Form 8-K PHOTRONICS INC For: May 25

May 25, 2022 6:22 AM EDT

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Exhibit 99.1

For Further Information:
John P. Jordan
Executive Vice President & CFO
203.740.5671



Photronics Reports Second Quarter Fiscal 2022 Results and Updates Long-Term Target Model

BROOKFIELD, Conn. May 25, 2022 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ: PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2022 second quarter ended May 1, 2022.
 
“Second quarter was another excellent quarter, as strong end-market demand and higher pricing across both mainstream and high-end IC products propelled us to our fifth consecutive quarter of record revenue,” said Frank Lee, chief executive officer. “As revenue grew, our operating leverage and disciplined cost management expanded gross and operating margins to 36% and 25%, respectively. Our balance sheet continues to strengthen and support our growth strategy of investing to align our operations and technology to serve the strongest sectors of the market. We expect favorable demand trends to continue for advanced mobile displays, high-end logic devices and mainstream IC applications as our customers release new designs and build out new capacity.”
 
Second Quarter 2022 Results

Revenue was $204.5 million, up 8% sequentially and 28% year-over-year

Net income attributable to Photronics, Inc. shareholders was $29.8 million ($0.49 per diluted share), up 29% over first quarter 2022 net income of $23.1 million ($0.38 per diluted share) and nearly triple the second quarter 2021 net income of $10.5 million ($0.17 per diluted share)

Integrated circuit (IC) revenue in the second quarter was $145.8 million, up 12% sequentially and 30% compared with the second quarter of last year

Flat panel display (FPD) revenue was $58.7 million, down 2% from last quarter and up 23% over the same period last year
 
Lee continued, “As I begin my tenure as CEO, Photronics is in a very strong place with a strong global team, leading technology, quality products, and growing market share.  We expect to continue to grow sequentially throughout 2022.  In fact, market dynamics and Photronics execution have again driven profitability levels that propelled the Company well beyond the projections in the target model we provided just last quarter.” Lee concluded, “Significant indicators from the market and other market participants are that these conditions will continue well into the future.  We have therefore included an updated target model in the supplemental information issued in connection with our conference call later today.”
 

Third Quarter 2022 Guidance
 
For the third quarter of 2022, Photronics expects revenue to be between $205 million and $215 million, and net income attributable to Photronics, Inc. shareholders to be between $0.45 and $0.55 per diluted share.
 
Conference Call
 
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, May 25, 2022.  The call can be accessed by logging onto Photronics’ website at www.photronics.com.  The live dial-in number is (877) 377-7095 or (408) 774-4601 outside of the United States and Canada.  The call will be archived on Photronics’ website.
 
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, 2021, the company had 1,728 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” within the meaning of the Private Securities Litigation Reform Act of 1995. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of the company and its subsidiaries. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of Photronics to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate,” “will,” “should,” “would,” “may” and “could” or similar words or expressions are generally forward-looking in nature and not historical facts. Any statements that refer to outlook, expectations or other characterizations of future events, circumstances or results are also forward-looking statements. Important risks, assumptions and other important factors that could cause future results to differ materially from those expressed in the forward-looking statements are specified in Photronics’ Annual and Quarterly filings with the Securities and Exchange Commission under headings such as “Forward-Looking Statements”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other filings and furnishings made by Photronics with the Securities and Exchange Commission from time to time. These risks and uncertainties include, but are not limited to, the current pandemic and future recurrences and other developments with respect thereto, governmental responses to the pandemic and related matters, changes in end markets resulting therefrom, changes in investment, tax, trade, exchange and other laws and regulations, compliance with local, State and Federal laws, rules and regulations including, but not limited to, import and export controls, tariffs and penalties, fines and violations related thereto, as well as economic, competitive, legal, governmental, political, monetary and fiscal policy, and technological factors and decisions we may make in the future regarding our business, capital structure and other matters. Photronics undertakes no obligation to release publicly any revisions to any forward-looking statements or, except as required to be disclosed in filings or furnishings with the Securities and Exchange Commission, to report events or to report the occurrence of unanticipated events. There is no assurance that Photronics’ expectations will be realized.
 



