Photronics Q2 2025 Earnings Report

Photronics EPS Results

• Actual EPS: $0.40
• Consensus EPS: $0.48
• Beat/Miss: Missed by -$0.08
• One Year Ago EPS: $0.46

Photronics Revenue Results

• Actual Revenue: $210.99 million
• Expected Revenue: $212.00 million
• Beat/Miss: Missed by -$1.01 million
• YoY Revenue Growth: -2.80%

Photronics Announcement Details

• Quarter: Q2 2025
• Date: 5/28/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 28, 2025
• Conference Call Time: 8:30AM ET

Photronics (NASDAQ:PLAB), together with its subsidiaries, engages in the manufacture and sale of photomask products and services in the United States, Taiwan, China, Korea, Europe, and internationally. It offers photomasks that are used in the manufacture of integrated circuits and flat panel displays (FPDs); and to transfer circuit patterns onto semiconductor wafers, and FDP substrates. The company offers electrical and optical components. It sells its products to semiconductor and FPD manufacturers, designers, and foundries, as well as to other high-performance electronics manufacturers through its sales personnel and customer service representatives. The company was formerly known as Photronic Labs, Inc. and changed its name to Photronics, Inc. in 1990. Photronics, Inc. was incorporated in 1969 and is based in Brookfield, Connecticut.

Photronics Q2 2025 Earnings Call Transcript

Key Takeaways

• Photronics delivered Q2 sales of $211 million and non-GAAP EPS of $0.40, and repurchased $72 million (3.6 million shares) to drive future earnings leverage.
• The company is expanding capacity in the U.S. and leveraging its 11 global cleanrooms to support high-end node migration and benefit from reshoring and AI-driven demand.
• Advanced photomask technology and adoption of larger G8.6 AMOLED panels in smartphones and laptops position Photronics to gain market share in the emerging G8.6 AMOLED era.
• Second-quarter revenue was flat sequentially and down 3% year-over-year, with softness in mainstream IC and lower-end nodes, leading to cautious Q3 guidance of $200–208 million revenue and $0.35–0.41 EPS.
• Strong operational controls drove a 37% gross margin and 26% operating margin in Q2, with negligible tariff impact, enabling $31 million in operating cash flow and a planned $200 million FY25 CapEx program.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Photronics Second Quarter Fiscal twenty twenty five Earnings Conference Call. At this time, participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your speaker today, Ted Morrow, Vice President of Investor Relations. Please go ahead.

[Ted Moreau, VP - Investor Relations at Photronics]

Thank you, operator. Good morning, everyone. Welcome to our review of Fortranix fiscal second quarter twenty twenty five financial results. Joining me this morning are Frank Lee, CEO George Mikrokostas, Chairman Eric Rivera, CFO and Chris Progler, CTO. The press release we issued earlier this morning, together with the presentation material that accompanies our remarks, are available on the Investor Relations section of our website.

[Ted Moreau, VP - Investor Relations at Photronics]

Comments made by any participants on today's call may include forward looking statements that include such words as anticipate, believe, estimate, expect, forecast and in our view. These forward looking statements are subject to various risks and uncertainties and other factors that are difficult to predict. 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 the presentation to conform these statements to actual results. Photronics has provided additional information in its most recent Form 10 ks and other subsequent reports filed with the SEC concerning factors that could cause actual results to differ materially.

[Ted Moreau, VP - Investor Relations at Photronics]

During the course of our discussion, we will refer to certain non GAAP financial measures. These numbers may be useful for analysts, investors and management to evaluate ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials. During the third quarter, we will be participating in the TD Cowen TMT Conference, the D. A.

[Ted Moreau, VP - Investor Relations at Photronics]

Davidson Consumer and Technology Conference, the Three Part Advisors East Coast Conference and the Singular Research Investor Conference. I will now turn the call over to Frank.

[Frank Lee, Chief Executive Officer at Photronics]

Thank you, Ted, and good morning, everyone. We achieved second quarter sales of $211,000,000 which was in the middle of our guidance range. Non GAAP diluted EPS was $0.40 We took the advantage of financial market opportunity during the quarter by spending $72,000,000 to repurchase 3,600,000.0 shares, which should give drive greater earnings leverage in the future. In our IC end market, chip designs are migrating to higher end nodes. These nodes require more photomask per design, which generate higher ASPs per MOSFET.

