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) | May 25, 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 May 25, 2022, Photronics, Inc. (the “Company”) issued a press release reporting second 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 May 25, 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 May 1, 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 May 25, 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 Q2 2022 Financial Results Conference Call May 25, 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: May 25, 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 Second Quarter Fiscal 2022 Results and Updates Long-Term Target Model
BROOKFIELD, Conn. May 25, 2022 (GLOBE NEWSWIRE) — Photronics, Inc. (NASDAQ:PLAB), a worldwide leader in photomask technologies and solutions, today reported financial results for its fiscal 2022 second quarter ended May 1, 2022.
“Second quarter was another excellent quarter, as strong end-market demand and higher pricing across both mainstream and high-end IC products propelled us to our fifth consecutive quarter of record revenue,” said Frank Lee, chief executive officer. “As revenue grew, our operating leverage and disciplined cost management expanded gross and operating margins to 36% and 25%, respectively. Our balance sheet continues to strengthen and support our growth strategy of investing to align our operations and technology to serve the strongest sectors of the market. We expect favorable demand trends to continue for advanced mobile displays, high-end logic devices and mainstream IC applications as our customers release new designs and build out new capacity.”
Second Quarter 2022 Results
| • | Revenue was $204.5 million, up 8% sequentially and 28% year-over-year |
|---|---|
| • | Net income attributable to Photronics, Inc. shareholders was $29.8 million ($0.49 per diluted share), up 29% over first quarter 2022 net income of $23.1 million ($0.38 per diluted share) and nearly triple the second quarter 2021 net<br> income of $10.5 million ($0.17 per diluted share) |
| --- | --- |
| • | Integrated circuit (IC) revenue in the second quarter was $145.8 million, up 12% sequentially and 30% compared with the second quarter of last year |
| --- | --- |
| • | Flat panel display (FPD) revenue was $58.7 million, down 2% from last quarter and up 23% over the same period last year |
| --- | --- |
Lee continued, “As I begin my tenure as CEO, Photronics is in a very strong place with a strong global team, leading technology, quality products, and growing market share. We expect to continue to grow sequentially throughout 2022. In fact, market dynamics and Photronics execution have again driven profitability levels that propelled the Company well beyond the projections in the target model we provided just last quarter.” Lee concluded, “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.”
Third Quarter 2022 Guidance
For the third quarter of 2022, Photronics expects revenue to be between $205 million and $215 million, and net income attributable to Photronics, Inc. shareholders to be between $0.45 and $0.55 per diluted share.
Conference Call
A conference call to discuss these results is scheduled for 8:30 a.m. Eastern time on Wednesday, May 25, 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” within the meaning of the Private Securities Litigation Reform Act of 1995. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by or on behalf of the company and its subsidiaries. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of Photronics to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may fluctuate,” “will,” “should,” “would,” “may” and “could” or similar words or expressions are generally forward-looking in nature and not historical facts. Any statements that refer to outlook, expectations or other characterizations of future events, circumstances or results are also forward-looking statements. Important risks, assumptions and other important factors that could cause future results to differ materially from those expressed in the forward-looking statements are specified in Photronics’ Annual and Quarterly filings with the Securities and Exchange Commission under headings such as “Forward-Looking Statements”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other filings and furnishings made by Photronics with the Securities and Exchange Commission from time to time. These risks and uncertainties include, but are not limited to, the current pandemic and future recurrences and other developments with respect thereto, governmental responses to the pandemic and related matters, changes in end markets resulting therefrom, changes in investment, tax, trade, exchange and other laws and regulations, compliance with local, State and Federal laws, rules and regulations including, but not limited to, import and export controls, tariffs and penalties, fines and violations related thereto, as well as economic, competitive, legal, governmental, political, monetary and fiscal policy, and technological factors and decisions we may make in the future regarding our business, capital structure and other matters. Photronics undertakes no obligation to release publicly any revisions to any forward-looking statements or, except as required to be disclosed in filings or furnishings with the Securities and Exchange Commission, to report events or to report the occurrence of unanticipated events. There is no assurance that Photronics’ expectations will be realized.
