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MS

MAGNACHIP SEMICONDUCTOR Corp (MX)·Q4 2024 Earnings Summary

Executive Summary

  • MX delivered Q4 revenue of $63.0M (+24.0% y/y, -5.1% q/q) and gross margin of 25.2%, both ahead of internal guidance midpoints; non-GAAP diluted EPS swung to +$0.07 from -$0.21 y/y, while GAAP diluted EPS was -$0.44 due to FX and impairment charges .
  • Management announced a strategic pivot to become a pure-play Power company and is exploring all options for the Display business; Display will be classified as discontinued operations beginning Q1 2025, with a goal to complete the process by end of Q2 2025 .
  • 2025 framework: Adjusted EBITDA breakeven by Q4 2025 (continuing ops), positive adjusted operating income in 2026, and positive adjusted free cash flow in 2027—part of its “3-3-3” goal to reach a $300M annual run-rate and 30% gross margin in three years .
  • Near-term outlook reflects seasonal Q1 softness and fab underutilization as foundry services wind down; Q1 2025 revenue guided to $42–$47M and GPM 18.5–20.5%, with FY25 revenue growth mid-to-high single digits for continuing ops and GPM 19.5–21.5% .

What Went Well and What Went Wrong

What Went Well

  • Gross margin beat and expansion: Q4 consolidated GPM reached 25.2%, above the 21.5–23.5% guide and up 190 bps q/q and 250 bps y/y; Standard Products GPM rose to 26.6% (+220 bps q/q) .
  • Segment momentum: PAS revenue +33.2% y/y (to $43.5M) and MSS +102% y/y (to $17.3M); MSS GPM 41.8% exceeded guidance (37.5–40.5%) .
  • Strategic clarity and new product pipeline: Management committed to pure-play Power focus, with 40+ next-gen power products slated for 2025 (including Gen6 IGBTs/SJ MOSFETs), targeting higher-value auto/industrial/AI markets; CEO/CFO voluntary salary cuts signal commitment .
    • “By focusing on the Power business, our goal is… quarterly adjusted EBITDA breakeven by the end of Q4 2025… $300 million annual revenue run rate with a 30% gross margin target” — CEO YJ Kim .

What Went Wrong

  • GAAP losses persisted: Q4 operating loss widened q/q to -$15.7M and net loss to -$16.3M on FX headwinds and a non-cash impairment in Display; GAAP diluted EPS -$0.44 .
  • Underutilization headwind: Wind-down of Transitional Foundry Services leaves ~20% of Gumi fab idle near-term, pressuring 2025 GPM (guided below 2024 on an equivalent basis) until new power ramps in 2H25 .
  • Seasonal/segment softness: Sequential revenue declined 5.1% q/q; PAS revenue fell 8.7% q/q on seasonality despite y/y strength .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$50.8 $66.5 $63.0
Gross Margin (%)22.7% 23.3% 25.2%
Operating Income ($M)-$15.9 -$11.0 -$15.7
Net Income ($M)-$6.0 -$9.6 -$16.3
GAAP Diluted EPS ($)-$0.16 -$0.26 -$0.44
Adjusted EBITDA ($M)-$10.0 -$4.9 -$2.6
Adjusted Diluted EPS ($)-$0.21 -$0.34 $0.07

Segment revenue and margins

SegmentQ4 2023 Revenue ($M)Q3 2024 Revenue ($M)Q4 2024 Revenue ($M)Q4 2023 GM%Q3 2024 GM%Q4 2024 GM%
Standard Products (SP)$41.2 $64.0 $60.7 22.9% 24.4% 26.6%
PAS$32.6 $47.6 $43.5 18.1% 19.4% 20.5%
MSS$8.6 $16.4 $17.3 41.3% 38.7% 41.8%
Transitional Foundry$9.6 $2.4 $2.3 ———

KPIs and balance sheet

KPIQ4 2023Q3 2024Q4 2024
Cash & Equivalents ($M)$158.1 $121.1 $138.6
DSO (days)—40 41
Inventory Days—65 60
Inventory ($M)$32.7 $36.1 $30.5
CapEx ($M)—$2.6 (Q3) $7.4 (Q4)
Share Repurchase—$2.5M in Q3 0.7M shrs/$2.9M in Q4; $24.6M remaining auth.

Notes: Q4 GAAP results include a $4.6M non-cash impairment related to Display and ~$2.0M other charges for Korea-mandated benefits; FX swings from KRW depreciation also worsened GAAP net loss, masking underlying operational progress captured in non-GAAP .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (Continuing Ops)Q1 2025Not previously guided$42–$47MNew
Gross Margin (Continuing Ops)Q1 2025Not previously guided18.5–20.5%New
Revenue (Continuing Ops)FY 2025Not previously guidedMid-to-high single-digit y/y growth vs $185.8M equivalentNew
Gross Margin (Continuing Ops)FY 2025Not previously guided19.5–21.5% (vs 21.5% equivalent in 2024)New, lower vs 2024 equivalent
CapExFY 2025—$26–$28M total; $14–$15M to upgrade GumiNew
Strategic MilestonesMulti-year—Adj. EBITDA breakeven by Q4’25; positive adj. op inc. in 2026; positive adj. FCF in 2027New

Rationale: Lower near-term margins reflect underutilization from foundry wind-down and new power products beginning production in 2H25; improvements expected as Phase 3 products ramp and Gumi mix shifts to higher-value power .