[Frank Lee, Chief Executive Officer at Photronics]

In The United States, our 2025 capacity expansion plan targets this no migration opportunity. In Asia, we are also in a strong position to benefit from a market transition towards higher end nodes as reflected in our Q2 results. We believe some of the positive node transition trends come from IC serving a growing AI ecosystem. In the FD market, we are the technology leading mass suppliers to the industry, including to companies that have their own captive mass operations. Conditioning improved during the quarter due to the seasonal timing of major smartphone and laptop design release.

[Frank Lee, Chief Executive Officer at Photronics]

For the first time, these consumer products were produced in larger G8.6 panel size using AMOLED display technology. We are optimistic that with more emerging G8.6 related products and R and D activities, our advanced photomask technology will help us gain market share in the coming G8.6 AMOLED era. With the current market dynamics, our geographic footprint is a strategic asset that differentiates Fortrani's position. To support our global customers, we operate 11 cleanroom production facilities, including six in Asia, 3 in The U. S.

[Frank Lee, Chief Executive Officer at Photronics]

And two in Europe. Our manufacturing facilities located close to our customers enables our rapid response advantage and facilitates collaboration with customer. Our global footprint allows Photonics to capitalize on new business opportunities as the semiconductor industry diversifies its manufacturing footprint. For example, our strategic capacity and capability expansion in The U. S.

[Frank Lee, Chief Executive Officer at Photronics]

Coincides with the reshoring of semiconductor production to The U. S. Our program is progressing as planned to support this U. S. Customer fab and design roadmaps and expansions.

[Frank Lee, Chief Executive Officer at Photronics]

U. S. Tariff dynamics during the quarter increased global macroeconomic uncertainty, While tariff negotiation remain ongoing, we can leverage our diverse geographic footprint as a strategic asset and a competitive advantage. Our ability to allocate production across our geographic locations allow us to ship the majority of masks within regions or countries, mitigating potential tariff costs for our customers. This morning, as part of carefully considered succession plan, I have decided to retire from the CEO position after three years.

[Frank Lee, Chief Executive Officer at Photronics]

I have truly enjoyed my time, and I'm proud of the work we have done to move us forward. I will continue to manage the Fortranis Asia operations until my retirement. I will now introduce you, George Makrokastas, our Chairman and newly appointed CEO.

[George Macricostas, Executive Chairman at Photronics]

Thank you, Frank. On behalf of the Board and the entire company, I wish to thank you for your twenty years of dedication to Photronics, including the last three years as CEO. You have played a significant role in our success, particularly in our Asia expansion, and I look forward to continuing to work with you at Photronics and on the board. By way of introduction, I started my career at Photronics at an entry level role and worked my way up to a senior leadership position, giving me a thorough understanding of the business and underlying technology. In February, I found RagingWire Data Centers, which became a highly respected data center provider, leading to its ultimate sale to NTT in 2018.

[George Macricostas, Executive Chairman at Photronics]

I've been a member of Photronics' Board of Directors for approximately twenty years, and earlier this year, was named Executive Chairman. I look forward to driving Photronics towards the next leg of profitable growth as I focus intensely on operational execution. I will now turn the call over to Eric to review our second quarter results and provide third quarter guidance.

[Eric Rivera, CFO at Photronics]

Thank you, George. Good morning, everyone. As Frank stated, our second quarter revenue was in line with expectations at $211,000,000 which was essentially flat sequentially and down 3% year over year. IC revenue of $156,000,000 declined 3% year over year. We noted a continuation of favorable design node migration trends in the quarter, which should continue in the future.

[Eric Rivera, CFO at Photronics]

High end revenue increased two percent year over year representing 38% of our IC revenue. We saw healthy foundry demand for both twenty two and twenty eight nanometer photomask products in Asia. Our mainstream IC revenue declined 6% year over year with the largest decline in photomask serving the oldest generation design nodes indicating continued weakness in this segment. This reduction was partially offset by design node migration to smaller IC geometries within mainstream, which require higher value photo masks. By application, revenue from memory applications declined sequentially due to the timing of projects.

