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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

graphic

 Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

Date of report (Date of earliest event reported) 
May 22, 2024


PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
 
Connecticut
0-15451
06-0854886
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)

15 Secor Road, Brookfield, CT
  
06804
(Address of principal executive offices)
  
(Zip Code)

Registrant's Telephone Number, including area code
  
(203) 775-9000

(Former name or former address, if changed since last report)

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 following provisions:

☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
COMMON STOCK, $0.01 par value per share
 PLAB
NASDAQ Global Select Market

Item 2.02.
Results of Operations and Financial Condition.
 
On May 22, 2024, Photronics, Inc. (the “Company”) issued a press release reporting second quarter fiscal 2024 results.

A copy of the press release is furnished as Exhibit 99.1 to this report.  The information contained in this Item 2.02 and the attached Exhibits 99.1, 99.2, 99.3, 99.4, 99.5, 99.6 and 99.7, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth by specific reference in such filing.

On May 22, 2024, the Company will conduct a conference call during which certain unaudited, non-GAAP financial information related to the Company’s operations for the three months ended April 28, 2024 may be disclosed. This information is set forth in Exhibit 99.7.

Item 9.01.
Financial Statements and Exhibits.
 
(d)
Exhibits

Press Release May 22, 2024.

Condensed Consolidated Statements of Income.

Condensed Consolidated Balance Sheets.

Condensed Consolidated Statements of Cash Flows.

Reconciliation of GAAP to Non-GAAP Financial Information.

Reconciliation of GAAP to Non-GAAP Financial Information (cont.).

Photronics Q2 2024 Financial Results Conference Call May 22, 2024 slides.

SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
PHOTRONICS, INC.
 
(Registrant)
    
 
By:
/s/ Richelle E. Burr
 
Name:
Richelle E. Burr
 
Title:
Executive Vice President,
   
Chief Administrative Officer,
   
General Counsel and Secretary

   
Date:  May 22, 2024
    
 
Exhibit 99.1
For Further Information:
Eric Rivera
Vice President & Interim CFO
203.740.5283
erivera@photronics.com

Photronics Reports Second Quarter Fiscal 2024 Results

BROOKFIELD, Conn. May 22, 2024 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its second quarter of fiscal year 2024 ended April 28, 2024.
 
“Second quarter revenue and gross margin were in line with the first quarter as positive seasonality trends were offset by business headwinds primarily related to temporary soft demand following the Chinese New Year holiday and the impact from earthquakes in Taiwan beginning in early April,” said Frank Lee, chief executive officer. “Order rates, which typically pause during Lunar New Year, have recovered at a slower rate than we typically observe. In addition, the recent earthquakes in Taiwan caused a loss of production across both IC and FPD, resulting in an approximately $3 million revenue impact. Despite these challenges, we maintained gross margin as the global Photronics team performed well, serving our customers by quickly and efficiently recovering from the disruptions. We achieved good earnings and cash generation, further strengthening our balance sheet and positioning us to continue investing in profitable growth. We are building momentum for solid performance in 2024 and beyond.”
 
Second Quarter Fiscal 2024 Results


 •
Revenue was $217.0 million, down 5% year-over-year and up 0.3% sequentially

•
GAAP net income attributable to Photronics, Inc. shareholders was $36.3 million, or $0.58 per diluted share, compared with $39.9 million, or $0.65 per diluted share in the second quarter 2023 and $26.2 million, or $0.42 per diluted share in the first quarter of 2024

•
Non-GAAP net income attributable to Photronics, Inc. shareholders was $28.7 million, or $0.46 per diluted share, compared with $32.9 million, or $0.54 per diluted share in the second quarter 2023 and $29.9 million, or $0.48 per diluted share in the first quarter of 2024

•
IC revenue was $160.9 million, down 4% year-over-year and up 2% sequentially

•
FPD revenue was $56.1 million, down 10% from the same quarter last year and 5% sequentially

•
Cash generated from operating activities was $76.5 million, and cash invested in organic growth through capital expenditures was $20.0 million

•
Cash balance at the end of the quarter was $539.2 million, with $20.7 million in short-term investments and $21.8 million in debt

Third Quarter Fiscal 2024 Guidance
 
For the third quarter of fiscal 2024, Photronics expects revenue to be between $221 million and $229 million and non-GAAP net income attributable to Photronics, Inc. shareholders to be between $0.53 and $0.59 per diluted share.
 
