PLAB - Earnings call transcript Q4 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Photronics Q4 Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded, Wednesday, December 9, 2020. [Operator Instructions] I would now like to hand the conference over to Troy Dewar, Vice President of Investor Relations.

Troy Dewar

Jimmy. you, Thank everyone. Good morning our results. review fourth to Photronics of financial quarter Welcome XXXX

may today's Joining any our which section Progler, page. that Peter John are in expressed anticipate, view. any with assume we the we me morning based call this Investors statements, that morning, this Kirlin, participants remarks, believe, to Actual Officer. estimate, risks, to These forward-looking obligation press Chief made are along Comments are information. are no as forward-looking Officer; such issued on earlier Technology words presentation factors predict. Jordan, Financial web Chief of results our include and of include Chief Chris statements and material implied, on number expect, our our upon update our those may or and the The by other difficult from release uncertainties accompanies our Officer; differ Executive available forecast, a forward-looking materially

before our available questions. you on and a.m. update an over Lastly, Peter. I call next website, to at this details be may event, will over XX, will invite are I will strategy XXXX December Monday, join include Peter, time, XX:XX all More on which contact outlook. At me long-term any where to to our with turn for the Analyst you Day. us our webcast, Investor The the Eastern turning call

Peter Kirlin

by level shy in IC the revenue highest XXXX eye-popping record of good FPD XXXX. row, year in million, record and revenue ever just surpassing record Troy, Despite for a XX%. the in year full the $XXX last an year revenue a in third achieved ever, you, year's second Thank established was was environment, everyone. record of revenue. consecutive the second very XXXX total in operating a morning, in challenging highest

milestones. and both well achieved shipped a record FPD. to products as in for China the basis a achievement for great also as year It many consolidated IC Photronics, on significant We was revenue customers of

was worsened among customers, mobile For typical demand the trends U.S. factors, sanctions saw quarter, we was strengthening logic/foundry as FPD, U.S. IC, where and by was primarily trade constrained In the some revenue against seasonality display Asia. fourth Huawei. geopolitical in lower by in

However, X% combination these memory weaker. was demand of our With factors, was a revenue sequentially. down

share $XX was million of $XX from strategy I returning on our accomplished growth, returns. improving on we last circumstances With shareholders. as shareholder and to of we operating repurchases, in the our the maintain the in per contraction deliver amount $XXX we able under profit future we challenging ended $XX increase million an discipline as is quarterly million business, in CapEx, stayed demonstrate to working, saw year in we're even revenue cash the decrease diluted to spent path We $X.XX Operating million these margin. long-term cost high thus and believe in year. investment achievements in expenses earnings our are investing with in a control of on cash, midst This leverage the that and share.

coronavirus. limit on Looking challenges as disruption, primarily design my around unlike faced on them to world back among governments activity in spread were the significant the customer team of chain XXXX, and we place any the and working supply XX-year were restrictions conditions commercial career, travel, the

certain own China their restrictions federal government against create set trade in the by companies of market dislocations. addition, In implemented U.S.

of confident we take work win it market. every that U.S. I with am and election challenges effective to results, and Fortunately, the opportunity and appears gained impact as and in their through we move They vaccines, way challenges, tremendously efforts, Regards expected I'm of of the have approval to the team share. we hard will the Due of diminish the proud record customers responded. care development to these our our XXXX. market revenue, the XXXX achieved

within percentage the few ago. came revenue three XXXX just points Our a of target set we years

May gold this really rescinded we target during recognize higher the our the market and continue improvement, formally position $XXX but I there room we for to business. victories, in is our moral chase market outlook There Further, our the we uncertainty, in While of driven the to for COVID growth. no the million I our performance. am and proud like long-term maximize are

Next points Day, will week, some me preview investment let we thesis. a an discuss compelling we of the that Photronics represents Investor will key during host event.

with manufacturer merchant We photomask are the XX global facilities. largest

competitors with the operations geographic of new China, semiconductor growth technology none technologies, display Moore's invest mobile can our of AMOLED our applications high-end of law. We enabling in secular road such introducing market as trends, expansion the into as of and our match. and continuation continue Something industry's such pursue technology to for map to align customers' the nodes

us to believe will and growth, in which positioning flow We or enables expands our this sheet, that cash our models our balance to us to returns. greater consolidate shareholder cash strengthen in invested shareholders. to invest have lead market We return

