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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) 
 
August 29, 2024
  

PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
 
Connecticut
001-39063
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 August 29, 2024, Photronics, Inc. (the “Company”) issued a press release reporting third 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 and 99.6, 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 August 29, 2024, the Company conducted a conference call during which certain unaudited, non-GAAP financial information related to the Company’s operations for the three months ended July 28, 2024 was disclosed. This information is set forth in Exhibit 99.6.

Item 9.01.
Financial Statements and Exhibits.
 
(d)
Exhibits
  Press Release August 29, 2024.
 Condensed Consolidated Statements of Income.
 Condensed Consolidated Balance Sheets.
 Condensed Consolidated Statements of Cash Flows.
 Reconciliation of GAAP to Non-GAAP Financial Information.
 Photronics Q3 2024 Financial Results Conference Call August 29, 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/ Eric Rivera
 
Name:
Eric Rivera
 
Title:
Chief Financial Officer
   
Date:  August 29, 2024
  


Exhibit 99.1

For Further Information:
Eric Rivera
Chief Financial Officer
203.740.5301
investorrelations@photronics.com

Photronics Reports Third Quarter Fiscal 2024 Results
and Share Repurchase Authorization

BROOKFIELD, Conn. August 29, 2024 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its third quarter of fiscal year 2024 ended July 28, 2024.
 
“Market softness in some segments during the quarter impacted photomask demand, reducing both IC and FPD revenue,” said Frank Lee, chief executive officer. “The photomask demand recovery that started to take shape early in the third quarter slowed during the period due to select regional and end-use customer order patterns. This was combined with broader customer focus on rising semiconductor channel inventory that limited chip design activity through the quarter. In response, we tuned our mix and sales strategy, allowing us to optimize margins despite lower demand. Megatrends such as AI, supply chain regionalization, and edge computing are driving secular photomask value and demand, supporting our optimistic view of the long-term global photomask industry outlook. Our leadership position gives us confidence we can drive future margins while at the same time execute smart investment and deployment strategies that can deliver top line growth and shareholder value.”
 
Third Quarter Fiscal 2024 Results

 •
Revenue was $211.0 million, down 6% year-over-year and 3% sequentially.

•
GAAP Net income attributable to Photronics, Inc. shareholders was $34.4 million, or $0.55 per diluted share, compared with $27.0 million, or $0.44 per diluted share in the third quarter of 2023 and $36.3 million, or $0.58 per diluted share in the second quarter of 2024.

•
Non-GAAP Net income attributable to Photronics, Inc. shareholders was $32.0 million, or $0.51 per diluted share, compared with $31.6 million, or $0.51 per diluted share in the third quarter of 2023 and $28.7 million, or $0.46 per diluted share in the second quarter of 2024.

•
IC revenue was $155.9 million, down 4% year-over-year and 3% sequentially.

•
FPD revenue was $55.1 million, down 10% from the same quarter last year and 2% sequentially.

•
Cash generated from operating activities was $75.1 million, and cash invested in organic growth through capital expenditures was $24.4 million.

•
Cash and Short-term investments at the end of the quarter were $606.4 million, and Debt was $20.1 million.
 
Share Repurchase
 
In addition, the Board of Directors has authorized an increase of the Company’s existing share repurchase program from the $31.7 million remaining up to a total of $100 million of its common stock. Any purchases will occur pursuant to a repurchase plan under SEC Rule 10b5-1.
 
“This announcement is a testament to our ability to generate strong cash flows and maintain a solid balance sheet over various economic conditions,” continued Mr. Lee. “We are taking this step to demonstrate our commitment to enhancing shareholder returns by returning cash to our shareholders and investing in the value we see in our equity.”
 
This authorization does not obligate the Company to repurchase any dollar amount or number of shares of common stock. The repurchase program may be suspended or discontinued at any time.
 
