MAGNACHIP SEMICONDUCTOR Corp

Previous wording

The semiconductor industry continues to face a number of macroeconomic challenges, including rising inflation, increased interest rates, supply chain disruptions, inventory corrections, shifting customer andend-user demand, fluctuations in currency rates, and geopolitical tensions, including without limitation ongoing conflicts involving Russia and Ukraine and Israel and Hamas including sustained military action and conflict in the Red Sea and recent escalations between Iran and Israel, any one of and all of which may cause volatility and unpredictability in the market for semiconductor products andend-user demand. The length and severity of these macroeconomic events and their overall impact on our business, results of operations and financial condition remain uncertain.

Current wording

The semiconductor industry continues to face a number of macroeconomic challenges, including rising inflation, increased interest rates, supply chain disruptions, inventory corrections, shifting customer andend-user demand, fluctuations in currency rates, and geopolitical tensions, including without limitation ongoing conflicts involving Russia and Ukraine, Israel’s wars with Hezbollah and Hamas, sustained military action and conflict in the Red Sea and recent escalations between Iran and Israel, any one or more of which may cause volatility and unpredictability in the supply chain or market for semiconductor products andend-user demand. The length and severity of these macroeconomic events and their overall impact on our business, results of operations and financial condition remain uncertain.

Previous wording

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 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” certainend-uses andend-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. Based on our understanding of the U.S. Export Regulations and related rules currently in effect, we do not anticipate that they will have a material impact on our current business, but we will continue reviewing and assessing these rules and regulations and their potential impact on our business. Additional changes to the U.S. Export Regulations are expected, but the scope or timing of such changes is unknown. 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.

Current wording

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 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” certainend-uses andend-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. Based on our understanding of the U.S. Export Regulations and related rules currently in effect, we do not anticipate that they will have a material impact on our current business, but we will continue reviewing and assessing these rules and regulations and their potential impact on our business. 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.

Previous wording

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 anon-U.S. GAAP measure. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) equity-based compensation expense, (ii) foreign currency loss (gain), net, (iii) derivative valuation loss (gain), net and (iv) early termination and other charges. EBITDA for the periods indicated is defined as net income (loss) before interest income, interest expense, income tax benefit, and depreciation and amortization.

Current wording

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 anon-U.S. GAAP measure. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) equity-based compensation expense, (ii) foreign currency loss (gain), net, (iii) derivative valuation loss (gain), net and (iv) early termination and other charges. EBITDA for the periods indicated is defined as net income (loss) before interest income, interest expense, income tax expense (benefit), and depreciation and amortization.

Previous wording

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, 2024 and 2023, we sold products to 145 and 138 customers, respectively, and our net sales to our ten largest customers represented 73% and 70% of our net sales—standard products business, respectively.

Current wording

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 nine months ended September 30, 2024 and 2023, we sold products to 158 and 157 customers, respectively, and our net sales to our ten largest customers represented 72% and 70% of our net sales—standard products business, respectively.

Previous wording

We are currently in the process of winding down the Transitional Fab 3 Foundry Services, which represented 4.4% and 5.7% of our total revenues for the three and six months ended June 30, 2024, respectively.

Current wording

We are currently in the process of winding down the Transitional Fab 3 Foundry Services, which represented 3.7% and 4.9% of our total revenues for the three and nine months ended September 30, 2024, respectively.

Previous wording

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, 2024, 96% of our employees were eligible for severance benefits.

Current wording

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 September 30, 2024, 95% of our employees were eligible for severance benefits.

Previous wording

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 innon-U.S. currencies, principally the Korean won, and we expect that this will remain true in the future. Because we report our results of operations in U.S. dollars converted from ournon-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 would be affected by changes in the exchange rate between the Korean won and the U.S. dollar as a substantial portion ofnon-cash translation gain or loss is associated with the intercompany long-term loans to one of our Korean subsidiaries, Magnachip Semiconductor, Ltd. or MSK, which is denominated in U.S. dollars. As of June 30, 2024, the outstanding intercompany loan balance including accrued interest between MSK and our Dutch subsidiary was $261.5 million. As a result of such foreign currency 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.