We China. Day have and in then, two facilities manufacturing staffing commitments performed made equipping well new as such since on ramping main we qualifying in XXXX, our delivering constructing last Investor

in can been customers' needs. These well business our China for key to staying do, XXXX, prioritizing leadership to have being of employing future. have true with We've intimacy everything diversify to become ensure In us low-cost revenue, years, our of do despite committed our customers' made products. that shops further to we XX the heading of producer, competency, meet increasing increasing addition, able we into in our attributes by have share maintain and to a challenges initiatives to by core in partner operational all we business technology served excellence our them our over the remain and trusted photomask we customer this high-end niche our sales kept customers and our progress growing against

have technology cash to at our shareholder right increase the margins customer By we right intend to profit to we right increasingly sustained value. deliver greater we expect leadership position. generation; time, optimistic to With the forward, our positioned and plans enhance growth. are business the Looking even delivering long-term expand for outlook regarding the

have next join hope We and more can week you I us. much to say

Before our call for turning and commitment commentary holiday John? all outlook, would on all performance the and their employees additional John work like wish provide and to season. Photronics' I to over a wonderful to thank the hard

John Jordan

everyone. Good Peter. Thank you, morning,

three Peter recovered the a excess began to As record. reset. still set a consecutive the in a trade was Huawei the QX, year QX record in while run revenue geopolitical suppress COVID $XXX million almost was related ago. year rate And $XXX we sanctions of excess the year. in mentioned, The the after influences exceeded supply chain set again target. run well revenue in on by XXXX QX target years disruption the we business revenue rate of XX% fiscal year million, third that Nonetheless, impacted fiscal and annual XXXX when by FPD the record against XXXX

our business a winds down as sees in typically fourth new slight introductions electronics demand, decrease seasonal from products. the consumer of During quarter, recent design cycle

compared pockets Revenue impacted up year. last impact some from the against increase Foundry, two area revenue The decline and logic was to level healthy of fourth mask IC quarter sectors continued trusted for negatively saw exacerbated memory, demand region trade not logic with defense sometime location a activity. expected Huawei. a record Our the by design particularly X% compared weakness and emergence be was customers drove U.S. sanctions with supplier XXXX. of opportunities the FPD foundry negative until also of for in a and quarter recovery $X.XX as a was revenue softness there. Taiwan applications. factors. other good the was last is benefited China new received an where same quarter demand strong revenue In and for U.S. product to for quarter from IC has high-end in geographies, during Korea was demand of logic by

restrictions First, our on call, mobile as trade a impact quarter chain. Huawei dramatic during having China the discussed supply against we U.S. third

process business is from release new units, limited. and the business. chain these resetting effect in largest ripple supply demand reduced the being mobile excluding our China, to mobile from chain market a buying the restrictions. from is the of in chain, and phone display chain, of suppliers in producers. phones felt especially smartphones moves reduced manufacturers. demand, their of the move end-to seen away we've aspect As the was that masks That process leading trade the semiconductors, phone Huawei separate China from edge effectively mobile recently Huawei low meet other U.S. to from was prohibited That ability -- insulate which division and of Huawei from very therefore, meet demand is panels, one throughout to their meaningful Huawei to that Since supply new to demand resetting their effect on panel is their by sold supply supply mid-price of the

As AMOLED our sets was down XX%, revenue a sequentially. mask result, for

trend TV lower continue products the profit. and as for product margins the due the to The releases delay existing for to masks and for was operating short-term production driver leverage higher mainstream impacting both impact resulted for quarter was incentive That operating IT panel demand GXX.X with line down a factors display Thus, LCD producers. new of of negatively and form gross results. Profit in demand for the profitability and pricing on were design end Strong well high improving unit second to demand. vast on them of created as plus of smaller runs maximize of the the revenue.

year and yield of our ramp Our investment. improved our X should FPD results phase next IC on Phase as expansion the China in next investment continued focus we margin complete implement of

our investor long-term expense line, more next $X.XX balance a $X.X our dollar-denominated the items non-controlling elaborate will million of Below our U.S. subsidiaries. line expectations, per and sheet included primarily of targets margin in with re-measurement unrealized in effect operating other resulting interests of and expense share for We the interest provision quarter. of the were on Tax earnings diluted Monday. of during foreign event

an at from during $XX operating balance quarter $XX shareholders debt. the We quarter. million X.X in $XX stock net million repurchased were Significant from was generated repurchases. cash and million million the to $XXX of during during million XXXX via Our $XX $XX $XX the the proceeds and of million, cash returned shares of end of year events during increase quarter the share activities, million expenditures, photronic capital million

JV JV Those our dividends paid generally CapEx back $XX our in million to than $XX also partner. China Total XXXX less million We $XX contributed was to target. dividends Taiwan million, periods. our in future are in

I Xiamen investment FPD our and in Next about Asia. as Phase of investment year, we we phase execute $XXX million of complete next CapEx forecast in the the

