MAGNACHIP SEMICONDUCTOR Corp

Previous wording

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 China or the United States are subject to heightened risks and uncertainties related to trade and export control policies, including the imposition of new tariffs or increases in existing tariffs. Furthermore, ongoing geopolitical tensions, including conflicts and instability in the Middle East, such as a potential escalation 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.

Current wording

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.

Previous wording

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 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 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.

Current wording

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 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.

Previous wording

A planned upgrade to the electrical substation in our Gumi fabrication facility by a third party is currently expected to temporarily impact our fabrication operations during the third quarter of 2026. To help mitigate potential customer supply disruptions, we currently plan to increase inventory production during the second quarter and a portion of the third quarter of 2026 in advance of the electrical substation upgrade being carried out by a third party owner of the substation. As a result, we expect our factory utilization rate to be somewhat higher in the second quarter of 2026, followed by lower utilization in the third quarter. Accordingly, we expect higher utilization to have a favorable impact on gross profit margin in the second quarter, while lower utilization in the third quarter is expected to adversely affect gross profit margins in the third and fourth quarters.

Current wording

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.

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 a non-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, net and (iii) derivative valuation loss (gain), net. EBITDA for the periods indicated is defined as net income(loss) before interest income, interest expense, income tax benefit, net 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 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.

Previous wording

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 loss to Adjusted EBITDA from continuing operations is as follows:

Current wording

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:

Previous wording

Adjusted EBITDA does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;

Current wording

Adjusted EBITDA does not consider the potentially dilutive impact of issuing stock-based compensation to our management team and employees;

Previous wording

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 equity-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.

Current wording

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.

Previous wording

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 equity-based compensation expense.

Current wording

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.

Previous wording

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 net income (loss) 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:

Current wording

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:

Previous wording

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 net income (loss), adjusted to exclude (i) equity-based compensation expense, (ii) foreign currency loss, net, (iii) derivative valuation loss (gain), net and (iv) income tax effect on non-GAAP adjustments.

Current wording

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.

Previous wording

The following table summarizes the adjustments to 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:

Current wording

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:

Previous wording

For the three months ended March 31, 2026 and 2025, income tax effect on non-GAAP adjustments were calculated by calculating the tax expense of each jurisdiction with or without the non-GAAP adjustments.

Current wording

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.

Previous wording

We believe that all adjustments to income (loss) from continuing operations used to calculate Adjusted Net Income (Loss) from continuing operations was applied consistently to the periods presented.

Current wording

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.

Previous wording

Adjusted Net Income (Loss) does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;

Current wording

Adjusted Net Income (Loss) does not consider the potentially dilutive impact of issuing stock-based compensation to our management team and employees;

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 three months ended March 31, 2026 and 2025, our products were sold to 143 and 140 end customers, respectively, and our net sales to our ten largest customers represented 73.4% and 75.4% of our net sales, 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 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.

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 in non-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 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 March 31, 2026, the outstanding intercompany loan balance including accrued interest between MSK and our Dutch subsidiary was $76.0 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.

Current wording

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.

Previous wording

The Power Solutions business. Net Sales from Power Solutions business were $46.2 million for the three months ended March 31, 2026, a $1.5 million, or 3.3%, increase compared to $44.7 million for the three months ended March 31, 2025. This increase was primarily due to an increase in revenue related to our Power Analog Solutions business, which was offset in part by a decrease in revenue from our Power IC business as described below.

Current wording

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.

Previous wording

Net sales from Power IC business were $4.6 million for the three months ended March 31, 2026, a $0.3 million, or 6.2%, decrease compared to $4.9 million for the three months ended March 31, 2025. The decrease in net sales from our Power IC business line was primarily attributable to a decrease in sales of certain OLED IT devices.

Current wording

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.

Previous wording

The Power Solutions business. Gross profit from our Power Solutions business was $7.2 million for the three months ended March 31, 2026, which represented a $2.2 million, or 23.2%, decrease from gross profit of $9.4 million for the three months ended March 31, 2025. Gross profit as a percentage of net sales for the three months ended March 31, 2026 decreased to 15.6% compared to 20.9% for the three months ended March 31, 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.

Current wording

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.

Previous wording

Net sales in the Asia Pacific (other than Korea) increased from $21.0 million for the three months ended March 31, 2025 to $23.6 million for the three months ended March 31, 2026, or by $2.6 million, or 12.4%, 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.

Current wording

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.

Previous wording

Research and Development Expenses. Research and development expenses were $6.7 million, or 14.5% of net sales, for the three months ended March 31, 2026, compared to $5.4 million, or 12.2% of net sales, for the three months ended March 31, 2025. The increase of $1.3 million, or 23.2%, was primarily attributable to higher personnel costs resulting from the increased headcount in research and development, and an increase in development activities for new generation power products.

Current wording

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.

Previous wording

Interest Income. Interest income was $1.1 million and $1.5 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Interest Income. Interest income was $0.9 million and $1.3 million for the three months ended June 30, 2026 and 2025, respectively.

Previous wording

Interest Expense. Interest expense was $0.4 million for each of the three months ended March 31, 2026 and 2025.

Current wording

Interest Expense. Interest expense was $0.3 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively.

