The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and the related notes included elsewhere in this Report.
Overview
We are a designer and manufacturer of analog and mixed-signal power semiconductor platform solutions for various applications, including industrial, automotive, communication, consumer and computing. We provide a broad range of standard products to customers worldwide. We, with about 45 years of operating history, own a substantial number of registered patents and pending applications, and have extensive engineering, design and manufacturing process expertise.
We develop and manufacture Power Analog Solutions products and develop Power integrated circuit (“IC”) products. Power Analog Solutions products include metal oxide semiconductor field effect transistors (“MOSFETs”) and insulated-gate bipolar transistors (“IGBTs”) for a range of devices, including televisions, smartphones, mobile phones, wearable devices, desktop PCs, notebook PCs, tablet PCs, home appliance, other consumer electronics, automotive and industrial applications such as power suppliers, e-bikes, photovoltaic inverters, LED lighting and motor drives.
Our Power IC products provide Power IC solutions to major television suppliers and large panel display suppliers. These products include AC-DC/DC-DC converters, LED drivers, regulators, power management integrated circuits (“PMICs”) and level shifter for a range of devices, including televisions, wearable devices, notebooks, tablet PCs and other consumer electronics, as well as automotive applications.
Our wide variety of analog and mixed-signal power semiconductor products combined with our mature technology platform allow us to address multiple high-growth end markets and rapidly develop and introduce new products and services in response to market demands. Our design center and substantial manufacturing operations in Korea place us at the core of the global electronics device supply chain. We believe this enables us to quickly and efficiently respond to our customers’ needs, and allows us to better serve and capture additional demand from existing and new customers. Substantially all of our Power IC products are produced using an external foundry. Through strategic cooperation with an external foundry, we seek to ensure we outsource wafers at competitive prices and produce quality products.
To maintain and increase our profitability, we must accurately forecast trends in demand for electronics devices that incorporate semiconductor products we produce. We must understand our customers’ needs as well as the likely end market trends and demand in the markets they serve, including trends and cyclicality in the semiconductor industry, which are influenced by broader macroeconomic conditions, including inflation, interest rates, geopolitical developments and global trade policies. For example, certain shipments to customers with operations in or exposure to the United States or China are subject to heightened risks and uncertainties arising from trade and export control policies, including the imposition of new tariffs, increases in existing tariffs, or other export control measures implemented by the United States, China, or other governmental authorities. Furthermore, ongoing geopolitical tensions, including conflicts and instability in the Middle East, such as the military conflict involving the United States, Israel, and Iran, as well as tensions between China and Taiwan, may contribute to increased volatility in global markets and increased costs, as well as disruptions in supply chains and impacts to customer demand. We must also invest in relevant research and development activities and purchase necessary materials on a timely basis to meet our customers’ demand while maintaining our target margins and cash flow.
The semiconductor markets in which we participate are highly competitive. The prices of our products tend to decrease regularly over their useful lives, and such price decreases can be significant as new generations of products are introduced by us or our competitors. We strive to offset the impact of declining selling prices for existing products through cost reductions and the introduction of new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to mitigate the risk of losses from product obsolescence.
Demand for our products and services is driven by overall demand for industrial, automotive, communication, consumer and computing products and can be adversely affected by, among others, periods of weak consumer and enterprise spending, changes in global trade conditions, export controls, tariffs, geopolitical uncertainty, or by market share losses by our customers. Macroeconomic conditions, including inflation, increased energy costs and supply chain constraints, have contributed to increased logistics and input costs across the supply chain, and such costs may remain elevated. We continue to monitor for potential disruptions or cost increases resulting from geopolitical tensions, including in the Middle East and Eastern Europe, as well as
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evolving global trade policies. In order to mitigate the impact of market volatility on our business, we continually strive to diversify our portfolio of products, customers, and target applications. We also expect that new competitors will emerge in these markets that may place increased pressure on the pricing for our products and services. While we believe we are well positioned competitively to compete in these markets and against these new competitors as a result of our long operating history, existing manufacturing capacity and our worldwide customer base, if we are not effective in competing in these markets, our operating results may be adversely affected.
Net sales for our Power Analog Solutions and Power IC products are driven by design wins in which we are selected by an electronics original equipment manufacturer (“OEM”) or other potential customers to supply its demand for a particular product. A customer will often have more than one supplier designed into multi-source components for a particular product line. Once we have design wins and the products enter into mass production, we often specify the pricing of a particular product for a set period of time, with periodic discussions and renegotiations of pricing with our customers. In any given period, our net sales depend heavily upon the end-market demand for the goods in which our products are used, the inventory levels maintained by our customers and, in some cases, allocation of demand for components for a particular product among selected qualified suppliers.
In contrast to completely fabless semiconductor companies, our internal manufacturing capacity provides us with greater control over certain manufacturing costs and the ability to implement process and production improvements for our internally manufactured products, which can favorably impact gross profit margins. Our internal manufacturing capacity also allows for better control over delivery schedules, improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation on these internally manufactured products. However, having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity that results in lower gross profit margins, particularly during downturns in the semiconductor industry.
Our Power Analog Solutions and Power IC businesses require investments in capital equipment. Analog and mixed-signal manufacturing facilities and processes are typically distinguished by the design and process implementation expertise rather than the use of the most advanced equipment. Many of these processes also tend to migrate more slowly to smaller geometries due to technological barriers and increased costs. For example, some of our products use high-voltage technology that requires larger geometries and that may not migrate to smaller geometries for several years, if at all. As a result, our manufacturing base and strategy do not require substantial investment in leading edge process equipment for those products, allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments. In addition, we are less likely to experience significant industry overcapacity, which can cause product prices to decline significantly. In general, we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time. In addition, we outsource manufacturing of those Power IC products which do require advanced technology and 8-inch wafer capacity. We believe this balanced capital investment strategy enables us to optimize our capital investments and facilitates more diversified product and service offerings.
As we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities, we have started outsourcing 8-inch wafer for Power IC products after the sale of our fabrication facility located in Cheongju, Korea in 2020. This additional source of manufacturing has been an important part of our supply chain management. By outsourcing manufacturing of Power IC products to an external foundry, we have been able to adapt dynamically to changing customer requirements and address growing markets without substantial capital investments by us. However, relying on the external foundry exposes us to the risk of being unable to secure manufacturing capacity, particularly during global shortages of foundry services. Although we work strategically with the external foundry to ensure long-term wafer capacity, if these efforts are at any time unsuccessful, our ability to deliver products to our customers may be negatively impacted, which would adversely affect our relationship with customers and opportunities to secure new design-wins.
Our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors. Additionally, we must innovate to remain ahead of, or at least rapidly adapt to, technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services. We believe
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that our established relationships and close collaboration with leading customers enhance our awareness of new product opportunities, market and technology trends and improve our ability to adapt and grow successfully.
Recent Developments
Strategic Partnership for Silicon Carbide (SiC) Technologies
In July 2026, we entered into a strategic partnership with Navitas Semiconductor Corporation (“Navitas”) to accelerate adoption of SiC technologies in high-voltage (“HV”) and ultra-high-voltage (“UHV”) power markets. Under the terms of the agreement, we will license certain Navitas technology to enter the HV and UHV SiC markets, enabling us to build on Navitas' proven SiC device platforms for next-generation power conversion applications.
