PLAB - Earnings call transcript Q3 2022

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Operator

Good day and thank you for standing by. Welcome to the Photronics Q3 fiscal year ’22 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during that session, you will need to press star-one-one on your phone. today’s being that advised be conference recorded. is Please hand over to would now speaker conference to like I your the today, Ms. Vice Richelle Counsel. Executive President, Officer Administrative Burr, and Chief General Ms. Burr, ahead. please go

Richelle Burr

Good results. review Chris. Thank to everyone. XXXX quarter fiscal our you third of morning Photronics Welcome

as morning may implied, and Lee, forward-looking in material no from our this over predict. upon other forecast, Comments Accounting presentation Corporate materially anticipate, believe, accompanies those this Relations forward-looking and include today’s uncertainties morning Eric Jordan, of to differ may to estimate, Rivera, any Officer, At our Chief along our are Progler, Officer. based are Frank Officer, Frank. this These words press or Chief on our participants Financial or information. forward-looking our release a to we available Chief the Chris remarks issued statements number earlier that are Actual are The and section with obligation Chief turn me Executive time, risks, I John statements of that expressed Joining the made our Technology Officer, on which the Investor our call webpage. Controller difficult factors will assume such view. expect, call results update we and include any by

Frank Lee

shortage with been has consumer build course customers there our the as continue profit. the both XXXX; record applications. per since Gross share. in automotive for and embrace the an for in new highs price, of We their FPD, and we quarter XX-year production net from strong also again, have our was Cash achieved quarter. several electronics end sequentially. making [indiscernible] consequently, and benefit $X.XX with delivery also Demand term will high been and road and margin and to of is has development half to more FPD. evaluated deliver mainstream slowdown IC have to organization expanding success we consecutive higher This we outstanding and These and and Photronics in margin $XXX I increased presence, actions times. telecommunications, sixth and us what customer XX% control. remains activities new the customer The customers IC to continued record X% revenue. next that and situation able IC was strategy of FPD with operation proud however, both of global full our Thank accomplish a expanded our been With serving pronounced beginning generation some opportunities. in of to establish most electronics. customers need such is mainstream; the results. QX continue capacity trends market of partnerships, Richelle closely mask in commitment and maps. positioning drive XX% experience ended agreements. [indiscernible] revenue operational XG partnerships in mega strong net everyone. wave production has Photronics result million end quarter and you it been customers we second long There entire us of expansion customers and of designs, customers’ capacity rollout that the applications, shown the our of technology be help in superior morning earnings to good Once deep and of will together [indiscernible] align we strong has Recently high reached new records revenue than in our our and photomask cost dealing have capital and was great been investing by of long as capacity growth, growth and profitable mask working very the for cash, respectively geographies am locations, our investments across capacity both with for will for the Since

negative results in team support result, of largest expansion of FABS more critical including trust I’m commercial proud very masks, is even of well At a and any years, forward of our at ready our as photomask the of employees be and achieve and to Thank U.S., in XX the track the only ecosystem invest domestic we believe guidance. we our will the and I member John. a with U.S. impact quarter’s of and want their accomplishing to We As In technology of nanometer. global QX thank believe to the in Photronics, the passage we applauding for domestic I’ll to the performed the through to in extraordinary U.S. XX of manufacturing best stand the we in product all quarter supplier the and for this slowdown minor, the you. third CHIPS moment, year the high Photronics are manufacturer company. join needs. cooperation look work an to have peers the on history CHIPS, turn our semiconductor semiconductor call In our end reflected we and future. the Act. customers’

John Jordan

morning and activity driving Good quarter, in strong everyone. remained businesses. third Frank. FPD you the both Thank across growth Design IC

meeting challenging. in environment operations teams tremendous demand a that job an in remains Our did

prior of with mentioned, the we year quarter our XX% record X% grew $XXX consecutive Frank line revenue As top and at sixth compared up and quarter. million, achieved the sequentially

our another validates is strategy. performance we believe that quarter’s growth data This point

are as strategically end We applications markets our mobile sectors capacity as IC displays with AMOLED business, high that mainstream for as invested the of such aligned our nodes. and capabilities high in FPD in both have and growth well

up growth and pricing mainstream. higher both year-over-year results are the outperform was improved we and XX% revenue high and positioned strong million We continue end well sequentially to demand IC the are believe $XXX across to pleased with on market. of XX% and