Fourth Quarter Fiscal 2024 Guidance
 
For the fourth quarter of fiscal 2024, Photronics expects Revenue to be between $213 million and $221 million and non-GAAP Net income attributable to Photronics, Inc. shareholders to be between $0.48 and $0.54 per diluted share.
 
Webcast
 
A webcast to discuss these results is scheduled for 8:30 a.m. Eastern time on Thursday, August 29, 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 and non-GAAP earnings per share are "non-GAAP financial measures" as such term is defined by Regulation G of 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 a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to Net income (loss), Net income (loss) per share, or any other measure of consolidated results under U.S. 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 statement of income and must be considered in performing a comprehensive assessment of overall financial performance. Please refer to the non-GAAP reconciliations below.


Exhibit 99.2

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

   
Three Months Ended
    
Nine Months Ended
  
     
July 28,
2024
      
April 28,
2024
      
July 30,
2023
      
July 28,
2024
     
July 30,
2023
   
 
                               
Revenue
  
$
210,984
    
$
217,000
    
$
224,206
    
$
644,318
    
$
664,603
  
                                         
Cost of goods sold
    
135,846
      
137,749
      
137,405
      
410,674
      
413,323
  
                                         
Gross Profit
    
75,138
      
79,251
      
86,801
      
233,644
      
251,280
  
                                         
Operating Expenses:
                                        
                                         
Selling, general and administrative
    
19,436
      
18,996
      
18,032
      
56,753
      
52,728
  
                                         
Research and development
    
3,555
      
4,292
      
3,505
      
11,291
      
10,287
  
                                         
Total Operating Expenses
    
22,991
      
23,288
      
21,537
      
68,044
      
63,015
  
                                         
Other operating gain
    
1
      
89
      
-
      
90
      
-
  
                                         
Operating Income
    
52,148
      
56,052
      
65,264
      
165,690
      
188,265
  
                                         
Non-operating (loss) income, net
    
10,145
      
20,534
      
(911
)
    
26,931
      
(1,764
)
                                         
Income Before Income Tax Provision
    
62,293
      
76,586
      
64,353
      
192,621
      
186,501
  
                                         
Income tax provision
    
14,124
      
20,214
      
16,098
      
48,998
      
50,023
  
                                         
Net Income
    
48,169
      
56,372
      
48,255
      
143,623
      
136,478
  
                                         
Net income attributable to noncontrolling interests
    
13,781
      
20,121
      
21,296
      
46,804
      
55,604
  
                                         
Net income attributable to Photronics, Inc. shareholders
  
$
34,388
    
$
36,251
    
$
26,959
    
$
96,819
    
$
80,874
  
                                         
Earnings per share:
                                        
                                         
Basic
  
$
0.56
    
$
0.59
    
$
0.44
    
$
1.57
    
$
1.32
  
                                         
Diluted
  
$
0.55
    
$
0.58
    
$
0.44
    
$
1.55
    
$
1.31
  
                                         
Weighted-average number of common shares outstanding:
                                        
                                         
Basic
    
61,815
      
61,771
      
61,233
      
61,681
      
61,089
  
                                         
Diluted
    
62,414
      
62,409
      
61,974
      
62,369
      
61,650
  


Exhibit 99.3

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

   
July 28,
    
October 31,
  
   
2024
    
2023
  
Assets
            
             
Current assets:
            
Cash and cash equivalents
  
$
537,331
    
$
499,292
  
Short-term investments
    
69,046
      
12,915
  
Accounts receivable
    
199,926
      
194,927
  
Inventories
    
55,472
      
49,963
  
Other current assets
    
30,865
      
28,353
  
                 
Total current assets
    
892,640
      
785,450
  
                 
Property, plant and equipment, net
    
722,638
      
709,244
  
Other assets
    
29,823
      
31,527
  
                 
Total assets
  
$
1,645,101
    
$
1,526,221
  
                 
Liabilities and Equity
                
                 
Current liabilities:
                
