Photronics (PLAB) 11 Dec 242024 Q4 Earnings call transcript

Good day, and welcome to the Photronics Q4 FY '24 Earnings Call. [Operator Instructions]As a reminder, this conference is being recorded, Wednesday, December 11, 2024. I would now like to turn the conference over to Ted Moreau, Vice President, Investor Relations.

Thank you, operator. Good morning, everyone. of XXXX review Quarter our to Photronics' Fourth fiscal Results. Welcome

by believe, in forward-looking on include earlier Lee, this statements Relations The made such Rivera, issued are with our available morning estimate, our today's me that and on CEO; words presentation press website. morning, material the are we CTO. Joining remarks of Investor Progler, participants Frank Eric accompanies view. call anticipate, together Chris expect, CFO; release this that our forecast, the Comments as section any may include and

number These are risks, forward-looking statements are based predict. to and upon that a factors of other uncertainties difficult

Although we achievements. reflected expectations cannot are guarantee we future of that reasonable, or statements results, the performance in the believe level forward-looking activity,

update to our results. under the of duty of date the are forward-looking actual statements presentation after no to these the to any conform statements We

GAAP metrics. in During non-GAAP of these the we to refer to course results our of financial reconciliation A presentation will materials. financial is certain discussion, metrics our provided

fiscal the our January York be and participating XX December Conference we first to over now Needham will New Growth on Summit will turn I New the York CEO XX. in in on call Frank. the quarter, During

good everyone. and Ted, you, Thank morning,

sales both engagement have technology our team and the we him our previously extensive to in Before our of who the Relations, investors. has side part as joined we with to we capital of fourth Head take we us on worked markets quarter would experience excited begin, welcome as industry. Investor are I like Relations, Investor during moment and a Ted to Have Moreau, as the expand

was high-end with as sales Sales history. driven $XXX of in million level XXXX high highest of million FPD. the sales founded delivered end by our strong XXXX GXX.X+ the slightly from We coming record above we in second and year the sales $XXX fourth established Full with of was a quarter IC guidance. in

quarter, this in primarily U.S. positively turned and the demand markets, end Asia designs for IC the Regarding high-end

expanding digital AI supply of the economy mass Being are the next margin the years. chips subsidized combined AI ISIS for This, driving corners expansion ecosystem. support forward rapidly into of several all will push with a industry mass government demand to chain

of merchant global strong X presence, producers the we market benefit and favorable technology, mass process long-term IC positioned expertise trends. marginal As largest ourselves blue with from share leading have this to

Turning similar by size manufacturing roper manufacturing. display is Nature to to panel IC requires mobile on difficult a new mask, hence, and larger LTPS epidemic panel designs, ASP are which ASPs. to support high-end command such manufacture road display to maps compress display, GXX.X+ demand and driven assets needed higher and product capacity, are AMOLED photopic line

growth As products. in the global TDM solutions new allow supplier, at FPD largest design their to features mask makers panel our

full year, to future opportunity $XX about positioned of full well excited to We both strong LPD the further quarter the and are and contributed income million flow again into net extend QX $XXX -- our the cash in million sheet. maintain our of leadership. and once for for results These year. record balance are income strengthening net a

have increased by past million. $XXX XX -- we to Over investment the up million months, $XXX short-term

such to the footprint initiatives, product flexibility We in as and development strategic global financial expansion, have M&A. invest

existing on CapEx. our capture evolve In million to XXXX, opportunities. continue we we $XXX As spent network and growth

regional Asia with capacity IC $XXX large are productivity. capability plan In million also opportunities. and reliability to U.S. We a while improve network capital replacing spend growth analog deploying this and IC XXXX, markets, to on our capability a equipment multisite and focus in mainly growing U.S. and we to capacity to expand capture

in successfully in we installed in had then, did the our projected country. X have not China China, the market. Since have years operations production as to ago, data we Turning presence and we scaled IT our region in production X supply. for FPD mass from semiconductor and of -- demand in and display outgrow and facility with growing China Hefe. the facility to Xiamen largest is China

