ 42.3        88.7 %    $ 39.2        84.6 %    $ 3.0  

    Power IC

         5.4        11.3       4.8        10.4       0.5  
      

     

     

          

     

     

          

     

     

     

    Total Power solutions business

         47.6        100.0       44.1        95.0       3.6  

    Net sales – transitional Fab 3 foundry services

         —         —        2.3        5.0       (2.3 ) 
      

     

     

          

     

     

          

     

     

     

    Total revenues

       $ 47.6        100.0 %    $ 46.4        100.0 %    $ 1.2  
      

     

     

          

     

     

          

     

     

     

     

    38


         Three Months Ended
    June 30, 2025
        Three Months Ended
    June 30, 2024
       

     

     
         Amount      % of
    Net Sales
        Amount     % of
    Net Sales
        Change
    Amount
     
         (Dollars in millions)  

    Gross Profit

               

    Gross profit – Power solutions business

               

    Power Analog Solutions

       $ 7.7        18.2 %    $ 7.7       19.7 %    $ (0.0 ) 

    Power IC

         2.0        37.4       2.2       45.5       (0.2 ) 
      

     

     

          

     

     

         

    Total Power solutions business

         9.7        20.4 %      9.9       22.5 %      (0.2 ) 

    Gross profit – transitional Fab 3 foundry services

         —         —        (0.1 )      (5.2 )      0.1  
      

     

     

          

     

     

         

    Total gross profit

       $ 9.7        20.4 %    $ 9.8       21.1 %    $ (0.1 ) 
      

     

     

          

     

     

         

    Revenues

    Total revenues were $47.6 million for the three months ended June 30, 2025, a $1.2 million, or 2.6%, increase compared to $46.4 million for the three months ended June 30, 2024. This increase was primarily due to an increase in revenue related to our Power solutions business as described below.

    The Power solutions business. Net sales from our Power solutions business were $47.6 million for the three months ended June 30, 2025, a $3.6 million, or 8.1%, increase compared to $44.1 million for the three months ended June 30, 2024. The increase in net sales from our Power solutions business line was attributable to a higher demand for power products such as MOSFETs, including high-end MOSFETs in the communication and computing applications. A higher demand for our Power IC products, primarily for LED televisions and OLED IT devices, also had a favorable impact on net sales.

    Gross Profit

    Total gross profit was $9.7 million for the three months ended June 30, 2025 compared to $9.8 million the three months ended June 30, 2024, a $0.1 million, or 0.8%, decrease. Gross profit as a percentage of net sales for the three months ended June 30, 2025 decreased to 20.4% compared to 21.1% for the three months ended June 30, 2024. The decrease in gross profit and gross profit as a percentage of net sales was primarily due to our Power solutions business as further described below.

    The Power solutions business. Gross profit from our Power solutions business was $9.7 million for the three months ended June 30, 2025, which represented a $0.2 million, or 2.0%, decrease from gross profit of $9.9 million for the three months ended June 30, 2024. Gross profit as a percentage of net sales for the three months ended June 30, 2025 decreased to 20.4% compared to 22.5% for the three months ended June 30, 2024. The year-over-year decrease in gross profit as a percentage of net sales was primarily attributable to an unfavorable product mix primarily relating to ASP erosion due to increased pricing pressure on our older generation products, particularly in China.

     

    39


    Net Sales – Power solutions business by Geographic Region

    We report net sales – Power solutions business by geographic region based on the location to which the products are billed. The following table sets forth our net sales – Power solutions business by geographic region and the percentage of total net sales – Power solutions business represented by each geographic region for the three months ended June 30, 2025 and 2024:

     

         Three Months Ended
    June 30, 2025
        Three Months Ended
    June 30, 2024
           
         Amount      % of
    Net Sales –
    Power
    solutions
    business
        Amount      % of
    Net Sales –
    Power
    solutions
    business
        Change
    Amount
     
         (Dollars in millions)  

    Korea

       $ 22.7        47.7 %    $ 19.9        45.1 %    $ 2.8  

    Asia Pacific (other than Korea)

         22.4        47.1       22.6        51.3       (0.2 ) 

    United States

         1.5        3.1       0.3        0.7       1.2  

    Europe

         1.0        2.1       1.3        2.9       (0.3 ) 
      

     

     

        

     

     

       

     

     

        

     

     

       

     

     

     
       $ 47.6        100.0 %    $ 44.1        100.0 %    $ 3.6  
      

     

     

        

     

     

       

     

     

        

     

     

       

     

     

     

    Net sales – Power solutions business in Korea increased from $19.9 million for the three months ended June 30, 2024 to $22.7 million for the three months ended June 30, 2025, or by $2.8 million, or 14.3%, primarily due to a higher demand for power products such as MOSFETs, primarily for smartphone applications. A higher demand for our Power IC products, primarily for LED televisions and OLED IT devices, also had a favorable impact on net sales.

    Net sales – Power solutions business in Asia Pacific (other than Korea) were $22.4 million for the three months ended June 30, 2025, which remained almost flat, compared to $22.6 million for the three months ended June 30, 2024.

    Operating Expenses

    Selling, General and Administrative Expenses. Selling, general and administrative expenses were $9.3 million, or 19.6% of total revenues, for the three months ended June 30, 2025, compared to $9.7 million, or 21.0% of total revenues, for the three months ended June 30, 2024. The decrease of $0.4 million, or 4.3%, was primarily attributable to a decrease in professional fees mainly comprised of legal and consulting fees.

