Exhibit 99.2 PHOTRONICS, INC. Condensed Consolidated Statements of Income (in thousands, except per share amounts) (Unaudited) | | | | | Three Months Ended | | | | --- | --- | --- | --- | --- | --- | --- | | | | January 28, | | October 31, | | January 29, | | | | 2024 | | 2023 | | 2023 | | Revenue | $ | 216,334 | $ | 227,473 | $ | 211,090 | | Cost of goods sold | | 137,079 | | 142,591 | | 135,013 | | Gross Profit | | 79,255 | | 84,882 | | 76,077 | | Operating Expenses: | | | | | | | | Selling, general and a ...

Part I [Business Overview](index=7&type=section&id=Item%201.%20Business) Photronics is a leading global manufacturer of photomasks for integrated circuits and flat-panel displays, operating 11 facilities worldwide and focusing on both high-end and mainstream technologies - Photronics is the world's leading manufacturer of photomasks, critical for manufacturing integrated circuits (ICs) and flat-panel displays (FPDs), operating **11 manufacturing facilities globally**[19](index=19&type=chunk) Key Customer Revenue Concentration | Customer | 2023 (%) | 2022 (%) | 2021 (%) | | :--- | :--- | :--- | :--- | | United Microelectronics Corp. | 14% | 15% | 17% | | Semiconductor Manufacturing Int'l Corp. | 13% | 5% | 3% | | Samsung Electronics Co., Ltd. | 10% | 11% | 12% | | **Top 5 Customers (Aggregate)** | **51%** | **45%** | **43%** | - Research and development expenses were **$13.7 million in 2023**, a decrease from **$18.3 million in 2022**, with efforts focused on advanced IC and FPD photomasks[28](index=28&type=chunk) - The estimated total addressable market for IC and FPD photomasks is approximately **$7.5 billion**, with key competitors including Dai Nippon Printing and Hoya Corporation[37](index=37&type=chunk) Revenue from Non-U.S. Operations | Year | Percentage of Total Revenue (%) | | :--- | :--- | | 2023 | 86% | | 2022 | 85% | | 2021 | 84% | [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including industry volatility, customer and supplier concentration, substantial capital needs, intense competition, rapid technological change, operational complexities, and regulatory challenges, particularly with international operations [Concentration Related Risk Factors](index=13&type=section&id=Concentration%20Related%20Risk%20Factors) The company's business is highly dependent on the volatile microelectronics industry, relying on a limited number of key suppliers and a concentrated customer base, with the top five customers accounting for **51% of 2023 revenue** - The business is highly dependent on the historically volatile microelectronics industry, with demand for photomasks linked to design activity rather than semiconductor sales volume[53](index=53&type=chunk) - Reliance on a limited number of suppliers for specialized manufacturing equipment and raw materials poses risks of operational delays or quality issues[54](index=54&type=chunk)[55](index=55&type=chunk) - A significant portion of revenue is concentrated among a few large customers, with the **top two accounting for 27%** and the **top five for 51% of 2023 revenue**, posing a material risk if a major customer is lost[56](index=56&type=chunk) [Financing Related Risk Factors](index=14&type=section&id=Financing%20Related%20Risk%20Factors) Operating in a high fixed-cost, capital-intensive environment, the company faces risks that future cash flows may not cover projected **$140 million in fiscal 2024 capital expenditures** or that favorable additional financing will be available - The company's liquidity is highly dependent on revenue volume in a high fixed-cost environment, potentially leading to inadequate cash flows for capital expenditures, operations, and debt repayments[57](index=57&type=chunk) - Manufacturing leading-edge photomasks necessitates substantial and continuous capital investment, with projected capital expenditure payments for fiscal 2024 estimated at approximately **$140 million**[58](index=58&type=chunk) [Industry and Competitive Related Risk Factors](index=14&type=section&id=Industry%20and%20Competitive%20Related%20Risk%20Factors) Success depends on retaining key personnel and adapting to rapid technological changes in the highly competitive photomask industry, where failure to anticipate market needs, protect intellectual property, or continuously invest could be detrimental - The photomask industry's rapid technological change requires continuous investment and adaptation to smaller semiconductor geometries and advanced FPDs to maintain competitiveness[60](index=60&type=chunk) - The business faces a high risk of cyberattacks that could compromise intellectual property and sensitive information, potentially disrupting