We for thanks company, be advantages. expect our sustainable competitive to profitable a the to China growth continue engine to

of purchase agreements customer long-term local have position. support, market-leading Furthermore, as secured evidence our our our

As the long-term photomask have drivers, as positioned trends. as largest regionalization including U.S. to a leader benefit producer, market ourselves from we leadership

We will growth. continue to invest in profitable

status, technology to will We competitive source advantage enrollments. achieve their our leverage of photomask trusted our also customers our maintain as help and a

quarter first fourth will call quarter Eric I review the now provide guidance. to turn to results our and

Revenue you, up increased surge sales and was increased sales reduction million, memory to logic by growth was the both I X% improvement in revenue by primarily Frank. IC growth X% XX% sequentially both partially we slight see quarter-over-quarter, fourth driven U.S. mainstream high-end $XXX in a in was Thank Deputy. to a across that offset quarter as High-end Sequential the due in achieved soft and partially offset demand. foundries was Asia by logic in demand.

due for to stabilized. were our strong sub for XX-nanometer, was of smartphones. since of market XX- growing also which by EUV premium business. soft We growth. Mainstream demand growth for was FPD inclusive is By in revenue to business. sequentially lower sector advanced on mainstream strong our to sluggish improved high-end end for see essentially High X% due on strong mid-quarter to mobile remain specialty note, and demand was has that IC flat XX-nanometer the demand pleased slow GXX.X+ strongest focused sequentially, demand demand displays this up with offset

of even QX though premium was we're constraints flat Gross post-COVID. capacity from year-over-year, stemming from longer no pricing in benefiting experienced margin XX%

complexity. which result of other period duration, increased typically on Turning costs X higher from the to depending and technology as the were XX Increased recognized outside higher to qualification in we and SG&A months We services operating expenses. expenses. last experienced R&D activity, costs

to XX% strong in forward, Going operating our QX revenue. we expenses returning margins anticipate Operating remained at of of XX%. target

year in record company million. highest net income and $XXX full realized history the the For we of second XXXX, operating achieved income

conditions, was per GAAP After share. the our quarter. economic under impact results the FX previous EPS was We removing ability non-GAAP share compared loss, mixed in with to of per improve efficiency. and $X.XX even costs demonstrating continue $X.XX to EPS the $X.XX manage deliver operating strong

a ] We IC quarter, as the will strategically CapEx U.S. increase to million million most total in the revenue. multi-node $XXX expand in IC the invest million and of year, we generated million tools. $XX capacity and cash with CapEx million, support to capability for to in aging demand In flow anticipate year in $XXX operating $XXX in to bringing $XX of the replace earmarked the representing our the investment and XX% we [ market to XXXX, quarter grow

At sheet XXXX suspension requirements customer and customer production to us strategies XX% the expect in the $XXX our putting support year. in over to position equipment the by strengthened from total our U.S. strategy. million, consists decreased great same and investment the demand rate debt, The growth proliferate as investments increasing growing leases, was plan a We of be We low primarily support which increasing semiconductor combined year, time, regionalization industry to and total mid short-term both during balance globally. the XX%. completed cash of increases

be which second We maturity have will debt quarter. during fiscal paid virtually at off million $XX our all in remaining,

expansion $XX to of of Directors and In our of us to from geographic initiatives million. Last cash we our reinvesting a initiatives allocation the authorization share X repurchases an potential in as aspect million invest Share business $XXX quarter, strategy in development shareholders. remaining addition capital CapEx arise. the and are our up that after growth authorized any our increase to allows ability Board footprint sheet total our business return balance announced to development to ambitions, of repurchase such through that business

guidance, weeks. uneven that X visibility Before limited I'll and to demand for providing X remind and our product predict is you difficult to with backlog of typical --

expect $XXX first million, assets orders quarter late to ASP range qualifications, $XXX low can revenue to With impacts demand, that a meaning number a the quarter be revenue those high, earnings. are beginning including for have Year impact of high-end high-end New typical January. in on relatively seasonality and our for addition, In our in Chinese significant we quarterly first accounting million of

of and expectations between per we operating sales lower controls. XX%, disciplined volumes, share. seasonally and current non-GAAP maintaining This while to the earnings our margin diluted equates range model, for XX% an to per first cost those on the estimate reflecting $X.XX to Based quarter be operating in revenue share $X.XX