    Research and Development Expenses. Research and development expenses were $7.0 million, or 14.7% of total revenues, for the three months ended June 30, 2025, compared to $5.8 million, or 12.4% of total revenues, for the three months ended June 30, 2024. The increase of $1.2 million, or 20.9%, was primarily attributable to higher personnel costs resulting from the increased headcount of research and development staff and an increase in material costs for power products based on the timing of development activities.

    Other Charges. For the three months ended June 30, 2025, we recorded $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals.

    Operating Loss

    As a result of the foregoing, operating loss of $7.4 million was recorded for the three months ended June 30, 2025 compared to operating loss of $5.7 million for the three months ended June 30, 2024. As discussed above, the increase in operating loss of $1.7 million resulted primarily from a $1.2 million increase in research and development expenses, a $0.8 million increase in other charges and a $0.1 million decrease in gross profit, which was offset in part by a $0.4 million decrease in selling, general and administrative expenses.

     

    40


    Other Income (Expense)

    Interest Income. Interest income was $1.3 million and $2.1 million for the three months ended June 30, 2025 and 2024, respectively.

    Interest Expense. Interest expense was $0.4 million and $0.5 million for the three months ended June 30, 2025 and 2024, respectively.

    Foreign Currency Gain (Loss), Net. Net foreign currency gain for the three months ended June 30, 2025 was $10.8 million compared to net foreign currency loss of $3.6 million for the three months ended June 30, 2024. The net foreign currency gain for the three months ended June 30, 2025 was due to the appreciation in value of the Korean won relative to the U.S. dollar during the period. The net foreign currency loss for the three months ended June 30, 2024 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period.

    A substantial portion of our net foreign currency gain or loss is non-cash translation gain or loss associated with intercompany long-term loans to one of our Korean subsidiaries, which are denominated in U.S. dollars, and are affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of June 30, 2025 and 2024, the outstanding intercompany loan balances, including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary, were $241.7 million and $261.5 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income (loss) since the intercompany balances were not considered long-term investments in nature because management intended to settle these intercompany balances at their respective maturity dates.

    Income Tax Benefit, Net

    Income tax benefit was $4.1 million for the three months ended June 30, 2025, which was primarily attributable to the estimated taxable loss in our Korean subsidiary for the respective period, including loss recognized in connection with the shutdown of the discontinued Display business during the second quarter of 2025.

    Income tax benefit was $5.4 million for the three months ended June 30, 2024, which was primarily due to the estimated taxable loss for the respective period from its primary operating entity in Korea for continuing operations.

    Income (Loss) from Continuing Operations

    Income from continuing operations for the three months ended June 30, 2025 was $8.5 million compared to loss from continuing operations of $2.2 million for the three months ended June 30, 2024. The $10.7 million improvement in results from continuing operations was primarily attributable to a $14.4 million improvement in net foreign currency gain or loss, which was offset in part by a $1.7 million increase in operating loss and a $1.2 million decrease in income tax benefit.

    Loss from Discontinued Operations, Net of Tax

    Loss from discontinued operations, net of tax for the three months ended June 30, 2025 was $8.2 million, compared to loss from discontinued operations, net of tax of $10.8 million for the three months ended June 30, 2024. The $2.6 million improvement in loss from discontinued operations, net of tax primarily resulted from a $3.6 million decrease in income tax expense, which was offset in part by a $0.4 million increase in operating loss.

    Net Income (Loss)

    As a result of the foregoing, a net income of $0.3 million was recorded for the three months ended June 30, 2025 compared to a net loss of $13.0 million for the three months ended June 30, 2024. As discussed above, the improvement in net loss of $13.3 million primarily resulted from a $10.7 million increase in income from continuing operations and a $2.6 million decrease in loss from discontinued operations, net of tax.

     

    41


    Results of Operations – Comparison of Six Months Ended June 30, 2025 and 2024

    The following table sets forth consolidated results of operations for the six months ended June 30, 2025 and 2024:

     

         Six Months Ended
    June 30, 2025
        Six Months Ended
    June 30, 2024
           
         Amount     % of
    Total Revenues
        Amount     % of
    Total Revenues
        Change
    Amount
     
         (Dollars in millions)  

    Revenues

              

    Net sales – Power solutions business

       $ 92.3       100.0 %    $ 84.0       93.5 %    $ 8.4  

    Net sales – transitional Fab 3 foundry services

         —        —        5.9       6.5       (5.9 ) 
      

     

     

         

     

     

         

     

     

     

    Total revenues

         92.3       100.0       89.8       100.0       2.5  

    Cost of sales

              

    Cost of sales – Power solutions business

         73.3       79.3       67.0       74.6       6.2  

    Cost of sales – transitional Fab 3 foundry services

         —        —        6.7       7.4       (6.7 ) 
      

     

     

         

     

     

         

     

     

     

    Total cost of sales

         73.3       79.3       73.7       82.0       (0.4 ) 
      

     

     

         

     

     

         

     

     

     

    Gross profit

         19.1       20.7       16.1       18.0       2.9  

    Selling, general and administrative expenses

         19.0       20.6       19.3       21.5       (0.2 ) 

    Research and development expenses

         12.9       14.0       12.0       13.3       0.9  

    Other charges

         0.8       0.9       —        —        0.8  
      

     

     

         

     

