Earnings call transcript Q3 2023

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Operator

Good day and thank you for standing by. Welcome to the Photronics Third Quarter Fiscal Year 2023 Earnings Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions]. today's being that September on advised XXXX. X, be conference recorded is Wednesday, Please like the to Richelle now would I turn Administrative Burr, conference Officer. Chief to over Please ahead. go

Richelle Burr

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

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

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

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

Frank Lee

everyone. morning, and you, Thank good Richelle,

record quarter. better our million job year's in quarter demand. even $XXX quarter, the a than in third Revenue Our flow softer X% while set previous than X% and lower third $XXX great team slightly cash million, last was the sequentially maintaining experienced of did the quarter margin we improving during

sixth range year-to-date, revenue. at our our to up track in year of revenues QX revenue the last of year. Looking to compared we achieve guidance, At consecutive on record the midpoint are full X% the are

Profitability downturn. extended nearly with margins the X%. performance year has up backdrop gross of last We X% up semiconductor deliver against financial consistent margins to from improved continue an year-to-date operation and

IC as demand increased mainstream IC IC time, the share. was Asia the we to in have up slightly. same business. believe revenue reduced to We Turning revenue High-end overall our fall from caused customer At Asia. demand maintained foundry from market in QX

Our performing offset FPD continue GXX.X+ laptop, smartphones. have broad saw presence grow geographic and technologies and mobile increasing high-end the high-end and tablet, positioned expanding for by AMOLED sectors well the is photomask in in AMOLED growth demand declines market large for usage This automotive company LTPS into mass was improves. penetration continued display. to as into to displays. while

share We makers attempt reducing emerging market gain designs. panel also by AMOLED to see new

level of In Photronics require another production favoring high-quality new future positive on leadership technology product panels trend of the AMOLED will a photomask, This will glass. size years, superior and position. GX.X be

We by to advanced and levels further in revenue with costs AMOLED business to the are our product QX. line strong FPD kept operation the record us That maintain mix. controlling utilization in confident our demand we these win in continued to technologies. ability business and to high expect QX, fab mainstream at continue operation with enabled in set and lower overcame growth overall optimizing We into and QX. margins moderately levels trend our maintain The

Fab helped rate. utilization addition, and In preserve ASP long-term our agreements customer the us

a a As basis GAAP share a $X.XX basis. $X.XX result, earned on non-GAAP on and we per per share

industry than consumer to demand. due our global be and previously continued in seems semiconductor anticipated uncertainty macroeconomic Recovery to mute slower

drive industrial for will industry IC AI, this trend side, IC chip design both continue and learning for design center, high-end a a driver Photomask Photomask drive demand intensive positive requires on should for each to be positive of unique data business. as growth. to Since automotive, this Technologies to set many of However, mainstream the varieties makers such and ICs. IoT, machine launch design will release new product,

investment are in manufacturing we North [ph] manage supply to of help semiconductor supporting across more expect America capacity trend construction to also unruly in for global and Additionally, each additional projects Photomask. multiple semiconductor Europe plants region Asia, expanding capacity drive are chain. global their demand nodes. under Consequently, this [Indiscernible]

in financial capital Our initiative growth. advantage of profitable support sheet and outgrow believe allocation our ability We strategy, to capital Photomask long-term to discipline, investment. strategy result priority capital target the balance these IC from the allocation careful has growth The share and Photronics our of take management, trends. been cash to invest market win organic

us above XXXX margins, of ability the opportunities. under our is in industry from long-term. uniquely grow will even expand be difficult performing to I that that, a I will full over positioned great and we Photronics With track shareholder creating to is capital And to environment. Photomask confidence call continue to Photronics benefit deploy and the demand that growth on this All another factors confidence continue revenues, will give for value. and turn I year is well over the company optimistic be able the have John. to grow to am

John P. Jordan

Good Thank you, everyone. morning, Frank.