XXXX Beyond the first in quarter, line we our photomask that revenue with industry we dynamics. grow are can cautiously optimistic

And along we strategy to our trajectory. due growth and photomask leading to believe, market technology strategic and able we be growth market the with position should grow

we expand discipline should delivered for strategy. positioning financial in our are profitable managing in and our us of to value great and year leverage shareholders. core allow flow, thereby operating excellent and the deliver prudently and competencies, fourth our cash projects, leveraging By investing We improving investment growth cash and creating growth, continue in us another cost margins being high-return disciplined to quarter. do, delivering results our we ROIC As

I call for will now questions. over turn to the the your operator

[Operator Tom will of the Davidson. our with Instructions] line first come Diffely question from And D.A.

a up what Ask a were was detail bit few maybe They it on year-over-year. the quite impacted operating more a that first expenses. that. little And questions. the Maybe just on one-timers

the for question. Thanks

I'll XX% increased say let SG&A increased that. labor expect R&D talk we purposes, But about talk our perspective, to Chris expect benefits as we for From services. R&D. an expenses SG&A operating we well and to Chris to -- our primarily and about before probably So were OpEx it revenue... of have outside increased moving return as over I'll to R&D, about that

Okay.

outside side, it nature? was assume are the versus benefits on to onetime that real services, more more much in how SG&A the be recurring which tend Just I of and quickly labor

Sure.

bit actually increase versus I about we say more little of had Chris, you a So would recurring. would articulate impact. benefits about to the maybe nonrecurring R&D? half like labor some nonrecurring was But

Yes. another 'XX. We little activity node, Tom, finish will we pretty R&D And the pipeline that that new overall. We I often mask down a robust often new X-nanometer on product calls can industry turns in bit. qual increase, of calls. we couple side. especially Actually, had optical when comments and see the see in started a 'XX make R&D of a

So that's a good project.

program for high EUV product NA projects in had in revenue development some got 'XX. a We've on actually EUV our high going that's record the

down I'd be a our R&D doing that's that spend. barter then U.S., And seeing of migration, other think to the out the now. side particularly and on process driving node I customizations thing so mid is to seems there in that XXXX the of there's installed we're going kind So some less right well. U.S., some to support multi-beam in that. some in Europe R&D XXXX, We the point And tool we're

a revenue at of them. overall, of pipeline end it's good all back the So things have

our on So these we'll view. point spend projects from of money

sounds it Okay. continue bit of for And a higher $XXX million of going investment like And the go its it lot that to maybe, conversation a the towards Chris, could to is obviously, U.S. if little run than CapEx I in XXXX, historically.

So new I'm curious, just is on it capabilities, to you're that what that little for capacity, replacing new Is going $XXX million. get more tools? older color a maybe

Yes.

So Eric Tom, here.

most we we we prepared opportunity, why that's invest remarks, are going the expansion for U.S. and a So that and that lot by where going is of U.S. and the see new actually regionalization capacity the this as in trends And at to is in of the see to it in is this mentioned driven we're time. this right? that occurring as the see opportunity market,

in is your gone for the also replacing capacity. vast number, amount majority have -- but But that for to some the we that -- some is it's point, new black, old that expanding tools for also have of in

