MagnaChip Semiconductor Corporation Aktie

Thank you for standing by, and welcome to Magnachip Semiconductor's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mike Bishop with Investor Relations. Please go ahead, sir.

Thank you, Jonathan. Hello, everyone, and thank you for joining us to discuss Magnachip's financial results for the first quarter ended March 31, 2026. The first quarter earnings release that was issued today after the close of market 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 Camillo Martino, Magnachip's Chief Executive Officer; and Shin Young Park, our Chief Financial Officer. 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?

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?

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?

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.

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

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.

You're asking for this quarter, Suji, right?

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.

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.

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

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?

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.

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

Manufacturing services for the...

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

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.

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.

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

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

Thank you for standing by, and welcome to the Magnachip Semiconductor Corporation's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, is being recorded. And now I'd like to introduce your host for today's program, Mike Bishop with Investor Relations. Please go ahead, sir.

Thank you. Hello, everyone, and thank you for joining us to discuss Magnachip's financial results for the fourth quarter and year-end December 31, 2025. The fourth quarter earnings release that was issued today after the close of market can be found on the company's Investor Relations website. The webcast replay of today's call will be archived and available on our website shortly afterwards.

Joining me today are Camillo Martino, Magnachip's Chief Executive Officer; and Shin Young Park, our Chief Financial Officer. Camillo will discuss the company's recent operating performance and business overview, and Shin Young will review the results for the quarter and provide guidance for the first 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 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'll 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 fourth quarter earnings release in the Investor Relations section of our website.

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

Thank you, Mike, and good afternoon, everyone. I would like to open with a comment I made last quarter. Specifically, Magnachip has a strong foundation, a strong history in power, our reputation for reliability and quality and relationships with customers who care about performance and execution.

Looking back at 2025, we have implemented many changes to lay the foundation to improve the financial and go-to-market fundamentals which we believe will result in a positive and consistent recovery over time. We are investing responsibly in areas where we see great potential while staying disciplined and realistic about what it takes to turn of power semiconductor business around.

I would like to look back on Q4 and 2025, highlighting what we have completed, and we will provide more detail on our go-forward operating strategy. First, a quick review of the quarter. For Q4, revenue was $40.6 million and gross margin was 9.3%. For the full year, revenue was $178.9 million and gross margins were 17.6%.

Consistent with our comments from our last earnings call, our results continue to reflect 3 realities. Pricing pressure on legacy products remains intense, especially in China. Factory loading and utilization was a headwind, although we saw utilization slightly above in Q4, what we had said during last quarter's earnings call.

We need highly competitive products to it. This is a very important reality. And where we do have competitive products, we can absolutely win. That's the core point behind our product strategy. Shin Young will walk through the financial details and guidance later, moving to the more important changes that we have made during 2025.

Over the past year and especially over the past several months, we have taken 3 meaningful actions. Firstly, we significantly reduced our cost structure. We exited the display business, and we resized the organization accordingly. We also executed workforce actions and cost reduction programs to reduce OpEx and to focus the company exclusively on the power business.

Secondly, we've reorganized and focused our sales and marketing teams on specific market segments and customers. This is important because winning in power cities is not a one size fits all. It is segment-by-segment and customer by customer.

Thirdly, we increased our investment in R&D to significantly improve our mid- to longer-term product competitiveness. In 2025, we launched 55 new generation products versus a total of 4 for the entire 2024 year. This is a massive acceleration by our engineering team and reflects targeted investment on longer-term growth.

These new generation products are designed to improve our competitiveness, and improve our product margin structure over time. So those 3 definitive changes have already been made. With respect to our go-forward operating strategy, I would now like to 6 highlight foundational pillars that we believe are fundamental to the successful recovery and longer-term profitable growth in that [indiscernible] business.

Number one, focus market segments. We are investing in the priority and markets where we believe we can earn better margins and build durable customer positions. The markets are the [indiscernible] automotive industrial motor control, solar and energy-related applications and server data infrastructure.

And in the future, we expect to be delivering advanced power solutions to the robotics market as well. We are not going to chase every end market. We are going to concentrate on the segments where our technology road map and proximity to significant and strategically important customers can translate into sustainable share and better economics.

Number two, our product competitiveness. At the heart of our turnaround strategy is product competitiveness. This is a comment that we have made many times previously. We are continuing to accelerate our product development activities. Our plan is to deliver more than 40 new generation products in 2026.

This is in addition to the 55 new generation products launched in 2025. This compares to a total of only 4 new generation products launched in 2024 and none at all in 2023. Again, this is the result of a targeted investment with a specific aim to increase revenue, utilization and product margins over time.

These products are designed to be meaningfully better, not incremental. Number 3 is our Power IC business. As we expand our focus on certain market segments, we will begin to develop key systems expertise that will align power ICs and gate drying as without future power product roadmap and it will miss Magnachip's revenue generation potential.

Number four, modules. We are also expanding how we go to market with customers through a module strategy. A module allows us to combine multiple [indiscernible] sometimes our own, sometimes bid [indiscernible] into a packaged solution that should increase our product content per application.

Our aim is to increase sales efficiency, drive higher revenue and better target markets and the margins in markets where customers want integration and where the economics support it. Number five, technology movement. To continue to support and offer greater value to our key customers, we are actively evaluating offering silicon carbide product solutions set.

Our entry into the silicon carbide market will be thoughtful and deliberately targeting markets where we can have longer-term revenue visibility and in which return on invested capital and payback as demonstrably attractive.

We believe our reputation and geographical location should enable us to exist such attractive market savings.

Finally, number six, strategic partnerships. Our position as a trusted power semiconductor company in Korea, places us in a strong position to establish mutually beneficial relationships with key customers and technology partners who value our local access, security of supply, expertise and reputation.

Building stronger and deeper customer relationships and our focused micro segment is critical, and we believe having multiple anchor customers that have dropped a broad range of our products will be highly beneficial and a testament to our value proposition.

Likewise, partnerships with technology leaders who recognize our value as a trusted partner in a strategically important market will accelerate our product road maps while expanding our market reach in a capital-efficient manner. We believe developing these close relationships with anchor customers and technology partners will provide a foundation for significant value creation over time.

We believe the strategic customer relationships we are developing, the focused market segments we are pursuing and the advanced technology we are developing, including silicon carbide will significantly expand Magnachip's TAM and [indiscernible] Selling modules and higher value-added power ASCs will further expand our TAM to approximately double over the next 5 years.

Even more importantly, our SAM is expected to nearly triple over the next 5 years. We are building a more balanced and resilient business 1 way of customer relationships support investment decisions and value creation over a multiyear horizon.

Now let me address some recent board level activities. We recently announced that Cristiano Amoruso, Chief Investment Officer of [indiscernible] has joined the Board as a director. His firm became a significant shareholder of Magnachip because it believes in Magnachip's ability to create significant long-term value for its customers, shareholders and employees.

The Board also believes the company is significantly undervalued relative to its long-term value creation potential and believe that focused execution and the strategic realignments we are employing, product competitiveness, market focus, technology road map and customer technology partnerships can turn the company to grow and create significant long-term shareholder value.

In line with its [indiscernible] responsibilities, the Board will responsibly and carefully evaluate any actionable opportunities that can accelerate and derisk shareholder value creation and compare it with all other options available to the company. Looking forward, allow me to set the expectations clearly. This turnaround will take time.

We believe that great products and great customer partnerships will turn Magnachip around. At the same time, and as we discussed previously, new-generation products take time to qualify, to ramp and to contribute meaningfully towards revenue.

