MAGNACHIP SEMICONDUCTOR CORP Management's Discussion And Analysis Of Financial Condition And Results Of Operations (form 10-Q)

The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and the related notes included elsewhere in this Report.

Our standard products business includes our Display Solutions and Power Solutions business lines.

Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income

• we believe that Adjusted EBITDA, by eliminating the impact of a number of

items that we do not consider to be indicative of our core ongoing operating

performance, provides a more comparable measure of our operating performance

• we believe that Adjusted EBITDA is commonly requested and used by securities

effects of financing, income taxes and the accounting effects of capital

spending, as well as other one time or recurring items described above; and

• we believe that Adjusted EBITDA is useful for investors, among other reasons,

core operating performance and to understand and assess the manner in which

We use Adjusted EBITDA in a number of ways, including:

• for planning purposes, including the preparation of our annual operating

• to evaluate the effectiveness of our enterprise level business strategies;

• in communications with our Board of Directors concerning our consolidated

• in certain of our compensation plans as a performance measure for determining

(a) This adjustment eliminates the impact of

generally require cash settlement, and, therefore, are not used by us to

assess the profitability of our operations. We believe that analysts and

investors will find it helpful to review our operating performance without

(b) This adjustment mainly eliminates the impact of

foreign currency translation associated with intercompany debt obligations

and foreign currency denominated receivables and payables, as well as the

cash impact of foreign currency transaction gains or losses on collection of

such receivables and payment of such payables. Although we expect to incur

foreign currency translation gains or losses in the future, we believe that

isolation of this adjustment provides investors with enhanced comparability

to prior and future periods of our operating performance results.

derivatives, which represents derivatives value changes excluded from the

risk being hedged. We enter into derivative transactions to mitigate foreign

exchange risks. As our derivative transactions are limited to a certain

portion of our expected cash flows denominated in U.S. dollars, and we do not

enter into derivative transactions for trading or speculative purposes, we do

not believe that these charges or gains are indicative of our core operating

(d) For the three and six months ended June 30, 2021, this adjustment eliminates

operating results and are not expected to represent an ongoing operating

expense or income to us, we believe our operating performance results are

more usefully compared if this adjustment is excluded.

(e) For the three and six months ended June 30, 2022, we recorded $0.8 million of

professional service fees and expenses incurred in connection with certain

strategic evaluations. For the three and six months ended June 30, 2021, this

professional service fees and expenses incurred in connection with the

regulatory requests. As these adjustments meaningfully impacted our operating

results and are not expected to represent ongoing operating expenses to us,

we believe our operating performance results are more usefully compared if

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures, or future

requirements, for capital expenditures or contractual commitments;

• Adjusted EBITDA does not reflect changes in, or cash requirements for,

charges, the assets being depreciated and amortized will often need to be

• Adjusted EBITDA does not consider the potentially dilutive impact of

• other companies in our industry may calculate Adjusted EBITDA differently

than we do, limiting its usefulness as a comparative measure.

(a) This adjustment eliminates the impact of

generally require cash settlement, and, therefore, are not used by us to

assess the profitability of our operations. We believe that analysts and

investors will find it helpful to review our operating performance without

(b) For the three and six months ended June 30, 2021, this adjustment eliminates

operating results and are not expected to represent an ongoing operating

expense or income to us, we believe our operating performance results are

more usefully compared if this adjustment is excluded.

professional service fees and expenses incurred in connection with certain

strategic evaluations. For the three and six months ended June 30, 2021, this

professional service fees and expenses incurred in connection with the

regulatory requests. As these adjustments meaningfully impacted our operating

results and are not expected to represent ongoing operating expenses to us,

we believe our operating performance results are more usefully compared if

• we use Adjusted Net Income (including on a per share basis) in

communications with our Board of Directors concerning our consolidated

financial performance without the impact of

expenses and the other items as we discussed below since we believe that

it is a more consistent measure of our core operating results from period

• we believe that reporting Adjusted Net Income (including on a per share

basis) is useful to readers in evaluating our core operating results

because it eliminates the effects of

expenses as well as the other items we discuss below, such as foreign