Magnachip (MX) Q1 2026 Earnings Transcript

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Date

Tuesday, April 28, 2026 at 5 p.m. ET

Call participants

• Interim Chief Executive Officer — Camillo Martino
• Chief Financial Officer — Shin Young Park
• Head of Investor Relations — Mike Bishop

Takeaways

• Consolidated revenue -- $46.2 million, reflecting a 3.3% year-over-year increase and a 13.9% sequential rise due in part to recovery from a prior onetime sales incentive program.
• Power Analog Solutions revenue -- $41.6 million, up 4.5% year over year and 13.1% sequentially; sequential increase was aided by reversal of a $2.7 million onetime incentive recognized in fiscal Q4 2025 (period ended December 31, 2025).
• Power IC revenue -- $4.6 million, down 6.2% year over year but up 21.3% sequentially; lower annual revenue reflects continued segment headwinds.
• Gross profit margin -- 15.6%, above guidance midpoint but down from 20.9% a year ago, driven by unfavorable product mix and ASP erosion chiefly in China.
• Operating expenses (SG&A) -- $7.7 million, down from $9.2 million a year ago, primarily reflecting cost reduction measures tied to a previous voluntary resignation program.
• R&D expense -- $6.7 million, increased from $5.4 million year over year, indicating a ramp in new product development investment; 55 new generation products targeted for 2026 after launching 55 in 2025 and only 4 in 2024.
• Adjusted operating loss -- $6.5 million, compared to a $4.4 million loss a year ago and an $11.9 million loss sequentially; improvement from prior quarter due to higher gross profit and reduced operating expenses.
• Adjusted EBITDA -- Negative $3.6 million, compared to negative $1.2 million a year ago and negative $8.9 million in fiscal Q4 2025; sequential gains attributed to improved gross profit and lower costs.
• Non-GAAP diluted loss per share -- $0.11 loss versus $0.08 loss both a year ago and in the prior quarter.
• Cash balance -- $94.6 million, down from $103.8 million in fiscal Q4 2025; the decrease was largely due to $3.9 million in capital expenditures and operating cash outflows.
• Total borrowings -- $42.3 million, including $15.9 million in equipment loans; $26.4 million of the term loan reclassified to short term due to March 2027 maturity with expectations to extend per standard practices.
• Fiscal Q2 2026 revenue guidance -- $44.5 million to $48.5 million, indicating roughly flat sequential revenue and a 2.3% year-over-year decline at midpoint.
• Fiscal Q2 2026 gross margin guidance -- 17% to 19%, up sequentially from 15.6% but below the 20.4% achieved in fiscal Q2 2025; higher Q2 utilization rates anticipated due to inventory build ahead of a planned fiscal Q3 2026 substation upgrade.
• Segment gross margin differences -- Power IC margins reportedly around 40%, well above corporate average, while Power Analog Solutions is highly utilization-dependent and subject to fixed cost absorption effects.
• Legacy foundry service end -- Discontinuation of foundry services in early 2025 resulted in 20% idle capacity at the Gumi fab, negatively affecting overall gross margin; capital expenditures focus on upgrading equipment for new generation power products rather than immediate conversion of idle capacity.
• Portfolio revamp strategy -- Management reaffirmed pursuit of the six foundational pillars emphasizing accelerated new product launches, with the goal for new generation products to reach approximately 10% of total revenue by fiscal Q4 2026 (period ended December 31, 2026) (from 2% in 2025).
• Planned fiscal Q3 2026 substation upgrade -- Temporary increase in inventory and utilization in fiscal Q2 and Q3 2026 to mitigate risk from factory downtime, with subsequent negative effects expected on utilization and gross margin in fiscal Q3 and Q4 2026.
• Product focus -- 2026 launches to span medium voltage, low voltage, IGBT, and super junction products, with expectations of delayed margin impact until customer qualification is complete.

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Risks

• Revenue uplift in fiscal Q1 2026 was partially attributable to a onetime sales incentive program, creating "short-term variability in revenue," which may not indicate sustainable growth.
• Management cited "pricing pressure on legacy products, particularly in China," and noted ASP erosion as the primary reason for year over year gross margin decline.
• The planned fiscal Q3 2026 upgrade to the Gumi site "will have an impact on our factory operations" leading to expected declines in utilization and gross margins in the second half.
• Discontinuation of foundry services created approximately 20% idle capacity at Gumi, highlighting ongoing efficiency challenges in asset utilization.