QX FPD later. same IC rate QX we'll revenue. to the orders in Both lower primary were the third of anticipate Our cause QX. guidance, an X% somewhat record $XXX quarter low million. and of QX over the end QX percentage. be and million result of was anticipated flat is QX year's $XXX the guidance better for reflected the was off for lag of quarter with A order quarterly revenue guidance increase We the of discuss anticipated off X% that as Revenue essentially the last at that in our by

Mainstream of revenue overall X% sequentially Asia. in countercyclical on we've demand has the logic memory of industry IC discussed with Consistent of revenue more remained million Photomask downturn. IC tempered supply sustained $XXX.X revenue was in was the the despite Photronics High-end face foundry weakness past, nature strong down relatively sequentially. the purchase in increased our inform expansion industry the helped strong demand in together to a pricing. outlook, continued added in and where favorable And IC IC our the of industry our structure support our dynamic investments business our strategies, the provide but post agreement in with and growth targeted. Taiwan that to of capacity are The customer understanding demand will collaboration region. continue China facilities the with fueling supplemented long-term with

level. was the revenue also FPD down X% record-setting quarter second from

growth Although AMOLED fewer business masks. AMOLED to offset overall high-end by XX.X+ declined the supply mobile continues strong, demand as LTPSNG was

strong of We displays see leading demand gain to the emerging releasing designs well from share. new as continue mobile to are as competitors market that AMOLED producers

the each to softness. designs mainstream FPD in anticipate have we makers production we and offset other new released slight continued high-end to the quarter As the mobile capacity demand We in growing toggled panel applications. for past, as

focus cost management, operating in relentless gross line our with mentioned, despite margins Frank X% we the records with lower quarter and second on maintained the revenue. achieved As in

revenue achieved already our period QX, we have into and margin ranges margin we are the time. ending continue XX-month margin Since and it on update trailing model XX% to cost as the management. pricing will operating fiscal will that with leverage, XXXX operating target in Over XX%. gross of disciplined expand margins future of both our model, margins power, and reissue to at based Nonetheless, drive grows a we

$XX.X currency per the A unrealized $XX.X on $XXX again based quarter GAAP to on strong net our year-to-date $XX to upon $X.XX movements, was adjusting in a On nearly was the at in quarter $XX.X loss million million of million. and the $X.XX at result our flow CAPEX million based We managing the per flow in in and strong non-operating year-to-date cash million revenues due net invested cash quarter, income QX this or basis we $XX.X foreign for the million good CAPEX job income quarter. a free share midpoint capital. share. Operating income diluted guidance. to a Net achieved bringing of or working basis, solid non-GAAP

capacity, million $XXX approximately discussed. for remains primarily I IC forecast CAPEX XXXX the increased Our

sheet, the balance $XXX.X million were cash at investments short-term On quarter the of end the million. and $XX.X was

debt, investments could future. strong liquidity provides We the uncertainties face low-cost The financial leases. resilience our against we of which equipment million of have and in growth position consists ample for $XX.X

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

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

of $X.XX continue for revenue our we to to will to Photomask the expectations $X.XX to current Given display $XXX continue those our diluted quarter strive quarter per revenue those position. we fourth well per semiconductor non-GAAP We the demand fourth do operating of Based on in in believe to range range be earnings to market-leading caveats, the be expect and share will $XXX environment, in and and the model, we estimate share. to million. million increase current

operator XXXX. exceeds I in a trends well long-term technologies footprints shareholder demand for the confidence us the performing customers' questions. with value. are continue of Favorable unmatched can broad to our a expectations, products consistently call global that targets and customers team your to and give to we and great our our that over achieve We will presence creating need, deliver suited for long-term align turn now Photomasks,

Operator

[Operator Instructions].

The Davidson. Tom comes D.A. question from with Diffely first

is line Your open.

