Form 8-K - Current report

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

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
99.1		Press Release May 22, 2024.
99.2		Condensed Consolidated Statements of Income.
99.3		Condensed Consolidated Balance Sheets.
99.4		Condensed Consolidated Statements of Cash Flows.
99.5		Reconciliation of GAAP to Non-GAAP Financial Information.
99.6		Reconciliation of GAAP to Non-GAAP Financial Information (cont.).
99.7		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

Document and Entity Information	May 22, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 22, 2024
Entity File Number	0-15451
Entity Registrant Name	PHOTRONICS, INC.
Entity Central Index Key	0000810136
Entity Incorporation, State or Country Code	CT
Entity Tax Identification Number	06-0854886
Entity Address, Address Line One	15 Secor Road
Entity Address, City or Town	Brookfield
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06804
City Area Code	203
Local Phone Number	775-9000
Title of 12(b) Security	COMMON STOCK, $0.01 par value per share
Trading Symbol	PLAB
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false