• Fourth quarter revenue of $61.0 million was near the high-end of our guidance range. YoY, our revenue decreased 44.7% primarily due to severe 28nm wafer shortages required for our Display business.
  • Full-year revenue of $337.7 million decreased 28.8% YoY due to significantly lower Display revenue as a result of severe 28nm 12-inch OLED wafer shortages that impacted 2nd half design-in projects from our large panel customers in Korea and weak demand for Android smartphones that led to an inventory correction by smartphone OEMs.
  • Gross profit margin for the fourth quarter was 26.4%, within our guidance range.
  • Full-year gross profit margin of 30.0% was down 240 bps YoY due mainly to certain inventory reserves and scrap cost related to 12-inch OLED products as a result of lower demand for China smartphones.
  • GAAP diluted earnings per share for the fourth quarter was $0.07; Full-year GAAP diluted loss per share was $0.18.
  • Non-GAAP diluted loss per share for the fourth quarter was $0.36; Full-year non-GAAP diluted earnings per share was $0.19.

 

SEOUL, South KoreaFeb. 16, 2023 /PRNewswire/ — Magnachip Semiconductor Corporation (NYSE: MX) (“Magnachip” or the “Company”) today announced financial results for the fourth quarter and full-year 2022.

(PRNewsfoto/Magnachip Semiconductor)YJ Kim, Magnachip’s chief executive officer commented, “We closed the fourth quarter with $61.0 million revenue, near the high-end of our guidance range. Q4 results continued to reflect the impact of severe wafer shortages and inventory correction in our Display business and deteriorating consumer demand in our Power Solutions business. Despite the challenges of this past year, we stayed focused and achieved milestones that set the foundation for recovery in 2023. In Display, we expanded our OLED business into international markets by winning a new tier one panel customer outside of Korea and strengthened our global supply chain by qualifying two additional foundries. Further, in Q4, we successfully qualified two OLED projects with our two leading panel customers and expect to begin shipping at the end of this quarter. In Power Solutions, we achieved a record year with 2022 revenue up 1.2% despite the slowdown in the 2nd half due to macro weakness. Further, our Power Solutions business won a record 209 design-in/wins, more than double compared to previous years.”

YJ continued, “Looking ahead, we continue to expect the first half of 2023 to be impacted by inventory corrections and broader macro weakness, but we believe the reopening of China should eventually lead to an improvement in their economy and consumer demand, which will help both our businesses. We expect a recovery in Display revenue in the second half of 2023 as we ramp shipments of our four design-in projects with our two leading panel customers.  For Power, we anticipate on maintaining our momentum of design wins and premium tier product mix. As channel inventories are consumed and the broader economy recovers, we expect to see a rebound in Power revenue.”

 

Q4 and 2022 Financial Highlights
In thousands of U.S. dollars, except share data
GAAP
Q4 2022 Q3 2022 Q/Q change Q4 2021 Y/Y change
Revenues
Standard Products Business
Display Solutions 7,556 6,355 up 18.9 % 41,298 down 81.7 %
Power Solutions 46,271 56,416 down 18.0 % 58,212 down 20.5 %
Transitional Fab 3 foundry services(1) 7,163 8,428 down 15.0 % 10,825 down 33.8 %
Gross Profit Margin 26.4 % 24.2 up 2.2% pts 35.0 % down  8.6%pts
Operating Income (Loss) (10,117) (10,008) down      n/a 63,870 down n/a
Net Income (Loss) 2,971 (17,195) up      n/a 53,611 down 94.5 %
Basic Earnings (Loss) per Common Share 0.07 (0.38) up      n/a 1.16 down 94.0 %
Diluted Earnings (Loss) per Common Share 0.07 (0.38) up      n/a 1.12 down 93.8 %
In thousands of U.S. dollars, except share data
Non-GAAP(3)
Q4 2022 Q3 2022 Q/Q change Q4 2021 Y/Y change
Adjusted Operating Income (Loss) (8,567) (6,646) down n/a 14,421 down n/a
Adjusted EBITDA (4,768) (2,995) down n/a 18,144 down n/a
Adjusted Net Income (Loss) (15,848) 1,097 down n/a 13,699 down n/a
Adjusted Earnings (Loss) per Common Share—Diluted (0.36) 0.02 down n/a 0.29 down n/a