Summary

Magnachip Semiconductor (NYSE:MX) reported sequential and year-over-year revenue growth in fiscal Q1 2026 (period ended March 31, 2026), but leadership emphasized that this was buoyed by non-recurring channel incentive adjustments and ongoing transition activities. Management confirmed that new generation products are on an accelerated launch trajectory, with a target of 55 introductions in 2026 and a projected increase to approximately 10% of total revenue in the fourth quarter of 2026, yet these will require time to materially influence margin and profitability. Gross margin guidance for next quarter signals a temporary improvement due to higher utilization from proactive inventory builds ahead of a planned substation upgrade, but management indicated that margins are set to decline over the second half as operational disruptions occur. Liquidity remains supported by a cash balance of $94.6 million, though lower than year-end, and the refinancing timeline for $26.4 million of short-term term loans extends beyond March 2027 with lender awareness. Capital allocation is being steered toward equipment upgrades aligned with the power products roadmap rather than immediate conversion of all idle capacity.

• Management described the competitive landscape as "challenging," reiterating that product competitiveness is the key to success in current market conditions.
• R&D spending increased to fund product pipeline acceleration, with a sharp jump in new generation launches versus prior years (four launches in 2024, 55 in 2025, and 55 planned in 2026).
• Power IC gross margin remains structurally higher than company average, but represents a smaller revenue base; further scale is not anticipated during 2026.
• Operational execution around the planned electrical substation upgrade is intended to prevent customer delivery risk, with a trade-off of increased inventory and later gross margin compression.

Industry glossary

• ASP (Average Selling Price): The average per-unit revenue realized from product sales, a crucial margin determinant in semiconductors.
• MOSFET (Metal Oxide Semiconductor Field-Effect Transistor): A type of power transistor central to discrete and integrated power management product lines.
• IGBT (Insulated-Gate Bipolar Transistor): A semiconductor device combining high efficiency and fast switching, used in power discrete and integrated modules.
• Gumi fab: Magnachip’s manufacturing facility in Gumi, South Korea, referenced in regard to utilization and cost structure.

Full Conference Call Transcript

Camillo will discuss the company's recent operating performance and business overview, and Shin Young will review the financial results for the quarter and provide guidance for the second quarter of 2026. There will be a Q&A session following the prepared remarks. During the course of this conference call, we may make forward-looking statements about Magnachip's business outlook and expectations. 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 inherent 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 otherwise required by law, the company does not undertake any obligation to update these statements. During the call, we will also discuss non-GAAP financial measures. These 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.

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

Camillo Martino: Thanks, Mike. Good afternoon, everyone, and thank you for joining us. I am very happy to be here today for my third earnings call with Magnachip. Let me reiterate a point that I've made consistently over the past several quarters. Specifically, MagnaChip has a strong technical foundation with a long history in power semiconductors and deep relationships with important customers. We are building on that foundation to execute a multiyear transformation to return the company to profitable growth. Although we are in the early stages of this transition, I believe that we are making good progress. Let me address the quarter directly.

From a revenue standpoint, Q1 came in stronger than typical seasonality would suggest with both sequential and year-over-year growth. Allow me to provide some clarity on how to interpret that result. A portion of the strength was driven by actions we took in prior quarters, specifically our previously communicated onetime sales incentive program to reduce channel inventory. This action was necessary to improve the health of the sales channel, but it also creates some short-term variability in revenue. While the top line growth is encouraging, we are still operating in a challenging competitive environment. Consistent with our communications in prior quarters, we continue to face pricing pressure on legacy products, particularly in China.

And as we have said before, product competitiveness is the key to winning. Where we have competitive products, we can win. Where we do not, it is difficult to win in this market. On gross margin, we saw sequential improvement. We feel good about our progress, and we are at the beginning of a multiyear journey to substantially improve gross margin. Let me now step back and reconnect this quarter to our broader strategy. As you may recall, last quarter, we articulated a new strategy comprising 6 foundational pillars for the company's longer-term recovery and profitable growth. We are actively executing on all of them.

I will not go through each one of them in detail today, but I would like to reinforce a few key points. As we have consistently said, at the center of everything we are doing is improving product competitiveness by developing new generation products. These are all critical to our long-term success. We have focused our efforts on accelerating our R&D and launching new products. We launched 55 new generation products in 2025, and we are now aiming for another 55 new generation products in 2026 after launching only 4 new generation products in 2024 and 0 in 2023.

We believe that the launch of many new generation products on a consistent basis will have a meaningful contribution to our financial recovery efforts. Some of these new generation products include those we mentioned in our recent press releases, including our newest 8th generation of products for the BatteryFET set as well as for MV MOSFETs. While it takes some time for our customers to qualify a new product and subsequently drive revenue, we believe that over time, these new products will return the company to revenue growth and improve margins.

Consistent with our comments last quarter, we expect new generation products to comprise approximately 10% of our total revenue in the fourth quarter of 2026 up from only 2% for the full year 2025. In parallel, we expect to continue deepening our relationships with important industry leaders in our target market segments. This will be crucial to returning to growth. I would like to address our Power IC business as that is an area of opportunity and is also critical to our long-term success. It is a smaller portion of our business right now, and we expect it to remain so through 2026.

