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Photronics Reports Second Quarter Fiscal 2023 Results

PLAB | May 24, 2023

BROOKFIELD, Conn., May 24, 2023 (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 2023 ended April 30, 2023.

“We achieved record revenue in the second quarter with growth across IC and FPD as demand for our design-driven product remained high,” said Frank Lee, chief executive officer. “Mainstream IC demand remained robust across all regions, especially Asia and the US. FPD demand was driven primarily by AMOLED for advanced mobile displays as that technology continues to be adopted across new devices. Profit margins expanded on positive volume leverage, pricing, favorable mix, and tight control of cost. Cash generated from operating activities was very strong, enabling us to strengthen our balance sheet while also investing in organic growth. We are on pace for another great year in 2023 and to deliver on our long-term financial goals. I am confident that our team will continue to perform well to create value for our shareholders.”

Second Quarter Fiscal 2023 Results

Revenue was $229.3 million up 9% sequentially and 12% year-over-year
GAAP net income attributable to Photronics, Inc. shareholders was $39.9 million ($0.65 per diluted share), compared with $14.0 million ($0.23 per diluted share) in the first quarter of 2023 and $27.4 million ($0.45 per diluted share) in the second quarter 2022
Non-GAAP net income attributable to Photronics, Inc. shareholders was $32.9 million ($0.54 per diluted share), compared with $24.4 million ($0.40 per diluted share) in the first quarter of 2023 and $23.1 million ($0.38 per diluted share) in the second quarter 2022
IC revenue was $167.1 million, up 7% sequentially and 15% year-over-year
FPD revenue was $62.3 million, up 14% sequentially and 6% more than same quarter last year
Cash generated from operating activities was $82 million, and cash invested in growth through capital expenditures was $27 million
Cash balance at the end of the quarter was $367.5 million with debt of $28 million, providing funds and available liquidity to support our growth investments

Third Quarter Fiscal 2023 Guidance

For the third quarter of fiscal 2023, Photronics expects revenue to be between $224 million and $234 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 Wednesday, May 24, 2023. 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, 2022, the company had 1,828 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 at www.photronics.com/riskfactors. 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, Free Cash Flow, LTM Free Cash Flow, 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.

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


	Three Months Ended							Six Months Ended
	April 30,		January 29,			May 1,		April 30,			May 1,
	2023		2023			2022		2023			2022

Revenue	$	229,306	$	211,090		$	204,509	$	440,397		$	394,336

Cost of goods sold		140,904		135,013			134,289		275,918			264,253

Gross Profit		88,402		76,077			70,220		164,479			130,083

Operating Expenses:

Selling, general and administrative		17,878		16,818			16,613		34,696			32,340

Research and development		3,479		3,302			4,206		6,781			10,145

Total Operating Expenses		21,357		20,120			20,819		41,477			42,485

Operating Income		67,045		55,957			49,401		123,002			87,598

Non-operating (loss) income, net		13,571		(14,425	)		8,021		(854	)		12,728

Income Before Income Tax Provision		80,616		41,532			57,422		122,148			100,326

Income tax provision		21,343		12,582			14,393		33,925			25,571

Net Income		59,273		28,950			43,029		88,223			74,755

Net income attributable to noncontrolling interests		19,344		14,964			15,597		34,308			24,259

Net income attributable to Photronics, Inc. shareholders	$	39,929	$	13,986		$	27,432	$	53,915		$	50,496

Earnings per share:

Basic	$	0.65	$	0.23		$	0.45	$	0.88		$	0.84

Diluted	$	0.65	$	0.23		$	0.45	$	0.88		$	0.83

Weighted-average number of common shares outstanding:

Basic		61,138		60,894			60,606		61,016			60,382

Diluted		61,507		61,470			61,145		61,489			61,041

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


	April 30,		October 31,
	2023		2022

Assets

Current assets:
Cash and cash equivalents	$	367,485	$	319,680
Short-term investments		45,431		38,820
Accounts receivable		214,464		198,147
Inventories		54,940		50,753
Other current assets		37,796		37,252

Total current assets		720,116		644,652

Property, plant and equipment, net		699,917		643,873
Other assets		30,992		27,305

Total assets	$	1,451,025	$	1,315,830



Liabilities and Equity

Current liabilities:
Current portion of long-term debt	$	7,017	$	10,024
Accounts payable and accrued liabilities		178,151		183,773