In 2026, we still expect legacy products to represent the vast majority of revenue and pricing pressure affecting these products will continue. We expect new generation products to comprise approximately 10% of our total revenue in the fourth quarter of 2026, up from 2% for the full year 2025. So 2026 will remain a challenging period, especially for gross margin as we transition the portfolio and scale new generation products.

We believe we are taking the rent corrective actions to improve our competitive position and create a path to meaningful value creation. We will continue to be transparent prioritized cash discipline and execute the product road map or urgency.

With that, I'll turn -- turn over the call to Shin Young to walk through the quarterly financial results. and our outlook. Shin Young?

Thank you, Camillo, and welcome, everyone, on the call. Let's start with key financial metrics for Q4 and full year 2025. I quarter Q4 consolidated revenue from continuing operations, which includes power analog solutions and power IC was $40.6 million approximately at the midpoint of our guidance range of $38.5 million to $42.5 million. This was down 17% year-over-year and down 11.7% sequentially on an Apple step basis. This compared with the equivalent revenue of $48.9 million in Q4 2024 and $45.9 million in Q3 2025.

For the full year 2025, total consolidated revenue from continuing operations was $178.9 million compared with $185.8 million in 2024, representing a 3.7% year-over-year decline. This result was consistent with our prior guidance, which anticipated an approximately 3.8% year-over-year decrease.

Revenue from Power analog Solutions in Q4 was $36.8 million, down 15.3% year-over-year and down 11.4% sequentially, primarily due to competitive pricing pressure on our older generation products, which was especially intense in China.

The $2.7 million onetime sale incentive was recognized as a reduction in revenue in Q4 2025 as part of our effort to reduce elevated inventory levels in the channel, primarily in China. For the full year 2025, revenue from power analog solutions was $160.5 million compared with $166.8 million in 2024.

This 3.8% year-over-year decline was primarily due to intensified pricing pressure on our older generation products, partially offset by revenue growth in low voltage MOSFET attributable to market share gains. Revenue from Power IC in Q4 was $3.8 million.

This was down 30.4% year-over-year and down 14.5% sequentially. The sequential decline was due mainly to customer order poolings in Q3 from Q4. Revenue from PoC for the full year 2025 was $18.4 million, down 3.4% year-over-year compared with $19 million in 2024. In Q4, consolidated gross profit margin from continuing operations was 9.3%.

And within the virus range of 8% to 10% compared with 23.2% in Q4 2024 and 18.6% in Q3 2025 on an apples-to-apples basis. The previously mentioned onetime sales incentive had a 560 basis point negative impact on gross profit margin.

Year-over-year and sequential decline was primarily attributable to an unfavorable product mix driven mainly by ASP version, particularly in China, and filling our fabric lower-margin products and a lower utilization rate.

For the full year 2025, consolidated gross profit margin from continuing operations was 17.6%. Within our annual guidance range of 17% to 18% compared with 21.5% in 2024. Year-over-year change was primarily driven by continuing pricing pressure. Continued pricing pressure, lower margin products loaded in our effect and a lower fab utilization rate.

The company's display business has been classified as a discontinued operation in 2025. We Including me, all of the following figures reflect results from continuing operations and prior periods have been recast on a comparable basis. Q4 SG&A was $8.6 million compared with equivalent January of $9.8 million in Q4 '24 and $8. 3 million in Q3 2025.

We expect to see annual OpEx savings of more than $2 million beginning in Q4 2025 from our cost reduction efforts, including the execution of the voluntary resignation program, primarily for shares function employees in Q3. Stock-based compensation charges, including SG&A were $0.4 million in Q4 and as compared with $1.6 million in Q4 '24 and negative $28,000 in Q3 2025.

Both in Q3 and Q4, we recorded adjustments to stock-based compensation expense related to the separation of certain executives and associate feature of their equity grant. For the full year 2025, SG&A was compared with $38.1 million in 2024. Stock-based compensation charges including SG&A were $1.9 million in 2025 and $4.8 million in 2024.

Q4 R&D was $7.6 million compared with equivalent R&D of $6.6 million in Q4 2024 and $7.8 million in Q3 2021. The R&D in Q4 increased year-over-year due to the acceleration of new product development. We introduced 55 new generation products in 2025, of which 44% were introduced in Q4.

This compares to 4 in all of 2024. For the full year 2025, R&D was $27.3 million compared to $25 million in the prior year. Before I go into the details of our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our fourth quarter earnings release.

Our non-GAAP results are as follows: Q4 adjusted operating loss was $11.9 million compared with an equivalent adjusted operating loss of $3.5 million in Q4 2020 and adjusted operating loss of $1.4 million in Q3 2021. The as EBITDA was negative $8.9 million compared with an equivalent adjusted EBITDA of $0.3 million in Q4 2024 and negative $4 million in Q3 2021.

For the full year 2025, adjusted operating loss was $28.5 million compared with an equivalent adjusted operating loss of $19.1 million in 2024. Adjusted EBITDA in '25 was negative $15.6 million compared with an equivalent adjusted EBITDA of negative $4.2 million in 2024. Adjusted operating loss and adjusted EBITDA deteriorated year-over-year, primarily due to lower gross profit and higher R&D expenses, as explained above.

Our Q4 non-GAAP diluted loss per share was -- as compared with equivalent non-GAAP diluted earnings per share of $0.15 in Q4 2024 and non-GAAP diluted loss per share of $0.01 in Q3 2021. Our weighted average non-GAAP diluted shares outstanding for the quarter were $36 million, $37.7 million in Q4 2024 and 35.9 million shares in Q3 2021.

For the full year 2025, non-GAAP diluted loss per share was $0.22 compared with $0.22 in 2024. Weighted average non-GAAP diluted shares outstanding for 2025 were 36.2 million shares compared with $37.8 million in 2024.

Moving to the balance sheet. Previously, we had expected our cash at the end of 2025 to be in the mid-$90 million range. However, we ended Q4 with cash of $103.8 million and this compared with $138.6 million at the end of Q4 2024. The main cash outflow during 2025 included $30 million in net cash CapEx related to package costs and history severance associated with the loan resignation program executed in Q3 and $3.6 million spent on share repurchases, primarily in the first half of 2024.

The remaining gap was primarily attributable to net cash loss from operations. At end of Q4, our long-term borrowings totaled $44.6 million, which included $16.7 million of the equipment loans. Including maintenance CapEx, our total CapEx for the full year 2020 was $30 million.

However, the net cash impact was $13 million due to partial funding through the equipment loan. Now moving to our first quarter 2026 guidance. While actual results may vary for Q1 2026 Mega currently expects consolidated revenue from continuing operations, which includes power analog solutions of Power IC businesses. to be in the range of $44 million to $48 million, up 13.4% sequentially and up 2.9% year-over-year at the midpoint.

This compares with $40.6 million in Q4 2025 and $44.7 million in Q1 2025. The Consolidated gross profit margin from continuing operations to be in the range of 14% to 16%, up from 9.3% in Q4 2025, but down from 20.9% in Q1 2020. Finally, I'd like to add that on a reported basis and excluding stock-based compensation and onetime charges, total operating expenses, SG&A and R&D together, decreased by 35% in 2025 compared with 2024.

Also, as a result of our cost reduction efforts, we expect more than $2 million of annualized SG&A savings that started in the fourth quarter of 2025.