     

         

     

     

     

    Operating loss

         (13.7 )      (14.9 )      (15.1 )      (16.8 )      1.4  

    Interest income

         2.9       3.1       4.3       4.8       (1.4 ) 

    Interest expense

         (0.9 )      (0.9 )      (0.7 )      (0.7 )      (0.2 ) 

    Foreign currency gain (loss), net

         10.4       11.3       (8.6 )      (9.6 )      19.0  

    Other income, net

         0.2       0.2       0.2       0.2       0.0  
      

     

     

         

     

     

         

     

     

     
         12.6       13.6       (4.9 )      (5.4 )      17.5  
      

     

     

         

     

     

         

     

     

     

    Loss from continuing operations before income tax benefit

         (1.1 )      (1.2 )      (20.0 )      (22.2 )      18.8  

    Income tax benefit, net

         (4.5 )      (4.9 )      (3.5 )      (3.9 )      (1.1 ) 
      

     

     

         

     

     

         

     

     

     

    Income (Loss) from continuing operations

         3.4       3.7       (16.5 )      (18.4 )      19.9  

    Loss from discontinued operations, net of tax

         (12.0 )      (13.0 )      (11.9 )      (13.3 )      (0.0 ) 
      

     

     

         

     

     

         

     

     

     

    Net loss

       $ (8.6 )      (9.3 )    $ (28.4 )      (31.6 )    $ 19.9  
      

     

     

         

     

     

         

     

     

     

     

         Six Months Ended
    June 30, 2025
        Six Months Ended
    June 30, 2024
           
         Amount      % of
    Total Revenues
        Amount      % of
    Total Revenues
        Change
    Amount
     
         (Dollars in millions)  

    Revenues

                

    Net sales – Power solutions business

                

    Power Analog Solutions

       $ 82.1        88.9 %    $ 75.8        84.3 %    $ 6.3  

    Power IC

         10.2        11.1       8.2        9.1       2.0  
      

     

     

          

     

     

          

     

     

     

    Total Power solutions business

         92.3        100.0       84.0        93.5       8.4  

    Net sales – transitional Fab 3 foundry services

         —         —        5.9        6.5       (5.9 ) 
      

     

     

          

     

     

          

     

     

     

    Total revenues

       $ 92.3        100.0 %    $ 89.8        100.0 %    $ 2.5  
      

     

     

          

     

     

          

     

     

     

     

    42


         Six Months Ended
    June 30, 2025
        Six Months Ended
    June 30, 2024
           
         Amount      % of
    Net Sales
        Amount     % of
    Net Sales
        Change
    Amount
     
         (Dollars in millions)  

    Gross Profit

               

    Gross profit – Power solutions business

               

    Power Analog Solutions

       $ 14.8        18.0 %    $ 13.3       17.6 %    $ 1.5  

    Power IC

         4.3        41.7       3.6       43.9       0.7  
      

     

     

          

     

     

         

     

     

     

    Total Power solutions business

         19.1        20.7 %      17.0       20.2 %      2.1  

    Gross profit – transitional Fab 3 foundry services

         —         —        (0.8 )      (13.7 )      0.8  
      

     

     

          

     

     

         

     

     

     

    Total gross profit

       $ 19.1        20.7 %    $ 16.1       18.0 %    $ 2.9  
      

     

     

          

     

     

         

     

     

     

    Revenues

    Total revenues were $92.3 million for the six months ended June 30, 2025, a $2.5 million, or 2.8%, increase compared to $89.8 million for the six months ended June 30, 2024. This increase was primarily due to an increase in revenue related to our Power solutions business as described below.

    The Power solutions business. Net sales from our Power solutions business were $92.3 million for the six months ended June 30, 2025, an $8.4 million, or 10.0%, increase compared to $84.0 million for the six months ended June 30, 2024. The increase in net sales from our Power solutions business line was attributable to a higher demand for power products such as MOSFETs in the communication applications. A higher demand for our Power IC products, primarily for LED televisions and OLED IT devices, also had a favorable impact on net sales.

    Gross Profit

    Total gross profit was $19.1 million for the six months ended June 30, 2025 compared to $16.1 million for the six months ended June 30, 2024, a $2.9 million, or 18.1%, increase. Gross profit as a percentage of net sales for the six months ended June 30, 2025 increased to 20.7% compared to 18.0% for the six months ended June 30, 2024. The increase in gross profit and gross profit as a percentage of net sales was primarily due to our Power solutions business as further described below.

    The Power solutions business. Gross profit from our Power solutions business was $19.1 million for the six months ended June 30, 2025, which represented a $2.1 million, or 12.5%, increase from gross profit of $17.0 million for the six months ended June 30, 2024. Gross profit as a percentage of net sales for the six months ended June 30, 2025 increased to 20.7% compared to 20.2% for the six months ended June 30, 2024. The year-over-year increase in gross profit as a percentage of net sales was primarily attributable to the appreciation in value of U.S. dollar against the Korean Won in the first quarter of 2025, which was offset in part by an unfavorable product mix primarily relating to ASP erosion due to increased pricing pressure on our older generation products, particularly in China.