Total current liabilities		185,168		193,797

Long-term debt		21,322		32,310
Other liabilities		39,851		27,634

Photronics, Inc. shareholders' equity		928,047		831,527
Noncontrolling interests		276,637		230,562
Total equity		1,204,684		1,062,089

Total liabilities and equity	$	1,451,025	$	1,315,830

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


	Six Months Ended
	April 30,			May 1,
		2023			2022

Cash flows from operating activities:
Net income	$	88,223		$	74,755
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		39,085			41,405
Share-based compensation		3,830			3,041
Changes in operating assets, liabilities and other		(21,461	)		(15,912	)

Net cash provided by operating activities		109,677			103,289

Cash flows from investing activities:
Purchases of property, plant and equipment		(57,728	)		(34,809	)
Purchases of available-for-sale debt securities		(9,837	)		0
Proceeds from maturity of available-for-sale debt securities		4,000			0
Government incentives		1,393			1,394
Other		(88	)		(199	)

Net cash used in investing activities		(62,260	)		(33,614	)

Cash flows from financing activities:
Repayments of debt		(14,720	)		(27,571	)
Purchases of treasury stock		-			(2,522	)
Contributions from noncontrolling interest		-			24,995
Proceeds from share-based arrangements		730			4,384
Net settlements of restricted stock awards		(1,252	)		(1,452	)

Net cash used in financing activities		(15,242	)		(2,166	)

Effects of exchange rate changes on cash, cash equivalents, and restricted cash		15,621			(14,917	)

Net increase in cash, cash equivalents, and restricted cash		47,796			52,592
Cash, cash equivalents, and restricted cash, beginning of period		322,409			279,680

Cash, cash equivalents, and restricted cash, end of period	$	370,205		$	332,272

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


	Three Months ended									Six Months ended
	April 30,			January 29,			May 1,			April 30,			May 1,
	2023			2023			2022			2023			2022


*Reconciliation of GAAP to Non-GAAP Net Income:*

GAAP Net Income	$	39,929		$	13,986		$	27,432		$	53,915		$	50,496
FX (gain) loss		(10,718	)		16,944			(7,844	)		6,226			(13,112	)
Estimated tax effects of above		2,823			(4,506	)		1,947			(1,683	)		3,284
Estimated noncontrolling interest effects of above		901			(2,060	)		1,543			(1,159	)		1,639
Non-GAAP Net Income	$	32,935		$	24,364		$	23,078		$	57,299		$	42,307


Weighted-average number of common shares outstanding - Diluted		61,507			61,470			61,145			61,489			61,041

*Reconciliation of GAAP to Non-GAAP EPS:*

GAAP diluted earnings per share	$	0.65		$	0.23		$	0.45		$	0.88		$	0.83
Effects of the above adjustments	$	(0.11	)	$	0.17		$	(0.07	)	$	0.05		$	(0.14	)
Non-GAAP diluted earnings per share	$	0.54		$	0.40		$	0.38		$	0.93		$	0.69

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


*Reconciliation of Net cash provided by operating activities to Free Cash Flow*
	Six Months ended			Year ended
	April 30,			October 31,			October 31,			Target Model
	2023			2022			2021			Two-year Horizon


GAAP Net cash provided by operating activities	$	109,677		$	275,187		$	150,772		$	350,000 - 400,000

Purchases of property, plant and equipment		(57,728	)		(112,338	)		(109,099	)		(100,000	)

Free Cash Flow	$	51,949		$	162,849		$	41,673		$	250,000 - 300,000


*Reconciliation of Free Cash flow to LTM Free Cash Flow:*

	Free Cash Flow

Six Months ended April 30, 2023	$	51,949

Year-ended October 31, 2022		162,849

Six Months ended May 1, 2022		(68,480	)

LTM April 30, 2023	$	146,318


*Reconciliation ofCash and cash equivalentsto Net Cash:*
				As of
	April 30,			October 31,			May 1,
	2023			2022			2022

Cash and cash equivalents	$	367,485		$	319,680		$	329,282

Current portion of Long-term debt		(7,017	)		(10,024	)		(12,410	)

Long-term Debt		(21,322	)		(32,310	)		(70,138	)

Net Cash	$	339,146		$	277,346		$	246,734