operations and causing financial harm[61](index=61&type=chunk) - The highly competitive industry, where customers often use multiple suppliers, emphasizes product quality, delivery time, price, and technical capability as key competitive factors[64](index=64&type=chunk) [Investment Related Risk Factors](index=16&type=section&id=Investment%20Related%20Risk%20Factors) Investment risks include potential joint venture partner failures, substantial operational risks in China related to intellectual property and geopolitical tensions, and potential charges from facility closures or acquisition integration difficulties - Joint ventures involve shared control, where disagreements or a partner's failure to fulfill obligations could adversely affect operations and necessitate additional resources[65](index=65&type=chunk)[66](index=66&type=chunk) - Operations in China, initiated in 2019, expose the company to significant risks including intellectual property protection challenges, U.S.-China geopolitical tensions, and potential restrictions on operations or investments[67](index=67&type=chunk) [Operations Related Risk Factors](index=17&type=section&id=Operations%20Related%20Risk%20Factors) Operational risks include significant fluctuations in quarterly results due to order timing and product mix, operating leverage risk from high fixed costs, and challenges in non-U.S. operations, which accounted for **86% of 2023 revenue**, including currency fluctuations and political instability - Quarterly operating results fluctuate significantly due to short order-to-shipment cycles, high fixed costs, and variable demand, rendering quarter-to-quarter comparisons unreliable for future performance indication[71](index=71&type=chunk)[72](index=72&type=chunk) - Non-U.S. operations, comprising approximately **86% of total revenues in 2023**, are subject to inherent risks such as currency fluctuations, political and economic instability, and trade barriers[73](index=73&type=chunk)[74](index=74&type=chunk) - The capital-intensive nature of the business results in high fixed costs, meaning a decline in sales volume could lead to underutilized capacity and significantly impact operating margins[77](index=77&type=chunk) [Regulatory and General Risk Factors](index=19&type=section&id=Regulatory%20and%20General%20Risk%20Factors) The company faces various regulatory risks, including changes in tax laws, U.S. and foreign export controls, and environmental regulations, alongside general risks such as ESG matters, internal control effectiveness, global catastrophic events, and stock price volatility - The company is subject to U.S. and foreign export control laws, such as EAR, which could prohibit product sales to restricted entities or regions, especially amidst trade disputes involving countries like China[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - Global catastrophic events, including pandemics, wars (e.g., Russia-Ukraine), and political tensions in operating regions like Taiwan and China, could adversely affect the business[86](index=86&type=chunk) - The company's stock price is subject to volatility influenced by financial results, customer or supplier changes, industry developments, and broader economic conditions[96](index=96&type=chunk) [Item 1B. Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[98](index=98&type=chunk) [Item 1C. Cybersecurity](index=23&type=section&id=Item%201C.%20Cybersecurity) This item is not applicable for this reporting period - Not applicable[99](index=99&type=chunk) [Item 2. Properties](index=24&type=section&id=Item%202.%20Properties) The company operates photomask manufacturing facilities globally, with owned properties in the US and Korea, owned buildings on leased land in Asia, and leased facilities in Europe and Taiwan Manufacturing Facilities | Location | Ownership Type | | :--- | :--- | | Allen, Texas | Owned | | Boise, Idaho | Owned | | Brookfield, Connecticut | Owned | | Cheonan, Korea | Owned | | Hefei, China | Owned (Land Leased) | | Taichung, Taiwan | Owned (Land Leased) | | Xiamen, China | Owned (Land Leased) | | Hsinchu, Taiwan | Owned (Land Leased) | | Bridgend, Wales | Leased | | Dresden, Germany | Leased | | Hsinchu, Taiwan | Leased | [Item 3. Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings involving the company is detailed in Note 15 to the consolidated financial statements - For information on legal proceedings, refer to Note 15 to the consolidated financial statements in Part II, Item 8 of this report[101](index=101&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[102](index=102&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=25&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NASDAQ Global Select Market under **PLAB**, has never paid cash dividends, and has **$31.7 million remaining** under its **$100 million share repurchase program** as of 2023, with no repurchases in fiscal 2023 - The company's common stock is traded on the NASDAQ Global Select Market under the symbol **PLAB**[104](index=104&type=chunk) - The company has never paid cash dividends and plans to retain future earnings for business operations[105](index=105&type=chunk) - A **$100 million share repurchase plan** authorized in September 2020 has **$31.7 million remaining** as of the report date, with no shares repurchased in fiscal 2023[106](index=106&type=chunk) [Item 6. [Reserved]](index=25&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[109](index=109&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal year 2023 saw record revenue of **$892.1 million**, an **8.2% increase**, driven by growth in both IC and FPD segments, with improved gross margin, increased operating income, and strong liquidity, while projecting **$140 million in capital expenditures** for fiscal 2024 [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Fiscal year 2023 total revenue increased **8.2% to $892.1 million**, driven by **9.8% IC growth** and **4.0% FPD growth**, leading to a **2.0 percentage point gross margin expansion to 37.7%**, despite a decrease in non-operating income due to foreign currency impacts Fiscal Year Revenue by Product Type (YTD FY23 vs YTD FY22) | Product Type | YTD FY23 Revenue ($M) | YoY Change ($M) | YoY Change (%) | | :--- | :--- | :--- | :--- | | **Total IC** | **$651.3** | **$58.3** | **9.8%** | | High-end IC | $195.0 | $(0.4) | (0.2)% | | Mainstream IC | $456.3 | $58.6 | 14.7% | | **Total FPD** | **$240.8** | **$9.3** | **4.0%** | | High-end FPD | $200.8 | $13.9 | 7.4% | | Mainstream FPD | $40.0 | $(4.6) | (10.3)% | | **Total Revenue** | **$892.1** | **$67.5** | **8.2%** | Fiscal Year Revenue by Geographic Origin (YTD FY23 vs YTD FY22) | Geographic Origin | YTD FY23 Revenue ($M) | YoY Change ($M) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Taiwan | $316.9 | $25.5 | 8.8% | | China | $245.4 | $32.8 | 15.4% | | Korea | $162.2 | $6.1 | 3.9% | | United States | $128.9 | $2.7 | 2.1% | | Europe | $36.6 | $0.2 | 0.5% | | Other | $2.1 | $0.3 | 13.5% | Gross Margin Performance | Period | Gross Profit ($M) | Gross Margin (%) | | :--- | :--- | :--- | | YTD FY23 | $336.2 | 37.7% | | YTD FY22 | $294.2 | 35.7% | - Non-operating income decreased by **$10.3 million in FY23** primarily due to less favorable foreign currency transaction impacts, partially offset by increased interest income from higher cash balances[141](index=141&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with cash and cash equivalents increasing to **$499.3 million** in fiscal 2023, supported by **$302.2 million in operating cash flow**, and plans **$140 million in capital expenditures** for fiscal 2024, with **$31.7 million remaining** in its share repurchase program Cash Position | Metric | Oct 31, 2023 ($M) | Oct 31, 2022 ($M) | | :--- | :--- | :--- | | Cash and cash equivalents | $499.3 | $319.7 | | Net Cash (Non-GAAP) | $474.7 | $277.3 | - Capital expenditures for fiscal year 2024 are estimated at approximately **$140 million**, aimed at high-end and mainstream tools to increase operating capacity and support customer demand[150](index=150&type=chunk) Cash Flow Summary | Cash Flow Activity ($M) | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $302.2 | $275.2 | $150.8 | | Net cash used in investing activities | $(101.5) | $(147.8) | $(103.5) | | Net cash used in financing activities | $(18.5) | $(38.7) | $(53.9) | - Free Cash Flow (non-GAAP) increased to **$170.9 million in FY23** from **$162.9 million in FY22**, driven by higher net cash from operating activities[155](index=155&type=chunk)[164](index=164&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is foreign currency exchange rate fluctuations from global operations, where a hypothetical **10% adverse movement** could result in a **$52.0 million pre-tax loss**, while interest rate risk is considered immaterial - The company's primary market risk stems from foreign currency exchange rate fluctuations, with key exposures including the South Korean won, New Taiwan dollar, Chinese renminbi, Japanese yen, and euro[173](index=173&type=chunk) - As of October 31, 2023, a hypothetical **10% adverse movement** in key foreign currencies against functional currencies would have resulted in a net unrealized pre-tax loss of **$52.0 million**[175](index=175&type=chunk) - Interest rate risk is considered minimal, as a **10% adverse movement** in interest