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 in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Steven Pelayo 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 31, 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 YJ Kim, Magnachip’s Chief Executive Officer and Shinyoung Park, our Chief Financial Officer. YJ will discuss the company's recent operating performance and business overview, and Shinyoung 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 Magnachip’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 developments. 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 GAAP 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 YJ Kim. YJ?

Hello, everyone, and thank you for joining us today. And welcome to Magnachip’s Q1 earnings call. As a reminder, on April 8, we announced that after a thorough review, our Board of Directors unanimously approved the plan to shut down the company's display business by the end of Q2. So, we will continue to evaluate opportunities 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. Shinyoung 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 Magnachip’s 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 a return to sustainable profitability. Navigating an unpredictable macroeconomic landscape will likely pose challenges for our industry. We have a very small amount, less than $2.5 million, in direct shipments to the U.S., but we are monitoring the tariff situation closely. However, our aim is still to attain a quarterly adjusted EBITDA breakeven 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 three-three-three strategy. Turning to Q1 results. Consolidated Q1 revenue from continuing operations, which includes power analog solutions and power IC 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 million 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%. Q1 was the fourth consecutive quarter of year-over-year growth from continuing operations, driven by power analog solutions growth in communications and automotive markets as well as strength in power IC. We released 27 new generation power analog solution products in Q1 that are fully qualified and ready for commercial sampling. These innovative product families opened new high-value market opportunities for Magnachip, such as automotive, industrial and AI applications. We currently expect these three market opportunities to represent more than 60% of Magnachip’s 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 our pure play in 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-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 March, nearly double the 6 achieved in Q1 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 six 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 a 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 applications from Taiwanese suppliers and an automotive electric oil pump for vehicles targeted for the European market. In Power IC, 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 analog 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 even 20% to 30% more die per wafer in our Gumi fab. When fully ramped, these new products are expected to drive higher gross margins compared to the previous generations. Now I will provide more details by business slide. Power and analog solution business revenue of $39.9 million was up 9.1% year over year and down 8.3% quarter over quarter. Power and 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 smartphone customers in Korea. While a smaller portion overall, the automotive business showed strong growth and had new design wins in the European and American end customer automotive markets. By this segment, industrial revenue declined 8.7% year-over-year, representing approximately one-third of Power Analog Solutions' revenue. The decline stemmed from slower e-bike and e-motor revenue offset by strengths from line A, 5G battery managed systems, power tools and solar. As stated earlier, we are securing NHL design wins for our new Super Junction Gen 6 products for China lighting and e-motor applications. Consumer revenue increased 4.6% year-over-year. Overall, the consumer market accounted for 36% of Power and Analog 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 better 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 the number one market share in battery effects at our major Korean smartphone end customer, including the majority 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 saw a 10% year-over-year decline in Q1 due to softer 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 win moving into mass production in Q2 ‘25. 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 continues 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 IC business, revenue was $4.9 million, an increase of 44.1% year over year and down 10% sequentially. The Power IC business represented 11% of consolidated Q1 revenue from continuing operations. The year-over-year growth was strong for both TVLED and OLED power ICs. 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 managed fourth consecutive quarter of year-on-year growth from continuing operations, which we expect to continue for the fifth consecutive quarter in Q2. We expect inventory levels in the channel to slightly decrease in Q2. The strong performance in Power and Analog Solutions in Q1 was driven primarily by market share gains and new products in communications. The automotive 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 Shinyoung to give you more details in our financial performance in the first quarter and provide Q2 and full year 2025 guidance.