Current wording

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 innon-U.S. currencies, principally the Korean won, and we expect that this will remain true in the future. Because we report our results of operations in U.S. dollars converted from ournon-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 would be affected by changes in the exchange rate between the Korean won and the U.S. dollar as a substantial portion ofnon-cash translation gain or loss is associated with the intercompany long-term loans to one of our Korean subsidiaries, Magnachip Semiconductor, Ltd. or MSK, which is denominated in U.S. dollars. As of September 30, 2024, the outstanding intercompany loan balance including accrued interest between MSK and our Dutch subsidiary was $259.7 million. As a result of such foreign currency 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.

Previous wording

The standard products business. Net sales from our standard products business were $50.8 million for the three months ended June 30, 2024, a $0.5 million, or 1.1%, decrease compared to $51.4 million for the three months ended June 30, 2023.

Current wording

The standard products business. Net sales from our standard products business were $64.0 million for the three months ended September 30, 2024, a $12.4 million, or 24.0%, increase compared to $51.6 million for the three months ended September 30, 2023.

Previous wording

The transitional Fab 3 foundry services. Net sales from the transitional Fab 3 foundry services were $2.3 million and $9.6 million for the three months ended June 30, 2024 and 2023, respectively.

Current wording

The transitional Fab 3 foundry services. Net sales from the transitional Fab 3 foundry services were $2.4 million and $9.6 million for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Gross profit from our Power Analog Solutions business line was $7.7 million for the three months ended June 30, 2024, which represented a $1.3 million, or 14.4%, decrease from gross profit of $9.0 million for the three months ended June 30, 2023. Gross profit as a percentage of net sales for the three months ended June 30, 2024 decreased to 19.7% compared to 23.1% for the three months ended June 30, 2023. The year-over-year decrease in gross profit as a percentage of net sales was primarily attributable to a lower utilization rate of our internal fabrication facility in Gumi from the wind-down of transitional foundry services and an unfavorable product mix.

Current wording

Gross profit from our Power Analog Solutions business line was $9.2 million for the three months ended September 30, 2024, which represented a $2.5 million, or 21.1%, decrease from gross profit of $11.7 million for the three months ended September 30, 2023. Gross profit as a percentage of net sales for the three months ended September 30, 2024 decreased to 19.4% compared to 28.6% for the three months ended September 30, 2023. The year-over-year decrease in gross profit as a percentage of net sales was primarily attributable to a lower utilization rate of our internal fabrication facility in Gumi from the wind-down of transitional foundry services and an unfavorable product mix.

Previous wording

Net sales – standard products business in Korea increased from $30.9 million for the six months ended June 30, 2023 to $38.2 million for the six months ended June 30, 2024, or by $7.3 million, or 23.6%, primarily due to a higher demand for power products such as MOSFETs, primarily for smartphone applications, which was offset in part by a lower demand for our mobile OLED display driver ICs. A higher demand for our Power IC products, primarily for televisions and OLED IT devices, also had a favorable impact on net sales.

Current wording

Net sales – standard products business in Korea increased from $19.2 million for the three months ended September 30, 2023 to $25.1 million for the three months ended September 30, 2024, or by $5.8 million, or 30.2%, primarily due to a higher demand for power products such as MOSFETs, including high-end MOSFETs, primarily for smartphone and home appliance. A higher demand for our mobile OLED display driver IC and Power IC products also had a favorable impact on net sales.

Previous wording

Net sales – standard products business in Asia Pacific (other than Korea) decreased from $35.0 million in the three months ended June 30, 2023 to $29.2 million for the three months ended June 30, 2024, or by $5.8 million, or 16.6%, primarily due to weak demand for ourauto-LCD display driver ICs and mobile OLED display driver ICs. A lower demand for power products such as MOSFETs in the industrial application, especiallye-bikes, also had an unfavorable impact on net sales.

Current wording

Net sales – standard products business in Asia Pacific (other than Korea) increased from $29.9 million in the three months ended September 30, 2023 to $37.0 million for the three months ended September 30, 2024, or by $7.2 million, or 24.1%, primarily due to a higher demand for automotive OLED display driver ICs. A higher demand for power products such as MOSFETs, including high-end MOSFETs in the computing and industrial applications, and IGBTs for solar inverters also had a favorable impact on net sales.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $11.7 million, or 22.1% of total revenues, for the three months ended June 30, 2024, compared to $12.1 million, or 19.9% of total revenues, for the three months ended June 30, 2023. The decrease of $0.4 million, or 3.3%, was primarily attributable to a decrease in employee compensation including certain incentives and benefit related accruals, which was offset in part by an increase in professional fees mainly comprised of legal and consulting fees.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $12.1 million, or 18.2% of total revenues, for the three months ended September 30, 2024, which remained almost flat, compared to $12.1 million, or 19.7% of total revenues, for the three months ended September 30, 2023.

