8-K
Photronics Inc (PLAB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
| Date of report (Date of earliest event reported) | February 23, 2022 |
|---|
PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
| Connecticut | 0-15451 | 06-0854886 |
|---|---|---|
| (State or Other Jurisdiction of)<br><br> <br>Incorporation | (Commission File Number) | (IRS Employer Identification No.) |
| 15 Secor Road, Brookfield, CT | 06804 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant's Telephone Number, including area code | (203) 775-9000 | |
| --- | --- |
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| COMMON STOCK, $0.01 par value per share | PLAB | NASDAQ Global Select Market |
| PREFERRED STOCK PURCHASE RIGHTS | N/A | N/A |
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On February 23, 2022, Photronics, Inc. (the “Company”) issued a press release reporting first quarter fiscal 2022 results.
A copy of the press release is furnished as Exhibit 99.1 to this report. The information contained in this Item 2.02 and the attached Exhibits 99.1, 99.2, 99.3, 99.4, and 99.5, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth by specific reference in such filing.
On February 23, 2022, the Company will conduct a conference call during which certain unaudited, non-GAAP financial information related to the Company’s operations for the three months ended January 30, 2022 may be disclosed. This information is set forth in Exhibit 99.5.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
| 99.1 | Press Release dated February 23, 2022. |
| 99.2 | Condensed Consolidated Statements of Income. |
| 99.3 | Condensed Consolidated Balance Sheets. |
| 99.4 | Condensed Consolidated Statements of Cash Flows. |
| 99.5 | Photronics Q1 2022 Financial Results Conference Call February 23, 2022 slides. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PHOTRONICS, INC. | ||
|---|---|---|
| (Registrant) | ||
| By: | /s/ Richelle E. Burr | |
| Name: | Richelle E. Burr | |
| --- | --- | --- |
| Title: | Executive Vice President, | |
| Chief Administrative Officer, | ||
| General Counsel and Secretary | ||
| Date: February 23, 2022 |
Exhibit 99.1
| For Further Information:<br><br> <br>John P. Jordan<br><br> <br>Executive Vice President & CFO<br><br> <br>203.740.5671<br><br> <br>jjordan@photronics.com |
|---|
Photronics Reports First Quarter Fiscal 2022 Results
and Updates Long-Term Target Model
BROOKFIELD, Conn. February 23, 2022 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2022 first quarter ended January 30, 2022.
“Strong end-market demand trends have continued into 2022, helping us achieve our fourth consecutive quarter of record revenue,” said Peter Kirlin, chief executive officer. “Our investment strategy is producing the intended results as demonstrated by growth in excess of market rates. We’ve aligned our operations and technology to serve the strongest sectors of the market, such as AMOLED for mobile displays, high-end logic devices for advanced electronics and mainstream IC to support the proliferation of chips needed for the enablement of the internet of things.”
First Quarter 2022 Results
| • | Revenue was $189.8 million, up 5% sequentially and 25% year-over-year |
|---|---|
| • | Net income attributable to Photronics, Inc. shareholders was $23.1 million ($0.38 per diluted share), compared with fourth quarter 2021 net income of $19.8 million ($0.33 per diluted share) – a 15%<br> sequential increase in EPS, and first quarter 2021 net income of $8.0 million ($0.13 per diluted share) – nearly 300% year-over-year increase |
| --- | --- |
| • | Integrated circuit (IC) revenue in the first quarter was $129.8 million, up 3% sequentially and 24% compared with the first quarter of last year |
| --- | --- |
| • | Flat panel display (FPD) revenue was $60.1 million, up 8% over last quarter and 27% over the same period last year. |
| --- | --- |
“Market dynamics and Photronics’ execution have driven profitability levels that propelled the Company well beyond the projections in the target model we provided in December 2020,” concluded Kirlin. “Significant indicators from the market and other market participants are that these conditions will continue well into the future. We have therefore included an updated target model in the supplemental information issued in connection with our conference call later today.”
Second Quarter 2022 Guidance
For the second quarter of 2022, Photronics expects revenue to be between $188 million and $196 million, and net income attributable to Photronics, Inc. shareholders to be between $0.32 and $0.38 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, February 23, 2022. The call can be accessed by logging onto Photronics' website at www.photronics.com. The live dial-in number is (877) 377-7095 or (408) 774-4601 outside of the United States and Canada. The call will be archived on Photronics’ website.