Current portion of long-term debt
  
$
20,090
    
$
6,621
  
Accounts payable and accrued liabilities
    
171,036
      
178,602
  
                 
Total current liabilities
    
191,126
      
185,223
  
                 
Long-term debt
    
28
      
17,998
  
Other liabilities
    
40,518
      
47,391
  
                 
Equity:
                
Photronics, Inc. shareholders' equity
    
1,067,994
      
975,008
  
Noncontrolling interests
    
345,435
      
300,601
  
Total equity
    
1,413,429
      
1,275,609
  
                 
Total liabilities and equity
  
$
1,645,101
    
$
1,526,221
  

 
Exhibit 99.4

Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

   
Nine Months Ended
  
     
July 28,
2024
      
July 30,
2023
   
             
Cash flows from operating activities:
            
Net income
  
$
143,623
    
$
136,478
  
Adjustments to reconcile net income to net cash
                
provided by operating activities:
                
Depreciation and amortization
    
61,613
      
59,523
  
Share-based compensation
    
9,841
      
5,874
  
Changes in operating assets, liabilities and other
    
(22,003
)
    
(6,319
)
                 
Net cash provided by operating activities
    
193,074
      
195,556
  
                 
Cash flows from investing activities:
                
Purchases of property, plant and equipment
    
(87,733
)
    
(78,813
)
Purchases of short-term investments
    
(100,558
)
    
(9,837
)
Proceeds from maturities of short-term investments
    
44,696
      
22,500
  
Government incentives
    
1,541
      
2,033
  
Other
    
(4
)
    
(116
)
                 
Net cash used in investing activities
    
(142,058
)
    
(64,233
)
                 
Cash flows from financing activities:
                
Repayments of debt
    
(4,500
)
    
(16,351
)
Proceeds from share-based arrangements
    
1,074
      
1,241
  
Net settlements of restricted stock awards
    
(3,002
)
    
(1,292
)
                 
Net cash used in financing activities
    
(6,428
)
    
(16,402
)
                 
Effects of exchange rate changes on cash, cash equivalents, and restricted cash
    
(6,454
)
    
13,813
  
                 
Net increase in cash, cash equivalents, and restricted cash
    
38,134
      
128,734
  
Cash, cash equivalents, and restricted cash, beginning of period
    
501,867
      
322,409
  
                 
Cash, cash equivalents, and restricted cash, end of period
  
$
540,001
    
$
451,143
  

 
Exhibit 99.5

PHOTRONICS, INC.
Reconciliation of GAAP Net income attributable to Photronics, Inc. shareholders to Non-GAAP Net income
(in thousands)
(Unaudited)

   
Three Months ended
  
     
July 28,
2024
      
April 28,
2024
      
July 30,
2023
   
                   
GAAP Net income attributable to Photronics, Inc. shareholders
  
$
34,388
    
$
36,251
    
$
26,959
  
FX (gain) loss
    
(4,068
)
    
(14,766
)
    
4,543
  
Estimated tax effects of FX (gain) loss
    
914
      
3,743
      
(1,193
)
Estimated noncontrolling interest effects of above
    
681
      
3,489
      
1,328
  
Non-GAAP Net income attributable to Photronics, Inc. shareholders
  
$
31,915
    
$
28,717
    
$
31,637
  
                         
Weighted-average number of common shares outstanding - Diluted
    
62,414
      
62,409
      
61,974
  
                         
                         
GAAP Diluted earnings per share
  
$
0.55
    
$
0.58
    
$
0.44
  
Effects of non-GAAP adjustments above
    
(0.04
)
    
(0.12
)
    
0.07
  
Non-GAAP Diluted earnings per share
  
$
0.51
    
$
0.46
    
$
0.51
  

 
Exhibit 99.6

 August 29, 2024  Q3 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. 
 
