UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this
chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
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Securities registered pursuant to Section 12(b) of the Act:
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| Item 7.01. |
Regulation FD Disclosure.
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The virtual analyst and investor day presentation included as Exhibit 99.1 to this report may be presented at meetings with investors, analysts, and others on December
14, 2020. A copy of the presentation will be posted on the Photronics, Inc. website.
The information in this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed subject to the requirements of amended Item 10 of Regulation S-K, nor shall it be
deemed incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The
furnishing of this information hereby shall not be deemed an admission as to the materiality of any such information.
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Financial Statements and Exhibits.
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(d)
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Exhibits
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Photronics’ Virtual Analyst and Investor Day Presentation dated December 14, 2020.
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PHOTRONICS, INC.
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(Registrant)
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By:
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/s/ Richelle E. Burr
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Name:
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Richelle E. Burr
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Title:
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Executive Vice President,
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Chief Administrative Officer,
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General Counsel and Secretary
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Date: December 14, 2020
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Exhibit 99.1
Virtual Analyst and Investor DayDecember 14, 2020 Global Merchant Photomask Leader
Safe Harbor Statement This presentation and some of our comments may contain projections or other
forward-looking statements regarding future events, our future financial performance, and/or the future performance of the industry. These statements are predictions, and contain risks and uncertainties. Actual events or results may differ
materially from those presented. These statements include words like “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “may”, “plan”, “project”, “in our view” or the negative thereto. We cannot guarantee the accuracy of any forecasts
or estimates, and we are not obligated to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see the documents we file from time to
time with the Securities and Exchange Commission. 12/14/2020 2
Overview & Strategy Peter Kirlin, CEO
Today’s objectives Present PLAB investment thesisReview progress since 2018 investor dayDescribe next
growth phaseDemonstrate alignment with market trendsProvide long-term financial targetsAnswer your questions 12/14/2020 4
A Compelling Investment Thesis Global leader in merchant photomask industryDelivering growth by
leveraging core competenciesGrowing more quickly than the marketTechnology aligned with secular growth trendsChina industry expansion (IC & FPD) – Made in China 2025Display technology inflectionsInvestment growth strategy to double
EPSTop-line growing at twice industry growth rateOperating leverage expands marginsIncreasing cash flow to fund growth and share repurchase 12/14/2020 5
Leading merchant with unmatched global presence 12/14/2020 6 ICFPDIC & FPD Unmatched Global
Footprint11 Strategically Located Manufacturing Facilities Sources: SEMI 2019 Photomask Characterization Study; internal estimates
Phases of Photronics revenue growth 12/14/2020 7 Phase I: 1969 – 1986Technology StartupOrganic
GrowthMostly USPre-IPO Phase II: 1986 – 2002 M&A GrowthMerchant ConsolidationGlobal Expansion Phase III: 2003 – 2017Enter High-End MarketForm Strategic PartnershipsInvest in High-End CapabilityEstablish FPD PresenceImprove Balance
Sheet Phase IV: 2018 and Beyond Leverage China 1st Mover AdvantageExtend Technology LeadershipIncrease Market ShareStrategic Capital Allocation
Investment focus driving financial results 12/14/2020 8 535 551 610 +11% CAGR
Delivering on commitments 2018 Investor Day Commitment Results Growth $630M revenues and $0.80
EPS $610M and $0.52, impacted by COVID lockdowns & trade war Market Position China production to start H119 Hefei delivered; Xiamen plan modified Enter G10.5+ market Market leader Grow market share Delivered Financial
Strength Cash / net cash equal to pre-investment 2017: cash = $308M; net cash = $246M2020: cash = $279M; net cash = $210M plus $79M in share repurchases since 2018 Improve ROIC 2017 = 1.4%2020 = 3.9% 12/14/2020 9
Growing China business We have growing business in China34% of total revenue in 202023% of IC
revenue58% of FPD revenueGrowing strong since 2017IC +67% CAGRFPD +71% CAGRLocal manufacturing accelerates growthCustomer contracts fosters sustainable resultsIC JV enables us to compete more effectively 12/14/2020 10 +69% CAGR
FPD nearly doubled over 3 years Targeted high-end investmentsG10.5+AMOLED & LTPS for mobilePartner
with largest panel makersRunway left for advance display growthMobile platformsAdvanced TVMini & Micro LED2021 investments aligned with market trends 12/14/2020 11 +24% CAGR
Evolving investment focus 2018 Strategic Targets 2020 Strategic Targets G10.5+ Complete AMOLED
inflection point Advanced display technologies: AMOLED for mobile; OLED for TV/IT; emerging Micro and Mini LED China geographic expansion Continues, driven by Made In China 2025 industrial policy and growing nationalism 12/14/2020 12
2021-2023 Targets Double industry growth rates: 5-7%Expanding gross and operating margins, reaching
high twenties and high teens, respectivelyMore than doubling EPS to well in excess of $1 / share 12/14/2020 13
Summary We have sustained double digit growth in a very challenging environment over the past 3