Webcast
 
A webcast to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, May 22, 2024.  The call will be broadcast live and on-demand on the Events and Presentations link on the Photronics website. Analysts and investors who wish to participate in the Q&A portion of the call should click here. It is suggested that participants register fifteen minutes prior to the call's scheduled start time.
 
About Photronics
 
Photronics is a leading worldwide manufacturer of integrated circuit (IC) and flat panel display (FPD) photomasks. High precision quartz plates that contain microscopic images of electronic circuits, photomasks are a key element in the IC and FPD manufacturing process. Founded in 1969, Photronics has been a trusted photomask supplier for over 50 years.  As of October 31, 2023, the company had approximately 1,885 employees. The company operates 11 strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the company can be accessed at www.photronics.com.
 
Forward-Looking Statements
 
Certain statements in this press release constitute “forward-looking statements” regarding our industry, our strategic position, and our financial and operating results.  These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, performance or achievements to differ materially.  Please refer to the documents we file with the Securities and Exchange Commission. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in these forward-looking statements. These certain factors can be found in our most recent SEC filings.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of this release to conform these statements to actual results.
 
Non-GAAP Financial Measures
 
Non-GAAP Net Income attributable to Photronics, Inc. shareholders, non-GAAP earnings per share, and Net Cash are "non-GAAP financial measures" as such term is defined by the Securities and Exchange Commission, and may differ from similarly named non-GAAP financial measures used by other companies. The attached financial supplement reconciles Photronics, Inc. financial results under GAAP to non-GAAP financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate our future on-going performance because they enable a more meaningful comparison of our projected performance with our historical results. These non-GAAP metrics are not intended to represent funds available for our discretionary use and are not intended to represent, or be used as a substitute for, gross profit, operating income, net income, cash and cash equivalents, or cash flows from operations, as measured under GAAP. The items excluded from these non-GAAP metrics, but included in the calculation of their closest GAAP equivalent, are significant components of the condensed consolidated balance sheets and statement of cash flows and must be considered in performing a comprehensive assessment of overall financial performance. Please refer to the non-GAAP reconciliations on the following pages.


Exhibit 99.2

PHOTRONICS, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)

   
Three Months Ended
    
Six Months Ended
  

  
April 28,
2024
      
January 28,
2024
      
April 30,
2023
      
April 28,
2024
      
April 30,
2023
   
                               
Revenue
  
$
217,000
    
$
216,334
    
$
229,306
    
$
433,334
    
$
440,397
  
                                         
Cost of goods sold
    
137,749
      
137,079
      
140,904
      
274,828
      
275,918
  
                                         
Gross Profit
    
79,251
      
79,255
      
88,402
      
158,506
      
164,479
  
                                         
Operating Expenses:
                                        
                                         
Selling, general and administrative
    
18,996
      
18,321
      
17,878
      
37,317
      
34,696
  
 
                                        
Research and development
    
4,292
      
3,445
      
3,479
      
7,736
      
6,781
  
 
                                        
Total Operating Expenses
    
23,288
      
21,766
      
21,357
      
45,053
      
41,477
  
                                         
Other operating gain
    
89
      
-
      
-
      
89
      
-
  
                                         
Operating Income
    
56,052
      
57,489
      
67,045
      
113,542
      
123,002
  
                                         
Non-operating (loss) income, net
    
20,534
      
(3,747
)
    
13,571
      
16,786
      
(854
)
                                         
Income Before Income Tax Provision
    
76,586
      
53,742
      
80,616
      
130,328
      
122,148
  
                                         
Income tax provision
    
20,214
      
14,660
      
21,343
      
34,874
      
33,925
  
                                         
Net Income
    
56,372
      
39,082
      
59,273
      
95,454
      
88,223
  
                                         
Net income attributable to noncontrolling interests
    
20,121
      
12,902
      
19,344
      
33,023
      
34,308
  
                                         
Net income attributable to Photronics, Inc. shareholders
  
$
36,251
    
$
26,180
    
$
39,929
    
$
62,431
    
$
53,915
  
                                         
Earnings per share:
                                        