Linda Umwali

for letting questions. of Thank the Linda is you behalf this Hi, on Tom Diffely. us ask

margins gross it the you there, color detail had question, despite the for be some slowdown. on So you factors driving the I Thank seems know pricing the guess favorable, then on Could quarter a first management is you mentioned give cost that any good helpful? margins, would and you. still my demand pretty bit more us like I

Frank Lee

Thank you. Okay.

customer product agreement price cost with IC long-term the our Our mix, and also especially areas. in major a protects

previous to more high-end mix have product We compared quarter.

is ASP side. ASP and on revenue is the So the compound actually so better, this

our to the operation of control In to procurement to usage team the materials the cost. has together and efficiency terms and operation reduce of worked team cost, improve

anything John, have So to add. you

John P. Jordan

it's the same may be purchase operations but our competitors. think volume that Linda, those the remember long-term agreements really pricing for our important, throughput, we're for the really only have good getting with I a we not provided support to that not through

better the the about that So that mix Frank second And really quarter in points. was that you margin by even help might in note margins. discussed the than basis support good margin previous XX this quarter plus the

Linda Umwali

demand looks softer guess picture the across in what what that board, mentioned in certain mainstream, mainstream could like in I future follow-up, segments in is paint the the on And look demand business? helpful. very you it you and for or it That's maybe the like is business, particularly a my margins

John P. Jordan

Linda, stay basis, very the long-term strong. demand is for a mainstream On expected Yes. to

during little to be seems to it a later, the we the slow, So end again later. strengthen the fourth quarter. third to we comes point but of as out mainstream We out hope of hope And of quarter comes demand expect kind quarter, we the it, across see that XXXX think seemed demand be we'll we third then to it industry its -- of board. strong expect was a low in

Frank Lee

Additional comment to, John.

is even lower slightly backlog previous Our quarter. than

However, relatively it still a high maintained level.

our our than is its overall previous especially situation, longer times cycle than competitors is the because softness under the measuring So actually in market quarter. becoming,

taking in many competitive be before are So not to we [indiscernible] orders as our as second we half. can mainstream

again. the market our high back QX turned early believe level next in if in year, total around revenue will mainstream However, or be I again to

Linda Umwali

the characterize Thank continued the year? weak end you at what for of with semiconductor overall the moment the in and market the maybe the health the you China in issues through this terms FPD guys, and how of being demand for market anticipate and environment semi of And the for would you both you then Chinese color. geopolitical

Frank Lee

you Chris, to do comment? want

Christopher J. Progler

We we've as business of continued. restrictions Linda, thus imposed on our any it's our it's by government And Chinese been, discussed as of strong in past, change the far. the any the minimal. business business don't as in has been the is and Chinese see effect the so

John P. Jordan

commercial in pivoted that And midrange I are getting leading to for very of making. FAB guess gets is capacity China nodes those A noticed the we and healthy restricted nodes, thing edge. mask that lot other is the capacity for

there's supports core our lift midrange, design So actually a in which in in some ways, activities certain business.

The overall Photomask as be pretty and slightly it down far As few to it or gradually is in is down sharply XXXX. in in a XXXX. flat, companies expected bounce that semiconductor, expected be industry, to XXXX back follow

of Photronics So kind a those broad of both whole indicators. market as outperforming is

we're indices certainly are we in of broader tracking still kind of in or outperforming generally and going markets. on what's semiconductor those both sitting So but mask, the not

Linda Umwali

of expansion about year. for China there Thank for million you're question this or looking other then you. last expenses. Is is expand, IC? IC mentioned, the to this believe, the $XXX John, I split capital And Taiwan maybe I my talk and the about capacity just any it and FPD is in believe, you facilities year

John P. Jordan

capital have in supplementing but Taiwan tools of lines our is putting the board we lot No, it and Linda. in China, A locations. across lithography all and we're

Linda Umwali

great. Okay, you Thank for your time.

John P. Jordan

you you much. very Thank Thank Linda.

Operator

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

Frank Lee

us in and strong you long-term look our you. day delivering achieving this updating thank good Thank make morning. as we in proud team's joining in for of XXXX performance you. and forward Thank a our results to you progress targets. Have I'm

Operator

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

Photronics (PLAB) 6 Sep 232023 Q3 Earnings call transcript