Magnachip Reports Results for Third Quarter 2024

Q4 and Full-year 2024 Financial Guidance

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

For Q4 2024:

Consolidated revenue to be in the range of $59.0 to $64.0 million, including approximately $2.0 million of Transitional Foundry Services.
- MSS revenue to be in the range of $15 to $17 million, down 2.7% sequentially but up 87% year-over-year at the mid-point. This compares with MSS revenue of $16.4 million in Q3 2024 and MSS equivalent revenue of $8.6 million in Q4 2023.
- PAS revenue to be in the range of $42 to $45 million, down 8.6% sequentially but up 33.3% year-over-year at the mid-point. This compares with PAS revenue of $47.6 million in Q3 2024 and PAS equivalent revenue of $32.6 million in Q4 2023.
Consolidated gross profit margin to be in the range of 21.5% to 23.5%.
- MSS gross profit margin to be in the range of 37.5% to 40.5%. This compares with MSS gross profit margin of 38.7% in Q3 2024 and MSS equivalent gross profit margin of 41.3% in Q4 2023.
- PAS gross profit margin to be in the range of 17% to 19%. This compares with PAS gross profit margin of 19.4% in Q3 2024 and PAS equivalent gross profit margin of 18.1% in Q4 2023.

For the full-year 2024, we currently expect:

MSS revenue to grow double digits year-over-year as compared with MSS equivalent revenue of $44.4 million in 2023, consistent with what we communicated throughout the year.
PAS revenue to grow double digits year-over-year as compared with PAS equivalent revenue of $151.3 million in 2023, consistent with what we communicated throughout the year.
Transitional Foundry Services revenue will be wound down by the end of 2024, as expected. We expect any remaining amounts to be immaterial beyond Q4 2024.
Consolidated revenue flattish, as compared to our prior expectation of flattish-to-slightly down.
Consolidated gross profit margin between 21% to 22%, as compared to our prior expectation of 19% to 22%. This compares with the consolidated gross profit margin of 22.4% in 2023.

Q3 2024 Earnings Conference Call

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

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

Safe Harbor for Forward-Looking Statements

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

About Magnachip Semiconductor

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

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands of U.S. dollars, except share data) (Unaudited)

	Three Months Ended									Nine Months Ended
	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Revenues:
Net sales – standard products business	$	64,020		$	50,835		$	51,619		$	160,396		$	154,508
Net sales – transitional Fab 3 foundry services		2,440			2,336			9,626			8,302			24,721
Total revenues		66,460			53,171			61,245			168,698			179,229
Cost of sales:
Cost of sales – standard products business		48,400			39,113			36,829			123,401			112,008
Cost of sales – transitional Fab 3 foundry services		2,599			2,457			9,935			9,267			27,108
Total cost of sales		50,999			41,570			46,764			132,668			139,116
Gross profit		15,461			11,601			14,481			36,030			40,113
Gross profit as a percentage of standard products business net sales		24.4%			23.1%			28.7%			23.1%			27.5%
Gross profit as a percentage of total revenues		23.3%			21.8%			23.6%			21.4%			22.4%
Operating expenses:
Selling, general and administrative expenses		12,091			11,734			12,089			35,089			36,391
Research and development expenses		14,373			12,691			11,627			38,227			36,180
Early termination and other charges		—			—			—			—			9,251
Total operating expenses		26,464			24,425			23,716			73,316			81,822
Operating loss		(11,003	)		(12,824	)		(9,235	)		(37,286	)		(41,709	)
Interest income		2,051			2,228			2,382			6,492			7,916
Interest expense		(574	)		(554	)		(189	)		(1,366	)		(645	)
Foreign currency gain (loss), net		5,066			(3,557	)		(2,583	)		(3,492	)		(4,776	)
Other income (loss), net		(31	)		108			87			121			55
Loss before income tax expense (benefit)		(4,491	)		(14,599	)		(9,538	)		(35,531	)		(39,159	)
Income tax expense (benefit)		5,126			(1,602	)		(4,373	)		2,500			(8,577	)
Net loss	$	(9,617	)	$	(12,997	)	$	(5,165	)	$	(38,031	)	$	(30,582	)
Basic loss per common share—	$	(0.26	)	$	(0.34	)	$	(0.13	)	$	(1.00	)	$	(0.73	)
Diluted loss per common share—	$	(0.26	)	$	(0.34	)	$	(0.13	)	$	(1.00	)	$	(0.73	)
Weighted average number of shares—
Basic		37,468,849			38,174,920			40,145,290			38,060,682			41,747,255
Diluted		37,468,849			38,174,920			40,145,290			38,060,682			41,747,255

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share data) (Unaudited)