About Photronics
Photronics is a leading worldwide manufacturer of integrated circuit (IC) and flat panel display (FPD) photomasks. High precision quartz plates that contain microscopic images of electronic circuits, photomasks are a key element in the IC and FPD manufacturing process. Founded in 1969, Photronics has been a trusted photomask supplier for over 50 years. As of October 31, 2021, the company had 1,728 employees. The company operates 11 strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the company can be accessed at www.photronics.com.
Forward-Looking Statements
Certain statements in this press release constitute “forward-looking statements” regarding our industry, our strategic position, and our financial and operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, performance or achievements to differ materially. Please refer to the documents we file with the Securities and Exchange Commission. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in these forward-looking statements. These certain factors can be found at www.photronics.com/riskfactors. 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 this release to conform these statements to actual results.
Exhibit 99.2
PHOTRONICS, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| January 30,<br><br> <br>2022 | October 31,<br><br> <br>2021 | January 31,<br><br> <br>2021 | ||||
| Revenue | $ | 189,827 | $ | 181,288 | $ | 152,067 |
| Cost of goods sold | 129,964 | 129,347 | 121,538 | |||
| Gross Profit | 59,863 | 51,941 | 30,529 | |||
| Operating Expenses: | ||||||
| Selling, general and administrative | 15,727 | 14,322 | 14,053 | |||
| Research and development | 5,939 | 4,100 | 4,710 | |||
| Total Operating Expenses | 21,666 | 18,422 | 18,763 | |||
| Operating Income | 38,197 | 33,519 | 11,766 | |||
| Non-operating income, net | 4,707 | 3,809 | 680 | |||
| Income Before Income Tax Provision | 42,904 | 37,328 | 12,446 | |||
| Income tax provision | 11,178 | 8,697 | 2,937 | |||
| Net Income | 31,726 | 28,631 | 9,509 | |||
| Net income attributable to noncontrolling interests | 8,662 | 8,820 | 1,473 | |||
| Net income attributable to Photronics, Inc. shareholders | $ | 23,064 | $ | 19,811 | $ | 8,036 |
| Earnings per share: | ||||||
| Basic | $ | 0.38 | $ | 0.33 | $ | 0.13 |
| Diluted | $ | 0.38 | $ | 0.33 | $ | 0.13 |
| Weighted-average number of common shares outstanding: | ||||||
| Basic | 60,158 | 60,216 | 62,475 | |||
| Diluted | 60,936 | 60,908 | 63,005 |
Exhibit 99.3
PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| January 30,<br><br> <br>2022 | October 31,<br><br> <br>2021 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 314,195 | $ | 276,670 |
| Accounts receivable | 170,673 | 174,447 | ||
| Inventories | 61,971 | 55,249 | ||
| Other current assets | 50,940 | 44,250 | ||
| Total current assets | 597,779 | 550,616 | ||
| Property, plant and equipment, net | 692,289 | 696,553 | ||
| Other assets | 45,180 | 47,033 | ||
| Total assets | $ | 1,335,248 | $ | 1,294,202 |
| Liabilities and Equity | ||||
| Current liabilities: | ||||
| Current portion of long-term debt | $ | 18,307 | $ | 22,248 |
| Accounts payable and accrued liabilities | 172,787 | 153,900 | ||
| Total current liabilities | 191,094 | 176,148 | ||
| Long-term debt | 78,540 | 89,446 | ||
| Other liabilities | 26,448 | 28,046 | ||
| Photronics, Inc. shareholders' equity | 838,425 | 823,692 | ||
| Noncontrolling interests | 200,741 | 176,870 | ||
| Total equity | 1,039,166 | 1,000,562 | ||
| Total liabilities and equity | $ | 1,335,248 | $ | 1,294,202 |
Exhibit 99.4
PHOTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| January 30,<br><br> <br>2022 | January 31,<br><br> <br>2021 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 31,726 | $ | 9,509 | ||
| Adjustments to reconcile net income to net cash | ||||||
| provided by operating activities: | ||||||
| Depreciation and amortization | 20,810 | 23,724 | ||||
| Share-based compensation | 1,457 | 1,301 | ||||
| Changes in operating assets, liabilities and other | 5,137 | (8,247 | ) | |||
| Net cash provided by operating activities | 59,130 | 26,287 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property, plant and equipment | (19,175 | ) | (17,532 | ) | ||
| Government incentives | - | 397 | ||||
| Other | (43 | ) | (61 | ) | ||
| Net cash used in investing activities | (19,218 | ) | (17,196 | ) | ||
| Cash flows from financing activities: | ||||||
| Repayments of debt | (15,192 | ) | (7,796 | ) | ||
| Purchases of treasury stock | (2,522 | ) | (13,209 | ) | ||
| Contribution from noncontrolling interest | 14,997 | - | ||||
| Proceeds from long-term debt | - | 6,205 | ||||
| Proceeds from share-based arrangements | 3,840 | 765 | ||||
| Net settlements of restricted stock awards | (1,458 | ) | (315 | ) | ||
| Net cash used in financing activities | (335 | ) | (14,350 | ) | ||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (2,057 | ) | 5,195 | |||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 37,520 | (64 | ) | |||
| Cash, cash equivalents, and restricted cash, beginning of period | 279,680 | 281,602 | ||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 317,200 | $ | 281,538 |
Exhibit 99.5
Q1 2022 Financial Results Conference CallFebruary 23, 2022 Photronics, Inc.
