Magnachip Announces Plan to Shut Down Display Business by End of Q2 2025 Company to Become a Pure-Play Power Business To Drive Profitable Growth and Maximize Shareholder Value[...]

Magnachip Announces Plan to Shut Down Display Business by End of Q2 2025

Company to Become a Pure-Play Power Business To Drive Profitable Growth and Maximize Shareholder Value

-Company will continue to evaluate opportunities to monetize Display assets-

SEOUL, South Korea, April 8, 2025 - Magnachip Semiconductor Corporation (NYSE:MX) ("Magnachip" or the "Company") today announced that after a thorough review its Board of Directors unanimously approved a plan to shut down the Company's Display business by the end of the second quarter of 2025. The Company had previously announced its intention to explore all strategic options for the Display business and to classify the Display business as discontinued operations when it reports Q1 results in May in order to focus as a pure-play Power discrete and Power IC company and to achieve profitable revenue growth and maximize shareholder value. However, the Company has not been able to consummate a transaction following several months of discussions with several interested parties on terms that the Company's Board of Directors believed were in the best interests of the Company and its stockholders. Therefore, the Company has already begun notifying its customers impacted by this decision.

Shutting down the Display business will include the liquidation of Magnachip Mixed-Signal, Ltd. ("MMS"), the Company's wholly owned subsidiary that operates the discontinued Display business. The Company will retain its Power IC business which had previously resided in MMS and now operates alongside the Company's Power discrete business in Magnachip Semiconductor, Ltd. ("Magnachip Korea"), the Company's wholly owned subsidiary that comprises the Power solutions business. Together, the Power IC and Power discrete businesses represent Magnachip's going-forward continuing operations. The Company will maintain a small team to continue to support customers with respect to "end of life" ("EOL") products. While Magnachip expects to shut down the Display business by the end of Q2, Magnachip will continue to evaluate opportunities to monetize Display assets.

Magnachip CEO YJ Kim said, "It was an extremely difficult decision to shut down our Display business when considering both our valued customers and employees. However, our first priority is to ensure Magnachip's long-term success by achieving consistent profitability and earnings growth in order to maximize shareholder value. Navigating the unpredictable macroeconomic headwinds will likely pose significant challenges to all companies over the coming few quarters. At the same time, our strategic pivot to focus exclusively on Power discrete and Power IC businesses is designed to position the Company for a return to profitability. We aim to attain a quarterly Adjusted EBITDA* break-even from continuing operations by the end of this year. We also believe that this will pave the way for positive adjusted operating income* in 2026 and positive adjusted free cash flow* in 2027. Each of these targets will act as milestones towards achieving a goal in 3 years to reach a $300 million annual revenue run-rate with a 30% gross profit margin target. We call this our 3-3-3 strategy." Magnachip's Power discrete and Power IC businesses generated $185 million in revenue in 2024, up 13% from 2023, and the Company expects mid-to-high-single digit revenue growth in 2025."

Magnachip's Chairman of the Board Camillo Martino commented, "Having concluded an in-depth review of our businesses, Magnachip's Board of Directors made a unanimous decision to shut down the Display business in order to focus the Company on the revenue growth and profit potential of the Power discrete and Power IC businesses. We believe the actions announced today demonstrate the Board's firm commitment to put Magnachip on the path to achieve profitable revenue growth, restore the Company back to profitability and to enhance shareholder value."

The actions that are being undertaken by the Company in connection with the liquidation process are expected to result in a 30% to 35% reduction in annualized operating expenditures (excluding equity compensation charges) as compared with 2024. In addition, the Company will provide limited support for remaining customer obligations including the sale of EOL Display products, which will be conducted by Magnachip Korea.

The Company is unable at this time to provide an estimated amount or range of estimated amounts to be incurred or the future cash expenditures or charges that it will incur in connection with the shutdown of the Company's Display business and the liquidation of MMS. The Company expects to disclose such costs promptly after the Company makes a determination of an estimate or range of estimates of the costs that are expected to be incurred in connection with the shutdown of the Display business and the liquidation of MMS.

USE OF NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA, adjusted operating income and adjusted free cash flow are considered Non-GAAP measures. Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a meaningful understanding of the factors and trends affecting our business and operations and assist in evaluating our core operating performance. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net loss or as a better indicator of our operating performance than measures that are presented in accordance with GAAP. A reconciliation of historical GAAP results to Non-GAAP results can be found in our most recent earnings press release on the investor relations page of our website at https://investors.magnachip.com. We define adjusted free cash flow as net cash provided by operating activities, adjusted for net foreign currency transaction gain or loss, less capital expenditures.