                                         
Basic
  
$
0.59
    
$
0.43
    
$
0.65
    
$
1.01
    
$
0.88
  
 
                                        
Diluted
  
$
0.58
    
$
0.42
    
$
0.65
    
$
1.00
    
$
0.88
  
                                         
Weighted-average number of common shares outstanding:
                                        
                                         
Basic
    
61,771
      
61,455
      
61,138
      
61,613
      
61,016
  
 
                                        
Diluted
    
62,409
      
62,283
      
61,507
      
62,346
      
61,489
  


Exhibit 99.3

PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)

     
April 28,
2024
      
October 31,
2023
   
             
Assets
            
             
Current assets:
            
Cash and cash equivalents
  
$
539,160
    
$
499,292
  
Short-term investments
    
20,732
      
12,915
  
Accounts receivable
    
197,523
      
194,927
  
Inventories
    
54,257
      
49,963
  
Other current assets
    
32,461
      
28,353
  
                 
Total current assets
    
844,133
      
785,450
  
                 
Property, plant and equipment, net
    
729,489
      
709,244
  
Other assets
    
29,831
      
31,527
  
                 
Total assets
  
$
1,603,453
    
$
1,526,221
  
                 
Liabilities and Equity
                
                 
Current liabilities:
                
Current portion of long-term debt
  
$
19,318
    
$
6,621
  
Accounts payable and accrued liabilities
    
176,249
      
178,602
  
                 
Total current liabilities
    
195,567
      
185,223
  
                 
Long-term debt
    
2,456
      
17,998
  
Other liabilities
    
37,401
      
47,391
  
                 
Photronics, Inc. shareholders' equity
    
1,034,857
      
975,008
  
Noncontrolling interests
    
333,172
      
300,601
  
Total equity
    
1,368,029
      
1,275,609
  
                 
Total liabilities and equity
  
$
1,603,453
    
$
1,526,221
  


Exhibit 99.4

PHOTRONICS,  INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)


  
Six Months Ended
  


  
April 28,
2024
      
April 30,
2023
   

           
Cash flows from operating activities:
            
Net income
  
$
95,454
    
$
88,223
  
Adjustments to reconcile net income to net cash
                
provided by operating activities:
                
Depreciation and amortization
    
41,487
      
39,085
  
Share-based compensation
    
6,499
      
3,830
  
Changes in operating assets, liabilities and other
    
(25,446
)
    
(21,461
)
                 
Net cash provided by operating activities
    
117,994
      
109,677
  
                 
Cash flows from investing activities:
                
Purchases of property, plant and equipment
    
(63,311
)
    
(57,728
)
Purchases of available-for-sale debt securities
    
(16,551
)
    
(9,837
)
Proceeds from maturities of available-for-sale debt securities
    
9,000
      
4,000
  
Government incentives
    
1,419
      
1,393
  
Other
    
(6
)
    
(88
)
                 
Net cash used in investing activities
    
(69,449
)
    
(62,260
)
                 
Cash flows from financing activities:
                
Repayments of debt
    
(2,844
)
    
(14,720
)
Proceeds from share-based arrangements
    
1,055
      
730
  
Net settlements of restricted stock awards
    
(2,938
)
    
(1,252
)
                 
Net cash used in financing activities
    
(4,727
)
    
(15,242
)
                 
Effects of exchange rate changes on cash, cash equivalents, and restricted cash
    
(3,839
)
    
15,621
  
                 
Net increase in cash, cash equivalents, and restricted cash
    
39,979
      
47,796
  
Cash, cash equivalents, and restricted cash, beginning of period
    
501,867
      
322,409
  
                 
Cash, cash equivalents, and restricted cash, end of period
  
$
541,846
    
$
370,205
  


Exhibit 99.5

PHOTRONICS, INC.
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands)
(Unaudited)
 
