Magnachip Semiconductor (MX) 8-K Magnachip Reports Results for Fourth Quarter and Full-Year 2022

Exhibit 99.1

Magnachip Reports Results for Fourth Quarter and Full-Year 2022

• 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 2^nd 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 Korea, February 16, 2023 — Magnachip Semiconductor Corporation (NYSE: MX) (“Magnachip” or the “Company”) today announced financial results for the fourth quarter and full-year 2022.

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 2^nd 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%.

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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.

3

CONTACT:

Yujia Zhai

The Blueshirt Group

Tel. (860) 214-0809

Yujia@blueshirtgroup.com

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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

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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

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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

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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			September30, 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.

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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			September30, 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

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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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