We will also gain access to Navitas' SiC supply chain and materials ecosystem, supporting faster market entry. At the same time, we and Navitas will seek to port, qualify, and internalize the technology at our fabrication facility in order to help accelerate our entry into SiC technology. The licensed technologies are expected to support next-generation applications including energy and grid infrastructure, energy storage, industrial electrification, automotive and other high-power systems.
Gumi Power Substation Upgrade
A planned upgrade to the electrical substation in our Gumi fabrication facility by a third-party owner of the substation is expected to take place during the third quarter of 2026 and will temporarily impact operations at our Gumi facility. To help mitigate potential customer supply disruptions, we increased inventory production during the second quarter and a portion of the third quarter of 2026 in advance of the electrical substation upgrade. As a result, our factory utilization rate was higher in the second quarter, while utilization is expected to be lower in the third quarter during the planned upgrade.
The higher fab utilization in the second quarter is expected to have a favorable one-quarter lag impact on third-quarter gross profit margin. However, we currently expect this benefit to be more than offset by an unfavorable product mix driven by increased demand for lower-margin products. As a result, the planned increase in second-quarter production is not expected to have a significant positive impact on third-quarter gross margin.
Looking ahead, the lower fab utilization expected in the third quarter as a result of the planned electrical substation upgrade is expected to have a one-quarter lag impact on gross profit margin, with a modest negative impact expected on fourth-quarter gross margin.
Macroeconomic Industry Conditions
The semiconductor industry continues to face a number of macroeconomic challenges, including rising inflation, higher interest rates, supply chain disruptions, inventory corrections, shifting customer and end-user demand, fluctuations in currency rates, and geopolitical tensions, including without limitation ongoing conflicts involving Russia and Ukraine, sustained military action and conflicts in the Middle East, and trade conflicts or trade wars (especially those between the United States and China) including those arising directly or indirectly from tariffs imposed by the United States, any one or more of which may cause (if they have not already caused) volatility and unpredictability in the supply chain or market for semiconductor products and end-user demand. In particular, the military conflict involving the United States, Israel, and Iran has created significant volatility in global energy and materials markets and may adversely affect our manufacturing costs, supply chain continuity, and customer demand. For example, the resulting disruptions to oil, gas, and critical raw material shipments could constrain availability and/or increase costs of key inputs used in semiconductor production and could lead to delays or reduced demand across end markets, which may materially and adversely impact our business, financial condition, and results of operations. The length and severity of these macroeconomic events and their overall impact on our business, results of operations and financial condition remain uncertain.
Developments in Export Control Regulations
On October 7, 2022, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce published changes to U.S. export control regulations (U.S. Export Regulations), including new restrictions on Chinese entities’ ability to obtain advanced computing chips, develop and maintain supercomputers, and
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manufacture advanced semiconductors. Further, on October 12, 2022, a new rule went into effect requiring U.S. persons to obtain a license prior to engaging in certain activities that could “support” certain end-uses and end-users, including those related to weapons of mass destruction. Additionally, on October 21, 2022, BIS brought into effect a series of new Foreign Direct Product (FDP) rules and various new controls on advanced computing items, significantly expanding the scope of items that are subject to export control under the U.S. Export Regulations. More recently, on October 25, 2023, BIS published additional rules, which went into effect on November 17, 2023 to expand, clarify, and correct the rules published in October 2022. A further corrected and clarified version of these rules went into effect on April 4, 2024. On January 16, 2025, BIS published amendments and clarifications of the U.S. Export Regulations which further tightened controls of advanced computing items. On September 30, 2025, BIS published an “Affiliates Rule” to expand end-user controls to cover certain affiliates of entities designated on BIS Entity List or Military End User List or designated on the Specially Designated Nationals and Blocked Persons (SDN) List administered by the U.S. Department of the Treasury, Office of Foreign Assets Control. BIS subsequently delayed enforcement of the Affiliates Rule until November 2026. Based on our understanding of the U.S. Export Regulations and related rules currently in effect, we expect to invest additional resources and efforts in the screening of prospects, customers, and end-users in order to comply with the new Affiliates Rule once it goes into effect; while we do not anticipate that the rest of the rules will have a material impact on our current business, we will continue reviewing and assessing these rules and regulations and their potential impact on our business. BIS has recently altered aspects of its semiconductor licensing policies to a case-by-case review, taking into account requirements such as export volume thresholds and third party testing requirements. Additional changes to the U.S. Export Regulations are expected, such as recently proposed rule changes that may expand restrictions on export transactions involving end users or end uses with military connections; but the scope or timing of such changes is uncertain. We will continue to monitor such developments, including potential additional trade restrictions, and other regulatory or policy changes by the U.S. and foreign governments.
Explanation and Reconciliation of Non-U.S. GAAP Measures
Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss)
We use the terms Adjusted EBITDA, Adjusted Operating Income (Loss) and Adjusted Net Income (Loss) (including on a per share basis) in this Report. Adjusted EBITDA, as we define it, is a non-U.S. GAAP measure. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) stock-based compensation expense, (ii) foreign currency loss (gain), net, (iii) derivative valuation loss (gain), net and (iv) other charges. EBITDA for the periods indicated is defined as income(loss) from continuing operations before interest income, interest expense, income tax benefit, net and depreciation and amortization.
See the footnotes to the table below for further information regarding these items. We present Adjusted EBITDA as a supplemental measure of our performance because:
•we believe that Adjusted EBITDA, by eliminating the impact of a number of items that we do not consider to be indicative of our core ongoing operating performance, provides a more comparable measure of our operating performance from period-to-period and may be a better indicator of future performance;
•we believe that Adjusted EBITDA is commonly requested and used by securities analysts, investors and other interested parties in the evaluation of a company as an enterprise level performance measure that eliminates the effects of financing, income taxes and the accounting effects of capital spending, as well as other one time or recurring items described above; and
•we believe that Adjusted EBITDA is useful for investors, among other reasons, to assess a company’s period-to-period core operating performance and to understand and assess the manner in which management analyzes operating performance.
We use Adjusted EBITDA in a number of ways, including:
•for planning purposes, including the preparation of our annual operating budget;
•to evaluate the effectiveness of our enterprise level business strategies;
•in communications with our Board of Directors concerning our consolidated financial performance; and
•in certain of our compensation plans as a performance measure for determining incentive compensation payments.
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We encourage you to evaluate each adjustment and the reasons we consider them appropriate. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation. Adjusted EBITDA is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to income (loss) from continuing operations or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity. A reconciliation of income (loss) from continuing operations to Adjusted EBITDA from continuing operations is as follows:
Three Months Ended June 30, 2026 Six Months Ended June 30, 2026 Three Months Ended June 30, 2025 Six Months Ended June 30, 2025
(Dollars in millions)
Income (Loss) from continuing operations $ (7.6 ) $ (12.3 ) $ 9.2 $ 5.2
Interest income (0.9 ) (2.0 ) (1.3 ) (2.9 )
Interest expense 0.3 0.7 0.4 0.8
Income tax benefit, net (2.0 ) (3.9 ) (4.1 ) (4.5 )
Depreciation and amortization 2.8 5.6 3.2 6.4
EBITDA from continuing operations $ (7.5 ) $ (11.9 ) $ 7.4 $ 4.9
Adjustments:
Stock-based compensation expense(a) 1.0 1.7 1.0 1.8
Foreign currency loss (gain), net(b) 0.5 0.6 (10.8 ) (10.4 )
Derivative valuation loss (gain), net(c) (0.3 ) (0.3 ) 0.1 0.1
Other charges(d) 2.0 2.0 0.8 0.8
Adjusted EBITDA from continuing operations $ (4.2 ) $ (7.9 ) $ (1.5 ) $ (2.7 )
(a)This adjustment eliminates the impact of non-cash stock-based compensation expenses. Although we expect to incur non-cash stock-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.
