Photronics Reports Third Quarter Fiscal 2023 Results

Rhea-AI Summary

Photronics reports 2% increase in Q3 revenue, but lower than Q2 record levels. Maintains good profit margins and strong cash flow generation. Long-term photomask demand outlook remains positive. Fourth quarter revenue expected to be between $222M and $232M.

Positive

• 2% increase in Q3 revenue
• Maintained good profit margins
• Strong cash flow generation
• Positive long-term photomask demand outlook

Negative

• Lower than Q2 record levels
• Temporary demand slowdown in some end markets

BROOKFIELD, Conn., Sept. 06, 2023 (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 2023 ended July 30, 2023.

“The Photronics team performed well in the third quarter, maintaining strong margins in an environment where we experienced a temporary demand slowdown in some of our end markets,” said Frank Lee, chief executive officer. “Revenues increased 2% over the prior year quarter and were slightly lower than the record levels in the second quarter of this year. IC declined sequentially as softer mainstream demand more than offset high-end growth in Asia. FPD high-end demand was lower as strong AMOLED sales were offset by lower LTPS and G10.5+.

“Despite lower revenue, we maintained good profit margins and once again drove strong cash flow generation, further strengthening the balance sheet to fund our strategic growth initiatives and navigate the industry downturn. The long-term photomask demand outlook remains positive, driven by several secular drivers that support robust design activity for new devices and ongoing trends to onshore semiconductor production in response to rising geopolitical risks. As the world’s largest merchant photomask manufacturer, we are well positioned to benefit from these ongoing trends.”

Third Quarter Fiscal 2023 Results

• Revenue was $224.2 million, up 2% year-over-year and down 2% sequentially
• GAAP net income attributable to Photronics, Inc. shareholders was $27.0 million, or $0.44 per diluted share, compared with $31.2 million, or $0.51 per diluted share in the third quarter 2022 and $39.9 million, or $0.65 per diluted share in the second quarter of 2023
• Non-GAAP net income attributable to Photronics, Inc. shareholders was $31.6 million, or $0.51 per diluted share, compared with $28.9 million, or $0.47 per diluted share in the third quarter 2022 and $32.9 million, or $0.54 per diluted share in the second quarter of 2023
• IC revenue was $163.1 million, up 1% year-over-year and down 2% sequentially
• FPD revenue was $61.1 million, up 4% from the same quarter last year and down 2% sequentially
• Cash generated from operating activities was $85.9 million, and cash invested in organic growth through capital expenditures was $21.1 million
• Cash balance at the end of the quarter was $448.5 million, with $27.3 million in short-term investments and $26.7 million in debt
  

Fourth Quarter Fiscal 2023 Guidance

For the fourth quarter of fiscal 2023, Photronics expects revenue to be between $222 million and $232 million and non-GAAP net income attributable to Photronics, Inc. shareholders to be between $0.51 and $0.59 per diluted share.

Webcast

A webcast to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, September 6, 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, 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.

For Further Information:
John P. Jordan
Executive Vice President & CFO
203.740.5671
jjordan@photronics.com

PHOTRONICS, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
	Three Months Ended												Nine Months Ended
	July 30,				April 30,				July 31,				July 30,				July 31,
		2023				2023				2022				2023				2022
Revenue	$	224,206			$	229,306			$	219,948			$	664,603			$	614,283
Cost of goods sold		137,405				140,904				136,085				413,323				400,338
Gross Profit		86,801				88,402				83,863				251,280				213,945
Operating Expenses:
Selling, general and administrative		18,032				17,878				15,960				52,728				48,306
Research and development		3,505				3,479				4,151				10,287				14,297
Total Operating Expenses		21,537				21,357				20,111				63,015				62,603
Other operating loss		-				-				(23	)			-				(17	)
Operating Income		65,264				67,045				63,729				188,265				151,325
Non-operating (loss) income, net		(911	)			13,571				3,641				(1,764	)			16,370
Income Before Income Tax Provision		64,353				80,616				67,370				186,501				167,695
Income tax provision		16,098				21,343				18,146				50,023				43,717
Net Income		48,255				59,273				49,224				136,478				123,978
Net income attributable to noncontrolling interests		21,296				19,344				17,994				55,604				42,252
Net income attributable to Photronics, Inc. shareholders	$	26,959			$	39,929			$	31,230			$	80,874			$	81,726
Earnings per share:
Basic	$	0.44			$	0.65			$	0.51			$	1.32			$	1.35
Diluted	$	0.44			$	0.65			$	0.51			$	1.31			$	1.34
Weighted-average number of common shares outstanding:
Basic		61,233				61,138				60,701				61,089				60,488
Diluted		61,974				61,507				61,299				61,650				61,127

PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
	July 30,				October 31,
	2023				2022
Assets
Current assets:
Cash and cash equivalents	$	448,479			$	319,680
Short-term investments		27,325				38,820
Accounts receivable		206,128				198,147
Inventories		55,379				50,753
Other current assets		34,900				37,252
Total current assets		772,211				644,652
Property, plant and equipment, net		701,459				643,873
Other assets		29,673				27,305
Total assets	$	1,503,343			$	1,315,830
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	6,589			$	10,024
Accounts payable and accrued liabilities		184,063				183,773
Total current liabilities		190,652				193,797
Long-term debt		20,121				32,310
Other liabilities		40,694				27,634
Photronics, Inc. shareholders' equity		961,212				831,527
Noncontrolling interests		290,664				230,562
Total equity		1,251,876				1,062,089
Total liabilities and equity	$	1,503,343			$	1,315,830

PHOTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
	Nine Months Ended
	July 30,				July 31,
		2023				2022
Cash flows from operating activities:
Net income	$	136,478			$	123,978
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		59,523				61,210
Share-based compensation		5,874				4,623
Changes in operating assets, liabilities and other		(6,319	)			6,110
Net cash provided by operating activities		195,556				195,921
Cash flows from investing activities:
Purchases of property, plant and equipment		(78,813	)			(46,337	)
Purchases of available-for-sale debt securities		(9,837	)			-
Proceeds from maturity of available-for-sale debt securities		22,500				-
Government incentives		2,033				1,394
Other		(116	)			(179	)
Net cash used in investing activities		(64,233	)			(45,122	)
Cash flows from financing activities:
Repayments of debt		(16,351	)			(51,917	)
Purchases of treasury stock		-				(2,522	)
Contributions from noncontrolling interest		-				24,995
Proceeds from share-based arrangements		1,241				5,505
Net settlements of restricted stock awards		(1,292	)			(1,463	)
Net cash used in financing activities		(16,402	)			(25,402	)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash		13,813				(21,308	)
Net increase in cash, cash equivalents, and restricted cash		128,734				104,089
Cash, cash equivalents, and restricted cash, beginning of period		322,409				279,680
Cash, cash equivalents, and restricted cash, end of period	$	451,143			$	383,769

PHOTRONICS, INC.
Reconciliation of GAAP to Non-GAAP Financial Information
(in thousands)
(Unaudited)
	Three Months ended
	July 30,				April 30,				July 31,
		2023				2023				2022
Reconciliation of GAAP to Non-GAAP Non-operating (loss) Income:
GAAP Non-operating (loss) income, net	$	(911	)		$	13,571			$	3,641
FX (gain) loss		4,543				(10,718	)			(3,862	)
Non-GAAP Non-operating (loss) income, net	$	3,632			$	2,853			$	(221	)
Reconciliation of GAAP to Non-GAAP Income tax provision:
GAAP Income tax provision	$	16,098			$	21,343			$	18,146
Estimated tax effects of FX (gain) loss		(1,193	)			2,823				955
Non-GAAP Income tax provision	$	17,291			$	18,520			$	17,191
Reconciliation of GAAP to Non-GAAP Noncontrolling interests:
GAAP Noncontrolling interests	$	21,296			$	19,344			$	17,994
Estimated noncontrolling interest effects of above		1,328				901				527
Non-GAAP Noncontrolling interests	$	19,968			$	18,443			$	17,467
Reconciliation of GAAP to Non-GAAP Net Income:
GAAP Net Income	$	26,959			$	39,929			$	31,230
FX (gain) loss		4,543				(10,718	)			(3,862	)
Estimated tax effects of above		(1,193	)			2,823				955
Estimated noncontrolling interest effects of above		1,328				901				527
Non-GAAP Net Income	$	31,637			$	32,935			$	28,850
Weighted-average number of common shares outstanding - Diluted		61,974				61,507				61,299
Reconciliation of GAAP to Non-GAAP EPS:
GAAP diluted earnings per share	$	0.44			$	0.65			$	0.51
Effects of the above adjustments	$	0.07			$	(0.11	)		$	(0.04	)
Non-GAAP diluted earnings per share	$	0.51			$	0.54			$	0.47

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
	Nine Months ended
	July 30,
		2023
GAAP Net cash provided by operating activities	$	195,556
Purchases of property, plant and equipment		(78,813	)
Free Cash Flow	$	116,743
Reconciliation of Cash and cash equivalents to Net Cash:
					As of
	July 30,				October 31,				July 31,
		2023				2022				2022
Cash and cash equivalents	$	448,479			$	319,680			$	380,833
Current portion of Long-term debt		(6,589	)			(10,024	)			(10,727	)
Long-term Debt		(20,121	)			(32,310	)			(46,589	)
Net Cash	$	421,769			$	277,346			$	323,517