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MS

MAGNACHIP SEMICONDUCTOR Corp (MX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue from continuing operations rose 8.1% year over year to $47.6M and was above the midpoint of guidance; gross margin was 20.4%, within guidance. GAAP diluted EPS from continuing ops was $0.23, while non-GAAP diluted EPS was -$0.08, reflecting the exclusion of a $10.8M FX gain and a $4.1M tax benefit .
  • Versus Wall Street consensus, revenue modestly beat and non-GAAP EPS was better than expected; management lowered FY 2025 outlook to “flattish” revenue and 19–20% gross margin, citing tariff uncertainty and pricing pressure in China; Q3 revenue/gross margin guidance implies sequential and year-over-year declines at the midpoint .
  • Segment trends were mixed: PAS grew on communications (+46.7% YoY) and computing (+45.1% YoY), while PIC rose 11.1% YoY; industrial and automotive were weak due to e-bike softness and EV demand pressures .
  • Strategic and capital actions: share buybacks continued; upgraded CapEx timing increased 2025 spend to $32–34M to accelerate new-gen products, and post-quarter, the Board appointed an Interim CEO and announced multi-year CapEx cuts by >50% (to $30–35M through 2027) while exploring strategic alternatives—potential stock catalysts .

What Went Well and What Went Wrong

What Went Well

  • Fifth consecutive YoY revenue growth quarter from continuing operations; PAS strength in communications and computing plus PIC momentum in TV-LED and OLED power ICs .
  • Management accelerated the new-generation roadmap (Gen6 SJ, Gen8 MOSFET, IGBT), launching 28 PAS products in H1 and achieving 71 design wins in Q2 (+61% YoY), with early revenue expected by year-end and material impact in H2’26 .
  • Management quote: “We are accelerating the development of a full array of new generation…feature-rich power products which we expect will command higher prices and margins to drive future growth and profitability” .

What Went Wrong

  • Guidance cut: FY 2025 revenue now “flattish” vs prior mid-to-high single-digit growth; FY gross margin lowered to 19–20% (from 19.5–21.5%) due to tariffs and pricing pressure on older-generation products in China .
  • Margin compression and higher operating loss: consolidated gross margin fell to 20.4% vs 21.1% a year ago; PIC gross margin declined sequentially to 37.4% (from 46.5%); operating loss widened to -$7.4M .
  • Analyst concerns on pricing/utilization: CFO cited severe pricing competition in China and lower utilization impacting second-half margins and outlook; tariff-related customer pull-ins shifted revenue from H2 to Q2, adding near-term pressure .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$46.4 $44.7 $47.6
Gross Profit Margin %21.1% 20.9% 20.4%
Operating Loss ($USD Millions)-$5.7 -$6.3 -$7.4
GAAP Diluted EPS – Continuing Ops ($USD)-$0.06 -$0.14 $0.23
Non-GAAP Diluted EPS ($USD)$0.07 -$0.10 -$0.08
Adjusted EBITDA ($USD Millions)-$1.0 -$2.1 -$2.1
Consensus Revenue Estimate ($USD Millions)$51.47*$44.5*$47.2*
Consensus Primary EPS Estimate ($USD)-$0.33*-$0.22*-$0.125*

Values with asterisks (*) retrieved from S&P Global.

Key estimate comparisons:

  • Q2 revenue beat: $47.6M vs $47.2M consensus*; non-GAAP EPS beat: -$0.08 vs -$0.125 consensus*—helped by pull-ins and segment strength in communications/computing, despite pricing pressure in China .
  • GAAP EPS positive due to $10.8M FX translation gain and $4.1M tax benefit related to display shutdown .

Segment Breakdown

SegmentQ2 2024Q1 2025Q2 2025
PAS Revenue ($USD Millions)$39.24 $39.86 $42.26
PAS Gross Margin %19.7% 17.8% 18.2%
PIC Revenue ($USD Millions)$4.82 $4.87 $5.36
PIC Gross Margin %45.5% 46.5% 37.4%

PAS end-market mix (Q2 2025):

  • Communications: 20% of PAS, +46.7% YoY
  • Computing: 8% of PAS, +45.1% YoY
  • Consumer: 34% of PAS, -0.4% YoY; TV applications growing
  • Industrial: 35% of PAS, -1.9% YoY; strength in e-motors, LED lighting, 5G battery management
  • Automotive: 2% of PAS, -25% YoY

KPIs

KPIQ2 2024Q1 2025Q2 2025
Design Wins (count)44 50 71
New-Gen PAS Products Launched (cumulative H1)n/a27 28
Share Repurchases (shares/$)n/a~0.3M / $1.1M ~0.7M / $2.3M
Days Sales Outstanding (days)n/a47 47
Inventory Days (days)n/a70 81
Cash & Equivalents ($USD Millions)n/a$132.7 $113.3
CapEx ($USD Millions, period)n/a$0.21 $11.88