Thank you, YJ, and welcome everyone on the call. Let's start with key financial metrics for Q1. Total Q1 consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC was $44.7 million, which was in line with the midpoint of our guidance range of $42 million to $47 million. This was up 12.1% year over year and down 8.5% sequentially on an apples-to-apples basis. This compares with equivalent revenue of $39.9 million in Q1 2024 and $48.9 million in Q4 2024. Revenue from Power Analog Solutions was $39.9 million. This was up 9.1% year over year and down 8.3% sequentially, primarily reflecting seasonality. Revenue from Power IC was $4.9 million. This was up 44.1% year over year and down 10% sequentially. In Q1, consolidated gross profit margin from continuing operations was 20.9%, exceeding the high end of our guidance range of 18.5% to 20.5%, up from 17.6% year over year and down from 23.2% sequentially on an apples-to-apples basis. The upside versus guidance and year-over-year improvement was mostly due to the strengthened U.S. dollar against the Korean won. The sequential decline was mainly due to an unfavorable product mix. As we've disclosed previously, the company announced its plan to shut down the display business by the end of the second quarter of 2025. Shutting down the display business includes the liquidation of Magnachip Mixed Signal Limited, the company's wholly owned subsidiary that had operated the discontinued display business. As a result, the display business has been classified as discontinued operations from Q1 2025 and has reported separately on the face of the company's P&L. The prior period conforms to the current period presentation as it appears in our Form 8-K and in the Form 10-Q in Q1. All the following figures reflect results from continuing operations. Q1 SG&A was $9.7 million as compared to equivalent SG&A of $9.5 million in Q1 2024 and $10.4 million in Q4 2024. Q1 R&D was $5.9 million as compared to equivalent R&D of $6.2 million in Q1 2024 and $6.9 million in Q4 2024. Stock compensation charges, including operating expenses from continuing operations were $0.8 million in Q1 as compared to $0.8 million in Q1 2024 and $1.6 million in Q4 last year. These charges fluctuate every quarter depending on the timing and size of several growth trends. In Q1, we have narrowed operating losses due to a combination of higher revenue and improved gross profit margins as compared with Q1 2024. Q1 operating loss was $6.3 million. This compares to an equivalent operating loss of $9.4 million in Q1 2024 and an equivalent operating loss of $7.8 million in Q4 2024. On a non-GAAP basis, the Q1 adjusted operating loss was $5.4 million compared to an equivalent adjusted operating loss of $8.6 million in Q1 2024 and an equivalent adjusted operating loss of $4.5 million in Q4 last year. Loss in Q1 was $5.1 million as compared with an equivalent loss of $14.3 million in Q1 2024 and an equivalent loss of $8.7 million in Q4 last year. Q1 adjusted EBITDA was negative $2.1 million. This compares to an equivalent adjusted EBITDA of negative $4.8 million in Q1 2024 and a negative $500,000 in Q4 last year. Q1 GAAP diluted loss per share was $0.14 as compared with equivalent diluted loss per share of $0.37 in Q1 2024 and equivalent diluted loss per share of $0.24 in Q4 last year. Q1 non-GAAP diluted loss per share was $0.10. This compares with equivalent non-GAAP diluted loss per share of $0.26 in Q1 2024 and equivalent non-GAAP diluted earnings per share of $0.12 in Q4 last year. Our weighted average non-GAAP diluted shares outstanding for the quarter were 36.9 million shares and 38.5 million shares in Q1 2024, and 37.7 million shares in Q4 last year. Under our $50 million stock buyback program authorized in July 2023, we repurchased in Q1 2025 approximately 0.3 million shares for an aggregate purchase price of $1.1 million leaving about $23.5 million remaining authorization as of March 31, 2025. Additionally, we spent $1.9 million in April 2025 and repurchased approximately 600,000 shares. Moving to the balance sheet. We ended Q1 with cash of $132.7 million and $138.6 million at the end of Q4 2024. Net accounts receivable at the end of the quarter totaled $28.3 million and $28.4 million at the end of Q4 2024. Our days sales outstanding for Q1 was 47 days and compares to 41 days in Q4 last year. Our average days in inventory for Q1 was 70 days and compares to 60 days in Q4 last year. Inventories net at the end of the quarter totaled $32.6 million and $30.5 million at the end of Q4 2024. Q1 CapEx was $22 million. For the full year 2025, we reiterate our prior total CapEx forecast range of $26 million to $28 million, which includes approximately $14 million to $15 million for upgrade equipment set. We expect the majority of this CapEx to occur in the second quarter. This $14 million to $15 million was part of the previously disclosed $65 million to $70 million investment over three years upgrade of Gumi fab. The depreciation cost from the new investment in the Gumi facility will not begin to be reflected in our financial statements until 2027. At that time, we anticipate that a more robust portfolio of new generation power products will at least partially offset the impact. Additionally, we announced previously that we secured the $22.5 million equipment financing to partially support this $65 million to $70 million investment to upgrade the Gumi fab. Under the agreed terms and conditions with the lender bank, we expect to fund about half of the $14 million to $15 million using the decrement financing, the majority of which will occur in the second quarter of 2025. The remaining half is expected to be funded by the company's cash. This new investment in Gumi is expected to drive development of the new generation power product portfolio and upgrade the new tools to optimize product mix and improve gross profit margin. Lastly, as YJ mentioned above, as a result of strategy changes we are making, we aim to attain a quarterly adjusted EBITDA breakeven from continuing operations by the end of this year. The actions that are being undertaken by the company in connection with the liquidation process are expected to result in a 30% to 35% reduction in annualized operating expenses, excluding equity compensation charges as compared with 2024. We'll execute all available cost reduction initiatives to align our spending level with a strategy to become a pure-play power company, while enabling us to continue to make progress towards our three-three-three strategy.

We believe we hit the revenue bottom in Q1 for Power for this year. Looking to Q2, we currently forecast mid-single digit sequential growth leading to another quarter of mid-single digit year-over-year growth from continuing operations. We currently expect the industrial and computing markets to be relatively strong, driven by lighting and battery management system applications in industrial as well as strength in PC power from Taiwan in the computing market. The Communications segment will likely decline quarter on quarter due to exceptionally strong performance in the last two quarters but is currently expected to show strong year-over-year growth in excess of 30%. To wrap up, the pure play power strategy we announced last quarter focuses on shareholder value and prioritizes a return to profitability, supported by clearly articulated, transparent short-term and mid-term financial targets. As previously mentioned, uncertainty over macroeconomic headwinds will likely pose challenges for our industry over the coming quarters. Our strategic pivot to focus exclusively on power analog solutions and power IC business is designed to drive both top-line growth during new product launches as well as long-term structural improvement in operational efficiency, allowing us to achieve our target of a $300 million revenue run rate with a 30% gross margin in three years.