(b)This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results.
(c)This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.
(d)For the three and six months ended June 30, 2026, this adjustment eliminates $2.0 million of other charges, consisting of a $1.1 million customer goodwill payment related to a certain product, and $0.9 million of one-time employee incentives. For the three and six months ended June 30, 2025, this adjustment eliminates $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals. As this adjustment meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if this adjustment is excluded.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
•Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
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•Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;
•Adjusted EBITDA does not consider the potentially dilutive impact of issuing stock-based compensation to our management team and employees;
•Adjusted EBITDA does not reflect the costs of holding certain assets and liabilities in foreign currencies; and
•other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally.
We present Adjusted Operating Income (Loss) as supplemental measures of our performance. We prepare Adjusted Operating Income (Loss) by adjusting operating income (loss) to eliminate the impact of stock-based compensation expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Operating Income (Loss) is useful to investors to provide a supplemental way to understand our underlying operating performance and allows investors to monitor and understand changes in our ability to generate income (loss) from ongoing business operations.
Adjusted Operating Income (Loss) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to operating income (loss) or any other performance measure derived in accordance with U.S. GAAP. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Operating Income (Loss) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Operating Income (Loss), you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation. We define Adjusted Operating Income (Loss) for the periods indicated as operating income (loss) adjusted to exclude (i) stock-based compensation expense and (ii) other charges.
The following table summarizes the adjustments to operating loss that we make in order to calculate Adjusted Operating Loss for the periods indicated:
Three Months Ended June 30, 2026 Six Months Ended June 30, 2026 Three Months Ended June 30, 2025 Six Months Ended June 30, 2025
(Dollars in millions)
Operating loss $ (10.0 ) $ (17.1 ) $ (6.6 ) $ (11.9 )
Adjustments:
Stock-based compensation expense(a) 1.0 1.7 1.0 1.8
Other charges(b) 2.0 2.0 0.8 0.8
Adjusted Operating Loss $ (7.0 ) $ (13.5 ) $ (4.8 ) $ (9.2 )
(a)This adjustment eliminates the impact of non-cash stock-based compensation expenses. Although we expect to incur non-cash stock-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.
(b)For the three and six months ended June 30, 2026, this adjustment eliminates $2.0 million of other charges, consisting of a $1.1 million customer goodwill payment related to a certain product, and $0.9 million of one-time employee incentives. For the three and six months ended June 30, 2025, this adjustment eliminates $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals. As this adjustment meaningfully impacted our operating results and
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are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if this adjustment is excluded.
We present Adjusted Net Income (Loss) (including on a per share basis) as a further supplemental measure of our performance. We prepare Adjusted Net Income (Loss) (including on a per share basis) by adjusting income (loss) from continuing operations to eliminate the impact of a number of non-cash expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance. We believe that Adjusted Net Income (Loss) (including on a per share basis) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We present Adjusted Net Income (Loss) (including on a per share basis) for a number of reasons, including:
•we use Adjusted Net Income (Loss) (including on a per share basis) in communications with our Board of Directors concerning our consolidated financial performance without the impact of non-cash expenses and the other items as we discussed below since we believe that it is a more consistent measure of our core operating results from period to period; and
•we believe that reporting Adjusted Net Income (Loss) (including on a per share basis) is useful to readers in evaluating our core operating results because it eliminates the effects of non-cash expenses as well as the other items we discuss below, such as foreign currency gains and losses, which are out of our control and can vary significantly from period to period.
Adjusted Net Income (Loss) (including on a per share basis) is not a measure defined in accordance with U.S. GAAP and should not be construed as an alternative to income (loss) from continuing operations or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of liquidity. We encourage you to evaluate each adjustment and the reasons we consider them appropriate. Other companies in our industry may calculate Adjusted Net Income (Loss) (including on a per share basis) differently than we do, limiting its usefulness as a comparative measure. In addition, in evaluating Adjusted Net Income (Loss) (including on a per share basis), you should be aware that in the future we may incur expenses (income) similar to the adjustments in this presentation. We define Adjusted Net Income (Loss) (including on a per share basis); for the periods indicated as income (loss) from continuing operations, adjusted to exclude (i) stock-based compensation expense, (ii) foreign currency loss (gain), net, (iii) derivative valuation loss (gain), net, (iv) other charges and (v) income tax effect on non-GAAP adjustments.
The following table summarizes the adjustments to income (loss) from continuing operations that we make in order to calculate Adjusted Loss (including on a per share basis) from continuing operations for the periods indicated:
Three Months Ended June 30, 2026 Six Months Ended June 30, 2026 Three Months Ended June 30, 2025 Six Months Ended June 30, 2025
(Dollars in millions, except per share data)
Income (Loss) from continuing operations $ (7.6 ) $ (12.3 ) $ 9.2 $ 5.2
Adjustments:
Stock-based compensation expense(a) 1.0 1.7 1.0 1.8
Foreign currency loss (gain), net(b) 0.5 0.6 (10.8 ) (10.4 )
Derivative valuation loss (gain), net(c) (0.3 ) (0.3 ) 0.1 0.1
Other charges(d) 2.0 2.0 0.8 0.8
Income tax effect on non-GAAP adjustments(e) (0.5 ) (0.7 ) (2.3 ) (2.3 )
Adjusted Loss from continuing operations $ (4.9 ) $ (9.0 ) $ (2.0 ) $ (4.8 )
Reported earnings (loss) per share – basic $ (0.21 ) $ (0.34 ) $ 0.26 $ 0.14
Reported earnings (loss) per share – diluted $ (0.21 ) $ (0.34 ) $ 0.25 $ 0.14
Weighted average number of shares – basic 36,454,812 36,431,327 36,083,703 36,483,551
Weighted average number of shares – diluted 36,454,812 36,431,327 36,768,647 37,209,622
Adjusted loss per share – basic $ (0.13 ) $ (0.25 ) $ (0.05 ) $ (0.13 )
Adjusted loss per share – diluted $ (0.13 ) $ (0.25 ) $ (0.05 ) $ (0.13 )
Weighted average number of shares – basic 36,454,812 36,431,327 36,083,703 36,483,551
Weighted average number of shares – diluted 36,454,812 36,431,327 36,083,703 36,483,551
(a)This adjustment eliminates the impact of non-cash stock-based compensation expenses. Although we expect to incur non-cash stock-based compensation expenses in the future, these expenses do not generally require cash settlement, and, therefore, are not used by us to assess the profitability of our operations. We believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information.
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(b)This adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables, as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables. Although we expect to incur foreign currency translation gains or losses in the future, we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses, which we cannot control. Additionally, we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results.
(c)This adjustment eliminates the impact of gain or loss recognized in income on derivatives, which represents derivatives value changes excluded from the risk being hedged. We enter into derivative transactions to mitigate foreign exchange risks. As our derivative transactions are limited to a certain portion of our expected cash flows denominated in U.S. dollars, and we do not enter into derivative transactions for trading or speculative purposes, we do not believe that these charges or gains are indicative of our core operating performance.