At the same time, we do see significant opportunity for our Power IC business in the coming years. We continue to align our Power IC products as well as our future gate-driver IC products with our power discrete product road map, such as MOSFETs and IGBTs. The longer-term alignment of our discrete MOSFETs and our Power IC products will enable Magnachip to launch higher value-added integrated power modules in the future as well. We believe Magnachip's longer-term potential is substantial, and the accelerated launch of new generation products are building initial successes. So while we are confident in the direction, the financial improvement will be gradual. Let me turn over to Shin Young. Shin Young?

Shin Young Park: Thank you, Camillo, and welcome, everyone, on the call. I'll start with key financial metrics for Q1. Total Q1 consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC was $46.2 million, around the midpoint of our guidance range of $44 million to $48 million. This was up 3.3% year-over-year and up 13.9% sequentially compared to $44.7 million in Q1 2025 and $40.6 million in Q4 2025. Revenue from Power Analog Solutions in Q1 was $41.6 million, up 4.5% year-over-year and up 13.1% sequentially.

The sequential improvement was primarily driven by the $2.7 million of onetime sales incentive that was recognized as a reduction in revenue in Q4 2025 as part of our efforts to reduce elevated channel inventory. Revenue from power IC in Q1 was $4.6 million, down 6.2% year-over-year, but up 21.3% sequentially. In Q1, consolidated gross profit margin from continuing operations was 15.6%, above the midpoint of our guidance range of 14% to 16%. This compares to 20.9% in Q1 2025 and 9.3% in Q4 2025. Year-over-year decline was primarily attributable to an unfavorable product mix, driven mainly by ASP erosion, particularly in China. As a reminder, the $2.7 million of onetime sales incentive was recorded in Q4 2025.

Excluding this item, Q4 gross profit margin would have been 15%. On that basis, gross profit margin improved by 60 basis points quarter-over-quarter, primarily due to higher utilization rates. Moving to operating expenses. SG&A was $7.7 million in Q1 compared to $9.2 million in Q1 2025 and $8.6 million in Q4 2025. As mentioned in our prior earnings call, we expect to see annual OpEx savings of approximately $2.5 million beginning in Q4 2025 from our cost reduction efforts, primarily related to the voluntary resignation program implemented in Q3 last year. Stock-based compensation charges, included inSG&A, were $0.6 million in Q1 compared to $0.8 million in Q1 2025 and $0.4 million in Q4 2025.

R&D expenses were $6.7 million in Q1 compared to $5.4 million in Q1 2025 and $7.6 million in Q4 2025. The year-over-year increase reflects the acceleration of investment in new product development. As Camillo noted earlier, we are now aiming for 55 new generation products in 2026. Before turning to our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our first quarter earnings release. Our non-GAAP results are as follows. Adjusted operating loss was $6.5 million in Q1 compared to a loss of $4.4 million in Q1 2025 and a loss of $11.9 million in Q4 2025.

Adjusted EBITDA was negative $3.6 million in Q1 compared to negative $1.2 million in Q1 2025 and negative $8.9 million in Q4 2025. The quarter-over-quarter improvement in both adjusted operating loss and adjusted EBITDA was primarily driven by higher gross profit, along with lower operating expenses as discussed earlier. Q1 non-GAAP diluted loss per share was $0.11 compared to a loss per share of $0.08 in both Q1 2025 and Q4 2025. Weighted average non-GAAP diluted shares outstanding for the quarter were 36.4 million compared to 36.9 million in Q1 '25 and 36 million in Q4 2025. Moving to the balance sheet. We ended Q1 with cash of $94.6 million compared to $103.8 million at the end of Q4 2025.

The decrease was primarily driven by $3.9 million in capital expenditures with the remaining change largely attributable to operating cash outflows. At the end of Q1, total borrowings were $42.3 million, including $15.9 million of equipment loan. Of this amount, $26.4 million associated with the term loan was reclassified to short term during the quarter due to its maturity in March 2027. While this is standard accounting treatment, our lender is aware of the maturity profile, and we expect to be able to extend the maturity date beyond March 2027 and we'll address it in the ordinary course of business, consistent with typical market practice in Korea. Now moving to our second quarter 2026 guidance.

Consistent with Camillo's earlier comment, Q1 revenue came in stronger than typical seasonality due to the onetime sales incentive program. While actual results may vary, for Q2 2026, Magnachip currently expects consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC businesses to be in the range of $44.5 million to $48.5 million, roughly flat sequentially and a decrease of 2.3% year-over-year at the midpoint. This compares with $46.2 million in Q1 2026 and $47.6 million in Q2 2025. Consolidated gross profit margin from continuing operations to be in the range of 17% to 19%, up from 15.6% in Q1 2026, but down from 20.4% in Q2 2025.