For saw the EUV in semiconductors for new Asia proliferation continue and by increased and our is industry. innovate bring U.S. applications. as starts strong of across and discussed industry, also nanometer Mainstream XX ubiquitousness demand everything demand the design market, and use driven pick-up in the customers particularly use nodes new for we to continued in smaller a applications high and widely and continued the The strong in increase of to demand remained end, resulting driving and we mask demand. products

business in the of mobile deliver demand year. value revenue There driven ultra-large by $XX and opportunities our selective as to strong customers. are the Our help quarter and that AMOLED operations were development to across FPD last for initiatives. enable high expand for to million our our TVs screen product quarter capture investments we more also action across capacity IC that end up organization the masks supply for both double-digit last GXX.X+ both displays strong percentages increased with year-over-year XX% compared during pricing

in growth to and Although its demand production products end of China higher both robust dedication capacity products margin Revenue mainstream the FPD, strong the continued was trend. resulted from shipped to mainstream FPD decreased high revenue. in

into market and work to leader. pricing, of and during quarter off are sequential records, and term outlook business XX-year model. the margin continued entering build of our cost and into Based Our improvements on margin basis on points the in the our expect to expect investments long from margin bottom paid deliver leverage remain XX.X% end XX%, target long of improved and the improve to XX% were we during and reductions, revenue. to our as cost term margins we the both well there benefited XXX third operating continued improved model target continue ranges of Gross higher points focus to have targeted operating well of and from operating Gross moves revenue basis and Operating respectively our ranges. volumes, were sequentially both the continued expenses we the XXX discipline. and in implied the below and controlled quarter our

unrealized of the to further long million troughs. expect toward to in year-to-date of $XXX providing earnings the quarter qualify income continue economic debt and to increased support million, next potential although as We tax trend reduce China capital, growth to We still China debt. subsidies. during strong we invest government growth capex in the resulted Since the management $X.XX. the million of Capex in and maintaining and The non-controlling opportunities project of year, ability resources used net spend quarter term We long year, Taiwan our Income term provision model We increased with to this received term operations have of metric million refunds totality fiscal this from weather the target which in our our an earnings, due to with $XX remaining we increased wherewithal and foreign working cash, the in performance was fiscal ended long the $XXX flow JVs. products. reduced and more about on $XX year. into invest to could million. to of lapse by net with of million cash some fiscal operating we beginning earnings share exchange $XX quarter net to bringing for per gain in $XX good spend generated diluted together in we VAT results strong to

in indicators is and expansion early an of too to continued early guidance opportunities, point especially likely increase. provide abundance demand next IC, capex that will cause year fiscal capex it investment XXXX, precise While for of to to

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

on a masks lower can high segment Additionally, as high quarterly business of relatively number end impact our have the revenue grows and ASPS orders, the significant end for of earnings. high are this and sets a

range of be currency, midpoint, the Based adjusted of foreign earnings effects share year’s $X.XX fiscal and the FPD. our increase to fourth revenue, fiscal caveats, ’XX full with revenue increase the million of represents year’s driven year million, operating continuation last tempered be at model, $X.XX. QX our last full quarter fourth range we year of increase an IC expect earnings full midpoint, the economic this double share, the XX% EPS uncertainty, for a XXXX in the current estimate end an diluted of we year in full over demand over quarter expectations and over across year both the per to QX per by somewhat more favorable At those $X.XX seasonality. QX the by than those on typical and for trends in $XXX line a of of per XXXX revenue to and expectations and revenue XX% the to for $XXX Given share market XX% fiscal

revenue in with the outstanding margins, flow, Our is strategy. on fiscal to for sheet our performance strong first months cash to expanding balance of solid year support XXXX another deliver a nine pace and growth record

We are greater term towards the will we I making ultimately questions. long model Operator for our over palpable, will our value Session creation target to achieving shareholders. steady to Question-and-Answer your turn progress call now for the believe lead that

Operator

instructions] of Chung first will DA Hans Our from come Davidson. [Operator question

is line Your open.

Linda

Hi, Chung. this behalf us on ask is letting questions. Hans for Thank you Linda of

the have First the embedded of or my if in pieces constraints of as much you in first I outlook, the all, I supply chain moving as you and question, and a guess quarter. constraints terms congratulations supply in if how terms the a any from in I issues your then output, limiting well on are your are of demand in was follow-up. great any revenue potential perspective wondering environment constraints, of saw quarter the

Frank Lee

second chain some actually source, supply, but blank so not very in is supply this factor our on to small shortage your able third minimal. we see develop do and question, on are to QX FPD output. output The our is a impact answer We

Linda

into strong different and things, as That’s potential with demand thinking in guess see you’re but you or about think you quarter seeing the could lot in or any year a coming cancellations? any of the net actual in order you follow-up slowdown effect and of noted XXXX, markets. growth changes terms demand push-outs end in side markets, helpful, and--yes, in of whether concerns the we think. XXXX end I’m I’m curious of Then the about as I declines, how my you wondering any what are obviously