(d)For the three and six months ended June 30, 2026, this adjustment eliminates $2.0 million of other charges, consisting of a $1.1 million customer goodwill payment related to a certain product, and $0.9 million of one-time employee incentives. For the three and six months ended June 30, 2025, this adjustment eliminates $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals. As this adjustment meaningfully impacted our operating results and are not expected to represent an ongoing operating expense or income to us, we believe our operating performance results are more usefully compared if this adjustment is excluded.
(e)For the three and six months ended June 30, 2026 and 2025, income tax effect on non-GAAP adjustments was calculated by comparing the tax expense of each jurisdiction with and without the non-GAAP adjustments.
We believe that all adjustments to income (loss) from continuing operations used to calculate Adjusted Net Income (Loss) from continuing operations were applied consistently to the periods presented.
Adjusted Net Income (Loss) has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
•Adjusted Net Income (Loss) does not reflect changes in, or cash requirements for, our working capital needs;
•Adjusted Net Income (Loss) does not consider the potentially dilutive impact of issuing stock-based compensation to our management team and employees;
•Adjusted Net Income (Loss) does not reflect the costs of holding certain assets and liabilities in foreign currencies; and
•Other companies in our industry may calculate Adjusted Net Income (Loss) differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted Net Income (Loss) should not be considered as a measure of profitability of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted Net Income (Loss) only as a supplement.
Factors Affecting Our Results of Operations
Net Sales. We derive all of our sales (net of sales returns and allowances) from our Power Solutions business, which consists of our Power Analog Solution and Power IC businesses. Our product inventory is primarily located in Korea and is available for drop shipment globally. Outside of Korea, we maintain limited product inventory, and our sales representatives generally relay orders to our fabrication facility in Korea for fulfillment. We have strategically located our sales offices near concentrations of major customers. Our sales offices are located in Korea, Japan, Taiwan and Greater China. Our network of authorized agents and distributors is in the United States, Europe and the Asia Pacific region.
We recognize revenue when a customer obtains control of the product, which is generally upon product shipment, delivery at the customer’s location or upon customer acceptance, depending on the terms of the arrangement. For the six months ended June 30, 2026 and 2025, our products were sold to 160 and 163 end customers, respectively, and our net sales to our ten largest customers represented 73.2% and 74.0% of our net sales, respectively.
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Gross Profit. Our overall gross profit generally fluctuates as a result of changes in overall sales volumes and in the average selling prices of our products and services. Other factors that influence our gross profit include changes in product mix, the introduction of new products and services and subsequent generations of existing products and services, shifts in the utilization of our manufacturing facility and the yields achieved by our manufacturing operations, changes in material, labor and other manufacturing costs including outsourced manufacturing expenses, and variation in depreciation expense.
Average Selling Prices (“ASP”). Average selling prices for our products tend to be highest at the time of introduction of new products which utilize the latest technology and tend to decrease over time as such products mature in the market and are replaced by new generation products. We strive to offset the impact of declining selling prices for existing products through our product development activities and by introducing new products that command selling prices above the average selling price of our existing products. In addition, we seek to manage our inventories and manufacturing capacity so as to preclude losses from product and productive capacity obsolescence.
Material Costs. Our material costs consist of costs of raw materials, such as silicon wafers, chemicals, gases and tape and packaging supplies. We use processes that require specialized raw materials, such as silicon wafers, that are generally available from a limited number of suppliers. If demand increases or supplies decrease, the costs of our raw materials could increase significantly.
Labor Costs. A significant portion of our employees are located in Korea. Under Korean labor laws, most employees and certain executive officers with one or more years of service are entitled to severance benefits upon the termination of their employment based on their length of service and rate of pay. As of June 30, 2026, 97% of our employees were eligible for severance benefits.
Depreciation Expense. We periodically evaluate the carrying values of long-lived assets, including property, plant and equipment and intangible assets, as well as the related depreciation periods. We depreciate our property, plant and equipment using the straight-line method over the estimated useful lives of our assets. Depreciation rates vary from 30-40 years on buildings to 3-12 years for certain equipment and assets. Our evaluation of carrying values is based on various analyses including cash flow and profitability projections. If our projections indicate that future undiscounted cash flows are not sufficient to recover the carrying value of the related long-lived assets, the carrying value of the assets is impaired and will be reduced, with the reduction charged to expense so that the carrying value is equal to fair value.
Selling Expenses. We sell our products worldwide through a direct sales force as well as a network of sales agents and representatives to OEMs, including major branded customers and contract manufacturers, and indirectly through distributors. Selling expenses consist primarily of the personnel costs for the members of our direct sales force, a network of sales representatives and other costs of distribution. Personnel costs include base salary, benefits and incentive compensation.
General and Administrative Expenses. General and administrative expenses consist of the costs of various corporate operations, including finance, legal, human resources and other administrative functions. These expenses primarily consist of payroll-related expenses, consulting and other professional fees and office facility-related expenses.
Research and Development. The rapid technological change and product obsolescence that characterize our industry require us to make continuous investments in research and development. Product development time frames vary but, in general, we incur research and development costs one to two years before generating sales from the associated new products. These expenses include personnel costs for members of our engineering workforce, cost of photomasks, silicon wafers and other non-recurring engineering charges related to product design. Additionally, we develop base line process technology through experimentation and through the design and use of characterization wafers that help achieve commercially feasible yields for new products. The majority of research and development expenses of our Power IC business are material and design-related costs for Power IC products. Power IC uses standard BCD process technologies which can be sourced from multiple foundries. The majority of research and development expenses of our Power Analog Solutions business are certain equipment, material and design-related costs for Power Analog Solutions products.
Impact of Foreign Currency Exchange Rates on Reported Results of Operations. Historically, a portion of our revenues and cost of sales and greater than the majority of our operating expenses have been denominated in non-U.S. currencies, principally the Korean won, and we expect that this will remain true in the future.
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Because we report our results of operations in U.S. dollars converted from our non-U.S. revenues and expenses based on monthly average exchange rates, changes in the exchange rate between the Korean won and the U.S. dollar could materially impact our reported results of operations and distort period to period comparisons. In particular, because of the difference in the amount of our consolidated revenues and expenses that are in U.S. dollars relative to Korean won, depreciation in the U.S. dollar relative to the Korean won could result in a material increase in reported costs relative to revenues, and therefore could cause our profit margins and operating income to appear to decline materially, particularly relative to prior periods. The converse is true if the U.S. dollar were to appreciate relative to the Korean won. Moreover, our foreign currency gain or loss may be affected by changes in the exchange rate between the Korean won and the U.S. dollar, including those related to the intercompany long-term loans to our Korean subsidiary, Magnachip Semiconductor, Ltd. or MSK, which is denominated in U.S. dollars. As of June 30, 2026, the outstanding intercompany loan balance including accrued interest between MSK and our Dutch subsidiary was $76.9 million. While the intercompany loan balance including accrued interest has decreased compared to prior periods, changes in exchange rates could continue to affect our reported foreign currency gain or loss. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our stock could be adversely affected.
From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. Our Korean subsidiary, Magnachip Semiconductor, Ltd., enters into foreign currency zero cost collar contracts in order to mitigate a portion of the impact of U.S. dollar-Korean won exchange rate fluctuations on our operating results. Obligations under these foreign currency zero cost collar contracts must be cash collateralized if our exposure exceeds certain specified thresholds. These zero cost collar contracts may be terminated by a counterparty in a number of circumstances, including if our total cash and cash equivalents is less than $30.0 million at the end of a fiscal quarter unless a waiver is obtained from the counterparty. We cannot assure that any hedging technique we implement will be effective. If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on our results of operations.