[Eric Rivera, CFO at Photronics]

On the logic side, photomask sets serving mobile communications such as Wi Fi, Bluetooth and baseband IC were strong along with OLED driver ICs. Lower end design nodes serving power electronics, automotive and industrial applications remain in a weaker recovery state. Turning to FPD, revenue of $55,000,000 declined 2% year over year. FPD revenue experienced a low early in the quarter before the anticipated seasonal demand uplift. Higher mobile applications and continued adoption of advanced mass technologies supporting innovative new designs were areas of strength.

[Eric Rivera, CFO at Photronics]

Geographically revenue was led by our IC joint ventures in China and Taiwan where business remained healthy as customers rely on Photronics scale and product mix to support expansion of their product offerings. Revenue from The U. S. Declined sequentially due to lower end design node weakness and the timing of customer advanced node projects. We reported gross margin of 37% in line with our quarterly average over the past three years and well above historical levels as elevated operational controls drove greater than expected leverage across our infrastructure.

[Eric Rivera, CFO at Photronics]

We recently performed an analysis of the impact of tariffs on our supply chain and based on current expectations we have determined that these costs will have a negligible impact to our financial results. Operating margin of 26% in Q2 was above our guidance range and improved 180 basis points sequentially. Diluted GAAP EPS attributable to Photronics shareholders was $0.15 per share. After removing the impact of foreign exchange fully diluted non GAAP EPS attributable to Photronics shareholders was $0.40 a share. Our overall profitability reflects a greater contribution from our joint ventures in China and Taiwan.

[Eric Rivera, CFO at Photronics]

During the second quarter, we generated $31,000,000 in operating cash flow which represented 15% of total revenue. CapEx was $61,000,000 in the quarter, which included our planned expansion in The U. S. We remain on track to spend $200,000,000 in CapEx in fiscal twenty twenty five on a combination of capacity, capability and end of life tool initiatives. Based on current investment plans, we estimate that our CapEx in fiscal twenty twenty six will normalize from elevated fiscal twenty twenty five levels.

[Eric Rivera, CFO at Photronics]

Total cash and short term investments at the end of the quarter was $558,000,000 We have three elements to our capital allocation strategy including organic growth, strategic investments or returning cash to shareholders. During the quarter we spent $72,000,000 to opportunistically repurchase 3,600,000.0 shares and now have 23,000,000 remaining under our existing repurchase authorization. This is a significant endorsement of our confidence in the long term health of Photronics and we will remain strategic with respect to future share repurchases. Before providing guidance I'll remind you that demand for our products is inherently uneven and difficult to predict with limited visibility and typical backlog of one to three weeks. In addition, ASPs for high end assets are high meaning a relatively low number of high end orders can have a significant impact on our quarterly revenue and earnings.

[Eric Rivera, CFO at Photronics]

Additionally and as we have highlighted previously, our business is influenced by IC and display design activity and to a lesser degree by wafer and panel capacity dynamics. Given market conditions and tariff uncertainty, we remain cautious about the near term demand environment. We expect third quarter revenue to be in the range of 200,000,000 and $2.00 $8,000,000 Based on those revenue expectations and our current operating model, we estimate non GAAP earnings per share for the third quarter to be in the range of $0.35 to $0.41 per diluted share. This equates to an operating margin between 2022%. I'll now turn the call over to the operator for your questions.

[Operator]

Thank you. Our first question comes from the line of Tom Diffely with D. A. Davidson and Company. Your line is now open.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

Yes, good morning. Thank you for taking my questions. So first, maybe just a little more color on the mainstream business. You said there's continued softness there. I'm curious what you're seeing in kind of the overall supply demand of mainstream mass making capacity today and how that has impacted the margins?

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

And maybe perhaps how that influenced your capital spending plan this year?

[Frank Lee, Chief Executive Officer at Photronics]

Okay. Thank you, Tom. The mainstream market, as we highlight in the previous calls, remains still remains weak, mainly because a lot of our aged fab customers still have a very low wafer fab utilization. And I think this trend is something related to the industry, especially in the power, industrial, and consumer parts of the business. So I think in the long run, we will still put up more focus to build our capacity and capability in the high end and also in the high end of the mainstream. Chris, you want to add some comments?

[Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning at Photronics]

Yeah, thanks, Frank. I can say, you know, Tom, we had talked quite a bit about end of life tools impacting kind of organic supply of masks in the mainstream. We definitely saw that, but that cycle is starting to move forward and many companies are replacing those end of life tools with new equipment. There has been, because of that, a fair amount of capacity also added to the network globally for mainstream masks. I don't think it's an oversupply situation, but the muted demand Frank talked about and lower utilizations in wafer fabs combined with some capacity increases that were driven by end of life tool turnovers has made us somewhat a little bit unfavorable supply demand balance, but it's not a long, you know, we don't think that's a long term issue.

[Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning at Photronics]

It's just a point in the evolution of the mainstream mask supply.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

So Chris, are you seeing more of the weakness in Asia right now? And does that have anything to do with some of these kind of startup photo mask companies there? And then maybe to follow-up on that, in The US, you're still seeing a migration, it sounds like, of the mainstream to higher end mainstream. And I guess that is the driver of your increased capital spending this year.

[Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning at Photronics]

Yes. So on the first question, not necessarily confined to Asia. The weakness in mainstream on the wafer side is pretty broad based. Europe may be the strongest example of it because their, wafer supply is very much hinged to automotive and industrial microcontrollers and things like that. That's pretty weak for mainstream in general.

[Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning at Photronics]

So it's not necessarily confined to Asia or new upstarts in China. It's pretty broad based, still the weakness in mainstream. And if you look at the projections for fab utilization and supply for the customers, strong recoveries are not really projected till even later in 2026. So there's a fair amount of supply sloshing around still for mainstream applications in the industry. As far as our projects in The US, so that's correct.

[Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning at Photronics]

We had a marginal amount of capacity, but also node migration to, let's say, the higher end of the mainstream applications was one of our strategic goals for those investments. And we do think that's a growing part of the market in The US. So that's what we were targeting there.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

Great, thanks. And then just looking at the earnings on a year over year basis, is the largest impact year over year on roughly the same amount of revenue just the margins of the or pricing in the mainstream world, or would you say there's other factors in there as well?

[Frank Lee, Chief Executive Officer at Photronics]

Rick, you want to, other than pricing? Want to Sure. Margins?

[Eric Rivera, CFO at Photronics]

Oh, hi, Tom. This is Eric here. So with respect to pricing, I mean, we're trying to as we discussed previously, we are focusing on product mix.

[Eric Rivera, CFO at Photronics]

There is a bit of pressure on pricing overall, but we are muting that with product mix. So we're trying to focus on the higher end of mainstream and node migration as Chris just mentioned a few seconds ago.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

Okay. Then George, looking forward to work go ahead.

[Frank Lee, Chief Executive Officer at Photronics]

I'm sorry. In addition to what Eric just just comment, for Chinese, we do have several long term agreement with many of our main customers. So this long term agreement not only guarantee the order from the customer, but also provide us a stable pricing.

[Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning at Photronics]

Yeah, and Tom, maybe I can make one more comment on the mainstream because we don't want it to sound like it's all gloom. There's another there's a positive trend we're seeing also with some of the regionalization of the high end chip makers, foundries, and things like that. We're starting to look a little more seriously at outsourcing of the lower end layers of the advanced mask sets. So for example, this might be a five nanometer node and there's lots of mainstream mask layers in that. Regionalization of fabs is starting to open up some opportunities in mainstream demand for those applications as well.

[Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning at Photronics]

So that's kind of a positive side for the demand.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

Okay. Great. And I appreciate all the all the extra color there. And George, look forward to working with you. I worked with your dad for many, many years and always a good experience.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

Could you give us a hint as to what your first focus will be on? Is it cost structure? Is it driving revenue? Is it saving costs? What in particular do you think you'll be focused on first?

[George Macricostas, Executive Chairman at Photronics]

Probably all of the above with Frank. Frank has been leading the organization for the last three years, and obviously has more than twenty years with the company. So I'm looking forward to working with Frank to learn more about Asia. That's not an area that I have tremendous experience in, I know more about US and Europe, and the business overall. So I'm going to be working with Frank going forward to do more of an orderly type of a transition, discipline by discipline.