 Q3 2024 Summary  Positioned for Long-Term Profitable Growth and Sustainable Shareholder Value Creation  $211.0M  Revenue  24.7%  Operating Margin  $0.55  EPS  $0.51  Non-GAAP EPS1  $75.1M  OCF  $606.4M  Cash2 and Short-term investments  (6%) Y/Y  (3%) Q/Q  (440) bps Y/Y  (110) bps Q/Q  25% Y/Y  (5%) Q/Q  Flat Y/Y  11% Q/Q  (13%) Y/Y  (2%) Q/Q  27% Y/Y  8% Q/Q  Revenue lower due to market demand softness in some IC and FPD segments; slowing demand in select regional and end-use customer order patterns combined with focus on rising semiconductor channel inventory.  Operating margin compression due to impact from operating leverage on gross margin; lower sequential opex helped conserve profitability, resulting in higher non-GAAP EPS.  Maintaining strong balance sheet due to cash flow generation, manageable debt, and effective management of working capital.  Investing in IC capacity to capitalize on market growth driven by megatrends such as AI, IoT, and supply chain regionalization.  Announced an increase of existing share repurchase program to $100M to enhance shareholder returns, backed by our confidence in generating strong cash flows and maintaining a healthy balance sheet.  1See reconciliation included in this presentation; 2Includes cash equivalents 
 
 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 G8.6 form factor, requiring high-quality, advanced photomasks.  Long-Term Trends Driving Photomask Demand  Innovative Designs and Manufacturing Complexity is Good for Photomask Demand 
 
 Revenue by Product Line  $M  Q324  Q/Q  Y/Y  High-End*  49.5  (15%)  9%  Mainstream  106.4  3%  (10%)  Total  155.9  (3%)  (4%)  High-end down Q/Q on lower demand from Asia foundries; Y/Y up on strong US sales; memory up both Q/Q and Y/Y.  Mainstream up Q/Q primarily in US; soft Asia demand caused Y/Y decline.  Long-term 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 up Q/Q on improved AMOLED sales; mobile display demand lower Y/Y.  Mainstream lower due to lingering soft design activity on legacy LCD technology.  Long-term growth drivers:  Technology development drives higher-value mask demand.  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  Q324  Q/Q  Y/Y  High-End*  48.4  1%  (3%)  Mainstream  6.7  (17%)  (40%)  Total  55.1  (2%)  (10%)  IC  FPD 
 
 Balance Sheet and Cash Flow Metrics  Balance Sheet Provides Resilience, Enables Growth Strategy and Shareholder Value Creation  $M  Q324  Y/Y  Q/Q  Cash, cash equivalents, and Short-term investments  606.4  27%  8%  Debt  20.1  (25%)  (8%)  Operating Cash Flow  75.1  (13%)  (2%)  Capital Expenditures  24.4  16%  22%  Continued strong operating cash flow from income generation and working capital management.  Actively controlling cash, cash equivalents, and short-term investments to maintain liquidity and optimize returns.  Debt comprised of US equipment leases.  Capex targets growth in IC capacity & facility expansion.  Strong balance sheet able to fund growth investments, return cash to shareholders, and remain resilient to effects of industry downturns. 
 
 Q4 2024 Guidance   Revenue ($M)  213 – 221  Operating Margin  25% - 27%  Taxes ($M)  15 – 17  Diluted non-GAAP EPS  $0.48 - $0.54  Diluted Shares (M)  ~62  Full-year Capex (M)  ~130  Incorporation of chips in AI, IoT, 5G, and consumer products.  New designs to capture market share.  Advanced display technologies.  Outlook clouded by geopolitical uncertainty and macro-economic headwinds.  Controlling costs and managing cash to maximize returns and 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 and non-GAAP earnings per share are "non-GAAP financial measures" as such term is defined by Regulation G of 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 a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to Net income (loss), Net income (loss) per share, or any other measure of consolidated results under U.S. 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 statement of income and must be considered in performing a comprehensive assessment of overall financial performance. Please refer to the non-GAAP reconciliations on the following page.  
 
 Non-GAAP Financial Measures