Previous wording

Research and Development Expenses. Research and development expenses were $12.7 million, or 23.9% of total revenues, for the three months ended June 30, 2024, compared to $11.3 million, or 18.5% of total revenues, for the three months ended June 30, 2023. The increase of $1.4 million, or 12.8%, was primarily attributable to an increase in material costs for our 28-nanometer OLED display driver ICs based on the timing of development activities.

Current wording

Research and Development Expenses. Research and development expenses were $14.4 million, or 21.6% of total revenues, for the three months ended September 30, 2024, compared to $11.6 million, or 19.0% of total revenues, for the three months ended September 30, 2023. The increase of $2.7 million, or 23.6%, was mainly attributable to an increase in material costs for our 28-nanometer OLED display driver ICs based on the timing of development activities.

Previous wording

As a result of the foregoing, operating loss of $12.8 million was recorded for the three months ended June 30, 2024 compared to operating loss of $10.7 million for the three months ended June 30, 2023. As discussed above, the increase in operating loss of $2.2 million resulted primarily from a $1.9 million decrease in gross profit and a $1.4 million increase in research and development expenses, which was offset in part by a $0.8 million decrease in other charges and a $0.4 million decrease in selling, general and administrative expenses.

Current wording

As a result of the foregoing, operating loss of $11.0 million was recorded for the three months ended September 30, 2024 compared to operating loss of $9.2 million for the three months ended September 30, 2023. As discussed above, the increase in operating loss of $1.8 million resulted primarily from a $2.7 million increase in research and development expenses, which was offset in part by a $1.0 million increase in gross profit.

Previous wording

Interest Income. Interest income was $2.2 million and $2.7 million for the three months ended June 30, 2024 and June 30, 2023, respectively.

Current wording

Interest Income. Interest income was $2.1 million and $2.4 million for the three months ended September 30, 2024 and September 30, 2023, respectively.

Previous wording

Foreign Currency Loss, Net. Net foreign currency loss for the three months ended June 30, 2024 was $3.6 million compared to net foreign currency gain of $1.2 million for the three months ended June 30, 2023.

Current wording

Foreign Currency Gain (Loss), Net. Net foreign currency gain for the three months ended September 30, 2024 was $5.1 million compared to net foreign currency loss of $2.6 million for the three months ended September 30, 2023.

Previous wording

A substantial portion of our net foreign currency gain or loss isnon-cash translation gain or loss associated with intercompany long-term loans to one of our Korean subsidiaries, which are denominated in U.S. dollars, and are affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of June 30, 2024 and June 30, 2023, the outstanding intercompany loan balances, including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary, were $261.5 million and $293.1 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income (loss) 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.

Current wording

A substantial portion of our net foreign currency gain or loss isnon-cash translation gain or loss associated with intercompany long-term loans to one of our Korean subsidiaries, which are denominated in U.S. dollars, and are affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of September 30, 2024 and September 30, 2023, the outstanding intercompany loan balances, including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary, were $259.7 million and $281.7 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income (loss) 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.

Previous wording

Income tax benefit was $1.6 million for the three months ended June 30, 2024, which was primarily attributable to the estimated taxable loss in one of our operating entities in Korea, offset in part by a valuation allowance established for the other operating entity in Korea as a result of its assessment of realizability of the deferred tax assets in the future.

Current wording

Income tax expense was $5.1 million for the three months ended September 30, 2024, which was primarily related to a decrease in tax benefits frompre-tax loss of one of our operating entities in Korea and a valuation allowance established against the deferred tax assets of the other operating entity in Korea, as a result of its assessment of realizability of the deferred tax assets in the future.

Previous wording

Income tax benefit was $3.0 million for the three months ended June 30, 2023, which was primarily attributable to the estimated taxable loss in our then primary operating entity in Korea for the respective period.