     

    43


    Net Sales – Power solutions business by Geographic Region

    We report net sales – Power solutions business by geographic region based on the location to which the products are billed. The following table sets forth our net sales – Power solutions business by geographic region and the percentage of total net sales – Power solutions business represented by each geographic region for the six months ended June 30, 2025 and 2024:

     

         Six Months Ended
    June 30, 2025
        Six Months Ended
    June 30, 2024
           
         Amount      % of
    Net Sales –
    Power
    solutions
    business
        Amount      % of
    Net Sales –
    Power
    solutions
    business
        Change
    Amount
     
         (Dollars in millions)  

    Korea

       $ 44.4        48.1 %    $ 37.0        44.0 %    $ 7.5  

    Asia Pacific (other than Korea)

         43.4        47.0       43.7        52.0       (0.3 ) 

    United States

         2.7        2.9       0.6        0.8       2.0  

    Europe

         1.8        2.0       2.7        3.2       (0.8 ) 
      

     

     

        

     

     

       

     

     

        

     

     

       

     

     

     
       $ 92.3        100.0 %    $ 84.0        100.0 %    $ 8.4  
      

     

     

        

     

     

       

     

     

        

     

     

       

     

     

     

    Net sales – Power solutions business in Korea increased from $37.0 million for the six months ended June 30, 2024 to $44.4 million for the six months ended June 30, 2025, or by $7.5 million, or 20.2%, primarily due to a higher demand for power products such as MOSFETs, primarily for smartphone applications. A higher demand for our Power IC products, primarily for LED televisions and OLED IT devices, also had a favorable impact on net sales.

    Net sales – Power solutions business in Asia Pacific (other than Korea) were $43.4 million for the six months ended June 30, 2025, which remained almost flat, compared to $43.7 million for the six months ended June 30, 2024.

    Operating Expenses

    Selling, General and Administrative Expenses. Selling, general and administrative expenses were $19.0 million, or 20.6% of total revenues, for the six months ended June 30, 2025, compared to $19.3 million, or 21.5% of total revenues, for the six months ended June 30, 2024. The decrease of $0.2 million, or 1.2%, was primarily attributable to a decrease in professional fees mainly comprised of legal and consulting fees, which was offset in part by a net increase in employee compensation and certain benefit related charges.

    Research and Development Expenses. Research and development expenses were $12.9 million, or 14.0% of total revenues, for the six months ended June 30, 2025, compared to $12.0 million, or 13.3% of total revenues, for the six months ended June 30, 2024. The increase of $0.9 million, or 7.8%, was primarily attributable to higher personnel costs resulting from the increased headcount of research and development staff.

    Other Charges. For the six months ended June 30, 2025, we recorded $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals.

    Operating Loss

    As a result of the foregoing, operating loss of $13.7 million was recorded for the six months ended June 30, 2025 compared to operating loss of $15.1 million for the six months ended June 30, 2024. As discussed above, the improvement in operating loss of $1.4 million resulted primarily from a $2.9 million increase in gross profit and a $0.2 million decrease in selling, general and administrative expenses, which was offset in part by a $0.9 million increase in research and development expenses, and a $0.8 million increase in other charges.

    Other Income (Expense)

    Interest Income. Interest income was $2.9 million and $4.3 million for the six months ended June 30, 2025 and 2024, respectively.

    Interest Expense. Interest expense was $0.9 million and $0.7 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $0.2 million, or 26.6%, was primarily due to the Term Loan that we executed in March 2024.

     

    44


    Foreign Currency Gain (Loss), Net. Net foreign currency gain for the six months ended June 30, 2025 was $10.4 million compared to net foreign currency loss of $8.6 million for the six months ended June 30, 2024. The net foreign currency gain for the six months ended June 30, 2025 was due to the appreciation in value of the Korean won relative to the U.S. dollar during the period. The net foreign currency loss for the six months ended June 30, 2024 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period.

    A substantial portion of our net foreign currency gain or loss is non-cash translation gain or loss associated with intercompany long-term loans to one of our Korean subsidiaries, which are denominated in U.S. dollars, and are affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of June 30, 2025 and 2024, the outstanding intercompany loan balances, including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary, were $241.7 million and $261.5 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income (loss) since the intercompany balances were not considered long-term investments in nature because management intended to settle these intercompany balances at their respective maturity dates.

    Income Tax Benefit, Net

    Income tax benefit was $4.5 million for the six months ended June 30, 2025, which was primarily attributable to the estimated taxable loss in our Korean subsidiary for the respective period, including loss recognized in connection with the shutdown of the discontinued Display business during the second quarter of 2025.

    Income tax benefit was $3.5 million for the six months ended June 30, 2024, which was primarily due to the estimated taxable loss for the respective period from its primary operating entity in Korea for continuing operations.

    Income (Loss) from Continuing Operations

    Income from continuing operations for the six months ended June 30, 2025 was $3.4 million compared to loss from continuing operations of $16.5 million for the six months ended June 30, 2024. The $19.9 million improvement in results from continuing operations was primarily attributable to a $19.0 million improvement in net foreign currency gain or loss, a $1.4 million decrease in operating loss and a $1.1 million increase in income tax benefit, which was offset in part by a $1.4 million decrease in interest income.

    Loss from Discontinued Operations, Net of Tax

    Loss from discontinued operations, net of tax for the six months ended June 30, 2025 was $12.0 million, which remained almost flat, compared to loss from discontinued operations, net of tax of $11.9 million for the six months ended June 30, 2024.

    Net Loss

    As a result of the foregoing, a net loss of $8.6 million was recorded for the six months ended June 30, 2025 compared to a net loss of $28.4 million for the six months ended June 30, 2024. As discussed above, the improvement in net loss of $19.9 million primarily resulted from a $19.9 million decrease in loss from continuing operations.