On the other hand, to support the go-forward operating strategy commonly discussed earlier, we expect to increase -- we plan to increase our investment in R&D in 2026. Thank you. And now I'll turn the call over to Camillo for his final remarks. Camillo?

Thank you, Shin Young. We are committed to executing on the 6 foundational pillars we emphasized earlier. We have implemented a new go-forward strategy and many of the necessary changes to position Magnachip for future success and value creation.

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. I will turn the call to the operator to open the call for questions Operator?

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

Camillo, Shin Young. First, a question on the gross margin guidance. I know there was a gross margin inventory reserve hit in 4Q. Are you assuming a similar impact or are you assuming an impact Shenyang in 1Q? Or is that 14 to 16 range of pure range without expected in reserve?

That did not include the onetime incentive that we did execute -- so had we excluded Q4 onetime impact, Q4 margin would be like 15% inch. So like we are expecting the Q1 2026 to be the similar range, and that's mainly driven by the utilization and also the pricing pressure.

So that's actually letting us our gross margin at this time. So our revenue, still the vast majority of that is older generation product. We are still feeling the pricing pressure, especially in China.

Understood. Okay. That helps. And then on the operating expense savings from the restructuring, it will flow through. You said I think you said SG&A, right, the $2 million run rate, and that would be -- we'd see that benefit toward the end of '26? Or when would that step down? What's the linearity of that step down?

Well, that's actually the -- it's going to be the continuing basis. So it started in Q4 2025. I just quantify the actual impact is at 2 million plus, and we are going to see the full impact in 2026. And I'm hoping that, that's going to minimize the investment that we are going to do in R&D to support the go-forward strategy operating the strategy.

Okay. And then a question for yourself or maybe Camillo. The geographic exposure, as you bring these new products to market and the new focused segments, does that move your business out of China where it's competitive price-wise?

Or does it stay in China and less price competitive markets? What's the shift there as you go to new products and new markets versus the competitive China market right now?

Look, it's very clear that we have some very, very important, strategically important and very large customers right here in Korea. And so I think it's important that we do an excellent job in servicing their needs for the next many, many years.

So to me, it's -- they're here, they backyard, let deliver the value that we can realize together. It's not a strategy of moving away necessarily from any one country. it's more about focusing more on Korea because we're right here. And clearly, at the same time, we are a global company. We have sales offices in every country, every major country around the world. And so we're going to continue to service them as well.

But frankly, I would expect to have a higher percentage of our revenue coming from Korea because they're very close to us, right, very, very close, and we want and really service them extremely well.

Okay. That's very helpful, Camillo. And then last question on the silicon carbide effort. Can you tell us where you are in that? Is that in development effort? Do you have the technologies in-house you need -- do you have to invest or partner to get there? And what products or end markets might you target with silicon carbide?

So I don't want to disclose what products we're developing. I would say that we're in development. We are in development, absolutely. We're building the team as well as we are speaking. And to some of our key customers, we're sharing some of that information with them under NDA. At the same time, I would say that this is a long-term plan. This is not a 12-month plan.

Clearly, solving carbide is going to take many years, first, to develop and then potentially, we're going to look for ways to potentially manufacture either in-house or maybe in the short term, we may go to an outside fabric in the short term. So we're looking at everything there.

But very clearly, as I stated in my prepared remarks, silicon carbide is a very, very important part all our future road map. If you look at the market segments that we are pursuing, if you look at the key customers that we are deepening our relationships with silicon carbide is very, very important for them. All right. Thank you.

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, everyone, for participating on today's call. We appreciate your support of Magnachip. Operator?

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

Hello, and thank you for standing by. Welcome to Magnachip Semiconductor Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to Mike Bishop. You may begin.

Thank you. Hello, everyone, and thank you for joining us to discuss Magnachip's financial results for the third quarter ending September 30, 2025. The third quarter earnings release was issued today after the close of market and can be found on the company's Investor Relations website. The webcast and replay of today's call will be archived on our website shortly afterwards. Joining me on today's call are Camillo Martino, Magnachip's Chief Executive Officer; and Shin Young Park, our Chief Financial Officer. Camillo 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 fourth quarter. There will be a Q&A session following the prepared remarks. During the course of the 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 otherwise required by law, the company does not undertake any obligation to update these statements.

During the call, we'll 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 third quarter earnings release in the Investor Relations section of our website.

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

Thank you, Mike, and good afternoon, everyone. It has been approximately 2.5 months since I was appointed Interim CEO. Magnachip is a company with a rich history of innovation, a reputation for high reliability and quality and strong customer relationships. With that said, for the past couple of years, I believe we have failed to execute on our promises. I know our shareholders are frustrated and naturally upset. We are moving quickly to improve financial fundamentals and deliver long-term shareholder value. There are 5 very critical objectives for both Shin Young and myself. Number one, to reposition our product portfolio to be significantly more competitive; number two, to rightsize our OpEx structure for a pure-play power business; number three, conserve cash; number four, increase our transparency with our shareholders; and number five, explore strategic alternatives.

Consistent with our communications back in August, our Board continues to review all strategic alternatives. At the same time, I see tremendous potential here, especially with the lineup of a new generation of products either recently launched or to be launched soon and with a very strong product roadmap ahead. I believe we can execute our product strategy to deliver on that potential.

After joining the management team, we undertook a complete bottoms-up analysis of the company to highlight ways to correct course and put us on a path to recovery. We identified some significant changes in the near term and medium term that will require precise product planning and execution. I would like to present on this call our findings so far and outline the initial steps in our plan to address our issues and also our opportunities for the short term. My goal today and going forward is to be transparent about where we stand and where we are headed, the challenges we will likely face along the way and our plans to address them. Let me first share our high-level results of Q3.

Q3 revenue came in at $49.9 (sic) [ $45.9 ] million at about the midpoint of our guidance range. And gross profit margin was 18.6%, which was at the low end of the guidance range. These results reflect 3 realities: one, the pricing pressure on our legacy products is especially intense in China, some business we actually had to walk away from. Number two, lower fab utilization as a result of this pricing pressure and also due to the higher level of months of inventory at the end of Q3, especially in China. On the positive side, we did see significant strength in the Communications segment with revenue increasing 34% sequentially quarter-on-quarter and 95% year-over-year.

Regarding fab utilization. While we anticipate fab utilization rates will decline again in Q4, we believe that the Q4 fab utilization rate is likely to hit the low point of around the mid-50s to manage the mid-50 percentile to manage higher levels of inventory in the channel, and we expect to execute a $2.5 million incentive program to try and address it. In the meantime, we cannot afford idle capacity. And so we are pursuing every opportunity to aggressively load the fab with existing products to sustain operating leverage and stabilize and then improve gross profit margin until our new generation products contribute more meaningfully.

After Q4, we expect utilization to begin to recover, and we believe the new generation products will improve this metric in the future. These financial and operating results and the results of our analysis led us to create 5 objectives that I stated earlier, and I would like to elaborate on each one of these now. Our first objective is to reposition our product portfolio to be significantly more competitive. Magnachip's results clearly show the headwinds we are facing. Our competitive product position in China's industrial markets and the global consumer TV sector has significantly worsened over the past year. Intense price competition, coupled with an aging product portfolio have taken their toll.

Despite that, the engineering foundation here at Magnachip is solid, and we are taking decisive actions to stabilize our competitive position that we can then build upon. Namely, we are fast tracking new-generation product development to improve our competitiveness and achieve revenue growth, margin expansion and a return to improved rates of fab utilization. Areas of focus for these new generation products are our low and medium-voltage MXT MOSFET products, our Super-junction MOSFETs products and also our IGBT products. We are well underway with this initiative.

