Magnachip Semiconductor Corporation

Good day, everyone, and thank you for standing by. Welcome to the MagnaChip Semiconductor First Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please note that this conference is being recorded. I will now hand the conference over to your speaker host. Stephen Palau of Investor Relations, please go ahead.

Great. Hello, everyone. Thank you for joining us to discuss MagnaCHIP's financial results for the first quarter ended March 31st, 2025. The first quarter earnings release was issued today after the market closed and can be found on the company's investor relations website. The webcast replay of today's call will be archived on our website shortly afterwards. Joining me today are Y.J. Kim, MagnaCHIP's Chief Executive Officer, and Shin Young Park, our Chief Financial Officer. YJ will discuss the company's recent operating performance and business overview, and Shin Young will review financial results for the quarter and provide guidance for the second quarter. There will be a Q&A session following the prepared remarks. During the course of this conference call, we may make forward-looking statements about MagnetShip's business outlook and expectations. Our forward-looking statements and all other statements that are not historical facts reflect our beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the Safe Harbor Statement found in our SEC filings. Such statements are based upon information available to the company as of the date hereof and are subject to change for future development. Except as required by law, the company does not undertake any obligations to update these statements. During the call, we will also discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended as supplemental measures of MagnaCHIP's operating performance that may be useful to investors, a reconciliation of the non-GAAP financial measures to the most directly comparable gap measures can be found in our first quarter earnings release in the investor relations section of our website. With that, I'll now turn the call over to Y.J. Kim. Y.J.?