Foreign Currency Gain or Loss. Foreign currency translation gains or losses on transactions by us or our subsidiaries in a currency other than our or our subsidiaries’ functional currency are included in foreign currency gain (loss), net in our consolidated statements of operations. A substantial portion of this net foreign currency gain or loss relates to non-cash translation gain or loss related to the principal balance of intercompany balances at our Korean subsidiary, Magnachip Semiconductor, Ltd., that are denominated in U.S. dollars. This gain or loss results from fluctuations in the exchange rate between the Korean won and U.S. dollar.
Income Taxes. We record our income taxes in each of the tax jurisdictions in which we operate. This process involves using an asset and liability approach whereby deferred tax assets and liabilities are recorded for differences in the financial reporting bases and tax basis of our assets and liabilities. We exercise significant management judgment in determining our provision for income taxes, deferred tax assets and liabilities. We assess whether it is more likely than not that the deferred tax assets existing at the period-end will be realized in future periods. In such assessment, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent results of operations. In the event we were to determine that we would be able to realize the deferred income tax assets in the future in excess of their net recorded amount, we would adjust the valuation allowance, which would reduce the provision for income taxes.
We are subject to income- or non-income-based tax examinations by tax authorities of the U.S., Korea and multiple other foreign jurisdictions for all open tax years. Significant estimates and judgments are required in determining our worldwide provision for income- or non-income based taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a result.
Capital Expenditures. We primarily invest in manufacturing equipment, software design tools and other tangible assets mainly for fabrication facility maintenance, capacity expansion and technology improvement. Capacity expansions and technology improvements typically occur in anticipation of increases in demand. We typically pay for capital expenditures in partial installments with portions due on order, delivery and final acceptance. Our capital expenditures mainly include our payments for the purchase of property, plant and equipment.
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Inventories. We monitor our inventory levels in light of product development changes and market expectations. We may be required to take additional charges for quantities in excess of demand, cost in excess of market value and product age. Our analysis may take into consideration historical usage, expected demand, anticipated sales price, new product development schedules, the effect new products might have on the sales of existing products, product age, customer design activity, customer concentration and other factors. These forecasts require us to estimate our ability to predict demand for current and future products and compare those estimates with our current inventory levels and inventory purchase commitments. Our forecasts for our inventory may differ from actual inventory use.
Results of Operations – Comparison of Three Months Ended June 30, 2026 and 2025
The following table sets forth consolidated results of operations for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30, 2026 Three Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Net sales $ 44.7 100.0 % $ 47.6 100.0 % $ (2.9 )
Cost of sales 36.1 80.7 37.9 79.6 (1.9 )
Gross profit 8.6 19.3 9.7 20.4 (1.1 )
Operating expenses:
Selling, general and administrative expenses 8.7 19.6 9.0 18.8 (0.2 )
Research and development expenses 7.9 17.7 6.5 13.6 1.4
Other charges 2.0 4.4 0.8 1.8 1.1
Total operating expenses 18.6 41.7 16.3 34.2 2.3
Operating loss (10.0 ) (22.3 ) (6.6 ) (13.9 ) (3.4 )
Interest income 0.9 2.1 1.3 2.8 (0.4 )
Interest expense (0.3 ) (0.7 ) (0.4 ) (0.8 ) 0.1
Foreign currency gain (loss), net (0.5 ) (1.2 ) 10.8 22.7 (11.3 )
Other income (loss), net 0.3 0.6 (0.1 ) (0.2 ) 0.4
0.4 0.9 11.7 24.5 (11.3 )
Income (Loss) from continuing operations before income tax benefit, net (9.6 ) (21.4 ) 5.1 10.6 (14.7 )
Income tax benefit, net (2.0 ) (4.4 ) (4.1 ) (8.7 ) 2.2
Income (Loss) from continuing operations (7.6 ) (17.0 ) 9.2 19.3 (16.8 )
Income (Loss) from discontinued operations, net of tax 2.8 6.2 (8.9 ) (18.6 ) 11.7
Net income (loss) $ (4.8 ) (10.8 )% $ 0.3 0.7 % $ (5.1 )
Results by business line
Three Months Ended June 30, 2026 Three Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Net Sales
Power Solutions business
Power Analog Solutions $ 40.6 90.8 % $ 42.3 88.7 % $ (1.7 )
Power IC 4.1 9.2 5.4 11.3 (1.2 )
Total Power Solutions business 44.7 100.0 47.6 100.0 (2.9 )
Total net sales $ 44.7 100.0 % $ 47.6 100.0 % $ (2.9 )
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Three Months Ended June 30, 2026 Three Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Gross Profit
Power Solutions business
Power Analog Solutions $ 7.0 17.2 % $ 7.7 18.2 % $ (0.8 )
Power IC 1.7 40.9 2.0 37.4 (0.3 )
Total Power Solutions business 8.6 19.3 9.7 20.4 (1.1 )
Total gross profit $ 8.6 19.3 % $ 9.7 20.4 % $ (1.1 )
Net Sales
We operate within a single operating segment, Power Solutions business, which consists of our Power Analog Solutions and Power IC businesses.
The Power Solutions business. Net Sales from Power Solutions business were $44.7 million for the three months ended June 30, 2026, a $2.9 million, or 6.1%, decrease compared to $47.6 million for the three months ended June 30, 2025. This decrease was primarily due to a decrease in revenue from both our Power Analog Solutions and Power IC businesses, as described below.
Net sales from Power Analog Solutions business were $40.6 million for the three months ended June 30, 2026, a $1.7 million, or 4.0%, decrease compared to $42.3 million for the three months ended June 30, 2025. The decrease in net sales from our Power Analog Solutions business line was primarily attributable to weaker demand for our older generation products resulting from intensified pricing competition, which was offset in part by a higher demand for MOSFETs and IGBTs in the industrial applications.
Net sales from Power IC business were $4.1 million for the three months ended June 30, 2026, a $1.2 million, or 23.0%, decrease compared to $5.4 million for the three months ended June 30, 2025. The decrease in net sales from our Power IC business line was primarily attributable to a decrease in sales of our Power IC products, primarily for LED televisions and OLED IT devices.
Gross Profit
The Power Solutions business. Gross profit from our Power Solutions business was $8.6 million for the three months ended June 30, 2026, which represented a $1.1 million, or 11.0%, decrease from gross profit of $9.7 million for the three months ended June 30, 2025. Gross profit as a percentage of net sales for the three months ended June 30, 2026 decreased to 19.3% compared to 20.4% for the three months ended June 30, 2025. The year-over-year decrease in gross profit and gross profit as a percentage of net sales was primarily attributable to an unfavorable product mix, driven by ASP erosion resulting from increased competitive pricing pressure on our older generation products, particularly in China.
Net Sales by Geographic Region
We report net sales by geographic region based on the location to which the products are billed. The following table sets forth our net sales by geographic region and the percentage of total net sales represented by each geographic region for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30, 2026 Three Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Korea $ 18.8 42.1 % $ 22.7 47.7 % $ (3.9 )
Asia Pacific (other than Korea) 24.0 53.7 22.4 47.1 1.6
United States 1.0 2.2 1.5 3.1 (0.5 )
Europe 0.8 1.9 1.0 2.1 (0.1 )
$ 44.7 100.0 % $ 47.6 100.0 % $ (2.9 )
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Net sales in Korea decreased from $22.7 million for the three months ended June 30, 2025 to $18.8 million for the three months ended June 30, 2026, or by $3.9 million, or 17.1%, primarily due to a decrease in revenue resulting from the competitive pricing pressure on our older generation products in consumer applications and a lower demand for our Power IC products, primarily for LED televisions and OLED IT devices.