   
Three Months ended
  

  
April 28,
2024
      
January 28,
2024
      
April 30,
2023
   
                   
Reconciliation of GAAP to Non-GAAP Net Income:
                  
                   
GAAP Net Income
  
$
36,251
    
$
26,180
    
$
39,929
  
FX (gain) loss
    
(14,766
)
    
8,909
      
(10,718
)
Estimated tax effects of above
    
3,743
      
(2,244
)
    
2,823
  
Estimated noncontrolling interest effects of above
    
3,489
      
(2,939
)
    
901
  
Non-GAAP Net Income
  
$
28,717
    
$
29,906
    
$
32,935
  
                         
Weighted-average number of common shares outstanding - Diluted
    
62,409
      
62,283
      
61,507
  
                         
Reconciliation of GAAP to Non-GAAP EPS:
                        
                         
GAAP diluted earnings per share
  
$
0.58
    
$
0.42
    
$
0.65
  
Effects of the above adjustments
  
$
(0.12
)
  
$
0.06
    
$
(0.11
)
Non-GAAP diluted earnings per share
  
$
0.46
    
$
0.48
    
$
0.54
  


Exhibit 99.6

PHOTRONICS, INC.
Reconciliation of GAAP to Non-GAAP Financial Information (cont.)
(in thousands)
(Unaudited)

Reconciliation of  Cash and cash equivalents  to Net Cash:

   
As of
  

  
April 28,
2024
      
October 31,
2023
      
April 30,
2023
   
                   
Cash and  cash equivalents
  
$
539,160
    
$
499,292
    
$
367,485
  
                         
Current portion of Long-term debt
    
(19,318
)
    
(6,621
)
    
(7,017
)
                         
Long-term Debt
    
(2,456
)
    
(17,998
)
    
(21,322
)
                         
Net Cash
  
$
517,386
    
$
474,673
    
$
339,146
  


Exhibit 99.7

 May 22, 2024  Q2 2024 Financial Results Conference Call 
 
 Safe Harbor Statement  This presentation and some of our comments during this presentation 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. We refer you to the documents the Company files from time to time with the Securities and Exchange Commission. These documents contain and identify important factors that could cause the actual results for the Company to differ materially from those contained in our projections or forward-looking statements. These certain factors can be found in our most recent SEC filings. Although we believe that the expectations reflected in the forward-looking statements are reasonable, 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. 
 
 Q2 2024 Summary  Navigated Q2 Challenges; Positioned for Long-Term Profitable Growth and Sustainable Shareholder Value Creation  1Adjusted EPS is a non-GAAP measure; see reconciliation included in this presentation.  $217.0M  Revenue  25.8%  Operating Margin  $0.58  EPS  $0.46  Adjusted EPS1  $76.5M  OCF  $539.2M  Cash  (5%) Y/Y  +0.3% Q/Q  (340) bps Y/Y  (80) bps Q/Q  (11%) Y/Y  38% Q/Q  (15%) Y/Y  (4%) Q/Q  (7%) Y/Y  84% Q/Q  +47% Y/Y  +6% Q/Q  Revenue slightly higher Q/Q as positive seasonal trends were mostly offset by business headwinds primarily related to temporary soft demand following the Lunar New Year and the impact from Taiwan earthquakes  Operating income and adjusted EPS decreased due to an increase in qualification activity that raised operating expense  Balance sheet fortified due to strong cash flow generation, debt reduction, and effective management of working capital  Investing in IC capacity to capitalize on market growth trends 
 
 Semiconductor: growing capacity and design activity  More extensive use of semiconductors across multiple applications, driven by megatrends such as AI and IoT  Supply chain regionalization driving investments in semiconductor fabs that creates redundant production capacity and drives photomask demand  Differentiation by design becoming competitive factor in mainstream (ASIC) and leading-edge applications  Expanding EUV adoption drives semi manufacturer photomask outsourcing of legacy technology nodes, increasing TAM for merchant suppliers  Display: advanced displays driving innovation  Global panel makers innovating to win AMOLED market share  Growing competition drives innovation and greater mask value  AMOLED manufacturing moving to larger form factor, requiring high-quality, advanced photomasks  Long-Term Trends Driving Photomask Demand  Design and Manufacturing Complexity is Good for Photomask Demand 
 