Current wording

Income tax benefit was $4.4 million for the three months ended September 30, 2023, which was primarily attributable to the estimated taxable loss in our then primary operating entity in Korea for the respective period.

Previous wording

As a result of the foregoing, a net loss of $13.0 million was recorded for the three months ended June 30, 2024 compared to a net loss of $3.9 million for the three months ended June 30, 2023. As discussed above, the $9.1 million increase in net loss was primarily attributable to a $4.8 million increase in net foreign currency loss, a $2.2 million increase in operating loss and a $1.4 million decrease in income tax benefit.

Current wording

As a result of the foregoing, a net loss of $9.6 million was recorded for the three months ended September 30, 2024 compared to a net loss of $5.2 million for the three months ended September 30, 2023. As discussed above, the $4.5 million increase in net loss was primarily attributable to a $9.5 million decrease in income tax benefit and a $1.8 million increase in operating loss, which was offset in part by a $7.6 million improvement in net foreign currency loss.

Previous wording

Results of Operations – Comparison of Six Months Ended June 30, 2024 and 2023

Current wording

Results of Operations – Comparison of Nine Months Ended September 30, 2024 and 2023

Previous wording

The following table sets forth consolidated results of operations for the six months ended June 30, 2024 and 2023:

Current wording

The following table sets forth consolidated results of operations for the nine months ended September 30, 2024 and 2023:

Previous wording

The standard products business. Net sales from our standard products business were $96.4 million for the six months ended June 30, 2024, a $6.5 million, or 6.3%, decrease compared to $102.9 million for the six months ended June 30, 2023.

Current wording

The standard products business. Net sales from our standard products business were $160.4 million for the nine months ended September 30, 2024, a $5.9 million, or 3.8%, increase compared to $154.5 million for the nine months ended September 30, 2023.

Previous wording

Net sales from our Mixed-Signal Solutions business line decreased from $25.2 million for the six months ended June 30, 2023 to $20.6 million for the six months ended June 30, 2024. The decrease in net sales from our Mixed-Signal Solutions business line was primarily attributable to a decrease in revenue from our mobile OLED display driver ICs stemmed from slower than expected new design-wins and lower customer demand for legacy products, and weak demand for ourauto-LCD display driver ICs also had an unfavorable impact on net sales. This decrease was offset in part by a higher demand for our Power IC products, primarily for televisions and OLED IT devices, and a higher demand for automotive OLED display driver ICs.

Current wording

Net sales from our Mixed-Signal Solutions business line increased from $35.8 million for the nine months ended September 30, 2023 to $37.0 million for the nine months ended September 30, 2024. The increase in net sales from our Mixed-Signal Solutions business line was primarily attributable to a higher demand for our Power IC products, primarily for televisions and OLED IT devices, and a higher demand for automotive OLED display driver ICs. This increase was offset in part by a decrease in revenue from our mobile OLED display driver ICs stemmed from slower than expected new design-wins and lower customer demand for legacy products, and weak demand for ourauto-LCD display driver ICs also had an unfavorable impact on net sales.

Previous wording

Net sales from our Power Analog Solutions business line increased slightly to $39.2 million for the three months ended June 30, 2024 compared to $39.0 million for the three months ended June 30, 2023. The increase in net sales from our Power Analog Solutions business line was attributable to a higher demand for premium power products such ashigh-end MOSFETs in the consumer application, especially home appliance. This increase was offset in part by a lower demand for power products such as MOSFETs in the industrial application, especiallye-bikes.

Current wording

Net sales from our Power Analog Solutions business line increased from $118.7 million for the nine months ended September 30, 2023 to $123.3 million for the nine months ended September 30, 2024. The increase in net sales from our Power Analog Solutions business line was attributable to a higher demand for power products such as MOSFETs, including high-end MOSFETs in the communication and consumer applications.

Previous wording

The transitional Fab 3 foundry services. Net sales from the transitional Fab 3 foundry services were $5.9 million and $15.1 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

The transitional Fab 3 foundry services. Net sales from the transitional Fab 3 foundry services were $8.3 million and $24.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

The standard products business. Gross profit from our standard products business was $11.7 million for the three months ended June 30, 2024, which represented a $1.8 million, or 13.2%, decrease from gross profit of $13.5 million for the three months ended June 30, 2023. Gross profit as a percentage of net sales for the three months ended June 30, 2024 decreased to 23.1% compared to 26.3% for the three months ended June 30, 2023.