Safe Harbor Statement This presentation and some of our comments during this presentation may contain projections or other forward-looking statements regarding future events, our future financial performance, and/or the future performance of the industry. These statements are predictions, and contain risks and uncertainties. We refer you to the documents the Company files from time to time with the Securities and Exchange Commission. These documents contain and identify important factors that could cause the actual results for the Company to differ materially from those contained in our projections or forward-looking statements. These certain factors can be found at www.photronics.com/riskfactors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee the accuracy of any forecasts or estimates, and we are not obligated to update any forward-looking statements if our expectations change. 2/23/2022 2
Net income attributable to Photronics, Inc. shareholders of $23.1M ($0.38/share)Updating long-term target model based upon improving performance and positive demand outlookInvesting in mainstream IC capacity to capitalize on market growth trends IC (+3% Q/Q, +24% Y/Y) and FPD (+8% Q/Q, +27% Y/Y) both achieved record revenueRecord revenue to China, up 6% Q/Q and 69% Y/Y Strategic investments driving long-term, profitable growth $59M generated from operating activity$19M invested in capex$3M returned to investors through share repurchases Cash balance $314M Revenue was a record $189.8M up 5%Q/Q up 25%Y/Y 2/23/2022 3 Q1 2022 Summary
Investment Strategy Revenue GrowthWin lion’s share of “Made in China 2025” TAM growthSupplement new factories with point tool investmentsCapitalize on technology leadership in AMOLED to continue improving mixLeverage global footprint to exploit growth in “legacy foundry” businessMargin ExpansionSustained pricing strength in mainstream IC going into 2022Optimize asset tool set to match end-market demandIncreasing benefit from operating leverageExplore Strategic PartnershipsTargeting partnerships that extend market leadership positionBuilding on successful history of M&A and joint ventures 2/23/2022 4
Growth in Legacy Foundry = Dynamic Mainstream Mask Market Rebirth of the ASIC mask marketMoore’s law inefficient for many applicationsMask intensity higher than over-all semiconductor marketIndustry demand exceeds supplyDelivery times expanding from days to monthsWe are investing in incremental capacity to meet customer demandLow industry capacity creating pricing leverageDouble digit increases implemented in Taiwan and ChinaActively raising prices in Europe and Korea 2/23/2022 5
Delivering on Commitments and Updating Target Model $M (except EPS) 2019 2020 2021 Q1 2022 LTM Illustrative Target Model 2-Year Horizon Revenue $551 $610 $664 $702 $7759% CAGR $80010% CAGR $85011% CAGR Gross Margin 22% 22% 25% 28% 31-33% 32-34% 34-36% Operating Margin 9% 10% 14% 17% 20-22% 22-24% 24-26% Operating Cash Flow $68 $143 $151 $184 $225-250 $260-275 $290-300 Free Cash Flow* ($83) $77 $47 $78 $125-150 $160-175 $190-200 Diluted EPS $0.44 $0.52 $0.89 $1.14 $1.40-1.45 $1.55-1.65 $1.90-2.00 2/23/2022 6 *Free Cash Flow is a non-GAAP term which represents Operating Cash Flow less Capital Expenditures, which are reported under GAAP