 

In thousands of U.S dollars, except share data
GAAP
2022 2021 Y/Y Change
Revenues
Standard Products Business
Display Solutions 71,432 205,322 down 65.2 %
Power Solutions 230,464 227,777 up 1.2 %
Transitional Fab 3 foundry services(1) 35,762 41,131 down 13.1 %
Gross Profit Margin 30.0 % 32.4 % down 2.4% pts
Operating Income (Loss)(2) (5,244) 83,407 down n/a
Net Income (Loss) (8,036) 56,708 down n/a
Basic Earnings (Loss) per Common Share (0.18) 1.26 down n/a
Diluted Earnings (Loss) per Common Share (0.18) 1.21 down n/a

 

In thousands of U.S dollars, except share data
Non-GAAP(3)
2022 2021 Y/Y Change
Adjusted Operating Income 4,091 56,135 down 92.7 %
Adjusted EBITDA 19,517 70,701 down 72.4 %
Adjusted Net Income 8,752 50,152 down 82.5 %
Adjusted Earnings per Common Share—Diluted 0.19 1.07 down 82.2 %
(1) Following the consummation of the sale of the Foundry Services Group business and Fab 4 in Q3 2020, and for a period of up to three years, we will provide transitional foundry services to the buyer for foundry products manufactured in our fabrication facility located in Gumi (“Transitional Fab 3 Foundry Services”). Management believes that disclosing revenue of Transitional Fab 3 Foundry Services separately from the standard products business allows investors to better understand the results of our core standard products display solutions and power solutions business lines.
(2) For the year ended December 31, 2021, operating income of $83.4 million included net gain of $35.5 million that represented $70.2 million income from the recognition of a reverse termination fee, net of professional service fees and expenses of $34.7 million incurred in connection with the contemplated merger transaction.
(3) Management believes that non-GAAP financial measures, when viewed in conjunction with GAAP results, can provide a meaningful understanding of the factors and trends affecting our business and operations and assist in evaluating our core operating performance. However, such non-GAAP financial measures have limitations and should not be considered as a substitute for net income (loss) or as a better indicator of our operating performance than measures that are presented in accordance with GAAP. A reconciliation of GAAP results to non-GAAP results is included in this press release.

 

Financial Guidance

The Company’s near-term outlook is being challenged by previous OLED wafer allocation constraints that impacted 2nd half 2022 design-in projects and ongoing inventory correction in smartphones and other consumer end markets driven by weakening consumer demand. Q1 is also typically the Company’s seasonally slowest quarter following holiday shipments and is impacted by slower activity around the Chinese New Year.

In response to the industry-wide slowdown and inventory correction, the Company has reduced production at its Fab 3. As a result, the Company expects Q1’23 gross profit margin will be further impacted by lower utilization as well as higher manufacturing input costs such as electricity and wages. The Company currently expects gross profit margin to recover as volume and utilization improves in the 2nd half of 2023.

While actual results may vary, Magnachip currently expects the following for Q1’23:

  • Revenue to be in the range of $55 million to $59 million, including about $5 million of Transitional Fab 3 Foundry Services.
  • Gross profit margin to be in the range of 21% to 23%.

 

Q4 2022 Earnings Conference Call

Magnachip will host a corresponding conference call at 2:00 p.m. PT / 5:00 p.m. ET on Thursday, February 16, 2023, to discuss its financial results. In advance of the conference call, all participants must use the following link to complete the online registration process. Upon registering, each participant will receive access details for this event including the dial-in numbers, a PIN number, and an e-mail with detailed instructions to join the conference call. A live and archived webcast of the conference call and a copy of earnings release will be accessible from the ‘Investors’ section of the Company’s website at www.magnachip.com.