And -- the are process of serve serve to that expansion some this the now? current fabs? being capacity to Or of built is fabs newer for in is this of right

projects started, some fab mix. the There a know. they're lot are a world, you It's around Yes. of which the as

of slowed Some online, of pipeline there's of coming commercial have sweet photomasks. are of strong have spot few canceled, many in new been the them down. them still fabs but A and

be preparing that of over So some the customers where their we're lot that's showing next of going in our are X CapEx from increased and photos years. they're that needs support line to getting a is to what larger projections demand, with

to doing they're what project so customers the And we that that also in. these tend demand believe know are reliable and

So investing for some those we're new as of projects well.

just equipping Okay. that Great. have? you is this all facilities Any existing the brick-and-mortar,

facilities going But No in like CapEx going the No. things new walls are within no are but X now. expansions right some that there on. greenfields up, and

business. All probably, had then And Chris, mainstream question also I a right. the on

migration health node some I'm just about of the But more talked mainstream You going about the business. on. curious

do to Over have over pricing it, period business you several the we point. view last seems X-plus for really years, We was where next, waned years? a tight this had the there How IC That at had increases. supply. the call nice mainstream

be have my and feeling the on -- saw continues we I a basis, strong a last trajectory mainstream the was certainly over in some Asia particularly the supply-demand kind think to unit from as units the divisions. leveled of is But that are growth the mean, years imbalances of I couple mainstream. the healthy, have mainstream and of off our in of bulk rationalize

Frank it's happening make And some on in to appropriate what's mainstream. I think comments

in U.S. and growing market in Europe are Taiwan and mainstream actually market. pretty stable and The same

Of course, midstream. competition see continue do market to China, But of in mainstream grow. we the overall, little bit the a in

years growth And Frank, beyond And question industry Great. how of maybe just is growth you maybe view broader that? photomask in for do view Okay. What few your the 'XX? industry a you. next -- industry

Okay.

the is the in different ratio. U.S. actually a create the countries, And mentioned, lot including I focus of today we on region think as as new topic main projects regionalization the we

we is if we region, see stable region market. area a So by look Taiwan

Of business. And mix is China, more We to in course, the TSMC China. market high-end our capture want growing on but is are very still product focusing in we unique. fast,

on they main and reason Chris expansion. that's upgrade U.S., focus are we are putting and more our capacity capability as U.S., in lot projects mentioned, and in And a site the U.S. more and of

and AI. the the IC years will So semiconductor grow because basically, demand in course, of next the for photomask X

photomask. X are believe evaluations, will we we grow to continue the and So business on working outlook years for

for Okay. Maybe you, just question a Frank. final

products other using hands from my is? What the mass driving some around for AI the get talked opportunity you. about demand ecosystem ecosystem just in Photronics are to AI the You what

turn will Chris? I right. Chris. All this to question

yes. Yes, Thanks, Tom.

of starting and demand. own to get lot by their the and the a NVIDIA far of there's attention, most around that mask. the So build chain, circuitry supply as knows up as drive locked TSMC, main everybody chips some like well that's they pretty processors GPUs, the as peripheral they the But all GPU

And some are centers. memory the edge of driven mask which of chips, network the commercial by to available edge some data are are makers that chips, into AI, that going

We those that tuning are partners ships AI have on applications. memory for working

as set is around of would that. substantial GPU, the that I So it put main a devices which things support

trying we're deploy thing the projects of bit so ASIC, that a the we're is for business attached to And other a the number much inference integrated especially companies part of The And the ASIC running. AI, ASICs, application-specific are there's that heavily not little our circuits. on is are involved few quite seeing there but are model in a building, model side AI driven. to

pretty So network. of it's on part out that GPU just of and from ecosystem the the broad the to it's edge out building

closing Ted to at like I'm any showing queue in over the time. further for Moreau turn questions this call the no would now to Mr. I remarks. back

Thank you, Sherri.

I available great I We're Just weeks will have months in everybody and will you a to you. thank Photronics. today. talk interest wanted you the be hope I to over our of guys we joining periodically. for -- holidays, a day. happy have Thank and call really coming your hope appreciate

all concludes today's This for Thank program. participating. you

You may now disconnect.