Frank Lee

all customer don’t however, not little slowdown of [indiscernible] bit At mainstream we any in do in end in we [indiscernible]. customers, product, activities; slowdown some the this high mass in see customer push-out do moment, the a but we necessarily [indiscernible], see see

For XXXX, this weeks, our John actually our three model, as is backlog mentioned, to business so we-- normally moment at four

John Jordan

little a the customers, is that with of as them, of bit of we at the we When this our quarter, but we we back. fourth sometime XXXX our pullback coming beginning Linda, demand long there’s together, had anticipate cycle. the So be push-out saw from from major term going model discussions during discussed, be model that a put our to to going some we’ve

period, know at it’s factor three the muted we a has pullback good industry. all to don’t and forecast into through been or some never slowdown different now, occurring expect we now XXXX that--and been years our during it that we We’re so sometime notwithstanding now, and people’s pretty slowdown in contention growth our Whether know. a a that is not, has cycle anticipation different,

we we’ll yet, what a we in actually our We up we’re expect quarter, back expect so that for week have haven’t do and our the during demand to feel to and better XXXX pick about for put together XXXX. budget next

we As give the the forecast guidance the that the for guidance you past, well this and year, or at one at we we from full never do for can the now. quarter so QX knowledge point with best to time, we do our have for know is following year a

Chris Progler

constraints one in photomask. can back if the should of is comment. two years, still lot little will which not global pulls capacity photomask make commercial be easily even industry, so There’s the additional over or utilization a high in This I solved Chris. year bit, remain quite demand next a

harder up try that well to countercyclical downturn little makers down, chip kind see. the down you can bit while The goes they’re not see working activity improves design is that if to not that other the as same pick a often activity fabs the these may to the is of as see impact goes dynamic will where of us wafer severe, it fab capacity, utilization so to because refill so buffers give fabs, utilization design in be tend happens some

Linda

little revenues, the pricing appreciate could dynamics, you I having Then gross and mask seems effect versus and about a margins? mainstream as you the revenue [indiscernible] from down pricing last quarter growth growth pricing quarter-over-quarter the talk in to strong changes coming can my of color. question was could about more volume, a bit break order advanced significant which the maybe on how much the in be

John Jordan

an to in effect our high Yes, take Linda. that. difficult thank for the We’ve significant. that, improvement able environment quantify, been in the you is It’s pricing advantage we’ve to and so fix for of seen Asia, business but end

since now as forward time it’s are going in the get ensure to need. we’re agreements China. quarter As the customers us put term you that approach us capacity in investments long to support predictions helped want and agreements we’ve know, customers Over symbiotic because for going masks our then, pricing year. place to of that supportive to purchase had a long environment and last used very as try to Asia for since revenue to our much to they them coming term our second in they We their more

As increase. and the increases and over term have XX continues we agreements in in those rolled April, Many April in we of the and a quarter. to of March place number March X, purchase benefit long price those of got third result,

our been. think I what time we up with started we rough We margin improve, effect since really estimation number at differences it. can on just look in own over put a a the environment period pricing if that the to come gross pricing on the fixed has of can’t

Linda

the Great, today. you thank time for

John Jordan

Thank Linda. Thanks for the you questions.

Frank Lee

Thank you.

Operator

our for moment One please next you. Thank question.

of line the from come Patrick will question Ho Stifel. of next Our

open. line is Your

Patrick Ho

a markets today, been market electronics off seeing about and they so low comments the marketplaces are if markets in the orders consumer follow-up tangible across other a what you in Thank PCs, chain, overall you are are I’m that they’re that some like getting seen currently quarter. discern we’ve you in reductions seeing the at haven’t able smartphones, to to end on or weak? nice very Maybe semiconductor in is you high so much, weak push-out, as are where end made and first congrats

Frank Lee

but we I especially to [indiscernible]. main end one may thing situation factors inventory the customer, of from build-up the see, user, different, customer the is be in one the think the

customer wafer end room to Before design the customers, we high Chris the interface hope perhaps October, recover input is believe new little and is due we and an to make as to high with believe reluctant by should are clean-out should a the activity, product, mentioned, of have to to our of a activity utilization the so effect. inventory, term in bit [indiscernible] inventory, push-out to so and start the end or allows some according taper the so this we a and because inventory, activity is September down but that pilot fab short customers continue, there

Patrick Ho

of high for in demand Great, business. or question the follow-up to customer you, say, in the there that’s type they both--you John, Maybe you capex capex, does particularly mainstream, the the versus, equipment nuances in need end of my helpful. terms Is type buy? quite for affect of obviously is differences and overall any mainstream fungible, IC either the acquire high or you are know, of kind capex dollars, that