Exhibit 99.2
PHOTRONICS, INC.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| May 1,<br><br> <br>2022 | January 30,<br><br> <br>2022 | May 2,<br><br> <br>2021 | May 1,<br><br> <br>2022 | May 2,<br><br> <br>2021 | ||||||||
| Revenue | $ | 204,509 | $ | 189,827 | $ | 159,763 | $ | 394,336 | $ | 311,830 | ||
| Cost of goods sold | 131,582 | 129,964 | 120,514 | 261,546 | 242,052 | |||||||
| Gross Profit | 72,927 | 59,863 | 39,249 | 132,790 | 69,778 | |||||||
| Operating Expenses: | ||||||||||||
| Selling, general and administrative | 16,613 | 15,727 | 14,067 | 32,340 | 28,120 | |||||||
| Research and development | 4,206 | 5,939 | 4,375 | 10,145 | 9,085 | |||||||
| Total Operating Expenses | 20,819 | 21,666 | 18,442 | 42,485 | 37,205 | |||||||
| Operating Income | 52,108 | 38,197 | 20,807 | 90,305 | 32,573 | |||||||
| Non-operating income (expense), net | 8,021 | 4,707 | (772 | ) | 12,728 | (92 | ) | |||||
| Income Before Income Tax Provision | 60,129 | 42,904 | 20,035 | 103,033 | 32,481 | |||||||
| Income tax provision | 14,689 | 11,178 | 3,714 | 25,867 | 6,651 | |||||||
| Net Income | 45,440 | 31,726 | 16,321 | 77,166 | 25,830 | |||||||
| Net income attributable to noncontrolling interests | 15,597 | 8,662 | 5,795 | 24,259 | 7,268 | |||||||
| Net income attributable to Photronics, Inc. shareholders | $ | 29,843 | $ | 23,064 | $ | 10,526 | $ | 52,907 | $ | 18,562 | ||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.49 | $ | 0.38 | $ | 0.17 | $ | 0.88 | $ | 0.30 | ||
| Diluted | $ | 0.49 | $ | 0.38 | $ | 0.17 | $ | 0.87 | $ | 0.30 | ||
| Weighted-average number of common shares outstanding: | ||||||||||||
| Basic | 60,606 | 60,158 | 62,054 | 60,382 | 62,265 | |||||||
| Diluted | 61,145 | 60,936 | 62,568 | 61,041 | 62,786 |
Exhibit 99.3
PHOTRONICS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| May 1,<br><br> <br>2022 | October 31,<br><br> <br>2021 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 329,282 | $ | 276,670 |
| Accounts receivable | 190,259 | 174,447 | ||
| Inventories | 58,437 | 55,249 | ||
| Other current assets | 52,864 | 44,250 | ||
| Total current assets | 630,842 | 550,616 | ||
| Property, plant and equipment, net | 659,881 | 696,553 | ||
| Other assets | 41,661 | 47,033 | ||
| Total assets | $ | 1,332,384 | $ | 1,294,202 |
| Liabilities and Equity | ||||
| Current liabilities: | ||||
| Current portion of long-term debt | $ | 12,410 | $ | 22,248 |
| Accounts payable and accrued liabilities | 172,205 | 153,900 | ||
| Total current liabilities | 184,615 | 176,148 | ||
| Long-term debt | 70,138 | 89,446 | ||
| Other liabilities | 25,048 | 28,046 | ||
| Photronics, Inc. shareholders’ equity | 836,752 | 823,692 | ||
| Noncontrolling interests | 215,831 | 176,870 | ||
| Total equity | 1,052,583 | 1,000,562 | ||
| Total liabilities and equity | $ | 1,332,384 | $ | 1,294,202 |
Exhibit 99.4
PHOTRONICS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Six Months Ended | ||||||
|---|---|---|---|---|---|---|
| May 1,<br><br> <br>2022 | May 2,<br><br> <br>2021 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 77,166 | $ | 25,830 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 41,405 | 47,121 | ||||
| Share-based compensation | 3,041 | 2,723 | ||||
| Changes in operating assets, liabilities and other | (18,323 | ) | (17,455 | ) | ||