 

Online registration: https://register.vevent.com/register/BI7b1cf7d40d2f43489a0d4fc290ea1ea2

 

Safe Harbor for Forward-Looking Statements

Information in this release regarding Magnachip’s forecasts, business outlook, expectations and beliefs are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include expectations about estimated historical or future operating results and financial performance, outlook and business plans, including first quarter 2023 revenue and gross profit margin expectations, and the impact of market conditions associated with inflation and rising interest rates, the COVID-19 pandemic or the emergence of various variants of the virus, geopolitical conflict between Russia and Ukraine, and escalated trade tensions and supply constraints on Magnachip’s first quarter 2023 and future operating results. All forward-looking statements included in this release are based upon information available to Magnachip as of the date of this release, which may change, and we assume no obligation to update any such forward-looking statements. These statements are not guarantees of future performance and actual results could differ materially from our current expectations. Factors that could cause or contribute to such differences include, among others: the impact of changes in macroeconomic and/or general economic conditions, including those caused by or related to inflation, potential recessions or other deteriorations, economic instability or civil unrest; the COVID-19 pandemic or the emergence of various variants of the virus or other outbreaks of disease, and governmental lock-downs or other measures implemented in response thereto, and the Russia-Ukraine conflict; manufacturing capacity constraints or supply chain disruptions that may impact our ability to deliver our products or affect the price of components, which may lead to an increase in our costs, as well as impacting demand for our products from customers who are similarly affected by such capacity constraints or disruptions; the impact of competitive products and pricing; timely design acceptance by our customers; timely introduction of new products and technologies; ability to ramp new products into volume production; industry wide shifts in supply and demand for semiconductor products; industry and/or company overcapacity; effective and cost efficient utilization of manufacturing capacity; financial stability in foreign markets and the impact of foreign exchange rates; unanticipated costs and expenses or the inability to identify expenses which can be eliminated; compliance with U.S. and international trade and export laws and regulations by us, our customers and our distributors, including those related to the Russia-Ukraine conflict; change or ratification of local or international laws and regulations, including those related to environment, health and safety; public health issues, including the COVID-19 pandemic or the emergence of various variants of the virus; other business interruptions that could disrupt supply or delivery of, or demand for, Magnachip’s products, including uncertainties regarding the impacts of the COVID-19 pandemic or the emergence of various variants of the virus that may result in factory closures, reduced workforces, scarcity of raw materials and goods produced in infected areas, as well as reduced consumer and business spending affecting demand for Magnachip’s products due to government and private sector mandatory business closures, travel restrictions or the like to prevent the spread of disease; and other risks detailed from time to time in Magnachip’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including our Form 10-K filed on February 23, 2022 and subsequent registration statements, amendments or other reports that we may file from time to time with the SEC and/or make available on our website. Magnachip assumes no obligation and does not intend to update the forward-looking statements provided, whether as a result of new information, future events or otherwise.

 

About Magnachip Semiconductor

Magnachip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, computing, industrial and automotive applications. The Company provides a broad range of standard products to customers worldwide. Magnachip, with more than 40 years of operating history, owns a portfolio of approximately 1,100 registered patents and pending applications, and has extensive engineering, design and manufacturing process expertise. For more information, please visit www.magnachip.com. Information on or accessible through Magnachip’s website is not a part of, and is not incorporated into, this release.

 

CONTACT:

Yujia Zhai
The Blueshirt Group
Tel. (860) 214-0809
Yujia@blueshirtgroup.com

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except share data)
(Unaudited)
Three Months Ended Year Ended
December 31,
2022
September 30,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Revenues:
Net sales – standard products business $         53,827 $         62,771 $         99,510 $       301,896 $       433,099
Net sales – transitional Fab 3 foundry services 7,163 8,428 10,825 35,762 41,131
Total revenues 60,990 71,199 110,335 337,658 474,230
Cost of sales:
Cost of sales – standard products business 37,150 45,497 62,206 202,347 283,503
Cost of sales – transitional Fab 3 foundry services 7,742 8,477 9,525 34,047 37,184
Total cost of sales 44,892 53,974 71,731 236,394 320,687
Gross profit 16,098 17,225 38,604 101,264 153,543
Gross profit as a percentage of standard products business net sales 31.0 % 27.5 % 37.5 % 33.0 % 34.5 %
Gross profit as a percentage of total revenues 26.4 % 24.2 % 35.0 % 30.0 % 32.4 %
Operating expenses:
Selling, general and administrative expenses 12,562 11,411 13,255 50,872 52,440
Research and development expenses 13,653 13,321 12,197 52,338 51,212
Merger-related income, net (49,369 ) (35,527 )
Other charges, net 2,501 (1,349 ) 3,298 2,011
Total operating expenses (income) 26,215 27,233 (25,266 ) 106,508 70,136
Operating income (loss) (10,117) (10,008) 63,870 (5,244) 83,407
Interest income 2,420 1,784 858 5,980 2,609
Interest expense (269) (278) (132 ) (1,157) (1,371 )
Foreign currency gain (loss), net 17,492 (12,809) 147 (3,019) (11,853 )
Other income, net (42) 174 89 561 1,177
Income (loss) before income tax expense (benefit) 9,484 (21,137) 64,832 (2,879) 73,969
Income tax expense (benefit) 6,513 (3,942) 11,221 5,157 17,261
Net income (loss) $           2,971 $       (17,195) $         53,611 $         (8,036) $         56,708
Basic earnings (loss) per common share— $             0.07 $           (0.38) $             1.16 $           (0.18) $             1.26
Diluted earnings (loss) per common share— $             0.07 $           (0.38) $             1.12 $           (0.18) $             1.21
Weighted average number of shares—
Basic 44,054,275 44,865,266 46,369,520 44,850,791 44,879,412
Diluted 44,731,683 44,865,266 47,691,816 44,850,791 47,709,373

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
(Unaudited)
December 31,
2022
December 31,
2021
(In thousands of U.S. dollars, except share data)
Assets
Current assets
Cash and cash equivalents $                 225,477 $                   279,547
Accounts receivable, net 35,380 50,954
Inventories, net 39,883 39,370
Other receivables 7,847 25,895
Prepaid expenses 10,560 7,675
Hedge collateral 2,940 3,060
Other current assets 15,766 2,619
Total current assets 337,853 409,120
Property, plant and equipment, net 110,747 107,882
Operating lease right-of-use assets 5,265 4,275
Intangible assets, net 1,930 2,377
Long-term prepaid expenses 10,939 8,243
Deferred income taxes 38,324 41,095
Other non-current assets 11,587 10,662
Total assets $                 516,645 $                   583,654
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $                   17,998 $                     37,593
Other accounts payable 9,702 6,289
Accrued expenses 9,688 20,071
Accrued income taxes 3,154 11,823
Operating lease liabilities 1,397 2,323
Other current liabilities 5,306 7,382
Total current liabilities 47,245 85,481
Accrued severance benefits, net 23,121 33,064
Non-current operating lease liabilities 4,091 1,952
Other non-current liabilities 14,035 10,395
Total liabilities 88,492 130,892
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 150,000,000 shares authorized, 56,432,449 shares issued and 43,824,575 outstanding at December 31, 2022 and 55,905,320 shares issued and 45,659,304 outstanding at December 31, 2021 564 559
Additional paid-in capital 266,058 241,197
Retained earnings 335,506 343,542
Treasury stock, 12,607,874 shares at December 31, 2022 and 10,246,016 shares at December 31, 2021, respectively (161,422) (130,306 )
Accumulated other comprehensive loss (12,553) (2,230 )
Total stockholders’ equity 428,153 452,762
Total liabilities and stockholders’ equity $                 516,645 $                   583,654