	September 30, 2024				December 31, 2023
Assets
Current assets
Cash and cash equivalents		$	121,095			$	158,092
Short-term financial instruments			30,000				—
Accounts receivable, net			28,693				32,641
Inventories, net			36,127				32,733
Other receivables			5,301				4,295
Prepaid expenses			11,614				7,390
Hedge collateral			1,000				1,000
Other current assets			8,208				9,283
Total current assets			242,038				245,434
Property, plant and equipment, net			92,383				100,122
Operating lease right-of-use assets			3,810				4,639
Intangible assets, net			1,353				1,537
Long-term prepaid expenses			615				5,736
Deferred income taxes			46,643				50,836
Other non-current assets			24,513				12,187
Total assets		$	411,355			$	420,491
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$	24,644			$	24,443
Other accounts payable			11,768				5,292
Accrued expenses			9,133				10,457
Accrued income taxes			32				1,496
Operating lease liabilities			1,754				1,914
Other current liabilities			3,005				3,286
Total current liabilities			50,336				46,888
Long-term borrowing			30,312				—
Accrued severance benefits, net			17,347				16,020
Non-current operating lease liabilities			2,191				2,897
Other non-current liabilities			11,596				10,088
Total liabilities			111,782				75,893
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 150,000,000 shares authorized, 57,032,206 shares issued and 37,292,044 outstanding at September 30, 2024 and 56,971,394 shares issued and 38,852,742 outstanding at December 31, 2023			569				569
Additional paid-in capital			277,306				273,256
Retained earnings			260,853				298,884
Treasury stock, 19,740,162 shares at September 30, 2024 and 18,118,652 shares at December 31, 2023, respectively			(222,503	)			(213,454	)
Accumulated other comprehensive loss			(16,652	)			(14,657	)
Total stockholders’ equity			299,573				344,598
Total liabilities and stockholders’ equity		$	411,355			$	420,491

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) (Unaudited)

	Three Months Ended			Nine Months Ended
	September 30, 2024			September 30, 2024			September 30, 2023
Cash flows from operating activities
Net loss	$	(9,617	)	$	(38,031	)	$	(30,582	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		4,056			12,171			12,583
Provision for severance benefits		1,582			4,552			5,358
Loss (gain) on foreign currency, net		(10,708	)		6,140			14,532
Provision for inventory reserves		(591	)		(1,615	)		3,035
Stock-based compensation		1,977			4,093			5,383
Deferred income taxes		(47	)		3,111			88
Others, net		126			552			592
Changes in operating assets and liabilities
Accounts receivable, net		3,795			3,560			(6,409	)
Inventories		1,084			(2,365	)		3,635
Other receivables		(1,631	)		(1,030	)		4,993
Prepaid expenses		1,818			5,645			5,653
Other current assets		4,086			1,155			(7,944	)
Accounts payable		(1,325	)		619			6,066
Other accounts payable		(3,521	)		(10,197	)		(6,738	)
Accrued expenses		(912	)		(1,339	)		619
Accrued income taxes		(1,442	)		(1,459	)		(3,014	)
Other current liabilities		(693	)		(240	)		(741	)
Other non-current liabilities		(99	)		(345	)		(279	)
Payment of severance benefits		(527	)		(1,889	)		(6,183	)
Others, net		(316	)		(1,077	)		(841	)
Net cash used in operating activities		(12,905	)		(17,989	)		(194	)
Cash flows from investing activities
Proceeds from settlement of hedge collateral		627			627			3,335
Payment of hedge collateral		—			(612	)		(3,154	)
Purchase of property, plant and equipment		(2,609	)		(4,175	)		(2,280	)
Payment for intellectual property registration		(85	)		(263	)		(230	)
Collection of guarantee deposits		15			1,153			4,984
Payment of guarantee deposits		(180	)		(2,090	)		(7,276	)
Increase in short-term financial instruments		—			(30,000	)		—
Others, net		(37	)		(37	)		—
Net cash used in investing activities		(2,269	)		(35,397	)		(4,621	)
Cash flows from financing activities
Proceeds from long-term borrowing		—			30,059			—
Proceeds from exercise of stock options		—			—			27
Acquisition of treasury stock		(2,648	)		(9,507	)		(43,087	)
Repayment of financing related to water treatment facility arrangement		(119	)		(357	)		(371	)
Repayment of principal portion of finance lease liabilities		(35	)		(104	)		(69	)
Net cash provided by (used in) financing activities		(2,802	)		20,091			(43,500	)
Effect of exchange rates on cash and cash equivalents		6,604			(3,702	)		(10,518	)
Net decrease in cash and cash equivalents		(11,372	)		(36,997	)		(58,833	)
Cash and cash equivalents
Beginning of the period		132,467			158,092			225,477
End of the period	$	121,095		$	121,095		$	166,644

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES RECONCILIATION OF OPERATING LOSS TO ADJUSTED OPERATING LOSS (In thousands of U.S. dollars) (Unaudited)

	Three Months Ended									Nine Months Ended
	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Operating loss	$	(11,003	)	$	(12,824	)	$	(9,235	)	$	(37,286	)	$	(41,709	)
Adjustments:
Equity-based compensation expense		1,977			1,216			2,171			4,093			5,383
Early termination and other charges		—			—			—			—			9,251
Adjusted Operating Income Loss	$	(9,026	)	$	(11,608	)	$	(7,064	)	$	(33,193	)	$	(27,075	)

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