     

    45


    Liquidity and Capital Resources

    Our principal capital requirements are to fund sales and marketing, invest in research and development and capital equipment, to make debt service payments and to fund working capital needs. We calculate working capital as current assets less current liabilities.

    Our principal sources of liquidity are our cash, cash equivalents, cash flows from operations and financing activities. Our ability to manage cash and cash equivalents may be limited, as our primary cash flows are dictated by the terms of our sales and supply agreements, contractual obligations, debt instruments and legal and regulatory requirements. From time to time, we may sell accounts receivable to third parties under factoring agreements or engage in accounts receivable discounting to facilitate the collection of cash. In addition, from time to time, we may make payments to our vendors on extended terms with their consent. As of June 30, 2025, we did not have any accounts payable on extended terms or payment deferment with our vendors.

    As of June 29, 2018, our Korean subsidiary, Magnachip Semiconductor, Ltd. (“MSK”), entered into an arrangement whereby it (i) acquired a water treatment facility from SK hynix for $4.2 million to support our fabrication facility in Gumi, Korea, and (ii) subsequently sold the water treatment facility for $4.2 million to a third party management company that we engaged to run the facility for a 10-year term beginning July 1, 2018. As of June 30, 2025, the outstanding obligation of this arrangement is approximately $12.9 million for remaining service term through 2028.

    On March 26, 2024, MSK executed a Standard Credit Agreement (together with its General Terms and Conditions, the “Loan Agreement”) with Korea Development Bank (“KDB”). The Loan Agreement provides for a working capital term loan (the “Term Loan”) of KRW 40,000,000,000 (approximately $29.5 million based on the KRW/USD exchange rate of 1,356.4:1 as of June 30, 2025 as quoted by KEB Hana Bank). The Term Loan requires monthly interest-only payments and matures on March 26, 2027, at which time the full principal balance will be due and payable.

    On June 26, 2025, under its existing Equipment Financing Credit Agreement with KDB, MSK entered into a CAPEX Loan of KRW 9,520,000,000 (approximately $7.0 million based on the KRW/USD exchange rate of 1,356.4:1 as of June 30, 2025 as quoted by KEB Hana Bank). The CAPEX Loan requires monthly interest-only payments, with principal repayments deferred for an initial two-year period and amortized over the subsequent eight years, and matures on June 26, 2035.

    As of June 30, 2025, cash and cash equivalents held by MSK were $102.5 million, which represents 90% of our total cash and cash equivalents on a consolidated basis. We currently believe that we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our operations as well as capital expenditures for the next 12 months and the foreseeable future.

    Working Capital

    Our working capital balance as of June 30, 2025 was $156.5 million compared to $173.0 million as of December 31, 2024. The decrease in working capital balance was mainly attributable to a $25.3 million decrease in cash and cash equivalents resulted primarily from a $6.5 million of severance and other employee-related costs in connection with the liquidation of MMS, and continued execution of capital expenditures and stock repurchase program.

    Cash Flows from Operating Activities

    Cash outflow used in operating activities totaled $29.8 million for the six months ended June 30, 2025, compared to $5.1 million of cash outflow used in operating activities for the six months ended June 30, 2024. The net operating cash outflow for the six months ended June 30, 2025 reflects our net loss of $8.6 million, as adjusted favorably by $0.3 million, which mainly consisted of depreciation and amortization, provision for severance benefits, provision for inventory reserves, net foreign currency gain and stock-based compensation, and net unfavorable impact of $21.5 million from changes in operating assets and liabilities.

    Cash Flows from Investing Activities

    Cash outflow used in investing activities totaled $7.7 million for the six months ended June 30, 2025, compared to $33.1 million of cash outflow used in investing activities for the six months ended June 30, 2024. The $25.4 million decrease in cash outflow was primarily attributable to a $30.0 million of investment in short-term financial instruments in the first half of 2024, a $2.8 million of net decrease in hedge collateral and $2.8 million decrease in net payment of guarantee deposits, which was offset in part by a $10.5 million increase in purchase of property, plant and equipment.

     

    46


    Cash Flows from Financing Activities

    Cash inflow provided by financing activities totaled $2.6 million for the six months ended June 30, 2025, compared to $22.9 million of cash inflow provided by financing activities for the six months ended June 30, 2024. The financing cash inflow for the six months ended June 30, 2025 was primarily attributable to the $7.0 million of proceeds received from the CAPEX Loan with KDB, which was offset in part by a payment of $3.5 million for the repurchases of our common stock pursuant to our stock repurchase program and a payment of $0.5 million for the repurchase of our common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units. The financing cash inflow for the six months ended June 30, 2024 was primarily attributable to the $30.1 million of proceeds received from the Term Loan with KDB, which was offset in part by a payment of $6.3 million for the repurchases of our common stock pursuant to our stock repurchase program and a payment of $0.5 million for the repurchase of our common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units.

    For additional cash flow information associated with our discontinued operation, please see “Item 1. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2 – Discontinued Operations” included elsewhere in this Report.

    Capital Expenditures

    We routinely make capital expenditures for fabrication facility maintenance, enhancement of our existing facility and reinforcement of our global research and development capability. For the six months ended June 30, 2025, capital expenditures for property, plant and equipment were $12.1 million, a $10.5 million, or 671.6%, increase from $1.6 million for the six months ended June 30, 2024. The capital expenditures for the six months ended June 30, 2025 and 2024 were related to meeting our customer demand and supporting technology and facility improvement at our fabrication facility.