John Jordan

- Patrick for fungible, hardly that They’re question. thanks

determine that mentioned we’re mentioned, I next meeting and having I comments, increase our our we’re is going my increase, as be. planning for year just when week also to what will going capex to that next During

several in doing have on going in improvement the we’ve high next a expand that of really We’ve especially high are in that, been for for ROIC delivered years, capabilities, they’re exactly deposits tools the buying and calls, We’ve the that couple you’ve expanded next end to we’ve was ROIC. scrutiny end to To last year inspection prior observed high and lot seen discussed and end as point mentioned improvements next capex we’ve tools year mainstream been Asia we year. that very the U.S. we’re primarily over are of tools, for to in year, year. in in investments the seen this our mainstream, to As we’ve also criteria effective going we’ve result available, and our etc. that use we’re and IC a previously. capex in our We there that extent make did got Asia. and for of do The with also for we sure well tools logography over be past it tools, going facilities sure we’ve already--as the making investments. produce to do

As specific be, our we’re I if took high almost expansion They capabilities if you aren’t wind the in putting we’re put buying can lines everything our IC. the together, full each that and high capacity. together to as in with but end them up full we’d lines lines, put expand end tools in of we real

Frank Lee

in writer we inspection so middle we ready a Actually the the year, ready, be have do and Patrick, and end building we do have customer tools, are next after of expansion Taiwan, high move demand. clean in by also the and this the and tools end is room in meet XXXX to including Frank. is several the will end some facility year, capex fab this our

Chris Progler

end for on productivity. really cost we sense economically price add, only hard capability the is midrange tools is can other there, I look and mean, The reasons. it very, very thing We tools doesn’t run make mainstream just at - high I’d Patrick, on products

we high how a The of ownership, ROI, end that but get look capability and tends be sorts capex. high those cost in to of decision on things factor tools look overriding tools, at equipment, lot capacity also end the we right at We products for end fungible a the bit can the to, run that scrutiny to and on is so if more operate we end fab. need way but really little higher mainstream the isn’t lower midrange tools,

Patrick Ho

Great, that’s again. Thanks really helpful.

John Jordan

you Thank Patrick.

Operator

you. your next to star-one-one for ask Thank Again, our on please moment a question, question. One press phone.

Capital line of Richard come Markets. of Gus Northland question next Our will the from

open. is line Your

Gus Richard

for taking question. thanks Yes, the

board? any Just just real impact Asia general, regional is across the there or China slowdown and on or Is it quick on takeouts, the in that?

Frank Lee

I regions. recovery don’t China slowdown, China China so and, see Actually, The see remains regions operation in little at any still some why we bit that’s capacity. coming other a other over do happening. back as activity strong, very we mentioned, runs slowdown slowdown our is

Gus Richard

over a QX it Okay, last Then I decades, the thank recall is you. quarter your seasonally up? few typically is as down or

John Jordan

starting dampening coming currency it’s from so have would on couple record the as additions local we the have with know we effect so during from also have much and QX typically investments where QX. the been big from then foreign revenue be China, case, that’s rise stronger. has translated we lower is incremental exchange benefited for this seasonally the them in if giving during capex the from Gus, a to revenue the on the revenue so dollars, they and incremental year, But have last the incremental don’t locations translate didn’t than years muted capex In into dollar in year, revenues revenues. we the coming QX of in some they strong to several

Gus Richard

then part last look of--you at from it, just and had are more supply it’s was the me, when the and come capacity I’m point your comes expect would in there’s on, where last fully it when until not revenue that over of that flat wondering, few at sequentially, growth nice much upside incremental know, I business years, you you’re you if on? FPD your Got so, to one a utilized and

Frank Lee

the being higher we are at on make time and of product moment profit over-capacity, investment. we year, for decision wave our we making and we is first focus forecasting before capacity last FPD, the moment in cherry-picking the we’re Hefei at next our on profit expansion kind booking this finished a our orders but more so major of for In this

Gus Richard

so it helpful. Got me. it, Thanks for much. That’s very

John Jordan

the joining call, for Thanks Gus.

Operator

for turn closing End see Q&A queue. would now like no in the the further questions to conference to back you. remarks. Frank I of Thank Lee I over

Frank Lee

customers. delivering business in the to way strong the record to achievements of across the joining on our remains quarter is year. we forward we well third this success the are performed Thank Thank meeting another future. market morning. proud team and in to our our demand you. this and working We and Thank you entire serve continued look hard End I’m you. the for year

Operator

thank Ladies for that and concludes pleasant please We conference Have participation and today. your gentlemen, ask you your day. you that the disconnect call for lines. a

Photronics (PLAB) 30 Aug 222022 Q3 Earnings call transcript