Earnings call transcript Q1 2023

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Operator

Good day, and thank you for standing by. Welcome to the Photronics First Quarter Fiscal 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Richelle Burr, Chief Administrative Officer.

Richelle Burr

Thank you, Rivka. everyone. morning, Good review our fiscal first XXXX Welcome of results. quarter to Photronics'

Chief Lee, morning Financial Executive our Controller. Eric this and me Accounting our our Officer; Officer; Chief Rivera, are Progler, Chief Joining Corporate our Frank Chief Officer and Jordan, Officer; Chris Technology John

include These that Investor estimate, made release of press expect, no may Relations anticipate, obligation forecast, implied, forward-looking such factors predict. or today's statements our page. Comments any and materially material section any include update on remarks, participant uncertainties are call to with may the Monday, based in of that number statements or The our information. our from a together available results by we difficult expressed to words view. on issued believe, Actual presentation we and upon that assume other forward-looking accompanies forward-looking on the web are are risks, differ as those

our refer A is reconciliation analysts, our metrics discussion, to in performance. investors ongoing During for materials. the GAAP financial evaluate to we and useful presentation non-GAAP course to financial of These are will provided of management numbers metrics. results certain these

over time, like turn this to to At Frank. the would call I

Frank Lee

of able everyone. Photronics well. very challenges Thank QX, that of backdrop a $XXX.X report and was which This showing I'm you, million navigate uncertain conditions, was exceeded good macro Richelle, we difficult and morning, a against in to industry pleased achieved revenue to our environment expectations.

mixed, Indeed, softening demand in in the strong certain with and been demand has market nodes others. IC photomask

for smart image for mid-range strong order XX card, received LED and from nodes, nanometer, specific sensor, side, other IoT foundries to automotive, positive applications. Asian the we On driver, from XX the mainly flow

us by handle investments purchase long-term helping slowing and market periods share of revenue. industry us demand. helped us for a preserving few Our capital These and over plan benefitted better product have we good last demand, mix maintain agreements agreement providing entered years the customer that of

smartphone FPD business particular a remained for On strong driver panel QX IC with consistent China growth displays showing fab mid-range highlighted FPD high level, to our photomasks provided above. was for and the utilization the strength with our This our demand side, display major contribution at a makers.

margin were softer but still at QX financial Gross control last and through than pricing and details strong more margin discuss metrics strategy. continuous will operating slightly level John year, management maintained a in cost the later.

guidance outlook. with ongoing in QX quarter to forward Based stable our trends anticipate from customers, QX, Looking resulting order that input in we remain roughly current operation is in and demand to results. line first on our

even beyond downturn with steady always starts uncertainty our on continue the higher an wafer to remain demand understand cases, support display their their photomask production. we is and cycle and many as demand closely than or same work can While to photomask demand demand usual, ready In to customers as is business. industry design-driven QX during not

shops long photomasks close and term, A this IC market point believe well the supply for We broad over our masks. term. our global long-term global driver drive to a as us to these of chains. portfolio fabs technology capitalize toward on new of to are will a and in design-heavy mask be photomasks, positive greater place and presence, relationships photomask believe require trajectory customer the great the we FPD semiconductor captive be Longer Moreover, growing demand. future outsourcing regionalization supply position

and in as delivery. full Photronics' we world-class challenging executing in We have confidence through and they which by I navigating capability, made a customers by with to and have team, good year. will XXXX, continue performance global be in support will dynamics start evolve a cost our

us we some manufacturing for of additional create the control export tools and comments few risk I the to This chip technology on to on evolution over manufacture to on necessary China. turning would Japanese like rely a of have to offer recently and firms the Japan photomasks. services call may the as laws. restrictions to tighten export Netherlands for agreed John, Before material, continued