    Looking ahead, we expect the capital expenditures for the year ending December 31, 2025 to be in the range of $32 to $34 million, of which $12.1 million was incurred through June 30, 2025. The $32 to $34 million range includes approximately $20 to $22 million planned for new investments into our fabrication facility located in Gumi, Korea. The capital expenditures for 2025 will be partially funded through the $26.5 million Equipment Financing Credit Agreement, which is specifically designated for equipment purchases or upgrades in our Gumi fabrication facility. Of the $12.1 million of capital expenditures incurred in the first half of 2025, $7.0 million was funded by Equipment Financing Credit Agreement. These new investments in the Gumi fabrication facility are expected to drive development of new generation products, and upgrade new tools to optimize product mix and improve gross profit margin in the near future and the longer-term.

     

    47


    Critical Accounting Policies and Estimates

    Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our consolidated financial statements and accompanying notes.

    We believe that our significant accounting policies, which are described further in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for our fiscal year ended December 31, 2024, or our 2024 Form 10-K, are critical due to the fact that they involve a high degree of judgment and estimates about the effects of matters that are inherently uncertain. We base these estimates and judgments on historical experience, knowledge of current conditions and other assumptions and information that we believe to be reasonable. Estimates and assumptions about future events and their effects cannot be determined with certainty. Accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the business environment in which we operate changes.

    A description of our critical accounting policies that involve significant management judgement appears in our 2024 Form 10-K, under “Management’s Discussion and Analysis of Financial Conditions and Reports of Operations—Critical Accounting Policies and Estimates.” There have been no other material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates included in our 2024 Form 10-K.

     

    48


    Item 3.

    [Reserved]

     

    Item 4.

    Controls and Procedures

    Evaluation of Disclosure Controls and Procedures

    We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

    In connection with the preparation of this Report, we carried out an evaluation under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, as of June 30, 2025, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2025.

    Changes in Internal Control Over Financial Reporting

    There were no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

     

    49


    PART II. OTHER INFORMATION

     

    Item 1.

    Legal Proceedings

    For a discussion of legal proceedings, see “Part I, Item 3. Legal Proceedings” of our 2024 Form 10-K.

    See also “Item 1A. Risk Factors” in this Report and “Part I, Item 1A. Risk Factors” of our 2024 Form 10-K for additional information.

     

    Item 1A.

    Risk Factors

    The Company is subject to risks and uncertainties, any of which could have a significant or material adverse effect on our business, financial condition, liquidity or consolidated financial statements.

    In addition to the other information contained in this Report and the other reports and materials the Company files with the SEC, investors should carefully consider the risk factors disclosed in Part I, Item 1A of our 2024 Form 10-K as well as in our subsequent filings with the SEC. The risks described herein and therein are not the only ones we face.

    There have been no material changes to the risk factors disclosed in Part I, Item 1A of our 2024 Form 10-K.

     

    50


    Item 2.

    Unregistered Sales of Equity Securities and Use of Proceeds.

    The following table shows the monthly activity related to our repurchases of common stock for the quarter ended June 30, 2025.

     

    Period

       Total Number
    of Shares
    Purchased(1)
         Average
    Price Paid
    per Share
         Total Number
    of Shares
    Purchased as Part
    of Publicly
    Announced Plans
    or Programs(2)
         Approximate dollar
    value of Shares that
    may yet be
    Purchased under the
    Plans or Programs
    (in thousands)(2)
     

    April 2025

         612,184      $ 3.02        612,184      $ 21,639  

    May 2025(1)

         2,723      $ 3.28        —       $ 21,639  

    June 2025

         116,650      $ 3.87        116,650      $ 21,188  
      

     

     

        

     

     

        

     

     

        

     

     

     

    Total

         731,557      $ 3.16        728,834      $ 21,188  
      

     

     

        

     

     

        

     

     

        

     

     

     
     
    (1)

    Includes 2,723 shares withheld to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued under our equity incentive plans.

    (2)

    On July 19, 2023, the Company’s Board of Directors authorized a $50 million stock buyback program. Purchases have been and will be made in the open market or through privately negotiated transactions, depending upon market conditions and other factors. In connection with the repurchase program, the Company established a stock trading plan with Needham & Company, LLC in accordance with Rule 10b5-1 under the Exchange Act.

     

    Item 3.

    Defaults Upon Senior Securities

    Not applicable.

     

    Item 4.

    Mine Safety Disclosures

    Not applicable.

     

    51


    Item 5.
    Other Information
    Securities Trading Plans of Directors and Executive Officers
    During our last fiscal quarter, no director or officer, as defined in Rule
    16a-1(f),
    adopted or terminated a “Rule
    10b5-1
    trading arrangement” or a
    “non-Rule
    10b5-1
    trading arrangement,” each as defined in Regulation
    S-K
    Item 408.
    Voluntary Resignation Program
    As of August 1, 2025, we announced a voluntary resignation program (the “Program”) as part of our cost reduction initiatives to align our spending level with a strategy to become a pure-play power company. The shutdown of the Display business made some shared function headcount redundant because such functions had supported both the Display and Power businesses. Due to the voluntary nature of the Program, we are unable to provide an exact amount of the related financial impact at this time. However, the Program is expected to result in estimated annual savings in operating expenses of $2 to $3 million with the payback period of 1.5 years.
     