During the first 9 months of 2025, we have released 30 new-generation products compared with only 2 new-generation products in the same time period for 2024. In Q4 2025, we currently expect to launch at least another 20 new generation products, giving us a total of at least 50 new generation products in 2025 as compared to only 4 new generation products in all of 2024. Generally speaking, we consider a new-generation product is one in which we achieve a greater than 30% improvement in performance per unit area.

The challenge is the revenue ramp time for these new-generation products to impact our financial results. New-generation products will take multiple quarters or more to meaningfully contribute to the income statement, depending on the market segment. However, we are already seeing the initial results in Q3 as 2% of the total revenue came from new-generation products. We expect that number to be approximately 10% in Q4 and 2026. We are also very excited about our IGBT announcement today. We have signed a strategic licensing agreement with Hyundai Mobis regarding the use of IGBT technology, which stands for Insulated Gate Bipolar Transistor technology that we have been developing this together for many years now. We believe this agreement will enable us to expand our IGBT footprint beyond automotive markets into industrial, AI and renewable markets.

Industry analysts forecast the IGBT market, which will reach nearly $17 billion by 2029, up from $11 billion in 2024. Hyundai Mobis is a global auto parts provider focused on delivering differentiated mobility solutions that combine software and hardware together. And it is also associated with Hyundai Motor company, the world's third largest automotive manufacturing company. This partnership is still in its early stages, but we expect to see qualification results in 2026 and currently expect initial revenue to start in 2027.

Moving to the second objective to rightsize our OpEx structure for a pure-play power business. We have initiated multiple OpEx cost reduction programs, including workforce streamlining that will generate approximately $2.5 million of annualized OpEx savings. We will see the early impact of these actions in Q4 2025. With the current shutdown of the display business and the execution of this workforce reduction program, our overall headcount is expected to be reduced by more than 20% when comparing the end of 2025 versus the end of 2024. And for our non-factory employees, we expect the headcount reduction to be nearly 40% when comparing at the end of 2025 versus at the end of 2024. These initiatives that I just referenced are foundational to our third objective.

The third objective is conserving cash. We have reduced our CapEx investments to both conserve cash and lay the groundwork for our recovery. As we have already announced, among the first actions being taken in our plan is cutting capital expenditures for our Gumi fab upgrade by more than 50% over the next 2 years as we prioritize capital allocation. Our deliberate investment in CapEx for our Gumi fab was made to support the growth of our new generation power products that are critical to our financial recovery. I can say now that with these actions we have implemented, I believe we are moving in the right direction.

Now let me comment briefly on our fourth and fifth objectives involving being transparent and being -- and exploring strategic options. Let me assure you that I am personally committed to being transparent with our investors. Finally, the Board and management team are fully aligned as we explore all strategic options available to us.

Moving to my final thoughts here. During my years in the semiconductor industry, I've held executive roles in several chip companies, including as CEO of a publicly held semiconductor company. I have also lived and worked in Asia for many years as a senior executive for a global chip company. And so I'm very familiar with what it takes to compete here. With that said, I will be blunt. Turning Magnachip around will take time and require an all hands-on deck approach with intense focus from our management team. The next few quarters will remain challenging as our legacy products decline and our new-generation products begin to ramp. But we also have several reasons for optimism. For example, I really believe we have a strong engineering team, led by an intelligent CTO who is driving our entire product roadmap, a growing customer base and in addition, a clear product roadmap that targets higher-margin power segments. We are planning to have more definitive details on our go-forward operating strategy during our Q4 call early next year.

With that said, I will hand the call over to Shin Young for more detail on the financial results and guidance and then come back for final remarks. Shin Young?

Thank you, Camillo, and welcome, everyone, on the call. Let's start with key financial metrics for Q3. Total Q3 consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC was $45.9 million, which was about the midpoint of our guidance range of $44 million to $48 million. This was down 13.3% year-over-year and down 3.5% sequentially on an apples-to-apples basis. This compared with equivalent revenue of $53 million in Q3 2024 and $47.6 million in Q2 2025.

Revenue from Power Analog Solutions was $41.5 million. This was down 12.7% year-over-year and down 1.7% sequentially, primarily due to the competitive pricing pressure on our older generation products, which was especially intense in China. Revenue from Power IC was $4.4 million. This was down 18.9% year-over-year and down 18% sequentially. The sequential decline was due mainly to pull-ins by customers in Q2 from the second half of the year.

In Q3, consolidated gross profit margin from continuing operations was 18.6%, which was at the low end of the guidance range of 18.5% to 20.5%, down from 22% year-over-year and down from 20.4% sequentially on an apples-to-apples basis. Year-over-year decline was primarily attributable to an unfavorable product mix, driven mainly by ASP erosion, particularly in China, and filling our fab with lower-margin products and a lower utilization rate. The sequential decline was mainly attributable to a lower utilization rate. The Company's Display business has been classified as discontinued operations from Q1 2025. And from Q3 2025, we've additionally classified certain expenses incurred outside of Korea as discontinued operations. All of the following figures reflect results from continuing operations and the prior periods were reclassed to be on an apples-to-apples basis.

Q3 SG&A was $8.3 million as compared to equivalent SG&A of $9.5 million in Q3 2024 and $9 million in Q2 2025. Stock compensation charges included in SG&A were negative $28,000 in Q3 as compared to $1.4 million in Q3 2024 and $0.8 million in Q2 2025. In Q3, $0.7 million was reversed as a result of the prior CEO separation and the related stock forfeiture. Q3 R&D was $7.8 million as compared to equivalent R&D of $6.5 million in Q3 2024 and $6.5 million in Q2 2025. R&D in Q3 increased due to the acceleration of new product development. We expect at least 20 new-generation product introductions in Q4. In Q3, we recorded onetime charges of $4 million, of which $2.6 million represented the package cost for the employees we let go under the voluntary resignation program that we completed at the end of Q3 and the remainder primarily related to the separation payment and certain cash benefits disclosed in our prior CEO separation agreement.

Before I go into the details of our non-GAAP results, please note that our GAAP financial results are available in our Form 8-K filing with our third quarter earnings release. Our non-GAAP results are as follows: Q3 adjusted operating loss was $7.4 million compared to an equivalent adjusted operating loss of $2.9 million in Q3 2024 and an adjusted operating loss of $4.8 million in Q2 2025. Q3 adjusted EBITDA was negative $4 million. This compares to an equivalent adjusted EBITDA of $0.8 million in Q3 2024 and negative $1.5 million in Q2 2025. Adjusted operating loss and adjusted EBITDA deteriorated year-over-year and sequentially, mostly due to the lower gross profit amount and higher R&D expense as explained above.

Our non-GAAP diluted loss per share was $0.01. This compared with equivalent non-GAAP diluted loss per share of $0.20 in Q3 2024 and non-GAAP diluted loss per share of $0.05 in Q2 2025. This is due in part to the recognition of income tax benefit of $4.2 million in Q3 and $4.1 million in Q2 2025, whereas the recognition of income tax expense of $6.1 million in Q3 last year. Our weighted average non-GAAP diluted shares outstanding for the quarter were 35.9 million shares and 37.5 million shares in Q3 2024 and 36.1 million shares in Q2 2025.