rates on variable rate borrowings would not materially affect the financial statements[176](index=176&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year ended October 31, 2023, including balance sheets, income statements, and cash flows, with an unqualified opinion from Deloitte & Touche LLP on both financial statements and internal control effectiveness [Consolidated Financial Statements](index=42&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for fiscal 2023 reflect a strong financial position, with total assets growing to **$1,526.2 million**, total equity reaching **$975.0 million**, revenue increasing to **$892.1 million**, and net income attributable to shareholders at **$125.5 million** Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 31, 2023 | Oct 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $499,292 | $319,680 | | Total current assets | $785,450 | $644,652 | | Total assets | $1,526,221 | $1,315,830 | | Total liabilities | $250,612 | $253,741 | | Total Photronics, Inc. shareholders' equity | $975,008 | $831,527 | Consolidated Statement of Income Highlights (in thousands) | Account | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Revenue | $892,076 | $824,549 | $663,761 | | Gross profit | $336,162 | $294,213 | $167,044 | | Operating income | $253,050 | $211,866 | $94,554 | | Net income attributable to Photronics, Inc. shareholders | $125,485 | $118,786 | $55,449 | | Diluted EPS | $2.03 | $1.94 | $0.89 | Consolidated Statement of Cash Flows Highlights (in thousands) | Account | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $302,176 | $275,187 | $150,772 | | Net cash used in investing activities | $(101,545) | $(147,757) | $(103,494) | | Net cash used in financing activities | $(18,493) | $(38,689) | $(53,903) | [Notes to Consolidated Financial Statements](index=47&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, including revenue recognition over time, asset and liability composition, the consolidation of the PDMCX joint venture as a VIE, share-based compensation, income tax details with a **26.0% effective tax rate**, and customer concentration, with **three customers exceeding 10% of 2023 revenue** - The company recognizes most revenue "over time" for custom photomasks, as products have no alternative use and contracts ensure payment for completed work[220](index=220&type=chunk) - The PDMCX joint venture in Xiamen, China, is consolidated as a Variable Interest Entity (VIE) for which Photronics is the primary beneficiary[260](index=260&type=chunk) - In February 2023, the PDMCX joint venture repaid its **RMB 26.4 million ($3.9 million) Project Loans**, and the Corporate Credit Agreement expired in September 2023 without renewal[273](index=273&type=chunk)[275](index=275&type=chunk) - The effective income tax rate for FY23 was **26.0%**, higher than the U.S. statutory rate of **21.0%**, primarily due to foreign tax rate differentials and uncertain tax positions in non-U.S. jurisdictions[307](index=307&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=77&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[346](index=346&type=chunk) [Item 9A. Controls and Procedures](index=77&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of October 31, 2023, management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective, a conclusion supported by Deloitte & Touche LLP, with no material changes reported during 2023 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of **October 31, 2023**[347](index=347&type=chunk) - Management assessed the company's internal control over financial reporting as effective as of **October 31, 2023**, based on the COSO framework, with Deloitte & Touche LLP issuing an unqualified opinion on its effectiveness[350](index=350&type=chunk)[351](index=351&type=chunk) - No material changes to internal control over financial reporting were reported during 2023[352](index=352&type=chunk) [Item 9B. Other Information](index=79&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[360](index=360&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=79&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[361](index=361&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=79&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Definitive Proxy Statement - Required information is incorporated by reference from the 2023 Definitive Proxy Statement[363](index=363&type=chunk) [Item 11. Executive Compensation](index=79&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2023 Definitive Proxy Statement - Required information is incorporated by reference from the 2023 Definitive Proxy