Exhibit 99.2

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

   
Three Months Ended
   
Six Months Ended
 
   
May 1,
2022
   
January 30,
2022
   
May 2,
2021
   
May 1,
2022
   
May 2,
2021
 
                               
Revenue
 
$
204,509
   
$
189,827
   
$
159,763
   
$
394,336
   
$
311,830
 
                                         
Cost of goods sold
   
131,582
     
129,964
     
120,514
     
261,546
     
242,052
 
                                         
Gross Profit
   
72,927
     
59,863
     
39,249
     
132,790
     
69,778
 
                                         
Operating Expenses:
                                       
                                         
Selling, general and administrative
   
16,613
     
15,727
     
14,067
     
32,340
     
28,120
 
 
                                       
Research and development
   
4,206
     
5,939
     
4,375
     
10,145
     
9,085
 
 
                                       
Total Operating Expenses
   
20,819
     
21,666
     
18,442
     
42,485
     
37,205
 
                                         
Operating Income
   
52,108
     
38,197
     
20,807
     
90,305
     
32,573
 
                                         
Non-operating income (expense), net
   
8,021
     
4,707
     
(772
)
   
12,728
     
(92
)
                                         
Income Before Income Tax Provision
   
60,129
     
42,904
     
20,035
     
103,033
     
32,481
 
                                         
Income tax provision
   
14,689
     
11,178
     
3,714
     
25,867
     
6,651
 
                                         
Net Income
   
45,440
     
31,726
     
16,321
     
77,166
     
25,830
 
                                         
Net income attributable to noncontrolling interests
   
15,597
     
8,662
     
5,795
     
24,259
     
7,268
 
                                         
Net income attributable to Photronics, Inc. shareholders
 
$
29,843
   
$
23,064
   
$
10,526
   
$
52,907
   
$
18,562
 
                                         
Earnings per share:
                                       
                                         
Basic
 
$
0.49
   
$
0.38
   
$
0.17
   
$
0.88
   
$
0.30
 
 
                                       
Diluted
 
$
0.49
   
$
0.38
   
$
0.17
   
$
0.87
   
$
0.30
 
                                         
Weighted-average number of common shares outstanding:
                                       
                                         
Basic
   
60,606
     
60,158
     
62,054
     
60,382
     
62,265
 
 
                                       
Diluted
   
61,145
     
60,936
     
62,568
     
61,041
     
62,786
 




Exhibit 99.3

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

   
May 1,
2022
   
October 31,
2021
 
             
Assets
           
             
Current assets:
           
Cash and cash equivalents
 
$
329,282
   
$
276,670
 
Accounts receivable
   
190,259
     
174,447
 
Inventories
   
58,437
     
55,249
 
Other current assets
   
52,864
     
44,250
 
                 
Total current assets
   
630,842
     
550,616
 
                 
Property, plant and equipment, net
   
659,881
     
696,553
 
Other assets
   
41,661
     
47,033
 
                 
Total assets
 
$
1,332,384
   
$
1,294,202
 
                 
Liabilities and Equity
               
                 
Current liabilities:
               
Current portion of long-term debt
 
$
12,410
   
$
22,248
 
Accounts payable and accrued liabilities
   
172,205
     
153,900
 
                 
Total current liabilities
   
184,615
     
176,148
 
                 
Long-term debt
    70,138       89,446
 
Other liabilities
   
25,048
     
28,046
 
                 
Photronics, Inc. shareholders’ equity
   
836,752
     
823,692
 
Noncontrolling interests
   
215,831
     
176,870
 
Total equity
   
1,052,583
     
1,000,562
 
                 
Total liabilities and equity
 
$
1,332,384
   
$
1,294,202
 




Exhibit 99.4

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

   
Six Months Ended
 
   
May 1,
2022
   
May 2,
2021
 
             
Cash flows from operating activities:
           