Hello, everyone, and thank you for joining us today, and welcome to MagnetChip's Q1 earnings call. As a reminder, on April 8th, we announced that after a thorough review, our board of directors unanimously approved a plan to shut down the company's display business by the end of Q2, so we will continue to evaluate opportunity to monetize display assets. The company had previously announced its intention to explore all strategic options for the display business and to classify the display business as discontinued operations when it reports Q1 results in order to focus as a pure-play power semiconductor company. Shin-young will provide details in her section. As a result, the power analog solutions and power IC businesses, which accounted for $186 million in revenue in 2024, represent magnet chips going forward continuing operations. Our strategic pivot to focus exclusively on power analog solutions and power IC business is designed to drive a structural improvement in operational efficiency and position the company for return to sustainable profitability. Navigating on unpredictable macroeconomic landscape will likely pose challenges for our industry. We have a very small amount, less than $2.5 million in direct shipment to the U.S., but we are monitoring the tariff situation closely. However, our aim is still to attain a quarterly adjusted EBITDA break-even from continuing operations by the end of this year. We also believe that reaching this goal will pave the way for achieving positive adjusted operating income in 2026 and positive adjusted free cash flow in 2027. Each of these targets will act as milestones towards achieving a goal in three years to reach a 300 million annual revenue run rate with a 30% gross profit margin target. We call this our 333 strategy. Turning to Q1 results. Consolidated Q1 revenue from continuing operations which includes Power Analytics Solutions and PowerIC and excludes our former display business, was 44.7 million, up 12.1% year-over-year and down 8.5% sequentially on an apples-to-apples basis. Consolidated Q1 revenue from continuing operations was in line with the midpoint of our guidance range of 42 to 47 million. Consolidated Q1 gross profit margin from continuing operations of 20.9% was up 3.3 percentage points year-over-year, but down 2.3 percentage points sequentially. Consolidated Q1 gross profit margin from continuing operations exceeded the high end of our guidance range of 18.5% to 20.5%. Shin Young will provide more details in her section. Q1 was the fourth consecutive quarter of a year-over-year growth from continuing operations, driven by power analog solutions growth in communications and automotive markets, as well as strengths in PowerIC. We released 27 new generation power analog solution products in Q1 that are fully qualified and ready for commercial sampling. These innovative product families open new high-value market opportunities for magnitude, such as automotive, industrial, and AI applications. We currently expect these three market opportunities to represent more than 60% of managed future product mix in 2028, up from 37% in 2024. We already have ongoing engagement to penetrate other markets, which we expect to reach over 10% of our revenue by 2028, from less than 5% in 2024. In Q1, we saw power analog solution design wins across multiple end markets and regions, including Korea, China, USA, and Taiwan. Many of these design wins were from our new generation products. As part of our pivot to a pure play on power, we will be sharing additional metrics each quarter, such as the number of design wins. We define a design win as receiving a purchase order for a new application. We achieved 15 design wins in Q1, up 13.6% from 44 wins we achieved in the year or quarter, year ago, quarter. The industrial business had 25 design wins, up from 22 in Q1 2024, and representing 50% of the total. Other notable design win activity included the computing business, which had 11 design wins in the March quarter, nearly double the six achieved in Q1 to 2024. And the automotive business had five design wins, up from two in the year-ago period. From an application perspective, our new generation Gen 6 Super Junction products had design wins in the China lighting market, a PC power and computing application in Taiwan, and a TV main motherboard application in Korea. Our new generation low-voltage Gen 8 MOSFETs had a design win for new flagship portable smartphone in Korea, and our prior generation medium voltage and super junction products had design wins in the industrial market for e-scooters, and automotive power charge application from Taiwanese suppliers, and an automotive electric oil pump for vehicles targeted for the European market. In PowerIC, we secured design wins in Q1 with leading notebook manufacturing in China and Korea, as well as additional wins for LCD TV and monitors in Korea. We currently plan to launch a total of more than 50 new products, including 40 new generation power and electric solution products in 2025 and more than 55 additional new generation products in 2026. We expect these new generation power products to drive higher revenue and given the smaller die size and yield 20 to 30% more die for vapor in our Gumi Fab. When fully ramped, these new products are expected to drive higher growth margins compared to the previous generations. Now, I will provide more details by business slide. Power and Outlook Solutions business revenue of $39.9 million was up 9.1% year-over-year and down 8.3% quarter-over-quarter. Our analog solution represented nearly 90% of Q1 consolidated revenue from continuing operations. The sequential decline was mostly due to seasonality in each of our major segments, except in communications, where we enjoyed quarter-on-quarter growth. The year-over-year increase was primarily driven by the communication market, and more specifically, deeper penetration in smartphones and customers in Korea. While a smaller portion overall, the automotive business shows strong growth and had new design wins in the European and American end-customer automotive markets. By segment, industrial revenue declined 8.7% year-over-year, representing approximately one-third of power and luxury solutions revenue. The decline stems from slower e-bike and e-moto revenue, offset by strengths from Lightning. 5G battery-managed systems, power tools, and solar. As stated earlier, we are securing initial design wins for our new Super Junction Gen 6 products for China lighting and e-model applications. In consumer, revenue increased 4.6% year-over-year. Overall, the consumer market accounted for 36% of power and energy solutions revenue in Q1. Communication revenue represents 23% of power analog solution revenue in Q1 and increased nearly 64% year-over-year, fueled by design wins for battery effect in mainstream and flagship portable and AI-enabled smartphones in Korea. In addition, we saw expanded adoption in wearables such as watches and earbuds. As we mentioned before, we believe we now have number one market share in battery effect, at our major Korean smartphone end customer, including the major share of their flagship smartphone product line, which will soon utilize our new generation Gen 8 products. Overall, our low-voltage MOSFET revenue grew more than 40% year-on-year in Q1. Representing 7% of analog power and analog solution revenue, the computing segment, so a 10% year-over-year decline in Q1 due to software pricing and weaker demand from China for PC and laptop power adapters. We are leveraging our new Super Junction Gen 6 products to penetrate more PC power in Taiwan and expect to benefit from new notebook adapter design when moving into mass production in Q2 2025. While still less than 5% of power analog solutions revenue, the automotive segment saw strong year-over-year growth driven by increased global expansion beyond Korea and Japan with new design wins for vehicles targeting Europe and the USA. The number of automotive applications continued to increase and now includes electric oil pumps, cooling fans, power steering, and car chargers. We are also seeing strengths for IGBTs from China brands used for positive temperature coefficient or PTC heaters for electric vehicles. Turning to our power seed business, revenue was $4.9 million, an increase of 44.1% year-over-year and down 10.0% sequentially. The PowerIC business represented 11% of consolidated Q1 revenue from continuing operations. The year-over-year growth was strong for both TV LED and OLED PowerICs. The introduction of 20 new mid- to low-end TV models by our customers for 2025 also led to strong sequential growth in TV LED in Q1. In summary, Q1 was MagnetShift's fourth consecutive quarter of a year-on-year growth from continuing operations, which expect to continue for fifth consecutive quarter in Q2. We expect inventory levels in the channel to slightly decrease in Q2. The strong performance in power analog solutions in Q1 was driven primarily by market share gains and new products in communications. The auto vending market also performed well in Q1, given new design wins for vehicles targeted in Europe and the USA and continually broadening applications. Now, I'll turn the call over to Xinyu to give you more details in our financial performance in the first quarter and provide Q2 and full year 2025 guidance. Xinyu?