Statement[365](index=365&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=79&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and related stockholder matters is incorporated by reference from the company's 2024 Definitive Proxy Statement - Required information is incorporated by reference from the 2024 Definitive Proxy Statement[366](index=366&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=79&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2023 Definitive Proxy Statement - Required information is incorporated by reference from the 2023 Definitive Proxy Statement[367](index=367&type=chunk) [Item 14. Principal Accountant Fees and Services](index=80&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2024 Definitive Proxy Statement - Required information is incorporated by reference from the 2024 Definitive Proxy Statement[369](index=369&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=80&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed with the Form 10-K, with all financial statement schedules omitted due to immateriality or inapplicability - This section lists the financial statements and exhibits filed with the report, with all financial statement schedules omitted as they are not applicable or immaterial[371](index=371&type=chunk) [Item 16. Form 10-K Summary](index=84&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[378](index=378&type=chunk)

Photronics, Inc. (NASDAQ:PLAB) Q4 2023 Earnings Conference Call December 13, 2023 8:30 AM ET Company Participants Richelle Burr - EVP, Chief Administrative Officer Frank Lee - Chief Executive Officer John Jordan - EVP, Chief Financial Officer Chris Progler - EVP, Chief Technology Officer, Strategic Planning Conference Call Participants Tom Diffely - D.A. Davidson & Company Operator Good day and welcome to the Photronics Q4 FY ’23 Earnings Call. At this time all participants are in listen-only mode. Later we ...

Continued strong operating cash flow from income generation and working capital management Crypto and consumer products 11 | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|------------------------------------------------------------------------|--- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission file number 001-39063 PHOTRONICS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorpora ...

Financial Data and Key Metrics Changes - Revenue for the full year-to-date is up 8% compared to last year, with Q3 revenue at $224 million, a 2% increase year-over-year but a 2% decrease sequentially from Q2 [4][19] - Gross margins improved by 3% year-over-year, while operating margins increased nearly 4% [4][8] - Net income for the quarter was $27 million on a GAAP basis, or $0.44 per diluted share, and $31.6 million on a non-GAAP basis, or $0.51 per share [9] Business Line Data and Key Metrics Changes - Integrated Circuit (IC) revenue was $163.1 million, down 2% sequentially, with high-end IC revenue increasing due to strong foundry logic demand in Asia [7][20] - Flat Panel Display (FPD) revenue also decreased by 2% from the previous quarter, with strong AMOLED demand offset by declines in photomask for G10.5+ and LTPS displays [24] Market Data and Key Metrics Changes - The overall semiconductor market is expected to decline sharply in 2023 but is anticipated to gradually recover in 2024 [13] - The Photomask industry is expected to be flat or slightly down in 2023, with Photronics outperforming broader market indicators [13] Company Strategy and Development Direction - The company is focused on capital allocation strategies that prioritize profitable organic growth and investments in advanced technologies [6] - Photronics aims to leverage its technology leadership in AMOLED panels and maintain high utilization levels in its FPD fab operations [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand for Photomasks, driven by trends in AI, data centers, IoT, and automotive sectors [21][22] - The company is optimistic about revenue growth, margin expansion, and capital deployment to create shareholder value despite a challenging industry environment [10][22] Other Important Information - Operating cash flow was strong at $85.9 million, with year-to-date CAPEX at $78.8 million and a forecast of approximately $130 million for 2023 [9][10] - The company maintains a strong balance sheet with cash of $448.5 million and low debt levels, providing liquidity for growth investments [9] Q&A Session Summary Question: What are the driving factors behind the good margins despite demand slowdown? - Management attributed the strong margins to long-term purchase agreements with major customers, a favorable product mix, and effective cost management [28][30] Question: What does the future demand in mainstream look like? - Long-term demand for mainstream is expected to remain strong, with a potential recovery anticipated in Q4 and into 2024 [31][32] Question: How is the health of the Chinese market for both semi and FPD? - The Chinese business remains strong, with minimal impact from government restrictions [37] Question: What is the split of capital expenses for IC and FPD? - Capital expenses are primarily for expansion in Taiwan and China, with investments across all locations [38]