| Net cash provided by operating activities | 103,289 | 58,219 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property, plant and equipment | (34,809 | ) | (73,516 | ) | ||
| Government incentives | 1,394 | 5,775 | ||||
| Other | (199 | ) | (157 | ) | ||
| Net cash used in investing activities | (33,614 | ) | (67,898 | ) | ||
| Cash flows from financing activities: | ||||||
| Repayments of debt | (27,571 | ) | (8,636 | ) | ||
| Purchases of treasury stock | (2,522 | ) | (23,250 | ) | ||
| Contribution from noncontrolling interest | 24,995 | - | ||||
| Proceeds from share-based arrangements | 4,384 | 1,180 | ||||
| Proceeds from long-term debt | - | 12,439 | ||||
| Net settlements of restricted stock awards | (1,452 | ) | (371 | ) | ||
| Net cash used in financing activities | (2,166 | ) | (18,638 | ) | ||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (14,917 | ) | 5,686 | |||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 52,592 | (22,631 | ) | |||
| Cash, cash equivalents, and restricted cash, beginning of period | 279,680 | 281,602 | ||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 332,272 | $ | 258,971 |
Exhibit 99.5
Q2 2022 Financial Results Conference Call May 25, 2022 Photronics, Inc.
Safe Harbor Statement This presentation and some of our comments 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. Actual events or results may differ materially from those presented. These statements include words like “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “may”, “plan”, “project”, “in our view” or the negative thereto. 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. If you would like more information on the risks involved in forward-looking statements, please see the documents we file from time to time with the Securities and Exchange Commission. 5/25/2022 2
Net income attributable to Photronics, Inc. shareholders of $29.8M ($0.49/share) Appointment of Frank Lee as CEO; 42+ years industry experience; 16+ years with PLAB Investing in mainstream IC capacity to capitalize on market growth trends IC: +12% Q/Q, +30% Y/Y FPD: -2% Q/Q, +23% Y/Y To China: +8% Q/Q; +58% Y/Y Committed to driving long-term, profitable growth through strategic investments $44M generated from operating activity $16M invested in capex $10M contribution from JV partner Cash balance $329M Revenue was a record $204.5M up 8%Q/Q up 28%Y/Y 5/25/2022 3 Q2 2022 Summary
Investment Strategy Revenue Growth Win lion’s share of “Made in China 2025” TAM growth Supplement new factories with point tool investments Capitalize on technology leadership in AMOLED to continue improving mix Leverage global footprint to exploit growth in “legacy foundry” business Margin Expansion Sustained pricing strength in mainstream IC Optimize asset tool set to match end-market demand Increasing benefit from operating leverage Explore Strategic Partnerships Targeting partnerships that extend market leadership position Building on successful history of M&A and joint ventures 5/25/2022 4
Delivering on Updated Target Model 5/25/2022 5 *Free Cash Flow is a non-GAAP term; see reconciliation included in this presentation