Net sales in the Asia Pacific (other than Korea) increased from $22.4 million for the three months ended June 30, 2025 to $24.0 million for the three months ended June 30, 2026, or by $1.6 million, or 7.0%, primarily due to a higher demand for power products such as MOSFETs and high-end MOSFETs in computing and industrial applications, and IGBTs primarily for solar inverters.
Operating Expenses
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $8.7 million, or 19.6% of net sales, for the three months ended June 30, 2026, compared to $9.0 million, or 18.8% of net sales, for the three months ended June 30, 2025. The decrease of $0.2 million, or 2.6%, was primarily attributable to a decrease in employee compensation, driven mainly by the execution of the voluntary resignation program primarily for shared function employees and separation of certain executive officers in 2025.
Research and Development Expenses. Research and development expenses were $7.9 million, or 17.7% of net sales, for the three months ended June 30, 2026, compared to $6.5 million, or 13.6% of net sales, for the three months ended June 30, 2025. The increase of $1.4 million, or 21.7%, was primarily attributable to higher personnel costs resulting from the increased headcount in research and development, as well as the timing of continued investment in our new generation product development activities.
Other Charges. For the three months ended June 30, 2026, we recorded $2.0 million of other charges, consisting of a $1.1 million customer goodwill payment related to a certain product, and $0.9 million of one-time employee incentives. For the three months ended June 30, 2025, we recorded $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals.
Operating Loss
As a result of the foregoing, operating loss of $10.0 million was recorded for the three months ended June 30, 2026 compared to an operating loss of $6.6 million for the three months ended June 30, 2025. As discussed above, the increase in operating loss of $3.4 million resulted primarily from a $1.4 million increase in research and development expenses, a $1.1 million increase in other charges and a $1.1 million decrease in gross profit.
Other Income (Expense)
Interest Income. Interest income was $0.9 million and $1.3 million for the three months ended June 30, 2026 and 2025, respectively.
Interest Expense. Interest expense was $0.3 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively.
Foreign Currency Gain (Loss), Net. Net foreign currency loss for the three months ended June 30, 2026 was $0.5 million compared to a net foreign currency gain of $10.8 million for the three months ended June 30, 2025. The net foreign currency loss for the three months ended June 30, 2026 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period. The net foreign currency gain for the three months ended June 30, 2025 was due to the appreciation in value of the Korean won relative to the U.S. dollar during the period.
A substantial portion of our net foreign currency gain or loss is a non-cash translation gain or loss associated with the intercompany long-term loans to our Korean subsidiary, which is denominated in U.S. dollars, and is affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of June 30, 2026 and June 30, 2025, the outstanding intercompany loan balances including accrued interest
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between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary were $76.9 million and $241.7 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income since the intercompany balances were not considered long-term investments in nature because management intended to settle these intercompany balances at their respective maturity dates.
Income Tax Benefit, Net
We are subject to income taxes in the United States and many foreign jurisdictions and our effective tax rate is affected by changes in the mix of earnings between countries with differing tax rates.
Income tax benefit was $2.0 million for the three months ended June 30, 2026, which was primarily attributable to the estimated taxable loss in our Korean subsidiary for the respective period.
Income tax benefit was $4.1 million for the three months ended June 30, 2025, which was primarily attributable to the estimated taxable loss in our Korean subsidiary for the respective period, including loss recognized in connection with the shutdown of the discontinued Display business during the second quarter of 2025.
Income (Loss) from Continuing Operations
Loss from continuing operations for the three months ended June 30, 2026 was $7.6 million compared to income from continuing operations of $9.2 million for the three months ended June 30, 2025. The $16.8 million increase in loss from continuing operations was primarily attributable to an $11.3 million increase in net foreign currency loss, a $3.4 million increase in operating loss and a $2.2 million decrease in income tax benefit.
Income (Loss) from Discontinued Operations, Net of Tax
Income from discontinued operations, net of tax for the three months ended June 30, 2026 was $2.8 million compared to a loss from discontinued operations, net of tax of $8.9 million for the three months ended June 30, 2025. The $11.7 million improvement in loss from discontinued operations, net of tax primarily resulted from the absence of $7.4 million of impairment charges, primarily related to certain design tool software contracts and $1.6 million of early termination charges incurred in the prior-year period.
Net Income (Loss)
As a result of the foregoing, a net loss of $4.8 million was recorded for the three months ended June 30, 2026 compared to a net income of $0.3 million for the three months ended June 30, 2025. As discussed above, the deterioration in net loss of $5.1 million resulted from a $16.8 million increase in loss from continuing operations, which was offset by an $11.7 million improvement in loss from discontinued operations, net of tax.
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Results of Operations – Comparison of Six Months Ended June 30, 2026 and 2025
The following table sets forth consolidated results of operations for the six months ended June 30, 2026 and 2025:
Six Months Ended June 30, 2026 Six Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Net sales $ 90.9 100.0 % $ 92.3 100.0 % $ (1.4 )
Cost of sales 75.1 82.6 73.3 79.3 1.8
Gross profit 15.8 17.4 19.1 20.7 (3.2 )
Operating expenses:
Selling, general and administrative expenses 16.4 18.1 18.2 19.7 (1.8 )
Research and development expenses 14.6 16.1 11.9 12.9 2.7
Other charges 2.0 2.2 0.8 0.9 1.1
Total operating expenses 33.0 36.3 31.0 33.5 2.0
Operating loss (17.1 ) (18.9 ) (11.9 ) (12.9 ) (5.3 )
Interest income 2.0 2.2 2.9 3.1 (0.9 )
Interest expense (0.7 ) (0.8 ) (0.8 ) (0.9 ) 0.1
Foreign currency gain (loss), net (0.6 ) (0.7 ) 10.4 11.3 (11.0 )
Other income, net 0.3 0.3 0.0 0.0 0.2
1.0 1.0 12.5 13.5 (11.5 )
Income (Loss) from continuing operations before income tax benefit, net (16.2 ) (17.8 ) 0.6 0.7 (16.8 )
Income tax benefit, net (3.9 ) (4.3 ) (4.5 ) (4.9 ) 0.6
Income (Loss) from continuing operations (12.3 ) (13.5 ) 5.2 5.6 (17.5 )
Income (Loss) from discontinued operations, net of tax 2.8 3.1 (13.7 ) (14.8 ) 16.5
Net loss $ (9.5 ) (10.4 )% $ (8.6 ) (9.3 )% $ (0.9 )
Results by business line
Six Months Ended June 30, 2026 Six Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Net Sales
Power Solutions business
Power Analog Solutions $ 82.2 90.4 % $ 82.1 88.9 % $ 0.1
Power IC 8.7 9.6 10.2 11.1 (1.5 )
Total Power Solutions business 90.9 100.0 92.3 100.0 (1.4 )
Total net sales $ 90.9 100.0 % $ 92.3 100.0 % $ (1.4 )
Six Months Ended June 30, 2026 Six Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Gross Profit
Power Solutions business
Power Analog Solutions $ 12.3 15.0 % $ 14.8 18.0 % $ (2.5 )
Power IC 3.5 40.6 4.3 41.7 (0.7 )
Total Power Solutions business 15.8 17.4 19.1 20.7 (3.2 )
Total gross profit $ 15.8 17.4 % $ 19.1 20.7 % $ (3.2 )
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Net Sales
We operate within a single operating segment, Power Solutions business, which consists of our Power Analog Solutions and Power IC businesses.