Previous wording

Foreign Currency Loss, Net. Net foreign currency loss for the three months ended March 31, 2026 was $0.1 million compared to net foreign currency loss of $0.4 million for the three months ended March 31, 2025. The net foreign currency loss for the three months ended March 31, 2026 and 2025 was due to the depreciation in value of the Korean won relative to the U.S. dollar during the period.

Current wording

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.

Previous wording

A substantial portion of our net foreign currency gain or loss is 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 March 31, 2026 and March 31, 2025, the outstanding intercompany loan balance including accrued interest between our Korean subsidiary, Magnachip Semiconductor, Ltd., and our Dutch subsidiary were $76.0 million and $260.7 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.

Current wording

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.

Previous wording

Loss from continuing operations for the three months ended March 31, 2026 was $4.7 million compared to loss from continuing operations of $4.1 million for the three months ended March 31, 2025. The $0.6 million increase in loss from continuing operations was primarily attributable to a $1.9 million increase in operating loss and a $0.5 million decrease in interest income, which was offset by a $1.5 million increase in income tax benefit and a $0.3 million improvement in net foreign currency loss.

Current wording

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.

Previous wording

As a result of the foregoing, a net loss of $4.6 million was recorded for the three months ended March 31, 2026 compared to a net loss of $8.9 million for the three months ended March 31, 2025. As discussed above, the improvement in net loss of $4.2 million resulted from a $4.9 million improvement in loss from discontinued operations, net of tax, which was offset by a $0.6 million increase in loss from continuing operations.

Current wording

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.

Previous wording

Net sales in Korea decreased from $21.7 million for the three months ended March 31, 2025 to $20.7 million for the three months ended March 31, 2026, or by $1.1 million, or 4.8%, primarily due to a decreased revenue 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 low-voltage MOSFETs in communication applications. A lower demand for our Power IC products, primarily for OLED IT devices, also had an unfavorable impact on net sales.

Current wording

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.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $7.7 million, or 16.6% of net sales for the three months ended March 31, 2026, compared to $9.2 million, or 20.6% of net sales for the three months ended March 31, 2025. The decrease of $1.5 million, or 16.7%, 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.

Current wording

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.

Previous wording

As a result of the foregoing, operating loss of $7.2 million was recorded for the three months ended March 31, 2026 compared to operating loss of $5.3 million for the three months ended March 31, 2025. As discussed above, the increase in operating loss of $1.9 million resulted primarily from a $2.2 million decrease in gross profit and a $1.3 million increase in research and development expenses, which was offset in part by a $1.5 million decrease in selling, general and administrative expenses.

Current wording

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

Previous wording

Income from discontinued operations, net of tax for the three months ended March 31, 2026 was $0.1 million compared to loss from discontinued operations, net of tax of $4.8 million for the three months ended March 31, 2025. The $4.9 million improvement in loss from discontinued operations, net of tax primarily resulted from a $6.1 million decrease in research and development expense and $1.4 million decrease in selling, general and administrative expenses, which was offset in part by a $2.6 million decrease in gross profit and a $0.2 million increase in income tax expense.

Current wording

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.

Previous wording

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 March 31, 2026, the outstanding obligation of this arrangement is approximately $44.5 million for remaining service term through 2038.

Current wording

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.

Previous wording

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 (approximately $26.4 million based on the KRW/USD exchange rate of 1,513.4:1 as of March 31, 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.

Current wording

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.

Previous wording

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 (approximately $15.9 million in the aggregate based on the KRW/USD exchange rate of 1,513.4:1 as of March 31, 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.

Current wording

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.

Previous wording

As of March 31, 2026, cash and cash equivalents held by MSK were $87.8 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.

Current wording

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.

Previous wording

Our working capital balance as of March 31, 2026 was $98.3 million compared to $133.4 million as of December 31, 2025. The decrease in working capital balance was mainly attributable to the reclassification of $26.4 million of our Term Loan to the current portion of long-term borrowings, reflecting its maturity within one year.

Current wording

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.

Previous wording

Cash inflow provided by operating activities totaled $1.6 million for the three months ended March 31, 2026, compared to $4.7 million of cash outflow used in operating activities for the three months ended March 31, 2025. The net operating cash inflow for the three months ended March 31, 2026 reflects our net loss of $4.6 million, as adjusted favorably by $8.8 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 $2.6 million from changes in operating assets and liabilities.

Current wording

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.

Previous wording

Cash outflow used in investing activities totaled $5.9 million for the three months ended March 31, 2026, compared to $0.4 million of cash outflow used in investing activities for the three months ended March 31, 2025. The $5.6 million increase in cash outflow was primarily attributable to a $3.8 million net increase in hedge collateral and a $3.7 million increase in purchase of property, plant and equipment, which was offset in part by a $1.9 million net decrease in guarantee deposits.

Current wording

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.

Previous wording

Cash outflow used in financing activities totaled $0.3 million for the three months ended March 31, 2026, compared to $1.5 million of cash outflow used in by financing activities for the three months ended March 31, 2025. The financing cash outflow for the three months ended March 31, 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 outflow for the three months ended March 31, 2025 was primarily attributable to a payment of $0.9 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.

Current wording

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.

Previous wording

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 three months ended March 31, 2026, capital expenditures for property, plant and equipment were $3.9 million, a $3.7 million increase from $0.2 million for the three months ended March 31, 2025. Of the $3.9 million incurred during the first quarter of 2026, approximately $2.5 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.

Current wording

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.