Income Statement Summary $M (except EPS) Q222 Q122 Q/Q Q221 Y/Y Revenue $ 204.5 $ 189.8 8% $ 159.8 28% Gross Profit $ 72.9 $ 59.9 22% $ 39.2 86% Gross Margin 35.7% 31.5% 420 bps 24.6% 1,110 bps Operating Income $ 52.1 $ 38.2 36% $ 20.8 150% Operating Margin 25.5% 20.1% 540 bps 13.0% 1,250 bps Other non-operating income (expense) $ 8.0 $ 4.7 $ 3.3 ($ 0.8) $ 8.8 Income tax provision $ 14.7 $ 11.2 $ 3.5 $ 3.7 $ 11.0 Minority interest $ 15.6 $ 8.7 $ 6.9 $ 5.8 $ 9.8 Net income* $ 29.8 $ 23.1 29% $ 10.5 184% Diluted EPS* $ 0.49 $ 0.38 $ 0.11 $ 0.17 $ 0.32 Days in quarter 91 91 - 91 - Margins improved on operating leverage, disciplined cost management, and IC price realization Other non-operating income/expense primarily due to unrealized FX gain/loss Minority interest from IC JVs in Taiwan and China 5/25/2022 6 *Net income attributable to Photronics, Inc. shareholders
$M Q222 Q122 Q/Q Q221 Y/Y High-End* $ 51.4 $ 46.5 10% $ 41.3 24% Mainstream $ 94.4 $ 83.2 13% $ 70.7 34% Total $ 145.8 $ 129.8 12% $ 112.0 30% IC Photomask Revenue 5/25/2022 High-end growth driven by strong demand in Asia and US and higher price Continued mainstream growth from chip proliferation in consumer products, IoT, 5G, and Crypto supporting higher ASPs Outlook Continued strength from remote work and education Regionalization driving investments for global chip capacity Mainstream demand strong, expanding ASPs *28nm and smaller Total may differ due to rounding 7
FPD Photomask Revenue 5/25/2022 High-end demand up Q/Q as mobile growth offset soft G10.5+ Mainstream demand remains solid, with Q/Q decline associated with Chinese New Year holiday Outlook Dynamic market environment Mobile demand strength and mainstream LCD recovery expected to continue Technology development drives demand for higher-value masks *≥G10.5, AMOLED and LTPS $M Q222 Q122 Q/Q Q221 Y/Y High-End* $ 46.6 $ 46.3 1% $ 39.4 18% Mainstream $ 12.1 $ 13.8 (12%) $ 8.4 45% Total $ 58.7 $ 60.1 (2%) $ 47.8 23% Total may differ due to rounding 8
Select Financial Data $M Q222 Q122 Q221 Cash $ 329 $ 314 $ 256 Debt $ 83 $ 97 $ 114 Net Cash* $ 247 $ 217 $ 142 Operating Cash Flow $ 44 $ 59 $ 32 Capital Expenditures $ 16 $ 19 $ 56 Share repurchase - $ 3 $ 10 Debt is US equipment lease and local China loans; reduced debt $29M YTD Capex mostly mainstream IC capacity & facility expansion Balance sheet able to fund investments, share repurchases, and strategic M&A opportunities Total share repurchases of $68M under current (Sep 2020) $100M plan 5/25/2022 *Net cash defined is a non-GAAP term; see reconciliation included in this presentation 9
Q3 2022 Guidance Revenue ($M) $205 - $215 Operating Margin 27% - 29% Taxes ($M) $13 - $15 Diluted EPS $0.45 - $0.55 Diluted Shares (M) ~61 Full-year Capex (M) ~$100 Incorporation of chips in IoT, 5G, Crypto and consumer products Remote work and learning Advanced display technologies Growing nationalism spurs investment Outlook clouded by geopolitical uncertainty, rising inflation and supply chain challenges Driving margin expansion and improved cash flows to hit long-term target model 5/25/2022 10
For Additional Information: John P. Jordan Executive Vice President & CFO 203.740.5671 jjordan@photronics.com Thank you for your interest!
Appendix
Total Revenue 5/25/2022 13 IC FPD Total may differ due to rounding
IC Photomask Revenue 5/25/2022 14 Mainstream High-End High-End: 28nm and smaller; total may differ due to rounding
FPD Photomask Revenue 5/25/2022 15 Mainstream High-End High-End: ≥G10.5, AMOLED and LTPS; total may differ due to rounding
Non-GAAP Financial Measures 2/23/2022 16