    52


    Item 6.

    Exhibits.

     

    Exhibit
    Number

      

    Description

     10.1#*    Amendment to Employment Agreement, dated April 28, 2025, by and among Magnachip Semiconductor Corporation, Magnachip Semiconductor, Ltd., and Young-Joon Kim.
     10.2#*    Amended and Restated Executive Service Agreement, dated April 28, 2025, by and among Magnachip Semiconductor Corporation, Magnachip Semiconductor, Ltd., and Shin Young Park.
     10.3#*    Amendment to Employment Agreement, dated April 28, 2025, by and among Magnachip Semiconductor Corporation, Magnachip Semiconductor, Ltd., and Shin Young Park.
     10.4#*    Amended and Restated Director Compensation Policy, dated June 26, 2025.
     31.1#    Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Principal Executive Officer.
     31.2#    Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Principal Financial Officer.
     32.1†    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Executive Officer.
     32.2†    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer.
    101.INS#    Inline XBRL Instance Document.
    101.SCH#    Inline XBRL Taxonomy Extension Schema Document.
    101.CAL#    Inline XBRL Taxonomy Extension Calculation Linkbase Document.
    101.DEF#    Inline XBRL Taxonomy Extension Definition Linkbase Document.
    101.LAB#    Inline XBRL Taxonomy Extension Label Linkbase Document.
    101.PRE#    Inline XBRL Taxonomy Extension Presentation Linkbase Document.
    104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

    Footnotes:

     

    # 

    Filed herewith

    †

    Furnished herewith

    *

    Management contract, compensatory plan or arrangement

     

    53


    SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

     

       

    MAGNACHIP SEMICONDUCTOR CORPORATION

    (Registrant)

    Dated: August 5, 2025     By:  

    /s/ Young-Joon Kim

          Young-Joon Kim
         

    Chief Executive Officer

    (Principal Executive Officer)

    Dated: August 5, 2025     By:  

    /s/ Shin Young Park

          Shin Young Park
         

    Chief Financial Officer

    (Principal Financial Officer and Principal Accounting Officer)

     

    54

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    Q2 Results Summary Consolidated revenue from continuing operations (which includes Power Analog Solutions ("PAS") and Power IC ("PIC") businesses) increased 8.1% year-over-year to $47.6 million and was above the mid-point of our guidance range of $45.0 to $49.0 million. Consolidated gross profit margin from continuing operations of 20.4% was within our guidance range of 19.5% to 21.5%. Repurchased approximately 0.7 million shares for an aggregate purchase price of $2.3 million. Q2 2025 Highlights Q2 was the fifth consecutive quarter of year-over-year growth from continuing operations primarily driven by Power Analog Solutions (PAS) growth in communications and computing appli

    7/31/25 4:05:00 PM ET
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    Magnachip Introduces TOLT-Packaged 80V MXT MV MOSFET for E-Scooters and LEVs

    - Significant Improvements in Thermal Management and Power Efficiency for Motor Control Systems in E-Scooters and Light Electric Vehicles (LEVs) Magnachip Semiconductor Corporation ("Magnachip" or "Company") (NYSE:MX) today announced the release of a new 80V MXT MV MOSFET, MDLT080N017RH, featuring a TOLT (TO-Leaded Top-Side Cooling) package. The Company has already begun supplying the new MOSFET to a leading global electric motor manufacturer. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20250728763937/en/Comparison of TOLL and TOLT packages The TOLT-packaged MOSFET delivers a major advancement in thermal management. Unlike co

    7/28/25 6:55:00 AM ET
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    Officer Martino Camillo was granted 105,484 shares, increasing direct ownership by 41% to 364,611 units (SEC Form 4)

    4 - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Issuer)

    10/3/25 4:30:04 PM ET
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    Officer Martino Camillo bought $85,290 worth of shares (30,000 units at $2.84), increasing direct ownership by 13% to 259,127 units (SEC Form 4)

    4 - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Issuer)

    8/26/25 4:20:07 PM ET
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    Officer Park Shin Young bought $28,680 worth of shares (10,000 units at $2.87), increasing direct ownership by 4% to 251,786 units (SEC Form 4)

    4 - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Issuer)

    8/26/25 4:20:08 PM ET
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    Insider Purchases

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    Officer Martino Camillo bought $85,290 worth of shares (30,000 units at $2.84), increasing direct ownership by 13% to 259,127 units (SEC Form 4)

    4 - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Issuer)

    8/26/25 4:20:07 PM ET
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    Officer Park Shin Young bought $28,680 worth of shares (10,000 units at $2.87), increasing direct ownership by 4% to 251,786 units (SEC Form 4)

    4 - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Issuer)

    8/26/25 4:20:08 PM ET
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    Director Lee Ilbok bought $77,180 worth of shares (20,000 units at $3.86), increasing direct ownership by 10% to 219,181 units (SEC Form 4)

    4 - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Issuer)

    3/18/25 4:15:06 PM ET
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    Amendment: Magnachip Semiconductor Corporation filed SEC Form 8-K: Leadership Update

    8-K/A - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Filer)

    10/3/25 4:15:18 PM ET
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    Amendment: Magnachip Semiconductor Corporation filed SEC Form 8-K: Leadership Update