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
Three Months

Ended

Year Ended
December 31,
2022
December 31,
2022
December 31,
2021
Cash flows from operating activities
Net income (loss) $           2,971 $      (8,036) $       56,708
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization 3,775 15,000 14,239
Provision for severance benefits 1,126 6,289 8,282
Amortization of debt issuance costs and original issue discount 261
Loss (gain) on foreign currency, net (46,606) 19,729 32,432
Provision for inventory reserves 1,844 9,574 2,244
Stock-based compensation 1,550 6,037 7,704
Deferred income tax assets 56 278 918
Other, net 255 664 (613)
Changes in operating assets and liabilities
Accounts receivable, net 2,471 10,276 7,505
Inventories 582 (12,626) (5,939)
Other receivables 1,031 18,146 (21,538)
Other current assets 9,967 (4,150) 12,397
Accounts payable (1,533) (16,325) (11,437)
Other accounts payable (3,195) (9,410) (7,798 )
Accrued expenses (13,094) (7,228) 4,637
Accrued income taxes 3,083 (8,400) (1)
Deferred revenue (47) (1,261) (131)
Other current liabilities (276) (645) 1,445
Other non-current liabilities 226 749 (1,398 )
Contributions to severance insurance deposit accounts (7,662) (7,899) (5,688)
Payment of severance benefits (1,831) (6,012) (6,679)
Other, net 228 415 193
Net cash provided by (used in) operating activities (45,079) 5,165 87,743
Cash flows from investing activities
Proceeds from settlement of hedge collateral 12,427 15,232 5,214
Payment of hedge collateral (15,282) (3,349 )
Proceeds from disposal of property, plant and equipment 550 1,446
Purchase of property, plant and equipment (11,582) (23,394) (32,212 )
Payment for intellectual property registration (89) (390) (614 )
Collection of guarantee deposits 3,192
Payment of guarantee deposits (306) (2,381) (5,001 )
Other, net 495 737 (114 )
Net cash provided by (used in) investing activities 945 (24,928) (31,438 )
Cash flows from financing activities
Proceeds from exercise of stock options 1,786 4,279
Acquisition of treasury stock (8,895) (13,960) (1,653 )
Acquisition of stock under accelerated stock repurchase agreement (20,073)
Payment under accelerated stock repurchase agreement (17,427)
Repayment of financing related to water treatment facility arrangement (119) (500) (563 )
Others (20) (70) (107)
Net cash used in financing activities (9,034) (12,744) (35,544 )
Effect of exchange rates on cash and cash equivalents 27,814 (21,563) (21,154 )
Net decrease in cash and cash equivalents (25,354) (54,070) (393 )
Cash and cash equivalents
Beginning of the period 250,831 279,547 279,940
End of the period $       225,477 $    225,477 $   279,547

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS)
(In thousands of U.S. dollars)
(Unaudited)
Three Months Ended Year Ended
December 31,
2022
September 30,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Operating income (loss) $ (10,117) $ (10,008) $ 63,870 $ (5,244) $ 83,407
Adjustments:
Equity-based compensation expense 1,550 861 1,648 6,037 7,704
Inventory reserve related to Huawei impact of downstream trade restrictions (379) (1,460)
Merger-related income, net (49,369) (35,527)
Other charges, net 2,501 (1,349) 3,298 2,011
Adjusted Operating Income (Loss) $ (8,567) $ (6,646) $ 14,421 $ 4,091 $ 56,135

We present Adjusted Operating Income (Loss) as a supplemental measure of our performance. We define Adjusted Operating Income (Loss) for the periods indicated as operating income (loss) adjusted to exclude (i) Equity-based compensation expense (ii) Inventory reserve related to Huawei impact of downstream trade restrictions (iii) Merger-related income, net and (iv) Other charges, net.

For the year ended December 31, 2022, Other charges, net includes $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million, incurred in connection with certain strategic evaluations, both of which were offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi. For the year ended December 31, 2021, Other charges, net includes $3.4 million of non-recurring professional service fees and expenses incurred in connection with the regulatory requests, partially offset by $1.4 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi (which was closed during the year ended December 31, 2018).

For the year ended December 31, 2021, we recorded in our consolidated statement of operations net gain of $35.5 million that represented income of $70.2 million from the recognition of a reverse termination fee, net of professional service fees and expenses of $34.7 million incurred in connection with the contemplated merger transaction of the Company that was terminated in December 2021.

 