Great. That concludes our prepared remarks. Let's open the call for any questions that you may have. Operator, please go ahead.

Thank you. Our first question coming from the line of Suji Desilva from ROTH Capital. Your line is now open.

Hi, YJ. Hi, Shinyoung. Maybe, YJ, you can start at the high level and talk about the tariffs that are going on here and how Magnachip is positioned for that from a manufacturing footprint and markets you sell to just to understand the opportunity or impact going forward?

Great. Thank you. Yeah. So, we haven't really seen negative impact on the first half of the year. As we disclosed at the annual Analyst Day, 94% of our power revenue comes from Asia. And we have very material direct shipments to the U.S. with less than $2.5 million a year. So, we are closely monitoring the situation, and we think the risk is manageable at the moment, but we are really looking at this daily.

Okay. All right. Thanks, YJ. And then maybe on the financials, Shinyoung, maybe you talk about the gross margin. What are the drivers going forward for the Power Base business? Just to understand that generally. And then how much is the Gumi utilization benefit opportunity there? What's the timing of that tailwind?

Thanks, Suji. So, for at least for 2025, because we wound down the transition of foundry services by the end of last year, we said about 20% of our Gumi capacity was actually for the foundry services. And the new investments, $65 million to $70 million investment over like the next three years, that's going to be to upgrade the Gumi fab to support the new generation power product. That competition is going to go from 10% to 70%. So that will drive our gross margins to achieve the three-three-three strategy. So, it's not really that we are expanding our capacity simply. We are actually converting and upgrading to prove that to support the new generation power product. So, you're going to see improvement coming through over the next couple of years when we march toward the three-three-three strategy, at least for 2025 because of that either capacity and our new generation product which will begin to come in the second half of 2025, and that's why you saw our annual gross margin guidance already provided to the market.

Okay, Shinyoung. Very helpful. And then lastly, on the segments, trying to understand the Power IC segment versus the Analog segment. Is there a concerted effort there, YJ, to grow that segment in the mix? Does that have favorable margins? Is there some products focused on that? Or is the Power Analog segment really the focus of the growth near term?

Yeah. It's a very good question. So, I think we outlined the three-three-three strategy that requires double-digit growth for the next few years. So, our goal is to grow both segments, whether it's power analog or power IC, double-digit over the next few years. So, we do have focus on both areas for growth.

Hey, guys. Thanks for taking my questions as well. I'll also ask about the tariffs. Do you think any of the consumer or communication strength that you had in the first quarter represented a tariff-related pull forward? And how are your customers communicating order pattern earnings around the tariffs? And I understand that you have the high exposure to Asia. Thank you.

Yes. Very good question. So interestingly enough, we only saw one pull-in in Q1. That was in Power IC. That's for the TV applications. But it was very small. It’s like $100,000. Other than that, we did not see any pull-ins at all. And so for Q2, they are also very material, and we'll provide that detail. So, we haven't seen much pull-ins other than that.

Just to follow up on that, I mean, how is that a really small number, but I guess how would you categorize that one specifically as a pull-in?

You could tell by customers telling us, or you can look at the change of backlogs from Q2 versus Q3. That's how we noticed. And as we said, we shipped 94% to Asia, and only $2.5 million or less is direct shipments to the U.S. So, we actually monitor the situation very carefully.

Thank you. And as my second question, OpEx. The OpEx came in kind of at the low end of the guide, better than the expectations. Should we expect that level to hold through the year, around the $15 million level or some of this kind of one-time benefits in the $14.8 million number?

The $15 million you mentioned represents the actual Q1 operating expenses excluding stock-based compensation, specifically when we eliminate the direct costs related to the display business. After shutting down the display division and removing these costs, we anticipate a cost reduction of 30% to 35% compared to last year. Our goal is to achieve quarterly EBITDA breakeven by the end of this year. If we annualize that, it may fall slightly short. We still maintain a shared service function that supports both the display and power businesses. We will undertake necessary adjustments to reach the quarterly EBITDA breakeven target by year-end.

Thank you. There are no further questions in the queue at this time. I will now turn the call back over to Steven for any closing comments.

Great. Thank you. Before we conclude, I just want to give everyone a quick reminder of our upcoming investor conferences. In June, we'll present at the fifteenth Annual ROTH London Conference at the 4 Seasons Park Lane in London. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team. Please look for details on our future events on Magnachip’s Investor Relations website. This concludes our Q1 earnings conference call. Thank you and take care.

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