The Power Solutions business. Net Sales from Power Solutions business were $90.9 million for the six months ended June 30, 2026, a $1.4 million, or 1.6%, decrease compared to $92.3 million for the six months ended June 30, 2025. This decrease was primarily due to a decrease in revenue related to our Power IC business as described below.
Net sales from Power Analog Solutions business were relatively flat at $82.2 million for the six months ended June 30, 2026, compared to $82.1 million for the six months ended June 30, 2025. The increase in net sales from our Power Analog Solutions business line was primarily attributable to higher demand for MOSFETs and IGBTs in the industrial applications, which was substantially offset by weaker demand for our older generation products resulting from intensified pricing competition.
Net sales from Power IC business were $8.7 million for the six months ended June 30, 2026, a $1.5 million, or 15.0%, decrease compared to $10.2 million for the six months ended June 30, 2025. The decrease in net sales from our Power IC business line was primarily attributable to a decrease in sales of our Power IC products, primarily for OLED IT devices and LED televisions.
Gross Profit
The Power Solutions business. Gross profit from our Power Solutions business was $15.8 million for the six months ended June 30, 2026, which represented a $3.2 million, or 16.9%, decrease from gross profit of $19.1 million for the six months ended June 30, 2025. Gross profit as a percentage of net sales for the six months ended June 30, 2026 decreased to 17.4% compared to 20.7% for the six months ended June 30, 2025. The year-over-year decrease in gross profit and gross profit as a percentage of net sales was primarily attributable to an unfavorable product mix, driven by ASP erosion resulting from increased pricing pressure on our older generation products, particularly in China.
Net Sales by Geographic Region
We report net sales by geographic region based on the location to which the products are billed. The following table sets forth our net sales by geographic region and the percentage of total net sales represented by each geographic region for the six months ended June 30, 2026 and 2025:
Six Months Ended June 30, 2026 Six Months Ended June 30, 2025
Amount % of Net Sales Amount % of Net Sales Change Amount
(Dollars in millions)
Korea $ 39.5 43.4 % $ 44.4 48.1 % $ (4.9 )
Asia Pacific (other than Korea) 47.6 52.4 43.4 47.0 4.2
United States 2.2 2.5 2.7 2.9 (0.4 )
Europe 1.6 1.7 1.8 2.0 (0.3 )
$ 90.9 100.0 % $ 92.3 100.0 % $ (1.4 )
Net sales in Korea decreased from $44.4 million for the six months ended June 30, 2025 to $39.5 million for the six months ended June 30, 2026, or by $4.9 million, or 11.1%, primarily due to a decrease in revenue resulting from the competitive pricing pressure on our older generation products in consumer applications, which was offset in part by an increased demand for power products such as medium-voltage MOSFETs in industrial applications. A lower demand for our Power IC products, primarily for LED televisions and OLED IT devices also had an unfavorable impact on net sales.
Net sales in the Asia Pacific (other than Korea) increased from $43.4 million for the six months ended June 30, 2025 to $47.6 million for the six months ended June 30, 2026, or by $4.2 million, or 9.6%, primarily due to a higher demand for power products such as MOSFETs and high-end MOSFETs in computing and industrial applications, and IGBTs primarily for solar inverters.
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Operating Expenses
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $16.4 million, or 18.1% of net sales, for the six months ended June 30, 2026, compared to $18.2 million, or 19.7% of net sales, for the six months ended June 30, 2025. The decrease of $1.8 million, or 9.7%, was primarily attributable to a decrease in employee compensation, driven mainly by the execution of the voluntary resignation program primarily for shared function employees and separation of certain executive officers in 2025, as well as a decrease in professional fees mainly comprised of legal and consulting fees.
Research and Development Expenses. Research and development expenses were $14.6 million, or 16.1% of net sales, for the six months ended June 30, 2026, compared to $11.9 million, or 12.9% of net sales, for the six months ended June 30, 2025. The increase of $2.7 million, or 22.4%, was primarily attributable to higher personnel costs resulting from the increased headcount in research and development, as well as the timing of continued investment in our new generation product development activities.
Other Charges. For the six months ended June 30, 2026, we recorded $2.0 million of other charges, consisting of a $1.1 million customer goodwill payment related to a certain product, and $0.9 million of one-time employee incentives. For the six months ended June 30, 2025, we recorded $0.5 million of one-time employee incentives and $0.3 million of certain executive separation benefit related accruals.
Operating Loss
As a result of the foregoing, operating loss of $17.1 million was recorded for the six months ended June 30, 2026 compared to an operating loss of $11.9 million for the six months ended June 30, 2025. As discussed above, the increase in operating loss of $5.3 million resulted primarily from a $3.2 million decrease in gross profit, a $2.7 million increase in research and development expenses and a $1.1 million increase in other charges, which was offset in part by a $1.8 million decrease in selling, general and administrative expenses
Other Income (Expense)
Interest Income. Interest income was $2.0 million and $2.9 million for the six months ended June 30, 2026 and 2025, respectively.
Interest Expense. Interest expense was $0.7 million and $0.8 million for the six months ended June 30, 2026 and 2025, respectively.
Foreign Currency Gain (Loss), Net. Net foreign currency loss for the six months ended June 30, 2026 was $0.6 million compared to a net foreign currency gain of $10.4 million for the six months ended June 30, 2025. The net foreign currency loss for the six months ended June 30, 2026 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period. The net foreign currency gain for the six months ended June 30, 2025 was due to the appreciation in value of the Korean won relative to the U.S. dollar during the period.
A substantial portion of our net foreign currency gain or loss is a non-cash translation gain or loss associated with the intercompany long-term loans to our Korean subsidiary, which is denominated in U.S. dollars, and is affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of June 30, 2026 and June 30, 2025, the outstanding intercompany loan balances including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary were $76.9 million and $241.7 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income since the intercompany balances were not considered long-term investments in nature because management intended to settle these intercompany balances at their respective maturity dates.
Income Tax Benefit, Net
We are subject to income taxes in the United States and many foreign jurisdictions and our effective tax rate is affected by changes in the mix of earnings between countries with differing tax rates.
Income tax benefit was $3.9 million for the six months ended June 30, 2026, which was primarily attributable to the estimated taxable loss in our Korean subsidiary for the respective period.
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Income tax benefit was $4.5 million for the six months ended June 30, 2025, which was primarily attributable to the estimated taxable loss in our Korean subsidiary for the respective period, including loss recognized in connection with the shutdown of the discontinued Display business during the second quarter of 2025.
Income (Loss) from Continuing Operations
Loss from continuing operations for the six months ended June 30, 2026 was $12.3 million compared to income from continuing operations of $5.2 million for the six months ended June 30, 2025. The $17.5 million increase in loss from continuing operations was primarily attributable to an $11.0 million increase in net foreign currency loss, a $5.3 million increase in operating loss and a $0.6 million decrease in income tax benefit.
Income (Loss) from Discontinued Operations, Net of Tax
Income from discontinued operations, net of tax for the six months ended June 30, 2026 was $2.8 million compared to a loss from discontinued operations, net of tax of $13.7 million for the six months ended June 30, 2025. The $16.5 million improvement in loss from discontinued operations, net of tax, primarily resulted from a $9.0 million decrease in research and development expense, a $1.3 million decrease in selling, general and administrative expenses, and the absence of $7.4 million of impairment charges, primarily related to certain design tool software contracts, and $1.6 million of early termination charges incurred in the prior-year period, which was offset in part by a $2.7 million decrease in gross profit and a $0.7 million increase in income tax expense.