    8-K/A - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Filer)

    9/9/25 6:01:33 AM ET
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    Magnachip Semiconductor Corporation filed SEC Form 8-K: Leadership Update, Regulation FD Disclosure

    8-K - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Filer)

    8/11/25 4:20:35 PM ET
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    Oppenheimer resumed coverage on MagnaChip Semi

    Oppenheimer resumed coverage of MagnaChip Semi with a rating of Perform

    12/14/21 9:25:38 AM ET
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    Needham reiterated coverage on MagnaChip Semiconductor with a new price target

    Needham reiterated coverage of MagnaChip Semiconductor with a rating of Buy and set a new price target of $29.00 from $30.00 previously

    8/23/21 10:48:48 AM ET
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    Needham & Company LLC reiterated coverage on MagnaChip Semiconductor with a new price target

    Needham & Company LLC reiterated coverage of MagnaChip Semiconductor with a rating of Buy and set a new price target of $30.00 from $25.00 previously

    2/25/21 10:46:54 AM ET
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    Large Ownership Changes

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    SEC Form SC 13G/A filed by Magnachip Semiconductor Corporation (Amendment)

    SC 13G/A - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Subject)

    2/14/24 3:06:38 PM ET
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    SEC Form SC 13G filed by Magnachip Semiconductor Corporation

    SC 13G - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Subject)

    2/13/24 11:16:46 AM ET
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    SEC Form SC 13G/A filed by Magnachip Semiconductor Corporation (Amendment)

    SC 13G/A - MAGNACHIP SEMICONDUCTOR Corp (0001325702) (Subject)

    2/13/24 6:01:20 AM ET
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    Magnachip Reports Results for Second Quarter 2025

    Q2 Results Summary Consolidated revenue from continuing operations (which includes Power Analog Solutions ("PAS") and Power IC ("PIC") businesses) increased 8.1% year-over-year to $47.6 million and was above the mid-point of our guidance range of $45.0 to $49.0 million. Consolidated gross profit margin from continuing operations of 20.4% was within our guidance range of 19.5% to 21.5%. Repurchased approximately 0.7 million shares for an aggregate purchase price of $2.3 million. Q2 2025 Highlights Q2 was the fifth consecutive quarter of year-over-year growth from continuing operations primarily driven by Power Analog Solutions (PAS) growth in communications and computing appli

    7/31/25 4:05:00 PM ET
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    Magnachip to Announce Second Quarter 2025 Financial Results on July 31, 2025

    Magnachip Semiconductor Corporation ("Magnachip") (NYSE:MX) announced today that it will report its financial results for the second quarter ended June 30, 2025, on Thursday, July 31, 2025, after the market closes. The Company will host a corresponding conference call at 2:00 p.m. PT / 5:00 p.m. ET to discuss its financial results. In advance of the conference call, all participants must use the following link to complete the online registration process. Upon registering, each participant will receive access details for this event, including the dial-in numbers, a PIN number, and an e-mail with detailed instructions to join the conference call. Online registration: https://register-conf

    7/10/25 4:05:00 PM ET
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    Magnachip Reports Results for First Quarter 2025

    Q1 Results Summary Consolidated revenue from continuing operations (which includes Power Analog Solutions ("PAS") and Power IC ("PIC") businesses) of $44.7 million was in line with the mid-point of our guidance range of $42.0 to $47.0 million. Excluding Transitional Foundry Services, revenue from continuing operations increased 12.1% year-over-year. Consolidated gross profit margin from continuing operations of 20.9% was above the high-end of our guidance range of 18.5% to 20.5%. Repurchased approximately 0.3 million shares for an aggregate purchase price of $1.1 million during the quarter and ended Q1 with cash of $132.7 million. Announced the shutdown of Display business, which is

    5/12/25 4:05:00 PM ET
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    Leadership Updates

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    MAGNACHIP SEMICONDUCTOR CORPORATION ANNOUNCES RESIGNATION OF MEL KEATING AS A MEMBER OF THE BOARD OF DIRECTORS

    SEOUL, South Korea, Sept. 6, 2023 /PRNewswire/ -- Magnachip Semiconductor Corporation (NYSE:MX) ("Magnachip" or the "Company") received a letter of resignation, dated September 5, 2023, from Mr. Mel Keating, a member of the board of directors of the Company (the "Board"), whose resignation was accepted by the Board and effective as of September 5, 2023. Now that the Company has announced its plan to separate its Display and Power operations into two distinct legal entities, Mr. Keating has decided that, after over 7 years of service as a member of the Board, during which time

    9/6/23 4:05:00 PM ET
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    Magnachip to Appoint Shareholder Gilbert Nathan to the Board of Directors

    SEOUL, South Korea, April 13, 2023 /PRNewswire/ -- Magnachip Semiconductor Corporation ("Magnachip" or the "Company") (NYSE:MX) announced today that shareholder Gilbert Nathan will join its Board of Directors pursuant to the terms of an agreement (the "Agreement") entered into with Mr. Nathan and two of his affiliated entities. Under the terms of the Agreement, Mr. Nathan will immediately join the Company as an observer of the Company's Board of Directors (the "Board") and any ad hoc Strategic Review Committee of the Board (the "Strategic Review Committee"). In addition, reasonably promptly following the Company's 2023 Annual Meeting of Stockholders, the Board will appoint Mr. Nathan as a di

    4/13/23 4:05:00 PM ET
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