Before we talk about some balance sheet items, let me provide some comments regarding the company's discontinued Display business. The sale of the end-of-life Display product resulted in cash inflow of a little over $3 million in Q3, and we booked the onetime charges of $5.2 million due mainly to certain additional expenses incurred outside of Korea, of which about 40% was a noncash item, and we are in the process of reviewing and negotiating the remainder to reduce the cash outlay.

Moving to the balance sheet. We ended Q3 with cash of $108 million as compared to $113.3 million at the end of Q2 2025. The main cash outflow in Q3 was $4 million of net cash CapEx after subtracting $3.6 million, which was the Q3 funded portion by the previously announced equipment loan. At the end of Q3, our long-term borrowings amounted to $38.9 million, which included the $10.4 million of the equipment loan. As noted in August, when Camillo joined the management team to conserve cash, we've reduced upgrade CapEx for Gumi fab to be in the range of $30 million to $35 million by over 50% from the previously forecast range of $65 million to $70 million through 2027. Of the $30 million to $35 million range, we invested approximately $14 million in the first 3 quarters of 2025 and expect to spend approximately $6 million in Q4 2025. We view this investment as a requirement to support the development of the new-generation of power products.

For the full year 2025, we expect approximately 85% to 90% of the $20 million upgrade CapEx to be funded by the equipment loan to which an interest rate of less than 3% per annum will apply. Because the available amount of equipment loan ties to the total CapEx amount, which we reduced it by over 50%, the previously disclosed $26.5 million is now expected to be around $20 million. Including the maintenance CapEx for the full year 2025, we expect the total CapEx to be in the range of $29 million to $30 million and the related net cash impact to be in the range of $11.5 million to $12.5 million, which netted the funded portion by the equipment loan.

Additionally, in connection with the voluntary resignation program that we completed by the end of Q3, we paid in October the onetime package cost of $2.5 million that I mentioned earlier and $1.5 million of statutory severance, which was net of the deposits that made outside of the company's accounts for the Korean labor law. With the execution of this headcount reduction, we reduced an additional 5% of our total headcount after the shutdown of the Display business. With this additional 5% reduction, we target to achieve annual OpEx savings of approximately $2.5 million beginning in Q4 2025 with a payback period of about 1.5 years. With the cash outflows in Q4, mainly from CapEx and the payment timing of voluntary resignation program-related amounts as described above, we currently expect our cash balance at the end of 2025 to be in the level of mid-$90 million.

Now moving to our fourth quarter and full year 2025 guidance. While actual results may vary, for Q4 2025, Magnachip currently expects consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC businesses to be in the range of $38.5 million to $42.5 million, down 11.9% sequentially and down 17.1% year-over-year at the midpoint on an equivalent basis due in part to a onetime $2.5 million incentive program we expect to execute in Q4 to reduce higher levels of inventory in the channel. This compares with equivalent revenue of $45.9 million in Q3 2025 and $48.9 million in Q4 2024. Consolidated gross profit margin from continuing operations to be in the range of 8% to 10% due to the above described onetime incentive as well as a lower fab utilization rate. We expect this incentive program to be a 600 basis point negative impact. This compares with equivalent gross profit margin of 18.6% in Q3 2025 and 23.2% in Q4 2024.

For the full year 2025, consolidated revenue from continuing operations is expected to be down by 3.8% year-over-year at the midpoint of Q4 revenue guidance on an equivalent basis. The equivalent revenue in 2024 was $185.8 million. Consolidated gross profit margin from continuing operations is expected to be between 17% to 18% and the above described onetime incentive program in Q4 is expected to have an about 100 basis point negative impact in the full year consolidated gross profit margin. The equivalent gross profit margin was 21.5% in 2024.

As I approach my fourth year as CFO, I must acknowledge this year's financial results have been disappointing. As Camillo noted earlier, we must regain investors' confidence, and therefore, my focus as CFO will continue to be on heightened financial discipline and cash preservation. While there is clearly more work to do, I feel good about a number of actions we and the Board recently executed, which are expected to result in a reduction of annual OpEx by about 35% year-over-year and a reduction in headcount by more than 20% when comparing end of 2025 versus end of 2024. With these actions, we'll be better positioned to enter 2026.

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

Thank you, Shin Young. This quarter really reflects the realities of our transition into a pure-play power products company. Our Q4 guidance is much lower than what we would have liked to see because of the onetime incentive program. As a result, I felt it was necessary to provide you a little bit of color on Q1 as well, which is very abnormal and not something we would typically do. But I would say that we expect in Q1 2026, the top line revenue to sequentially grow by double digits. We acknowledge our failure to deliver on prior promises, and we certainly share the disappointment and frustration of our shareholders. Our priorities are very clear, including to explore strategic alternatives. The actions we have taken to reduce CapEx and OpEx and to revitalize our power product portfolio are repositioning Magnachip for long-term recovery and success. 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 move through this important phase. I will now turn the call over to the operator to open the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Suji Desilva with ROTH Capital.

So I appreciate all the updates here. So the incentives that you're doing, the impact, should we understand that, that will be an impact that happens through the December quarter and is cleared? I appreciate the 1Q guidance of up double digits. So should we think of that as being a 1-quarter event, Camillo, in terms of the effort there?

Well, we expect, as we mentioned, to have the impact this quarter, that financial $2.5 million impact this quarter. And we hope that our strategy, at least is that the inventory that we talked about in the channel will come down over time. But this is really a program to really encourage the sales channel to move the existing inventory. That is what is intended for. Maybe Shin Young, you have any additional financial comments.

We are trying to give our kind of channel guy to be price competitive. So we are booking this onetime thing as the expense, onetime expense, meaning the reduction in revenue in Q4. That's why it has an impact on the gross margin. But as Camillo explained, I mean, just make them as price competitive, we are hoping they're going to move their old kind of inventory.

Okay. I appreciate the color there. And then just thinking about the gross margin impact there. If we take the 4Q guidance of 9 and then we add back the 600 bps, should we think of that as a trough level looking into '26 for gross margin? Or maybe you could give us some sense of the puts and takes, maybe utilization along with that to think about the trends there?

Right. So the Camillo kind of during his prepared remarks that Q4 is likely to be the lowest point of our gross utilization rate being mid-50 percentage points. So there's a time lag between when you produce the product and when you recognize revenue, and that's kind of impacting your gross margin. So I mean it's probably a little early to give out the entire 2026 guidance, but kind of this lower gross margin utilization rate is kind of impacting the current quarter and also the next quarter in Q1 a little bit. I mean, setting aside the onetime incentive program.

So we'll have to see until the new-generation product can meaningfully contribute, but we said about 10% of our revenue like when we -- in Q4 2026, what that means is actually, we still have quite a bit and the largest chunk of the old generation product, which we are going to continue to feel some pricing pressure. So we think we're going to see as the new-generation product composition is kind of increasing and our margin we're going to be improving gradually with that pace. But until then, I think we are continuing to see the pricing pressure on our older generation products.

And it's fair to say -- just to add to that, it's fair to say that, look, 2026 is obviously going to be a challenging gross margin period of time for us because this pricing pressure doesn't go away at the end of the calendar year. It is there right now and our new products that we're planning is what we use to compete against that, but that will take time. So clearly, 2026 will be a challenging gross margin story for us as well.

Okay. Appreciate all that color. Maybe you can talk Camillo about the Hyundai Mobis agreement and just the genesis of it, kind of how it came about and if we should think about there being more agreements like that to target more product end markets beyond industrial IGBTs.