Net income
 
$
77,166
   
$
25,830
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
41,405
     
47,121
 
Share-based compensation
   
3,041
     
2,723
 
Changes in operating assets, liabilities and other
   
(18,323
)
   
(17,455
)
                 
Net cash provided by operating activities
   
103,289
     
58,219
 
                 
Cash flows from investing activities:
               
Purchases of property, plant and equipment
   
(34,809
)
   
(73,516
)
Government incentives
   
1,394
     
5,775
 
Other
   
(199
)
   
(157
)
                 
Net cash used in investing activities
   
(33,614
)
   
(67,898
)
                 
Cash flows from financing activities:
               
Repayments of debt
   
(27,571
)
   
(8,636
)
Purchases of treasury stock
   
(2,522
)
   
(23,250
)
Contribution from noncontrolling interest
   
24,995
     
-
 
Proceeds from share-based arrangements
   
4,384
     
1,180
 
Proceeds from long-term debt
   
-
     
12,439
 
Net settlements of restricted stock awards
   
(1,452
)
   
(371
)
                 
Net cash used in financing activities
   
(2,166
)
   
(18,638
)
                 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
   
(14,917
)
   
5,686
 
                 
Net increase (decrease) in cash, cash equivalents, and restricted cash
   
52,592
     
(22,631
)
Cash, cash equivalents, and restricted cash, beginning of period
   
279,680
     
281,602
 
                 
Cash, cash equivalents, and restricted cash, end of period
 
$
332,272
   
$
258,971
 

 


Exhibit 99.5

 Q2 2022 Financial Results Conference Call  May 25, 2022  Photronics, Inc. 
 

 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.  5/25/2022  2 
 

 Net income attributable to Photronics, Inc. shareholders of $29.8M ($0.49/share)  Appointment of Frank Lee as CEO; 42+ years industry experience; 16+ years with PLAB  Investing in mainstream IC capacity to capitalize on market growth trends  IC: +12% Q/Q, +30% Y/Y  FPD: -2% Q/Q, +23% Y/Y  To China: +8% Q/Q; +58% Y/Y  Committed to driving long-term, profitable growth through strategic investments  $44M generated from operating activity  $16M invested in capex  $10M contribution from JV partner  Cash balance  $329M  Revenue was a record  $204.5M  up 8%Q/Q  up 28%Y/Y  5/25/2022  3  Q2 2022 Summary 
 

 Investment Strategy  Revenue Growth  Win lion’s share of “Made in China 2025” TAM growth  Supplement new factories with point tool investments  Capitalize on technology leadership in AMOLED to continue improving mix  Leverage global footprint to exploit growth in “legacy foundry” business  Margin Expansion  Sustained pricing strength in mainstream IC   Optimize asset tool set to match end-market demand  Increasing benefit from operating leverage  Explore Strategic Partnerships  Targeting partnerships that extend market leadership position  Building on successful history of M&A and joint ventures  5/25/2022  4 
 

 Delivering on Updated Target Model  5/25/2022  5  *Free Cash Flow is a non-GAAP term; see reconciliation included in this presentation 
 

 Income Statement Summary  $M (except EPS)  Q222  Q122  Q/Q  Q221  Y/Y  Revenue  $ 204.5  $ 189.8  8%  $ 159.8  28%  Gross Profit  $ 72.9  $ 59.9  22%  $ 39.2  86%  Gross Margin  35.7%  31.5%  420 bps  24.6%  1,110 bps  Operating Income  $ 52.1  $ 38.2  36%  $ 20.8  150%  Operating Margin  25.5%  20.1%  540 bps  13.0%  1,250 bps  Other non-operating income (expense)  $ 8.0  $ 4.7  $ 3.3  ($ 0.8)  $ 8.8  Income tax provision  $ 14.7  $ 11.2  $ 3.5  $ 3.7  $ 11.0  Minority interest  $ 15.6  $ 8.7  $ 6.9  $ 5.8  $ 9.8  Net income*  $ 29.8  $ 23.1  29%  $ 10.5  184%  Diluted EPS*  $ 0.49  $ 0.38  $ 0.11  $ 0.17  $ 0.32  Days in quarter  91  91  -  91  -  Margins improved on operating leverage, disciplined cost management, and IC price realization  Other non-operating income/expense primarily due to unrealized FX gain/loss  Minority interest from IC JVs in Taiwan and China  5/25/2022  6  *Net income attributable to Photronics, Inc. shareholders 
 