Net Loss
As a result of the foregoing, a net loss of $9.5 million was recorded for the six months ended June 30, 2026 compared to a net loss of $8.6 million for the six months ended June 30, 2025. As discussed above, the increase in net loss of $0.9 million resulted from a $17.5 million increase in loss from continuing operations, which was offset by a $16.5 million improvement in loss from discontinued operations, net of tax.
Liquidity and Capital Resources
Our principal capital requirements are to fund sales and marketing, invest in research and development and capital equipment, to make debt service payments and to fund working capital needs. We calculate working capital as current assets less current liabilities.
Our principal sources of liquidity are our cash, cash equivalents, cash flows from operating and financing activities. Our ability to manage cash and cash equivalents may be limited, as our primary cash flows are dictated by the terms of our sales and supply agreements, contractual obligations, debt instruments and legal and regulatory requirements. From time to time, we may sell accounts receivable to third parties under factoring agreements or engage in accounts receivable discounting to facilitate the collection of cash. In addition, from time to time, we may make payments to our vendors on extended terms with their consent. As of June 30, 2026, we did not have any accounts payable on extended terms or payment deferment with our vendors.
As of June 29, 2018, our Korean subsidiary, Magnachip Semiconductor, Ltd. (“MSK”), entered into an arrangement whereby it (i) acquired a water treatment facility from SK hynix for $4.2 million to support our fabrication facility in Gumi, Korea, and (ii) subsequently sold the water treatment facility for $4.2 million to a third party management company that we engaged to run the facility for a 10-year term beginning July 1, 2018. Effective November 1, 2025, the service term was adjusted, extending the remaining service period through 2038. As of June 30, 2026, the outstanding obligation of this arrangement is approximately $42.8 million for remaining service term through 2038.
On March 26, 2024, MSK executed a Standard Credit Agreement (together with its General Terms and Conditions, the “Loan Agreement”) with Korea Development Bank (“KDB”). The Loan Agreement provides for a working capital term loan (the “Term Loan”) of KRW 40,000,000,000 ($25.9 million based on the KRW/USD exchange rate of 1,541.5:1 as of June 30, 2026 as quoted by KEB Hana Bank). The Term Loan requires monthly interest-only payments and matures on March 26, 2027, at which time the full principal balance will be due and payable.
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During 2025, under its existing Equipment Financing Credit Agreement with KDB, MSK entered into three CAPEX Loans in the aggregate principal amount of KRW 23,995,000,000, consisting of (i) KRW 9,520,000,000 on June 26, 2025, (ii) KRW 5,075,000,000 on September 26, 2025, and (iii) KRW 9,400,000,000 on December 30, 2025 ($15.6 million in the aggregate based on the KRW/USD exchange rate of 1,541.5:1 as of June 30, 2026, as quoted by KEB Hana Bank). The CAPEX Loans require monthly interest-only payments, with principal repayments deferred for an initial two-year period and amortized over the subsequent eight years, and matures on June 26, 2035.
On June 17, 2026, we entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc., as sales agent, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million under our shelf registration statement on Form S-3 (File No. 333-296756) and a related prospectus supplement dated June 17, 2026. During the three and six months ended June 30, 2026, we sold 10,809 shares of common stock under the program for net proceeds of $0.1 million, and $49.9 million remained available for future sales under the program as of June 30, 2026. We intend to use any net proceeds from sales under the program for general corporate purposes, which may include investments in strategic growth initiatives and technologies that support AI data centers and robotics.
As of June 30, 2026, cash and cash equivalents held by MSK were $82.1 million, which represents 93% of our total cash and cash equivalents on a consolidated basis. We currently believe that we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our operations as well as debt service and capital expenditures for the next 12 months and the foreseeable future.
Working Capital
Our working capital balance as of June 30, 2026 was $96.8 million compared to $133.4 million as of December 31, 2025. The decrease in working capital balance was mainly attributable to the reclassification of $25.9 million of our Term Loan to the current portion of long-term borrowings, reflecting its maturity within one year, as well as a $15.8 million decrease in cash and cash equivalents, primarily driven by operating cash outflows and $5.2 million of capital expenditures.
Cash Flows from Operating Activities
Cash outflow used in operating activities totaled $2.9 million for the six months ended June 30, 2026, compared to $29.8 million of cash outflow used in operating activities for the six months ended June 30, 2025. The net operating cash outflow for the six months ended June 30, 2026 reflects our net loss of $9.5 million, as adjusted favorably by $14.4 million, which mainly consisted of depreciation and amortization, provision for severance benefits, reversal for inventory reserves, net foreign currency gain or loss and stock-based compensation, and net unfavorable impact of $7.9 million from changes in operating assets and liabilities.
Cash Flows from Investing Activities
Cash outflow used in investing activities totaled $6.9 million for the six months ended June 30, 2026, compared to $7.7 million of cash outflow used in investing activities for the six months ended June 30, 2025. The $0.8 million decrease in cash outflow was primarily attributable to a $6.8 million decrease in the purchase of property, plant and equipment, which was offset in part by a $5.7 million net increase in hedge collateral.
Cash Flows from Financing Activities
Cash outflow used in financing activities totaled $0.4 million for the six months ended June 30, 2026, compared to $2.6 million of cash inflow provided by financing activities for the six months ended June 30, 2025. The financing cash outflow for the six months ended June 30, 2026 was primarily attributable to a payment of $0.2 million for the repurchase of our common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units. The financing cash inflow for the six months ended June 30, 2025 was primarily attributable to the $7.0 million of proceeds received from the CAPEX Loan with KDB, which was offset in part by a payment of $3.5 million for the repurchases of our common stock pursuant to our stock repurchase program and a payment of $0.5 million for the repurchase of our common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock units.
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For additional cash flow information associated with our discontinued operation, please see “Item 1. Interim Consolidated Financial Statements – Notes to Consolidated Financial Statements – Note 2 – Discontinued Operations” included elsewhere in this Report.
Capital Expenditures
We routinely make capital expenditures for fabrication facility maintenance, enhancement of our existing facility and reinforcement of our global research and development capability. For the six months ended June 30, 2026, capital expenditures for property, plant and equipment were $5.2 million, a $6.8 million decrease from $12.1 million for the six months ended June 30, 2025. Of the $5.2 million incurred during the first half of 2026, $3.2 million was related to investments in equipment at our fabrication facility located in Gumi, Korea. These investments are expected to support the development of new generation products and the installation of new tools to optimize product mix and improvement in gross profit margins for the future periods.
Critical Accounting Policies and Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our consolidated financial statements and accompanying notes.
We believe that our significant accounting policies, which are described further in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for our fiscal year ended December 31, 2025, or our 2025 Form 10-K, are critical due to the fact that they involve a high degree of judgment and estimates about the effects of matters that are inherently uncertain. We base these estimates and judgments on historical experience, knowledge of current conditions and other assumptions and information that we believe to be reasonable. Estimates and assumptions about future events and their effects cannot be determined with certainty. Accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the business environment in which we operate changes.
A description of our critical accounting policies that involve significant management judgement appears in our 2025 Form 10-K, under “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Critical Accounting Policies and Estimates.” There have been no other material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates included in our 2025 Form 10-K.
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