Yes. It's -- I've got to be a little bit careful as to what I say just from a confidentiality point of view. But Hyundai Mobis, as I mentioned, is part of Hyundai Corporation. We have been working on this development for a number of years, already. And this specific licensing agreement or this specific agreement is really giving us the use to license this technology for our own purposes. And obviously, Hyundai has their own strategy with this part as well. And I'm not going to comment on what their plans are to announce it or in what capacity.

But it's a very close relationship between us, and we expect to focus this -- our strategy on this licensing technology to the industrial markets in particular is what we said. And so we look forward to revenue starting to contribute from this licensing deal sometime in 2027. As we get closer to that time frame, we'll give more details and more color to our shareholders. But we're very encouraged. I mean, we're very excited. I think that was the only time I used the word excited in the entire script. I am very excited about this relationship.

It's always a balance. And then puts and takes. And then lastly, just I'll pass it on. The communication strength you saw there, I presume some of that's consumer smartphone. I'm wondering the sustainability of the wins and the strength you're seeing there.

That is a very good relationship we have with our key customers here in Korea. We've been working with them for a long time. The technology is very, very competitive, as we mentioned, and that's why we see an increase. There was a couple of years ago, we lost our competitive way, and now we've regained it with new products. So that actually is a perfect example of what happens when you have a competitive product, right? You have a competitive product, you can go out there and play the game to win, and we did that well.

And so now we need to do that with our entire other product portfolio that we talked about -- and so the 50 new-generation products that we've launched or planning to launch this year is very, very critical for our future financial recovery. And -- but that's not the end. As you can imagine, we plan to launch a whole bunch more next year. And in our Q4 call early next year, we'll provide more details on what is our new-generation product plan for 2026.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Mike for closing remarks.

Thank you. I would like to thank everyone for participating on our call today. We appreciate your continued support of Magnachip. This concludes our third quarter 2025 conference call.

Thank you for your participation. You may now disconnect.

Hello, and welcome to Magnachip Semiconductor Second Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Steven Pelayo. Sir, you may begin.

Great. Thank you. Hello, everyone. Thank you for joining us to discuss Magnachip's financial results for the second quarter ended June 30, 2025. The second quarter earnings release that was issued today after the market close 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 third 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 obligation 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 second quarter earnings release in the Investor Relations section of our website.

With that, I now will turn the call over to YJ Kim. YJ?

Hello, everyone, and thank you for joining us today on Magnachip's Q2 earnings call.

We continued in Q2 to execute on our strategic pivot to become a pure-play power semiconductor company, and we delivered solid results despite ongoing macro challenges. For Q2 2025, consolidated revenue from continuing operation was $47.6 million, up 8.1% year-over-year and above the midpoint of our guidance range. This was our fifth consecutive quarter of year-over-year growth on an apple-to-apple basis.

Gross profit margin from continuing operation was 20.4% was within our guidance range of 19.5% to 21.5%, though down 2.1 percentage points from a year ago and down slightly from Q1 due primarily to pricing pressure in China affecting older generation products. We expect our new generation power products will be more competitive and command better pricing as we roll out these offerings over the course of the next several quarters.

As we said before, the catalyst for achieving our financial goals is the successful rollout of our new generation products, including Gen 8 -- Gen 6 Super Junction and IGBTs and Gen 8 medium and low-voltage MOSFETs, as well as a full array of follow-on power products. We remain committed to our 3-3-3 strategy of achieving $300 million in revenue and 30% gross margin in 3 years, although the exact timing will depend in large part upon macro factors beyond our control. Shinyoung will provide more color in her section.

We've already launched 28 new generation products in the first half of 2025 and are on track to meet our previously stated goal in 2025 for 40 new generation Power Analog Solutions products. We will start to see initial new generation product revenue by the end of 2025 and meaningful impact in the second half of 2026.

We are exploring all options to accelerate our new generation product roadmap and now targeting more than 50 new generation products by end of 2025. We expect these new generation power products to drive higher revenue and given the smaller die sizes, yield 20% to 30% more die per wafer in our Gumi Fab. When new generations are fully ramped within a couple of years, these new products are expected to drive higher gross margins compared to the previous generations.

Breaking down the business lines. Power Analog Solutions or PAS revenue was $42.3 million, up 7.7% year-over-year and 6% quarter-over-quarter. PAS represented nearly 90% of total revenue. Power IC revenue was $5.4 million, up 11.1% year-over-year and up 10.2% sequentially.

We continue to see strong design win activity in Q2, reflecting customer acceptance of new power products. We achieved 71 total design wins in the quarter, up 61% from the 44 design wins in Q2 of last year. 23 of the design wins representing 32% of all wins were for new products. These new innovative product family opened new high-value market opportunities for Magnachip, in automotive, industrial and AI applications.

We currently expect these 3 market opportunities to represent more than 60% of Magnachip's future product mix in 2028, up from 51% in 2024. We already have ongoing engagement to penetrate automotive market, which we expect to reach over 10% of revenue by 2028 from less than 5% in 2024.

Some notable design win activity included, in the communications segment, we had 6 new design wins, up from 1 in Q2 a year ago. We continue to win power sockets for both major and flagship AI smartphone models, including multiple newly launched smartphones and also in upcoming foldable AI smartphones. We also had power design wins for tablet and smartwatch applications.

In the computing segment, we achieved 10 new design wins in Q2 compared to 0 in the year ago quarter. Most of these wins are related to PC power applications using our new Super Junction Gen 6 products. Super Junction Gen 6 products are also being adapted into new TV models for 2026 in the consumer segment, where we had 5 new design wins in Q2 '25, which was equal to the amount from previous year ago quarter.

In industrial, we secured 47 additional design wins, up from 36 in Q2 '24. We saw particular strength in China for LED lighting, again, leveraging Super Junction Gen 6. We also expanded into 5G battery management systems with our new medium voltage Gen 8 products.

Within automotive, we had 1 new design win in China for a PTC heater application and now begun mass production for other key vehicle systems such Idle Stop Go, AC inverters, electric oil pumps and car chargers destined for vehicles in Japan, the U.S. and Europe.

In Power IC, we had 2 design wins, which is the same as the number of win a year ago quarter. We are targeting additional design wins for LED drivers for 2026 TV models from multiple TV makers in Korea.

Now I'll provide more details by business segment within Power Analog Solutions. Industrial accounted for approximately 35% of PAS revenue and declined 1.9% year-over-year, primarily due to continued weakness in e-bike and solar inverter sales driven by macroeconomic uncertainties and price competition in the e-mobility segment. However, we saw strong sequential and year-over-year growth in higher performance e-motor applications, LED lighting and 5G battery management systems, supported by adoption of our new Super Junction Gen 6 and MV Gen 8 products. Despite the solid growth in e-motors, it was not enough to fully offset the softness in e-bike demand.

Consumer, which represented 34% of PAS revenue declined 0.4% year-over-year due to continued weakness in home appliance, mostly offset by year-over-year growth in TV applications. As mentioned before, we are targeting our new generation Super Junction Gen 6 products being adopted for multiple 2026 TV models.

Communications, which accounted for 20% of PAS revenue, grew nearly 47% year-over-year, reflecting increased share in both flagship and mass market smartphone models. In particular, our low-voltage MOSFET revenue for smartphone BatteryFETs increased 32% year-over-year, and we currently expect to hold the majority position with Korea's leading smartphone manufacturer in 2026, including in their flagship foldable models.