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Revenue (continuing ops)Q3 2025n/a$44–$48M New
Gross Profit Margin (continuing ops)Q3 2025n/a18.5%–20.5% New
Consolidated Revenue (continuing ops)FY 2025Mid-to-high single-digit growth YoY Flattish YoY Lowered
Gross Profit Margin (continuing ops)FY 202519.5%–21.5% 19%–20% Lowered
Total CapEx (2025)FY 2025Upgraded CapEx originally $14–$16M; timing shift raised upgraded to $20–$22M Total 2025 CapEx $32–$34M (incl. $20–$22M upgraded) Raised (timing)
Multi-year CapEx plan (through 2027)2025–2027$65–$70M (prior plan) $30–$35M; net cash outlay ~$12–$13M (rest via equipment loan) Cut >50%
OpEx Savings TargetFY run-raten/a$2–$3M annual via voluntary resignation program; payback ~1.5 years New
Adjusted EBITDA TargetQ4 2025Breakeven target reiterated “Close to” breakeven by Q4 2025 Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
3-3-3 Strategy (Revenue/Margin/Timeline)Announced pure-play pivot and 3-3-3 goals Reiterated roadmap and double-digit growth expectations Reaffirmed long-term targets; near-term softness acknowledged Stable long-term; near-term more cautious
AI/Technology InitiativesN/A specific to AI in PRNew-gen PAS products sampling; design wins across segments Design wins in flagship AI smartphones, portable AI phones; PC power and AI server pipeline Increasing AI relevance
Tariffs/MacroHighlighted trade/tariff tensions Outlook within guidance despite uncertainties Tariff uncertainty caused H2 pull-ins; pricing pressure in China Deteriorating macro impact
Product Performance (PAS/PIC)PAS +33% YoY in Q4; PIC >50% YoY for 2024 PAS +9% YoY; PIC +44% YoY PAS +7.7% YoY; PIC +11.1% YoY; PAS mix shifting Continued growth; mix headwinds
Regional Trends (China/Korea/Taiwan)N/A detailCommunications strength; TV drivers in Korea China: pricing pressure; strong LED lighting; Taiwan/China PC power growth Mixed: growth plus pricing headwinds
R&D ExecutionN/A detail27 new-gen PAS launched; cost reduction from display shutdown Accelerating launches; 28 H1 products; >50 by year-end Accelerating
CapEx/ManufacturingConverting idle capacity to PAS; wind down TFS Wind down TFS; 2025 gross margin 19.5–21.5% Upgraded CapEx for cookie set; 2025 CapEx $32–$34M; post-quarter multi-year CapEx cuts Near-term up; long-term down
Regulatory/LegalN/AN/ATax benefit tied to display shutdown in Korea One-off benefit

Management Commentary

  • CEO: “In Q2, Magnachip delivered our fifth consecutive quarter of year-over-year revenue growth… The quarter also benefited from some pull-in activity by customers… We face an uncertain environment due to tariffs and pricing pressures on older-generation products, particularly in China” .
  • CEO: “We remain firmly committed to our 3-3-3 strategy of achieving $300 million in revenue with 30% gross margin, although the exact timing will depend largely upon various macroeconomic factors” .
  • CFO: “The year-over-year decline [in gross margin] was primarily attributable to an unfavorable product mix, driven mainly by ASP erosion, particularly in China… [and] inventory reserves associated with a Power IP product, coupled with… pull-ins by a customer due to the uncertainty around tariffs” .
  • CFO: “We target to achieve annual operating expense savings of $2–$3 million… and get close to adjusted EBITDA breakeven in Q4 2025” .

Q&A Highlights

  • Tariff/pull-ins and outlook: Management indicated ~$2M of customer pull-ins, notably in TV-related areas, with effects largely realized by late Q2; combined with pricing pressure in China, this drove softer H2 expectations .
  • Gross margin drivers: Pricing competition in older-generation products and lower utilization vs prior forecast are pressuring margins into H2 .
  • OpEx and EBITDA breakeven: Voluntary resignation program expected to yield $2–$3M annual OpEx savings, helping approach adjusted EBITDA breakeven by Q4; impact mainly through SG&A reduction .
  • Communications strength detail: Wins in mid-range to flagship AI smartphones and portable AI phones, plus computing wins tied to Gen6 superjunction products .

Estimates Context

  • Q2 beats: Revenue $47.6M vs $47.2M consensus*; non-GAAP diluted EPS -$0.08 vs -$0.125 consensus*—a modest beat on both lines .
  • Q3 setup: Guidance $44–$48M vs $46.0M consensus*, with margin 18.5%–20.5%; suggests softer demand/pricing in China and the impact of Q2 pull-ins .
  • FY 2025: Consensus revenue $182.4M* aligns with lowered “flattish” Company outlook; consensus EPS -$0.66* reflects continued investment and margin pressure.
    Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term caution: Guidance reduction and China pricing pressure point to softer H2; expect estimate cuts and potential multiple compression unless margin headwinds abate .
  • Quality of beat: Q2 non-GAAP EPS and revenue modestly beat, but GAAP EPS benefitted from non-cash FX and tax items; focus on underlying margin trajectory and utilization .
  • Product cycle optionality: Accelerated new-gen launches (Gen6 SJ, Gen8 MOSFET, IGBT) and strong design-win momentum in AI smartphones/PC power/industrial provide medium-term upside to mix and ASPs .
  • Capital discipline: 2025 CapEx elevated to accelerate tools (“cookie set”) and product ramp, but multi-year CapEx now cut >50% post-quarter; monitor execution and cash burn vs loan-funded investments .
  • Cost actions: Voluntary resignation program and $2–$3M annual OpEx savings support the Q4 2025 adjusted EBITDA breakeven goal; track SG&A trends .
  • Segment lens: Watch PIC margin normalization and PAS mix shift; communications/computing strength offsets industrial/automotive softness; China remains key risk .
  • Governance/strategic alternatives: CEO transition and the Board’s review of strategic alternatives introduce potential corporate actions; could be a catalyst depending on outcomes .