We continually to a impact our and import quarter with review not results. restrictions practices best vendors with our suppliers ensure and create partners, compliance customers. The closely plans new that first our on work did export material requirements regulatory and our to have serve

future our review We what continue may have impact the to they restriction operations. and on

to With John. that, call I turn the

John Jordan

technologies. successfully trends, from Good and Revenue Thank increased as high-end slightly Frank. both fourth Design activity their typical up with done continued win the morning, IC team customers global quarter technology road the working and our job and for everyone. and great seasonal a reasonably particularly first were map well understand have in robust, somewhat you, our orders, commercial offset executed delivered. quarter teams FPD and to

imbalance the X.X% million, part, in Asia, An mainstream. supply/demand for IC particularly up sequentially. increase and able over offset maintain exclusive last continues pricing environment, a revenue support premiums the ASP X in years. to of was $XXX.X favorable The high-end to limited softness most established we're demand, in pricing

growth production strong FPD Many masks than demand masks. capacity can lower more continued mobile in improved X% demand. dedicated offset high-end the of high-end to revenue strength to sequentially reduced demand mainstream improved to High-end times, and mainstream growth for from displays. GXX.X+ $XX.X in million. Again, lead came revenue production

somewhat were due X premiums margins to that margins percentage pay deliveries. less and Gross mix, customers to operating points less than accelerate and lower quarter favorable expediting about fourth

product outcome. of and location was affect memory, including increase FPD, margin operating not the both especially in all revenue the and product, Although all IC created manufacture, related is to margins of high end, and business mix, high-end Difference pricing in nature equal.

slightly sequentially higher costs. on were increased expenses people Operating

DNA, higher overall quarter are last driven expenses target in SG&A tight Maintaining so expenses costs implied labor taxes on First Nonetheless, by employer XX% conditions and quarter to market a our first healthcare our costs. speak. higher operating model. wages, costs. grip the healthcare typically due well to fourth salaries of quarter SG&A part than below increased sales remained and of to higher year is from due and

we nonoperating quarter results, gain Due fourth been generally of or quarter. unrealized line were resulted U.S. variation first X loss the which in non-GAAP variations from loss provided an the exercise in each currencies of in currency in quarter our remeasurement remeasurement favorable produces for result dollar-denominated items with functional relationships a in a unrealized years. Nonoperating to the loss month-end that the The into balance quarter These $XX.X accounting degree the expectations. FX of noncash items from operations. can excluding presentation demonstrate have local over the the loss, last operating in foreign sheet and amounts, primarily either million to

and and income EPS and interest quarter, income basis. The was income of net $XX.X $X.XX. analogous GAAP million $XX and million was income an respectively. on diluted a expense EPS $XX.X basis, $XX.X $XX.X resulted were $X.XX EPS million provision million Last of non-GAAP net tax net $XX adjusted were $X.XX. net and million in of On noncontrolling diluted million The income and $X.XX, and EPS last year of

generated from expenditures in the was capital flow million government $X quarter. invested in received We $XX first Cash in and million incentives. million operations $XX

high-end increased forecast full XXXX, approximately primarily For mainstream $XXX remains CapEx at capacity. and IC for our million, year

debt. million for $XXX our end quarter investments in liquidity Our the We investments, we we at growth $XXX was and of uncertainties resilience cash for cash ample may or net XXXX. balance, believe including in million million after the against short-term have in face $XX

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

quarterly as this number and Additionally, the ASPs And our for orders of segment a relatively high. impact are earnings. grows, significant of high-end a can on business the mask sets have high-end revenue low

second second not million caveats, in the to industry's revenue reflected is be our in be phase to range revenues million. for sustained revenue will at quarter level to we $XXX anticipate maintain $XXX expect that quarter, photomasks. and in level ability the this belief demand necessarily those the that ratifies cyclical the Given We the current of

current and to the share estimate Based $X.XX on be to quarter, model, those share. $X.XX of the quarter, operating second in revenue diluted expectations earnings per for range current we per the our

demand. start teams with commercial positive near-term great our optimistic a a to carefully manage We Photomask and XXXX. are and has to the to operating remain moving of margins stable, made performing we believe increasing we leader, uncertainty, photomask view Despite market attainment been grow continue have to of and toward plan financial long-term keep targets. we well. long-term and are We demand our

operator the your the for questions. turn call over now I'll to

Operator

comes Instructions] from Davidson. D.A. first Thomas question Our the of Diffely of [Operator line

Thomas Diffely

it just when post-Chinese moving ramp not second at John, offset look about why parts? some seeing Year by So do talked you being typical quarter-over-quarter, curious, And it you in demand? is guidance, quarter New I'm you you're think stable the other being the

John Jordan

who's New defer on much rate. Frank, an more Year that I think I'll one authority order and to the Chinese

Frank Lee

happen tape-outs Chinese of different or lot a slightly before year, This the industry because overall Typically, environment. of it's New Christmas Year.

tape-outs do the mainstream we and to monitor the in start situation. So customers haven't need But input sales, see quarter, the we start yet. believe side, the may the recovery the to to happen our to tape-outs continue strong -- a on seen later high-end increase. some we from we according But recovery but from to our

Thomas Diffely

place you looking in then think nationalism. are when capacity What And regions talked be about at in in in comments, growing your of to benefit And kind ongoing PLAB you you your Okay. do particular will the prepared there? business?