 $M  Q222  Q122  Q/Q  Q221  Y/Y  High-End*  $ 51.4  $ 46.5  10%  $ 41.3  24%  Mainstream  $ 94.4  $ 83.2  13%  $ 70.7  34%  Total  $ 145.8  $ 129.8  12%  $ 112.0  30%  IC Photomask Revenue  5/25/2022  High-end growth driven by strong demand in Asia and US and higher price  Continued mainstream growth from chip proliferation in consumer products, IoT, 5G, and Crypto supporting higher ASPs  Outlook  Continued strength from remote work and education  Regionalization driving investments for global chip capacity  Mainstream demand strong, expanding ASPs  *28nm and smaller  Total may differ due to rounding  7 
 

 FPD Photomask Revenue  5/25/2022  High-end demand up Q/Q as mobile growth offset soft G10.5+  Mainstream demand remains solid, with Q/Q decline associated with Chinese New Year holiday  Outlook  Dynamic market environment  Mobile demand strength and mainstream LCD recovery expected to continue  Technology development drives demand for higher-value masks  *≥G10.5, AMOLED and LTPS  $M  Q222  Q122  Q/Q  Q221  Y/Y  High-End*  $ 46.6  $ 46.3  1%  $ 39.4  18%  Mainstream  $ 12.1  $ 13.8  (12%)  $ 8.4  45%  Total  $ 58.7  $ 60.1  (2%)  $ 47.8  23%  Total may differ due to rounding  8 
 

 Select Financial Data  $M  Q222  Q122  Q221  Cash  $ 329  $ 314  $ 256  Debt  $ 83  $ 97  $ 114  Net Cash*  $ 247  $ 217  $ 142  Operating Cash Flow  $ 44  $ 59  $ 32  Capital Expenditures  $ 16  $ 19  $ 56  Share repurchase  -  $ 3  $ 10  Debt is US equipment lease and local China loans; reduced debt $29M YTD  Capex mostly mainstream IC capacity & facility expansion  Balance sheet able to fund investments, share repurchases, and strategic M&A opportunities  Total share repurchases of $68M under current (Sep 2020) $100M plan  5/25/2022  *Net cash defined is a non-GAAP term; see reconciliation included in this presentation  9 
 

 Q3 2022 Guidance   Revenue ($M)  $205 - $215  Operating Margin  27% - 29%  Taxes ($M)  $13 - $15  Diluted EPS  $0.45 - $0.55  Diluted Shares (M)  ~61  Full-year Capex (M)  ~$100  Incorporation of chips in IoT, 5G, Crypto and consumer products   Remote work and learning  Advanced display technologies  Growing nationalism spurs investment  Outlook clouded by geopolitical uncertainty, rising inflation and supply chain challenges  Driving margin expansion and improved cash flows to hit long-term target model  5/25/2022  10 
 

 For Additional Information:  John P. Jordan  Executive Vice President & CFO  203.740.5671  [email protected]   Thank you for your interest! 
 

 Appendix 
 

 Total Revenue  5/25/2022  13  IC  FPD  Total may differ due to rounding 
 

 IC Photomask Revenue  5/25/2022  14  Mainstream  High-End  High-End: 28nm and smaller; total may differ due to rounding 
 

 FPD Photomask Revenue  5/25/2022  15  Mainstream  High-End  High-End: ≥G10.5, AMOLED and LTPS; total may differ due to rounding 
 

 Non-GAAP Financial Measures  2/23/2022  16 
 






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