 Revenue by Product Line  $M  Q224  Q/Q  Y/Y  High-End*  58.1  (5%)  32%  Mainstream  102.9  6%  (16%)  Total  160.9  2%  (4%)  High-end down Q/Q on lower US demand; Y/Y up on strong demand from Asia foundries  Mainstream up Q/Q as legacy demand was robust; lower Y/Y demand largely driven by Asia fabs  Growth drivers:  New designs by customers to gain market share and support technology roadmap for megatrends such as AI  Regionalization driving investments for global chip capacity  Able to maintain pricing in favorable supply / demand dynamic  *IC: 28nm and smaller; FPD: ≥G10.5, AMOLED and LTPS   Totals may differ due to rounding  High-end down due to lower demand for low-end smartphones  Mainstream lower due to soft design activity on legacy technology  Growth drivers:  Technology development drives demand for higher-value masks  Mobile demand is expected to remain strong with rollout of new designs and emerging panel makers winning market share  AMOLED moving to larger form factors driving need to collaborate on mask development  $M  Q224  Q/Q  Y/Y  High-End*  48.0  (5%)  (8%)  Mainstream  8.1  (0.4%)  (22%)  Total  56.1  (5%)  (10%)  IC  FPD 
 
 Balance Sheet and Cash Flow Metrics  *Net cash is a non-GAAP term; see reconciliation included in this presentation  Balance Sheet Provides Resilience, Enables Growth Strategy and Shareholder Value Creation  $M  Q224  Y/Y  Q/Q  Cash  539.2  47%  6%  Short-term Investments  20.7  (54%)  60%  Debt  21.8  (23%)  (7%)  Net Cash*  517.4  53%  7%  Operating Cash Flow  76.5  (7%)  84%  Capital Expenditures  20.0  (25%)  (54%)  Continued strong operating cash flow from income generation and working capital management  Debt comprised of US equipment leases  Capex targets growth in IC capacity & facility expansion  Strong balance sheet able to fund investments, share repurchases, and strategic opportunities and remain resilient to effects of industry downturns 
 
 Q3 2024 Guidance   Revenue ($M)  221 – 229  Operating Margin  28% - 30%  Taxes ($M)  18 – 19  Diluted non-GAAP EPS  $0.53 - $0.59  Diluted Shares (M)  ~62  Full-year Capex (M)  ~140  Incorporation of chips in IoT, 5G, Crypto and consumer products   New designs to capture market share  Advanced display technologies  Outlook clouded by geopolitical uncertainty and macro-economic headwinds  Driving margin expansion and cash flows to deliver long-term shareholder value 
 
 Appendix 
 
 Revenue by Product Group ($M)  Total may differ due to rounding  IC  FPD  Mainstream  High-End  Mainstream  High-End  Total Revenue  IC Revenue  FPD Revenue  High-End: 28nm and smaller  High-End: ≥G10.5, AMOLED and LTPS 
 
 Non-GAAP Financial Measures  Non-GAAP Net Income attributable to Photronics, Inc. shareholders, non-GAAP earnings per share, and Net Cash are "non-GAAP financial measures" as such term is defined by the Securities and Exchange Commission, and may differ from similarly named non-GAAP financial measures used by other companies. The attached financial supplement reconciles Photronics, Inc. financial results under GAAP to non-GAAP financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate our future on-going performance because they enable a more meaningful comparison of our projected performance with our historical results. These non-GAAP metrics are not intended to represent funds available for our discretionary use and are not intended to represent, or be used as a substitute for, gross profit, operating income, net income, cash and cash equivalents, or cash flows from operations, as measured under GAAP. The items excluded from these non-GAAP metrics, but included in the calculation of their closest GAAP equivalent, are significant components of the condensed consolidated balance sheets and statement of cash flows and must be considered in performing a comprehensive assessment of overall financial performance. Please refer to the non-GAAP reconciliations on the following pages.  
 
 Non-GAAP Financial Measures 
 
 Non-GAAP Financial Measures