Chris Progler

Tom, to have region their every chains expand major domestic has the Chris. supply programs is Hi, producing this semiconductors, regions All that. for

wanting significant amounts U.S. at be capacity. looking of and seem particular, we're them. install all of to Europe, So to new in

for to networks So with We're we're that ourselves expand customers. tracking opportunities at apply that. there. our also We're looking meeting incentives

look to of I achieve kind horizon X-year As probably the at full years, a have minimum, those to of think X government-initiated X-year might at entitlement you that as programs. when X to far probably -- to X- materialize, really

probably already before think seeing the bit it really of to should I of little a think some we're it, trying curve takes are companies frankly, expanding a you where horizon hold. X-year ahead But capacity. about by get So

Thomas Diffely

maybe Okay. include? of does it bit nodes? on early advanced is at too restrictions. more those to business And then technology your Is percentage the this what on maybe, follow-up that Chris, what nodes question. tell? potentially little a Japanese But a And

Chris Progler

most the a particular, the on for I don't us. impact EUV think I that see having nodes, large in advanced

growing year-over-year. actually business Our is EUV

mostly to year. it's of expect happen but thing. equipment that piloting, We R&D again manufacturers, support OEMs, programs, it sort to this

to is a growing for So it production we EUV, impacts don't us. from although have big exposure

nodes, curtailed, is that lot nodes products those key If at world. the into capacity future those on nodes. has then around midrange because impact was severely our major know, that Deep regions a companies scanners. a midrange mid-range dry at of fit you really of today, This as selling immersion the into all I UV are On ARF still think course, the and XXX scanner

we So does pretty right that, It do seem could but to to the future. not happening in be now, closely. have watch it

So an it, for we keep sure. eye on

the world they're of they ideas to tools to if the region. those one one need go to And guess still will chips. don't that I different region, -- a go is those going

So see. we it opportunity to this regionalization gets back

the that take we The certainly for on that. ask response, advantage plugged are how going in So regions try chips you those is built fabs, are would be if idea the up we'll to all And will to world, it. and be those of of make you someplace.

from There working She's every it comment day. on Richelle topic. on two may particular diligently be or very another this

Richelle Burr

that's think Chris. right, I

to. Netherlands said waiting and I actually and we're think is to accurate, everything agree what still the see Japan finally you --

Thomas Diffely

I in Okay. market I was about still this tools did surprised point that at the question, year. extra acquisition the the talked for you CapEx support space. then that of I we about talked pricing John, color. $XXX a expansion. appreciate of thought were mainstream million where the And final mainstream not you've new

John Jordan

that's good and Tom. -- memory, So a

last even still we I produced are available. less those, supplement able price. lines the most are that the right. used than tools can we are the point with, much that of pick those And There other to absolutely anymore. at be new part, You're up market at that we for may But think extent to and tools the mentioned, aren't our beginning existing as there year, on

to that, we So can tools the extent also existing the lines. supplement we scavenge like

of exception So it's really kind just point on tool basis. a

up for call. early Thanks so to getting

Thomas Diffely

West Just on another day the here. Coast

Operator

for and will Lee turn questions Instructions] [Operator further call time. to the Ladies I Frank this are no there now over comments. at closing gentlemen,

Frank Lee

you. Thank right. this joining morning. us you Thank All for

our are position and and we for control a We customers serve maintain demand photomasks can XXXX, good so to our have made start outlook our operations and as optimistic leader. believe we in we margins. maintain remain on can working our the hard We long-term the and revenue market

interest, day. you for you. have great Thank and again your a Thank

Operator

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

Photronics (PLAB) 22 Feb 232023 Q1 Earnings call transcript