XXXX. sheet and Our returned has strong million balance share invest since to China in enabled repurchases $XX through us

plotted sufficient have to we share a cash to in extend continue organic actively In in to our the course forward, generate and that from Looking invest will opportunities and shareholders. parallel, leadership, space Monday. photomask we market technology would we will growth open operations return on to cash more to M&A be

is guidance, visibility to is predict. is three products Before inherently demand our only I'll uneven I you of and always some provide remind our limited weeks as difficult our that to first quarter one backlog for typically and

the quarter. suppliers operations on Geopolitical address the two Additionally, impact or point sets an more I quarter significant and will an concerns our segment have have have high the of operations, actions industry government earnings. may our high-end first impact our high-end low this our of end days are or of health for ASPs and results. trade and relatively therefore, related a market revenue orders our in than our policy adverse business to and mask out demand also can number to will on quarterly grows that on customers risk as fourth resulting the a impact

into of $XXX and first revenue many healthy share. actions with flat these for earnings first estimate a revenue by to in trade government in limit caveats, Underlying essentially XXXX and our in the model, revenue year, of demand activity. to was geopolitical carried Based we million. business expectation to on $X.XX and to implies headwinds our current range remote range those $X.XX remain be appears Given restrictions operating market guidance challenges challenging we of many to to due trends although driven be improving, quarter sectors QX. work The and the our of and diluted is midpoint and per travel it expect XXXX. in quarter million the $XXX education,

profit while has drive all globe, growth, in a continue However, we our to responded and to be workforce and to technology position are solid in steps well the capabilities and improve taking margins meaningful able financially to around returns. to invest optimize

we initial to single-digit the operating I join suggests XXXX. high growth the to outlook XXXX over the the will for us more. similar year profit turn to now in percent growth questions. XX% and growth Our your Monday on be revenue be learn fiscal please operator that for will Again, call achieved will

Operator

Stifel. [Operator Instructions] Patrick Ho Our from first with question comes

is Your now line open.

Patrick Ho

first getting IC the within just Maybe utilization for mainstream many in the marketplace. edge off, high of been in Can trailing the Peter, of things? rates a you're side market terms little talking on kind that help and guess I of reconcile I've the the of segments commentary bit about terms geometries, of outlook just mixed you

Peter Kirlin

Yes.

that $XX level, $XX you been it mainstream year, pretty Patrick, So if it's Revenues the high million, look right? XXs, this happened U.S. of our you business can right, look remarkably the quarter-to-quarter, business million, from primarily into trend, XXX,XXX at stable Europe is and at year foot at of maybe back that stable China. during a you million, rotation peel has Taiwan and the $XX what if the

We bullish strengthen. business and we that that mainstream the or run as with Far Actually, in market expect our upward demand demand and as move you'll diminish Taiwan. been us West course, actually but East. the for that growth. logic or rotation foundry it's the think through into year growth And in the continue profile in So a more China a a see the is business is complete, is said, Asia. we is its hear to seeing week, with the less We opportunity and less shift. think market and shift year, the shifting I with, so about bit in we there's target more clear And and really more we're next next following on for

Patrick Ho

bit question of to guess, do the hear I the towards going term? I the Photronics Can positive the as Fair concur continues my memory in of a a be softness reconcile, of enough. side that's you that and the soft. the transitions, you industry a little in counts, shift But you're layer seeing driver that market on as DRAM NAND environment of of design Can of what's of little there reconcile on terms next-generation wins. the And the near for for devices. most typically maybe you follow-up same as memory nodes current both to at versus usually some terms in things. of well next-generation time,

Peter Kirlin

our impacts. down this rate, trade million driven XXX had $XXX was but it's a slightly just COVID. we've by QX. interesting because, by two through again, by we've QX a has about at basically look quarters run $XXX quarters QX been Yes, to we've basis -- QX. And driven high have as run basically you had was been below where at is on which QX IC right, and the war rate QX a our into million And great, if business, healthy year-to-year, we had lot describe pretty business year, of sold and those -- would

our of the year-over-year, significantly memory memory up the particularly has likewise, would as, from, you normal Through as down, early our industry. year to From by our So get and memory I describe been schizophrenic overall can the the the which a step our expecting if that, factory. been has sold And our customers, business I reflects the to real external down. up what influenced think and state only see strong year, spring. we perspective you business trend of profoundly into look material memory, is through next business we're

as in But aggressive are the So, business out, rebound memory for as in belly. given what the near-term transition we for which where market point pretty particular in optimistic, we year, have a less we our that really, revenue drives and next what more we're customers this as see our see or no plans industry. you is

So that's so yes, quick summary. a

Operator

time. the closing I'd the turn in Peter at for further call queue to Kirlin comments. back And no I'm questions this to showing like

Peter Kirlin

for morning, our and Okay. during we reconnecting Investor forward this to money Day. joining Thank you look us next

Operator

other do take join the two I like continue questions? sign queue. Q&A Would participants see you to we off, their to Before speakers,

Peter Kirlin

yes. course, Of

Operator

Understand.