Income Statement Summary $M (except EPS) Q122 Q421 Q/Q Q121 Y/Y Revenue $ 189.8 $ 181.3 5% $ 152.1 25% Gross Profit $ 59.9 $ 51.9 15% $ 30.5 96% Gross Margin 31.5% 28.7% 280 bps 20.1% 1,140 bps Operating Income $ 38.2 $ 33.5 14% $ 11.8 225% Operating Margin 20.1% 18.5% 160 bps 7.7% 1,240 bps Other non-operating income (expense) $ 4.7 $ 3.8 $ 0.9 $ 0.7 $ 4.0 Income tax provision $ 11.2 $ 8.7 $ 2.5 $ 2.9 $ 8.2 Minority interest $ 8.7 $ 8.8 ($ 0.2) $ 1.5 $ 7.2 Net income* $ 23.1 $ 19.8 16% $ 8.0 187% Diluted EPS* $ 0.38 $ 0.33 $ 0.05 $ 0.13 $ 0.25 Days in quarter 91 91 - 92 (1) Margins improved on leverage from higher revenue (IC & FPD) and better mainstream IC pricingOther non-operating income (expense) primarily due to FX gain (loss)Minority interest is IC JVs in Taiwan and China 2/23/2022 7 *Net income attributable to Photronics, Inc. shareholders
$M Q122 Q421 Q/Q Q121 Y/Y High-End* $ 46.5 $ 42.6 9% $ 36.8 27% Mainstream $ 83.2 $ 82.9 1% $ 68.2 22% Total $ 129.8 $ 125.4 3% $ 105.0 24% IC Photomask Revenue 2/23/2022 High-end growth driven by strong logic demand in AsiaMainstream up on proliferation of chips in IoT, 5G, Crypto and consumer products creating support for higher ASPsOutlookContinued strength from remote work and educationMainstream demand strong, expanding ASPsNew capacity coming online end of Q2 *28nm and smaller Total may differ due to rounding 8
FPD Photomask Revenue 2/23/2022 High-end demand improving for mobile AMOLED and G10.5+Mainstream recovery continues, with slight Q/Q decline due to capacity dedicated to high-end productsOutlookDynamic market environmentMobile demand strength and mainstream LCD recovery expected to continueTechnology development drives demand for higher-value masks *≥G10.5, AMOLED and LTPS $M Q122 Q421 Q/Q Q121 Y/Y High-End* $ 46.3 $ 41.0 13% $ 34.6 34% Mainstream $ 13.8 $ 14.9 (7%) $ 12.5 11% Total $ 60.1 $ 55.8 8% $ 47.1 27% Total may differ due to rounding 9
Select Financial Data $M Q122 Q421 Q121 Cash $ 314 $ 277 $ 279 Debt $ 97 $ 112 $ 102 Net Cash* $ 217 $ 165 $ 177 Operating Cash Flow $ 59 $ 38 $ 26 Capital Expenditures $ 19 $ 17 $ 18 Share repurchase $ 3 $ 13 $ 13 Debt is US equipment lease and local China loansTotal share repurchases of $68M under current (Sep 2020) $100M planCapex mostly mainstream IC capacity & facility expansionBalance sheet able to fund investments, share repurchases, and strategic M&A opportunities 2/23/2022 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion), as reported in accordance with GAAP 10
Q2 22 Guidance Revenue ($M) $188 - $196 Operating Margin 20% - 22% Taxes ($M) $9 - $10 Diluted EPS $0.32 - $0.38 Diluted Shares (M) ~61 Full-year Capex (M) ~$100 Incorporation of chips in IoT, 5G, Crypto and consumer products Remote work and learningAdvanced display technologiesGrowing nationalism spurs investmentOutlook clouded by geopolitical uncertainty and supply chain challengesDriving margin expansion and improved cash flows 2/23/2022 11
For Additional Information:John P. JordanExecutive Vice President & CFO203.740.5671jjordan@photronics.com Thank you for your interest!
Appendix
Total Revenue 2/23/2022 14 IC FPD Total may differ due to rounding
IC Photomask Revenue 2/23/2022 15 Mainstream High-End High-End: 28nm and smaller; total may differ due to rounding
FPD Photomask Revenue 2/23/2022 16 Mainstream High-End High-End: ≥G10.5, AMOLED and LTPS; total may differ due to rounding
Non-GAAP Financial Measures 2/23/2022 17
Non-GAAP Financial Measures 2/23/2022 18