Current wording

The standard products business. Gross profit from our standard products business was $37.0 million for the nine months ended September 30, 2024, which represented a $5.5 million, or 13.0%, decrease from gross profit of $42.5 million for the nine months ended September 30, 2023. Gross profit as a percentage of net sales for the nine months ended September 30, 2024 decreased to 23.1% compared to 27.5% for the nine months ended September 30, 2023.

Previous wording

Gross profit from our Power Analog Solutions business line was $13.3 million for the six months ended June 30, 2024, which represented a $6.0 million, or 31.0%, decrease from gross profit of $19.3 million for the six months ended June 30, 2023. Gross profit as a percentage of net sales for the six months ended June 30, 2024 decreased to 17.6% compared to 24.9% for the six months ended June 30, 2023. The year-over-year decrease in gross profit as a percentage of net sales was primarily attributable to a lower utilization rate of our internal fabrication facility in Gumi from the wind-down of transitional foundry services and an unfavorable product mix.

Current wording

Gross profit from our Power Analog Solutions business line was $22.6 million for the nine months ended September 30, 2024, which represented an $8.5 million, or 27.3%, decrease from gross profit of $31.1 million for the nine months ended September 30, 2023. Gross profit as a percentage of net sales for the nine months ended September 30, 2024 decreased to 18.3% compared to 26.2% for the nine months ended September 30, 2023. The year-over-year decrease in gross profit as a percentage of net sales was primarily attributable to a lower utilization rate of our internal fabrication facility in Gumi from the wind-down of transitional foundry services and an unfavorable product mix.

Previous wording

We report net sales – standard products business by geographic region based on the location to which the products are billed. The following table sets forth our net sales—standard products business by geographic region and the percentage of total net sales—standard products business represented by each geographic region for the six months ended June 30, 2024 and 2023:

Current wording

We report net sales – standard products business by geographic region based on the location to which the products are billed. The following table sets forth our net sales—standard products business by geographic region and the percentage of total net sales—standard products business represented by each geographic region for the nine months ended September 30, 2024 and 2023:

Previous wording

Net sales – standard products business in Korea increased from $14.4 million for the three months ended June 30, 2023 to $20.0 million for the three months ended June 30, 2024, or by $5.6 million, or 39.2%, primarily due to a higher demand for power products such as MOSFETs, including high-end MOSFETs, primarily for smartphone and home appliance. A higher demand for our Power IC products, primarily for televisions and OLED IT devices, also had a favorable impact on net sales.

Current wording

Net sales – standard products business in Korea increased from $50.1 million for the nine months ended September 30, 2023 to $63.2 million for the nine months ended September 30, 2024, or by $13.1 million, or 26.1%, primarily due to a higher demand for power products such as MOSFETs, including high-end MOSFETs, primarily for smartphone and home appliance. A higher demand for our Power IC products, primarily for televisions and OLED IT devices, also had a favorable impact on net sales.

Previous wording

Net sales – standard products business in Asia Pacific (other than Korea) decreased from $66.9 million in the six months ended June 30, 2023 to $54.9 million for the six months ended June 30, 2024, or by $12.0 million, or 18.0%, primarily due to a decrease in revenue from our mobile OLED display driver ICs andauto-LCD display driver ICs. The decreased demand for our power products such as MOSFETs, mainly fore-bikes, and IGBTs, primarily for solar inverters, also had an unfavorable impact on net sales.

Current wording

Net sales – standard products business in Asia Pacific (other than Korea) decreased from $96.8 million in the nine months ended September 30, 2023 to $91.9 million for the nine months ended September 30, 2024, or by $4.9 million, or 5.0%, primarily due to a decrease in revenue from our mobile OLED display driver ICs andauto-LCD display driver ICs, which was offset in part by a higher demand for automotive OLED display driver ICs. The decreased demand for our power products such as MOSFETs, mainly fore-bikes, also had an unfavorable impact on net sales.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $23.0 million, or 22.5% of total revenues, for the six months ended June 30, 2024, compared to $24.3 million, or 20.6% of total revenues, for the six months ended June 30, 2023. The decrease of $1.3 million, or 5.4%, was primarily attributable to a decrease in employee compensation including certain incentives and benefit related accruals, which was offset in part by an increase in professional fees mainly comprised of legal and consulting fees.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $35.1 million, or 20.8% of total revenues, for the nine months ended September 30, 2024, compared to $36.4 million, or 20.3% of total revenues, for the nine months ended September 30, 2023. The decrease of $1.3 million, or 3.6%, was primarily attributable to a decrease in employee compensation including certain incentives and benefit related accruals, which was offset in part by an increase in professional fees mainly comprised of legal and consulting fees.