Our next from Davidson. Diffely with D.A. Tom comes question

Your line is open.

Unidentified Analyst

this I wanted are This much I quarter sustain, that you, I morning. the headwinds right now, color do is including first to I guess, you [indiscernible] understand for in to geopolitical the quantifiable your number? ask guess conservatism Tom specificity difficult how outlook? but any obviously, actual are on

Peter Kirlin

Yes.

off is maybe our at seasonally look QX X% you QX. if down So business, of normally,

midpoint the of guidance quarter. So a our reflects flat

our So are improving. markets businesses our --

we've business, our look trends what guidance in So, you Asia, IC to if That's improvements improving seasonality. first, in the we at to done, pegged demand solid. offset pretty market basically right, our

at our My XX% brand utilization worst you estimate. in the memory last the right, FPD, years, and industry at in a goes -- started terms the estimate back Thanksgiving to internally remember. sour. but November photomedicine If quarter, FPD month quarter this was really maybe we that look remains for be industry I'm quarter, it to continues Likewise, is the may of can around I it about industry we market sour getting FPD. old, three what FPD five Thanksgiving, rebound improve. to through That's Right

Now, do, don't it -- We what could right? know. it will

what age to trying a and we're market terrible between normal kind market. was So, of a

the in haven't several utilization Our industry first was years $XX above the probably sold out. average but we last where it's been million percent quarter, quarter

that's guidance. and that's market. we of our our see So kind That's what

Unidentified Analyst

there. you the Thank for color so much

Peter Kirlin

right, also percent plate we with I the a associated it, rules, in have before right. recognition unlike Every years, line right. has completion add, would prior revenue Yes, the new

is. market backlog, in a quarter tools backlog into week that We're reflection is that can with So, quarter equipment of that ship to two a this company a right. not with some would runs next the our capital pull what business complete

Our what the our gives you at then expense representation guys operational business see tone to market us is the is of what us. exact strength in. discretion business ability one to time. in We There's WIP has it, an of or the make exactly no quarter of backlog no Management manage our whatsoever for comes the real another.

Operator

Thank you.

Our Richard from question with Northland. comes next Gus

Your open. line now is

Gus Richard

seeing helping has business banned, gotten are Real And that SMIC which quick their on is you to migrate foundries? the mainstream? just other customers

Peter Kirlin

big ours. Well, for SMIC over their that is see customer negative. harmed of like happens a the all, customer. first customer captives, is right. a don't extent to harms own not Anything customer Yes, way the the any I a us that because think but that external time, they not by We They're of in are have they're driven market. to customer any factors by

that think I in demand SMIC, first that seeing That's to if that's demand So, really for of world shift market it the not where well, mind comment. regardless be run to going like own them is customers that expand. Photronics, photomasks that, the market, their fraction we you create customers Having said our successful. customer want. customer would them way a our wish of -- who to a the happy of it's what all true market our a sits through merchant the to culture, on builds We walls all from buy significant be a help and in but it's our

Gus Richard

U.S. market semiconductor-related something for Got you have higher are or Is of then, than thoughts guys that consider? companies that star there's have to any the where it. might a Or on companies there? And listed planned valuations been the number significantly

Peter Kirlin

many intend has a at and aware value. what happens that -- years, because increase your could Yes, either so this that it in a potential that's of that one look or it, a typically around but is like we're shareholder to and possibilities hours move consider downs for we been of looking on normally back. geopolitical we're on the upside, slow generally lot have some have we front. depending potential ways And we to of relentlessly, trends can for to we're way good a Well, company constantly, move new to we're to get that's XX

headlong into growth where that's aggressive in the China, market, our we because very we're industry. see, have with others, so we unlike really So, rushed is

some we So, perspective, of from decision. the and the to an both evaluate as standpoint see what generally then move outcome of execution trends, at others make from minuses would kind like informed history describe of very aggressive that them forward. we're Look and the an based other of, I on

that's where So are. we

Gus Richard

for that. Okay, thank you

Peter Kirlin

interesting, that Yes, looks games, yes. it's but the in early

Gus Richard

Yes.

Thanks this for Okay, is so me. much.

Operator

further no at Thank questions queue this you and I'm now the time. showing in

Peter Kirlin

you look for and this reconnecting so Monday. we next us Okay, forward thank joining morning to

Operator

and conference. gentlemen, your does today's for This participation conclude you program. your thank Ladies on

disconnect. You may now

Photronics (PLAB) 9 Dec 202020 Q4 Earnings call transcript