Computing, which represent 8% of PAS revenue was up 45% year-over-year, driven primarily by higher PC power revenue in Taiwan and China. Automotive, which represented 2% of PAS revenue declined 25% year-over-year, mainly due to slower demand from Korea-based EV makers and some inventory controls from customers in China.

On our Power IC business, which represented 11% of consolidated Q2 revenue from continuing operations, grew 11.1% year-over-year and 10.2% sequentially. The growth was driven by both TV-LED and OLED power ICs, supported by the introduction of 20 new mid- to low-end TV models by our customers for 2025.

Finally, the shutdown of our Display business is now virtually complete. We are benefiting from end-of-life income streams and continue to explore monetization opportunities for the Display IP assets. China is a huge market, especially for power semiconductors. We started China for China strategy in early 2024 to address the local market opportunities.

However, tariff uncertainty along with competitive pricing pressure on our older generation products in China combined to create a challenging environment that will impact our near-term outlook in the second half of this year. In view of this, we have been proactive and decisive by taking structural actions internally to reduce costs and optimize operational efficiency with a goal to get close to a quarterly adjusted EBITDA breakeven from continuing operations by the end of this year.

We are also accelerating our R&D and product pipeline to differentiate our power product portfolio to be comparable to Tier 1 levels to command higher prices and margins. We also are accelerating product development for power devices targeted especially for China for better cost structure. All of these efforts have to support our long-term financial goals to maximize shareholder value.

Now I'll turn the call over to Shinyoung to give you more details of our financial performance in the second quarter and provide Q3 and full year 2025 guidance. Shinyoung?

Thank you, YJ, and welcome, everyone, on the call.

Let's start with key financial metrics for Q2. Total Q2 consolidated revenue from continuing operations, which includes Power Analog Solutions, PAS and Power IC was $47.6 million, which is above the midpoint of our guidance range of $45 million to $49 million. This was up 8.1% year-over-year and up 6.5% sequentially on an apples-to-apples basis. This compared with equivalent revenue of $44.1 million in Q2 2024 and $44.7 million in Q1 2025.

Revenue from Power Analog Solutions was $42.3 million. This was up 7.7% year-over-year and up 6% sequentially. Revenue from Power IC was $5.4 million. This was up 11.1% year-over-year and up 10.2% sequentially.

In Q2, consolidated gross profit margin from continuing operations was 20.4%, within our guidance range of 19.5% to 21.5%, down from 22.5% year-over-year and down from 20.9% sequentially on an apples-to-apples basis. The year-over-year decline was primarily attributable to an unfavorable product mix, driven mainly by ASP erosion, particularly in China. The sequential decline was mainly attributable to the timing of certain inventory reserves associated with a Power IC product, coupled with a higher-than-expected revenue in Q2 from pull-ins by a customer due to the uncertainty around tariffs.

The company's Display business has been classified as discontinued operations from Q1 2025. So all of the following figures reflect reserves from continuing operations. Q2 SG&A was $9.3 million as compared to equivalent SG&A of $9.7 million in Q2 2024 and $9.7 million in Q1 2025. Q2 R&D was $7 million as compared to equivalent R&D of $5.8 million in Q2 2024 and $5.9 million in Q1 2025. R&D in Q2 increased due to the acceleration of R&D efforts while developing a family of new generation IGBT and Super Junction products to target more high-value opportunities.

Stock compensation charges, including operating expenses from continuing operations were $0.9 million in Q2 as compared to $1 million in Q1 2024 and $0.8 million in Q1 2025. These charges fluctuate every quarter depending on the timing and size of stock award grants.

Q2 operating loss was $7.4 million. This compares to an equivalent operating loss of $5.7 million in Q2 2024 and an operating loss of $6.3 million in Q1 2025. On a non-GAAP basis, the Q2 adjusted operating loss was $5.6 million compared to an equivalent adjusted operating loss of $4.7 million in Q2 2024 and an adjusted operating loss of $5.4 million in Q1 2025.

Income from continuing operations in Q2 was $8.5 million as compared with an equivalent loss of $2.2 million in Q2 2024 and a loss of $5.1 million in Q1 2025. In Q2, we recognized net foreign currency gain of $10.8 million, majority of which was attributable to the noncash translation gain on certain intercompany borrowings as a result of FX volatility during the quarter.

We also booked in Q2 the income tax benefit of $4.1 million, which was primarily due to the tax loss recognized in Korea in connection with the shutdown of the Display business.

Q2 adjusted EBITDA was negative $2.1 million. This compares to an equivalent adjusted EBITDA of negative $1 million in Q2 2024 and negative $2.1 million in Q1 2025. Q2 GAAP diluted earnings per share was $0.23 as compared with equivalent diluted loss per share of $0.06 in Q2 2024 and diluted loss per share of $0.14 in Q1 2025. Q2 non-GAAP diluted loss per share was $0.08. This compares with equivalent non-GAAP diluted earnings per share of $0.07 in Q2 2024 and non-GAAP diluted loss per share of $0.10 in Q1 2025. The difference between our GAAP and non-GAAP EPS in Q2 2025 was primarily due to the elimination of the noncash foreign currency gain of $10.8 million that I explained earlier.

Our weighted average non-GAAP diluted shares outstanding for the quarter were 36.1 million shares and 38.5 million shares in Q2 2024 and 36.9 million shares in Q1 2025. As part of our stock buyback program authorized in July 2023, we repurchased in Q2 2025 approximately 0.7 million shares for an aggregate purchase price of $2.3 million, leaving about $21.2 million remaining authorization as of June 30, 2025.

Moving to the balance sheet. We ended Q2 with cash of $113.3 million as compared to $132.7 million at the end of Q1 2025. The 2 main cash outflow items were $11.9 million of CapEx, which will be explained separately later, and $6.5 million of onetime liquidation costs related to the discontinued Display business.

With respect to the discontinued Display business, we've previously estimated total onetime cash cost of approximately $12 million to $15 million. Of this estimated total cash cost in Q2, we actually paid statutory severance and other employee-related costs of $6.5 million.

We originally expected to pay certain contract termination charges in full, along with the statutory severance and other employee-related costs. However, we negotiated with the respective vendors that the total of $6.5 million of contract termination charges would instead be paid over the remaining existing contract terms of 1.5 years from Q2 2025, and that amount was recognized as part of other charges in the discontinued operations financials in Q2 2025.

The company has begun to provide limited support for remaining customer obligations, including the sale of end-of-life, EOL, Display products, which is being conducted by Magnachip Semiconductor Limited, the company's wholly owned subsidiary that operates the power business. The sale of EOL Display products and the potential monetization of the intellectual property assets of the discontinued Display business is expected to generate cash inflow of approximately $20 million over a period of approximately 2 years from the second half of 2025.

The total amount will depend upon the demand from customers and the outcome of the monetization efforts of the Display intellectual property assets. Any future revenue derived from the Display business will be accounted for separately as part of discontinued operations.

Net accounts receivable at the end of the quarter totaled $28.8 million and $28.3 million at the end of Q1 2025. Our days sales outstanding for Q2 was 47 days and compares to 47 days in Q1 2025. Our average days in inventory for Q2 was 81 days and compares to 70 days in Q1 2025. Inventories net at the end of the quarter totaled $37.6 million and $32.6 million at the end of Q1 2025.

Q2 CapEx, as noted earlier, was $11.9 million, of which $9.4 million was used to upgrade the Gumi Fab. For the full year 2025, we now expect our total CapEx to be in the range of $32 million to $34 million, which includes approximately $20 million to $22 million CapEx upgrade the Gumi Fab. The annual forecast for the upgrade CapEx in 2025 increased from the previously estimated range of $14 million to $15 million to $20 million to $22 million, primarily due to the timing shift of certain equipment purchases.