yearsOur leadership position is expandingMoving forward our investment focus is narrowing to drive accretive growthWith a business model demonstrated to deliver increasing shareholder value 12/14/2020 14
Delivering Technology to the Market Chris Progler, CTO
Photomasks help enable the connected world Golden age of design and integration as
differentiatorsGlobal dynamics enhance mask value: technology, yield, cost, speed, security, trustIncreasing barriers to entryLeadership through partnership: Process of Record, Long-Term Purchase Agreement, Joint Development ProjectsMarket
pushing more technology into masks: customization, design activityMulti-node supply and demand trends favorableFocused and opportunity driven investments: region, customer, technology 12/14/2020 16 Mask Enables Robust Design Market Win
for Customer
Photomask opportunity transcends lithography design nodes LegacyCostCapacity Continuity High-EndChip
enablementDesign integrationNew fab ramp 12/14/2020 17 Mid-RangeTime to marketDesign flexibilityYield
High-tech photomask demand drivers ICEUV – mask and litho tech still maturing, consumes heavy writing
resourceMask complexity and count needed for advanced designsSoC trends – multi-function customization alongside SoC disaggregationCloud to edge computing migration and design activityFPDMask carrying more of lithography loadAMOLED migrating
down from premium smartphonesTV display innovation: lighting, size, resolution, compensationsGaming, remote work and learning driving demand 12/14/2020 18
Speed of design turns takes center stage across the landscapeAdvanced mask complexity, level count and
yieldCapacity constraints at mid and legacy nodesTechnologies that enable our photomask velocityCustomer collaboration tools to streamline process developmentHigh yielding, self-correcting and efficient mask processesRapid mask tuning
connected to device and panel performanceProcess fan out and nanometer scale harmonization for tech localizationTechnology investments for IC are targeted at delivering world class mask velocityWe are developing technology to transform the
speed at which first time right photomasks can be delivered to customers Photomask velocity: A key differentiator 12/14/2020 19
Technology as a tool to support our business growth 12/14/2020 Growth Investment Cycle +12%
CAGR 20
How has China’s strategy energized served markets for growth? Domestic investments add local capacity
to win share and support national agendaForeign competition must improve product innovation to sustain advantage and shareIntegrated circuits and displays elevated to center stage in economic and security landscapePhotomasks stand at
crossroad of design and manufacturing enablementExamples:70% of LCD and 50% of AMOLED capacity to China by 2021Advanced TV shipments to double by 2024. Mask count per advanced TV on path to doubling.Foundry capital spending increased >35%
in 2020 12/14/2020 21
“Made in China 2025” driving growth 12/14/2020 22 Source: Internal Estimates
Summary Photomasks are enabling technology for IC and display in the connected worldKey tech
inflections driving growthChina investment and global share goals in IC and FPD: LCD to mobile pivot, multi-node IC design activitySweet spot mid-range IC nodes to support pervasive chip implementation. Capacity constraints.Leaders continue
innovation driving advanced mask complexity and outsourcingIC and display take center stage for global economic and security independenceOur investment strategy is aligned with these market trendsWe develop focused processes and products to
enhance customer yield and time to marketWe are the leading trusted partner in the marketplace 12/14/2020 23 Customer
Financial Model & Outlook John Jordan, CFO
2020 Summary Several revenue records establishedRevenue of $609.7MFPD revenue of $191.3MChina revenue
of $207.5M (IC = $97.1M; FPD = $110.5M)Operating income improved 23% Y/YGenerated $143M in cash from operating activities, invested $71M in capex, and returned $34M in cash to shareholdersChina facilities contributed $79M in revenue with
operating loss of $2M; Hefei was profitable for the year 12/14/2020 25
Illustrative Target Model 2018 2019 2020 Illustrative Target Model3-Year
Horizon Revenue $535 $551 $610 $7005% CAGR $7256% CAGR $7507% CAGR Gross Margin 25% 22% 22% 24-26% 26-28% 27-29% Operating Margin 12% 9% 10% 13-15% 15-17% 17-19% Operating Cash
Flow $131 $68 $143 $150-160 $160-170 $175-185 Free Cash Flow $39 ($83) $77 $80-90 $90-100 $100-110 EPS $0.59 $0.44 $0.52 $1.00-1.05 $1.15-1.25 $1.25-1.35 12/14/2020 26
Clear capital deployment priorities Fund organic growthGeographic expansion into ChinaInvestments to
maintain technical leadershipCapacity expansion when reciprocated by customer commitmentFinancial discipline to improve ROICExplore strategic M&APhotomask industry – IC & FPDAdjacencies to increase revenue diversificationShare
repurchaseRepurchased 7.9M shares ($79M) since 2018Redeemed $115M in convertible debt since 2016, eliminating 10.3M potentially dilutive shares 27 -27% 12/14/2020
Financial discipline improves shareholder value Targeted investments drive top-line growth in excess
of marketOperating leverage and cost reductions expand marginsTarget operating margins mid- to high-teensTarget incremental margins 50%Strong cash flow generation fortifies balance sheetCapital deployment priorities to improve
ROIC 12/14/2020 28
Summary Recent performance on upward trendGrowing more quickly than marketsMargin expansion creates
earnings powerStrong cash flow generationStrategic use of cash to fund growth and enhance shareholder returns 12/14/2020 29
A Compelling Investment Thesis Global leader in merchant photomask industryDelivering growth by
leveraging core competenciesGrowing more quickly than the marketTechnology aligned with secular growth trendsChina industry expansion (IC & FPD) – Made in China 2025Display technology inflectionsInvestment growth strategy to double
EPSTop-line growing at twice industry growth rateOperating leverage expands marginsIncreasing cash flow to fund growth and share repurchase 12/14/2020 30
Questions?
For Additional Information:R. Troy Dewar, CFAVice President, Investor
Relations203.740.5610tdewar@photronics.com Thank you for your interest!