MAGNACHIP SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA AND ADJUSTED NET INCOME (LOSS)
(In thousands of U.S. dollars, except share data)
(Unaudited)
Three Months Ended Year Ended
December 31,
2022
September 30,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Net income (loss) $           2,971 $        (17,195) $            53,611 $        (8,036) $           56,708
Adjustments:
Interest income (2,420) (1,784) (858) (5,980) (2,609)
Interest expense 269 278 132 1,157 1,371
Income tax expense (benefit) 6,513 (3,942) 11,221 5,157 17,261
Depreciation and amortization 3,775 3,623 3,663 15,000 14,239
EBITDA 11,108 (19,020) 67,769 7,298 86,970
Equity-based compensation expense 1,550 861 1,648 6,037 7,704
Foreign currency loss (gain), net (17,492) 12,809 (147) 3,019 11,853
Derivative valuation loss (gain), net 66 (146) (29) (135) (123)
Inventory reserve related to Huawei impact of downstream trade restrictions (379) (1,460)
Merger-related income, net (49,369) (35,527)
Other charges, net 2,501 (1,349) 3,298 1,284
Adjusted EBITDA $          (4,768) $          (2,995) $            18,144 $        19,517 $           70,701
Net income (loss) $            2,971 $        (17,195 ) $            53,611 $        (8,036) $           56,708
Adjustments:
Equity-based compensation expense 1,550 861 1,648 6,037 7,704
Foreign currency loss (gain), net (17,492) 12,809 (147) 3,019 11,853
Derivative valuation loss (gain), net 66 (146 ) (29) (135) (123)
Inventory reserve related to Huawei impact of downstream trade restrictions (379) (1,460)
Merger-related income, net (49,369) (35,527)
Other charges, net 2,501 (1,349) 3,298 1,284
Income tax effect on non-GAAP adjustments (2,943) 2,267 9,713 4,569 9,713
Adjusted Net Income (Loss) $         (15,848) $            1,097 $            13,699 $          8,752 $           50,152
Adjusted Net Income (Loss) per common share—
– Basic $             (0.36) $              0.02 $               0.30 $            0.20 $               1.12
– Diluted $             (0.36) $              0.02 $               0.29 $            0.19 $               1.07
Weighted average number of shares – basic 44,054,275 44,865,266 46,369,520 44,850,791 44,879,412
Weighted average number of shares – diluted 44,054,275 45,747,255 47,691,816 45,795,559 47,709,373

We present Adjusted EBITDA and Adjusted Net Income (Loss) as supplemental measures of our performance. We define Adjusted EBITDA for the periods indicated as EBITDA (as defined below), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Inventory reserve related to Huawei impact of downstream trade restrictions, (v) Merger-related income, net and (vi) Other charges, net. EBITDA for the periods indicated is defined as net income (loss) before interest income, interest expense, income tax expense (benefit) and depreciation and amortization.

We prepare Adjusted Net Income (Loss) 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) is particularly useful because it reflects the impact of our asset base and capital structure on our operating performance. We define Adjusted Net Income (Loss) for the periods as net income (loss), adjusted to exclude (i) Equity-based compensation expense, (ii) Foreign loss (gain), net, (iii) Derivative valuation loss (gain), net, (iv) Inventory reserve related to Huawei impact of downstream trade restrictions, (v) Merger-related income, net, (vi) Other charges, net and (vii) Income tax effect on non-GAAP adjustments.

For the year ended December 31, 2022, Other charges, net includes $2.8 million of one-time employee incentives and professional service fees and expenses of $1.0 million, incurred in connection with certain strategic evaluations, both of which were offset in part by a $0.5 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi. For the year ended December 31, 2021, Other charges, net includes $3.4 million of non-recurring professional service fees and expenses incurred in connection with the regulatory requests, partially offset by $1.4 million gain on sale of certain legacy equipment of the closed back-end line in our fabrication facility in Gumi (which was closed during the year ended December 31, 2018) and $0.7 million legal settlement gain related to certain expenses incurred in prior periods in connection with our legacy Fab 4 (which was sold during the year ended December 31, 2020) and awarded in the third quarter of 2021.

For the year ended December 31, 2021, we recorded in our consolidated statement of operations net gain of $35.5 million that represented income of $70.2 million from the recognition of a reverse termination fee, net of professional service fees and expenses of $34.7 million incurred in connection with the contemplated merger transaction of the Company that was terminated in December 2021.

For the quarter and year ended December 31, 2021, the adjustment for GAAP and cash tax expense difference in connection with the release of valuation allowances will no longer be an adjustment included in the Company’s non-GAAP financial measure. As such, Adjusted Net Income and Adjusted Net Income per Common Share for Q4 2021 and for the full year 2021 presented here have been recast to reflect the removal of this adjustment in accordance with Securities and Exchange Commission guidance.

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SOURCE Magnachip Semiconductor Corporation