In Q2, of the $9.4 million of upgrade CapEx, $7 million was funded by the previously announced $26.5 million equipment loan, resulting in our net cash impact from this upgrade CapEx in Q2 be $2.4 million. For the full year 2025, we expect approximately 80% to 85% of the $20 million to $20 million upgrade CapEx to be funded by the same $26.5 million equipment loan to which an interest rate of less than 3% per annum will apply and the remainder will be funded by the company's cash.

The loan was part of a previously disclosed strategy for Magnachip to make a $65 million to $70 million investment over 3 years to upgrade the Gumi Fab. The depreciation costs related to the Gumi Fab upgrade CapEx won't 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. This new investment in Gumi is expected to drive development of the new generation power product portfolio and upgrade new tools to optimize product mix and improve gross profit margins.

Before we move to the guidance section, let me provide some comments regarding the actions that are being undertaken by the company post shutdown of the Display business. As we've disclosed previously, we are prepared to execute all available cost reduction initiatives to align our spending level with a strategy to become a pure-play power company and to achieve certain financial goals.

We currently retain a cost structure, which includes some shared functions that historically have supported both Display and Power businesses. One of the initiatives being undertaken is headcount reduction, primarily through some shared functions made redundant through the closing of Display via a voluntary resignation program that we expect to commence and complete by the end of the third quarter.

Due to the voluntary nature of the program, we are unable to provide an exact amount of the related financial impact at this time. However, with the execution of this headcount reduction, we target to achieve annual OpEx savings of $2 million to $3 million with a payback period of 1.5 years.

Now moving to our third quarter and full year 2025 guidance. While actual results may vary, for Q3 2025, Magnachip currently expects consolidated revenue from continuing operations, which includes Power Analog Solutions and Power IC businesses to be in the range of $44 million to $48 million, down 3.5% sequentially and down 13.2% year-over-year at midpoint on an equivalent basis due to pull-ins by customers in Q2 from the second half of the year as well as competitive pricing pressure on our older generation products. This compares with equivalent revenue of $47.6 million in Q2 2025 and $53 million in Q3 2024.

Consolidated gross profit margin from continuing operations to be in the range of 18.5% to 20.5%. This compares with equivalent gross profit margin of 20.4% in Q2 2025 and 22% in Q3 2024.

For the full year 2025, consolidated revenue from continuing operations is now expected to be flattish as compared to our previous forecast of mid- to high-single-digit growth year-over-year due to a challenging environment related to tariff uncertainty and pricing pressure on older generation products in China. This compares with equivalent revenue of $185.8 million in 2024.

Consolidated gross profit margin from continuing operations between 19% to 20% as compared to our previous forecast of 19.5% to 21.5%. The equivalent gross profit margin was 21.5% in 2024.

Thank you. And now I'll turn the call back over to YJ for his final remarks. YJ?

In the first half of the year, we made a good progress on our goal to become a pure-play power semiconductor company. We expanded our new generation power product pipeline and focused on increasing customer adoptions across key growth markets, including automotive, industrial and communications.

In Q2, in particular, our growth was driven primarily by strong performances in our communications and computing businesses with each showing revenue growth of over 40% year-over-year. We also benefited modestly by some pull-ins by customers due to the uncertainty around tariffs.

Looking to the back half of the year, we faced an uncertain environment due to tariffs and pricing pressure in China. As a result, we currently anticipate a softer second half of the year relative to our prior expectations.

While headwinds are impacting our near-term outlook, we are being proactive and decisive taking structural actions to optimize operational efficiency while continuing to invest in R&D and CapEx to support our long-term 3-3-3 financial strategy.

As we shared today, we are accelerating the development of a full array of new generation products to drive future growth, and we expect to see initial revenue contribution by year-end, gaining momentum and having a material impact in the second half of 2026. This acceleration will allow us to roll out more feature-rich, differentiated and higher-margin products more quickly. We remain committed to maximizing shareholder value and prioritizing a return to profitability.

Now I'll turn the call back to Steven. Steven?

Okay. That concludes our prepared remarks. Now let's open up the call for questions that you may have. Operator, please go ahead.

[Operator Instructions] Our first question comes from the line of Suji Desilva with ROTH Capital.

The pull-ins you saw in the first half, some customers had tariff impact, I'm wondering if that's flowing through in the second half all the way to the next few quarters and whether you've largely seen the impact of that near term, you talked about one large customer. So curious how much that effect is lingering versus pricing pressure and other elements of the revenue?

Yes. So I think we mentioned the magnitude of estimated pull-in in the prior time, we saw maybe about $2 million. And I think some of that came in into the first half. And we saw some little more in the later part of the Q2, especially in the TV-related area. So we think that's already taken care of in terms of pull-in.

Great. And then on the gross margin, the ramp down that you're seeing in 1Q, 2Q and 3Q, is that primarily pricing now? Or are you adjusting utilization for the current environment and try to manage inventories here?

So the -- and pricing pressure for sure, Suji, that's kind of revenue outlook revision from the mid- to high-single-digit to flattish. And also that's impacting our gross margin, obviously. So we baked in previously and the pricing competition and pressure became more severe. So that's kind of dragging down our gross margin.

But at the same time, because the older generation product that we are kind of feeling the pressure there. So utilization rate is actually -- I mean, that's definitely is getting impacted as compared to our previous forecast. So lower utilization than our previous expectation, along with this kind of pricing pressure, the ASP erosion is impacting our second half, and that's how you're kind of seeing our soft kind of outlook in the second half of 2025.

[Operator Instructions] Our next question comes from the line of Nick Doyle with Needham & Company.

Just wondering if you can talk about where you're seeing strength in the communications, like which application is driving strength in the communications end market?

Yes, Nick. So if you look at our remarks today, we had more design wins in the communication. So from 1 to 5 models we had and we are seeing the trends from the new models that launched in 2025. So that's from mid-range to flagship AI smartphones and then the new launched AI foldable phones, and that's where we saw growth. And also in the computing area, we had more design wins, and that also contributed to the more design win. And then we are also seeing a good pipeline for the AI server as well.

Okay. And then if I could just ask about the OpEx and the EBITDA breakeven. I mean, you're saying you're targeting hopeful breakeven by the end of the year. Does that mean you can really take down OpEx $1 million to $2 million by the end of the year, kind of to be determined based on the voluntary employee dynamic?

Thanks, Nick. So I mean that's why we still target to get close to adjusted EBITDA breakeven in Q4 2025. So we are executing this voluntary resignation program. We are going to do that launch and execute it by the end of Q3. So you're going to see the impact in Q4 for sure. But our currently estimated range is like $2 million to $3 million OpEx reduction, like that's on an annual basis. So if you kind of divide it by 4, just roughly that kind of $0.5 million to $0.75 million kind of the reduction in OpEx and mainly should coming from the SG&A.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Steven for closing remarks.

Okay. Thank you. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conference. On August 20, we will present at the 6th Annual Needham Virtual Semiconductor and SemiCap One-on-One Conference. Attendance at the conference is by invitation only. For interested institutional investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team. Please look for details of our future events on Magnachip's Investor Relations website.

With that, this concludes our Q2 earnings conference call. Thank you, and take care.

Ladies and gentlemen, you may now disconnect. Thank you for your participation.