[George Macricostas, Executive Chairman at Photronics]

So this is not a wholesale change, it's more of an evolution. So I would say, right now my focus has been more on the back of house administrative type matters, and governance, etcetera, HR, legal, finance, and now I'm segueing into more of Frank's responsibilities, but definitely we are cost conscious, and wanna drive market share. So I think it's both levers, it's cost reduction containment slash, growing revenue by growing market share. Because as we know, the market is finite, so we can't necessarily create demand, we're gonna have to go and gain market share.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

Appreciate that. And, Frank, it's been a pleasure working with you the last three years as CEO and, you know, decade plus as the head of Asia before that. Well, thank you, everybody. I appreciate, your ability to answer my questions today, and talk to you soon.

[Frank Lee, Chief Executive Officer at Photronics]

Thanks, Tom.

[Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies]

Thank you.

[Eric Rivera, CFO at Photronics]

Thank you, Tom.

[Operator]

Thank you. Our next question comes from the line of Ghoshie Sri with Singular Research. Your line is now open.

[Gowshi Sriharan, Analyst at Singular Research]

Good morning, guys. Can you hear me?

[Eric Rivera, CFO at Photronics]

Yes, we can.

[Gowshi Sriharan, Analyst at Singular Research]

Okay. George, congratulations on your new role. Could you share your kind of your priorities with regards to US capacity expansion versus balancing your regionalization efforts due with ongoing growth in Asia?

[George Macricostas, Executive Chairman at Photronics]

Well, there's definitely gonna be appears anyway, there'll be some opportunities here in The US with TSMC and others and reshoring and obviously the geopolitical issues are driving that thought process and creating action by our customer base that we're going to have to react to. So I would say we're going evaluate the opportunities and deploy capital as we see fit. I think we may have mentioned that we're expanding our US capacity as it is, so we're going to continue to monitor that and invest appropriately. We also have, of course, end of life tools that we have to spend CapEx on, but also on pure capability on the high end as well.

[Gowshi Sriharan, Analyst at Singular Research]

Okay, awesome. Given that your top line was just around the midpoint guidance and you're forecasting a sequential decline, you talked a little bit about the efforts that you need to take to maybe address the weaker demand. Are these just customers delaying orders due to macroeconomic concerns? And what what is that what what would it take to kinda lift it two?

[Eric Rivera, CFO at Photronics]

Hello, Ghoshie. This is Eric here. So I think you hit the nail on the head. So we we are seeing, customers, feeling the uncertainty that's reflected in the market. Right?

[Eric Rivera, CFO at Photronics]

So the current tariff environment is creating that uncertainty. So that is the reason for our cautious outlook for the rest of the year.

[Gowshi Sriharan, Analyst at Singular Research]

Okay. And just my last question before. Given that you guys repurchased 72,000,000 even during kind of weaker earnings, how how do you prioritize? Are you looking to authorize any expansion of the buyback program if if if conditions remain challenging?

[Eric Rivera, CFO at Photronics]

Well, we have 23,000,000 remaining under our existing authorization and we'll continue to be opportunistic, with that remaining authorization that we have. And in terms of looking forward to increasing that authorization, share repurchase are part of our capital allocation strategy and in doing so, need to compare against other other investment opportunities that could yield a favorable, you know, return to Fortronics to ensure long term continued growth. So with all those considered, we keep our eyes open and we'll act appropriately at the appropriate time.

[Gowshi Sriharan, Analyst at Singular Research]

That's all I have. Thank you guys for taking my questions.

[Operator]

Thank you. And

[Operator]

I'm currently showing no further questions at this time. I'd like to turn the call back over to Ted Morrow for closing remarks.

[Ted Moreau, VP - Investor Relations at Photronics]

Thank you, Shannon, thank you everybody for joining us today. We really appreciate your interest in Photronics, and we will be available throughout the quarter to speak with all investors. Have a great day.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Ted Moreau, VP - Investor Relations
• Frank Lee, Chief Executive Officer
• George Macricostas, Executive Chairman
• Eric Rivera, CFO
• Christopher Progler, Executive Vice President, Chief Technology Officer, Strategic Planning

Analysts

• Tom Diffely, Director Of Institutional Research at D.A. Davidson Companies
• Gowshi Sriharan, Analyst at Singular Research