Finally, I would like to note that a planned upgrade to the electrical substation by a service provider in Gumi is expected in Q3 and will have an impact on our factory operations. To mitigate any potential customer disruptions, we plan to build some additional inventory in Q2 and into Q3. As a result, we would expect our factory utilization rate to be somewhat higher in Q2, followed by lower utilization in Q3. Since utilization is the main driver of gross margin, we expect our gross margin in Q2 will likely be higher as implied by our guidance. Gross margins are expected to decline in Q3 and decline further in Q4 as a result of the planned upgrade. Thank you.

And now I'll turn the call over to Camillo for his final remarks. Camillo?

Camillo Martino: Thank you, Shin Young. Allow me to reiterate that we are committed to executing on our turnaround strategy and in particular, the 6 foundational pillars that we articulated a quarter ago. While we proceed through this multiyear journey, we are pleased to see the initial signs of success. Ultimately, this new strategy should drive long-term shareholder value. I want to thank our employees for their continued hard work and dedication and our investors and partners for their patience and support as we return the company to growth. We will continue to be transparent, disciplined and focused on execution. I will now turn the call to the operator and open the call for questions.

Operator: And our first question for today comes from the line of Suji Desilva from ROTH Capital.

Sujeeva De Silva: Could you please start first with maybe the gross margins by segment and how they vary? And is one more manufacturing exposed than the other? Any color there would be helpful.

Shin Young Park: You're asking for this quarter, Suji, right?

Sujeeva De Silva: Yes, you had the gross margins in the press release by segment, and they were very different. I was just curious what the driver of one versus the other was and then, yes.

Shin Young Park: So we have a discrete business, which we call the Power Analog Solutions and Power IC businesses. So we've been kind of broken them down into those 2 buckets and power IC, that's the IC and the custom chip. So that the gross margin has been hovering around like 40 percentage, and it used to be a little over, but depending on the product mix. So that business, I mean, relatively revenue size is relatively small compared to the total company's revenue, but the margin has been pretty -- I mean, a lot higher than the normal corporate gross margin.

And the other Power Analog Solutions gross margin, that's kind of -- that's the product we are producing in our Gumi Fab, so there are multiple factors that go into the gross margin calculation, meaning utilization and fixed costs and all of those kind of put into that the Gumi Fab cost profile that we're going to dictate how the gross margin can kind of vary quarter-over-quarter of that product line.

Camillo Martino: And as Shin Young mentioned, utilization is a key factor that's driving that.

Sujeeva De Silva: Okay. And then can you talk about the products you're expecting in '26? And what kind of gross margin trend we can expect above the product you've already introduced in '25?

Camillo Martino: Yes, sure. The products that we have mentioned -- that we mentioned today, The 55, that's the plan for this year, new generation products. they are across the board. They are medium voltage, low voltage, IGBT, for example, super junction. So we are -- a whole bunch of new products right across the board. We're excited about that. That will have an impact on gross margin. But as we communicated on the call, it does take time to have an impact this year. I think we said that in Q4, we expect that new generation products to contribute approximately 10% of the total revenue.

But at the same time, you need to offset that with Shin Young's comments on the planned upgrade to the electrical substation because that will have an impact on Q4 margin as well in the other direction. So there's a few factors going into the second half.

Sujeeva De Silva: Okay. Great. And lastly, can you update us on where the manufacturing is from filling back into the manufacturing services capacity you had before?

Shin Young Park: Manufacturing services for the...

Sujeeva De Silva: Before when you had a contract where you were providing manufacturing services at cost and now how you're filling that in now today?

Shin Young Park: That's the foundry services that we provided to the buyer of our foundry business and the factory that we used to own them. So there are a certain margin on that one, although that's actually lower than our corporate margin in the past, you see that margin profile. So that foundry service actually ended in the beginning of the last year, so not in 2026 in 2025. So that's what we are dealing with the whole -- the idle capacity, approximately 20% of our Gumi factory is actually was dedicated for the foundry service and now that's kind of idle. So like you see that our gross margin has been suppressed because of that idle capacity.

So the whole kind of CapEx that we announced that we spent not all of them, but we cut them half and we are spending it. That's to upgrade our equipment to support this new generation Power product rather than kind of convert that idle capacity for the Power product just simply. I mean that's because of the pace of our product development and also the revenue, it takes some time to do it. So -- and also the softness of the -- I mean, our legacy product environment. So we are kind of being prudent to spend the CapEx to support that.

So it's really not over time, overnight kind of transition or the conversion from the foundry capacity to the Power capacity. But as we said previously, we're going to be very cautiously assess what's going to be the best for the company from the cash and also the profitability standpoint, how we're going to convert the capacity for the Power.

Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mike Bishop for any further remarks. Thank you.

Mike Bishop: Thank you, everyone, for participating on our call today. We appreciate your support of Magnachip. This concludes the call. Operator?

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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