Previous wording

Early Termination and Other Charges. For the six months ended June 30, 2023, we recorded $8.4 million of termination related charges in connection with the Program that we offered to certain employees during the first quarter of 2023. During the same period, we also recorded $0.8 million ofone-time employee incentives.

Current wording

Early Termination and Other Charges. For the nine months ended September 30, 2023, we recorded $8.4 million of termination related charges in connection with the Program that we offered to certain employees during the first quarter of 2023. During the same period, we also recorded $0.8 million ofone-time employee incentives.

Previous wording

As a result of the foregoing, operating loss of $26.3 million was recorded for the six months ended June 30, 2024 compared to operating loss of $32.5 million for the six months ended June 30, 2023. As discussed above, the decrease in operating loss of $6.2 million resulted primarily from a $9.3 million decrease in early termination and other charges, a $1.3 million decrease in selling, general and administrative expenses and a $0.7 million decrease in research and development expenses, which was offset in part by a $5.1 million decrease in gross profit.

Current wording

As a result of the foregoing, operating loss of $37.3 million was recorded for the nine months ended September 30, 2024 compared to operating loss of $41.7 million for the nine months ended September 30, 2023. As discussed above, the decrease in operating loss of $4.4 million resulted primarily from a $9.3 million decrease in early termination and other charges and a $1.3 million decrease in selling, general and administrative expenses, which was offset in part by a $4.1 million decrease in gross profit and a $2.0 million increase in research and development expenses.

Previous wording

Interest Income. Interest income was $4.4 million and $5.5 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

Current wording

Interest Income. Interest income was $6.5 million and $7.9 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Previous wording

Interest Expense. Interest expense was $0.8 million and $0.5 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

Current wording

Interest Expense. Interest expense was $1.4 million and $0.6 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Previous wording

Foreign Currency Loss, Net. Net foreign currency loss for the six months ended June 30, 2024 was $8.6 million compared to net foreign currency loss of $2.2 million for the six months ended June 30, 2023. The net foreign currency loss for the six months ended June 30, 2024 and June 30, 2023 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period.

Current wording

Foreign Currency Loss, Net. Net foreign currency loss for the nine months ended September 30, 2024 was $3.5 million compared to net foreign currency loss of $4.8 million for the nine months ended September 30, 2023. The net foreign currency loss for the nine months ended September 30, 2024 and September 30, 2023 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period.

Previous wording

A substantial portion of our net foreign currency gain or loss isnon-cash translation gain or loss associated with intercompany long-term loans to one of our Korean subsidiaries, which are denominated in U.S. dollars, and are affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of June 30, 2024 and June 30, 2023, the outstanding intercompany loan balances, including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary, were $261.5 million and $293.1 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income (loss) 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.

Current wording

A substantial portion of our net foreign currency gain or loss isnon-cash translation gain or loss associated with intercompany long-term loans to one of our Korean subsidiaries, which are denominated in U.S. dollars, and are affected by changes in the exchange rate between the Korean won and the U.S. dollar. As of September 30, 2024 and September 30, 2023, the outstanding intercompany loan balances, including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary, were $259.7 million and $281.7 million, respectively. Foreign currency translation gain or loss from intercompany balances were included in determining our consolidated net income (loss) 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.

Previous wording

Income tax benefit was $2.6 million for the six months ended June 30, 2024, which was primarily attributable to the estimated taxable loss in one of our operating entities in Korea, offset in part by a valuation allowance established for the other operating entity in Korea as a result of its assessment of realizability of the deferred tax assets in the future.

Current wording

Income tax expense was $2.5 million for the nine months ended September 30, 2024, which was primarily related to a decrease in tax benefits frompre-tax loss of one of our operating entities in Korea and a valuation allowance established against the deferred tax assets of the other operating entity in Korea, as a result of its assessment of realizability of the deferred tax assets in the future.