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
AI/Technology initiativesNext-gen OLED DDIC with >20% lower power; LV MOSFETs ~20% lower power for AI phones AI smartphones and PCs driving power needs; MSS ramps in China; PAS LV-MOSFETs for AI phones Power roadmap expands (Gen6 SJ MOSFETs/IGBTs); targeting AI data centers and AI-enabled devices Increasing focus and product breadth
Supply chain/utilizationPlan to fill idle Gumi capacity in 2025 as foundry winds down Foundry wind-down ongoing; utilization pressure ~20% Gumi idle; conversion investment over 3 years Transitional headwind near-term
Tariffs/macro/FX——Stronger USD vs KRW aided margins; FX drove GAAP net loss volatility FX sensitivity highlighted
Product performance (PAS)Industrial solar rebound; e-motors; LV-MOSFETs; home appliances Broad-based PAS growth above seasonal PAS +33% y/y; q/q seasonal downtick; new Gen5/6 design wins Broadening, seasonal patterns intact
Regional trendsChina smartphone OLED progress; Europe auto DDIC China OLED momentum; Korea TV strength China/Korea comms/TV strength; Japan/China auto ramps Diversifying
Display strategyChina OLED expansion (MTC) Continued China OLED traction Exploring all options; classify as discontinued ops in Q1’25 Strategic exit underway
R&D/ExecutionTaped out next-gen DDIC; smartwatch DDIC CTO hire in PAS; pipeline build 40+ new power products in 2025; 55 in 2026 Accelerating pipeline

Management Commentary

  • “Our utmost short-term goal is a return to profitability… transition to become a pure-play Power company… exploring all strategic options for the Display business.” — CEO YJ Kim .
  • “We are targeting quarterly adjusted EBITDA from continuing operations to be breakeven by the end of Q4 2025… invest approximately $65–$70 million over 3 years to upgrade the Gumi Fab.” — CFO Shin Young Park .
  • “Gen6 Super Junction power devices… offer 30% more die per wafer… drive meaningfully higher gross margins… opening new high-value markets such as automotive, industrial and AI.” — CEO YJ Kim .
  • “Power IC is pure fabless and typically has around 40% gross margin.” — CEO YJ Kim (Q&A) .

Q&A Highlights

  • 2025 growth drivers: Evenly distributed across consumer, communication, computing; new-gen products to expand into AI computing, industrial, automotive .
  • Gross margin path: 2025 guided ~100 bps below 2024 equivalent due to underutilization post-foundry and later 2H25 new product ramps; longer-term margin expansion from higher-mix power products and Gumi optimization .
  • Cash and CapEx: $65–$70M Gumi capex over 3 years; $26.5M equipment credit at <4% with 10-year maturity (3-year IO) to partially fund; continued buyback optionality .
  • Display alternatives: Considering sale, JV, licensing, or wind-down; aim to ensure smooth customer transition and regulatory compliance .
  • OpEx realignment: ~35–40% of OpEx tied to Display; efficiencies expected as company focuses on Power .

Estimates Context

  • S&P Global consensus (EPS and revenue) for Q4 2024 was not available at time of analysis due to data access limits. We attempted retrieval but were unable to obtain estimates; therefore, we cannot present a vs-consensus comparison. Instead, we note that Q4 revenue and margins exceeded the company’s guidance midpoints, and segment margins (MSS, PAS) exceeded or were above guidance ranges .
  • Where Street comparisons matter most, we expect models to adjust for: (i) underutilization from foundry wind-down depressing FY25 margins, (ii) new power product ramps beginning 2H25, and (iii) recast of continuing operations excluding Display .

Key Takeaways for Investors

  • The pivot to a pure-play Power model, with Display discontinued starting Q1’25, simplifies the story and aligns capex toward higher-return power products—potential re-rating catalyst if execution on 3-3-3 milestones stays on track .
  • Near-term gross margins are constrained by underutilization; expect a 1H’25 trough with improvement in 2H’25 as Phase 3 products start production and mix improves .
  • Product cadence is robust (40+ power products in 2025), targeting higher-value automotive/industrial/AI markets; Gen6 devices deliver 30% die/wafer improvements and better FOMs, supporting structural margin uplift over time .
  • Liquidity is strong ($138.6M cash) with low-cost equipment financing; continued buybacks ($24.6M authorization remaining) offer capital return flexibility during the transition .
  • Watch Q1’25 guide execution (rev $42–$47M, GPM 18.5–20.5%) and early indicators of 2H’25 ramps; any acceleration in AI/auto design-ins or faster Gumi conversion could pull forward the margin inflection .
  • Non-GAAP profitability trends are improving (Q4 Adj. EBITDA -$2.6M vs -$10.0M y/y; Adj. EPS +$0.07), but GAAP results remain FX-sensitive; focus on continuing-ops metrics from Q1’25 onward .

Appendix: Additional Relevant Press Releases in Q4 Cycle

  • Company strategy update: Plan to become a pure-play Power business; Display strategic alternatives; 3-3-3 goals .
  • Product launches: Two Gen6 650V IGBTs for solar inverters; 25 Gen6 SJ MOSFETs targeting AI/industrial/smart home with ~23% faster switching and ~40% RSP improvement .