Q3 2023 Financial Results Conference Call September 6, 2023 Safe Harbor Statement 9/6/2023 2 -2% Q/Q +2% Y/Y PHOTRONICS, INC. PHOTRONICS, INC. PHOTRONICS, INC. PHOTRONICS, INC. $448.5M IC: -2% Q/Q, +1% Y/Y FPD: -2% Q/Q, +4% Y/Y $27.3M Short-term investments • Maintaining margins and strong cash flow as demand softens Q/Q; favorable long-term demand drivers remain • Investing in IC capacity to capitalize on market growth trends *Net income attributable to Photronics, Inc. shareholders • On pace for record ye ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) Unaudited financial statements for the periods ended April 30, 2023, show the company's financial position and performance [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets reached $1.45 billion and total equity grew to $1.20 billion, reflecting strong retained earnings growth **Condensed Consolidated Balance Sheet Highlights (in thousands)** | Account | April 30, 2023 | October 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $720,116 | $644,652 | | **Total assets** | $1,451,025 | $1,315,830 | | **Total current liabilities** | $185,168 | $193,797 | | **Total liabilities** | $246,341 | $253,741 | | **Total equity** | $1,204,684 | $1,062,089 | [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Quarterly revenue rose 12.1% to $229.3 million, driving a 45.5% increase in net income and a diluted EPS of $0.65 **Three Months Ended Financial Performance (in thousands, except EPS)** | Metric | April 30, 2023 | May 1, 2022 | | :--- | :--- | :--- | | Revenue | $229,306 | $204,509 | | Gross Profit | $88,402 | $70,220 | | Operating Income | $67,045 | $49,401 | | Net Income Attributable to Photronics, Inc. | $39,929 | $27,432 | | Diluted EPS | $0.65 | $0.45 | **Six Months Ended Financial Performance (in thousands, except EPS)** | Metric | April 30, 2023 | May 1, 2022 | | :--- | :--- | :--- | | Revenue | $440,397 | $394,336 | | Gross Profit | $164,479 | $130,083 | | Operating Income | $123,002 | $87,598 | | Net Income Attributable to Photronics, Inc. | $53,915 | $50,496 | | Diluted EPS | $0.88 | $0.83 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated $109.7 million in cash, while capital expenditures drove higher cash use in investing **Six Months Ended Cash Flow Summary (in thousands)** | Activity | April 30, 2023 | May 1, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $109,677 | $103,289 | | Net cash used in investing activities | ($62,260) | ($33,614) | | Net cash used in financing activities | ($15,242) | ($2,166) | | Net increase in cash | $47,796 | $52,592 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail key accounting policies, VIE consolidation, debt repayment, and significant capital expenditure commitments - The company is a leading manufacturer of photomasks, a key element in the production of integrated circuits (ICs) and flat-panel displays (FPDs), operating eleven manufacturing facilities worldwide[29](index=29&type=chunk) - The PDMCX joint venture with DNP is consolidated as a Variable Interest Entity (VIE) because **Photronics is the primary beneficiary**, holding a controlling financial interest[47](index=47&type=chunk) - In Q2 FY23, the company **repaid the entire remaining balance of its Xiamen Project Loans**, totaling 26.4 million RMB (approx $3.9 million), leaving only finance leases as outstanding debt[51](index=51&type=chunk)[57](index=57&type=chunk) - Revenue is primarily recognized 'over time' as the company performs work on custom photomasks, using a cost-based input method to measure progress[62](index=62&type=chunk) - As of April 30, 2023, the company had outstanding **capital expenditure commitments of approximately $113.1 million**, mainly for high-end equipment[95](index=95&type=chunk) - The share repurchase program authorized in September 2020 has **$31.7 million remaining for future repurchases** as of April 30, 2023[104](index=104&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Record Q2 revenue of $229.3 million was driven by strong IC and FPD demand, improving gross margin to 38.6% [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Revenue grew 12.1% year-over-year to $229.3 million, driven by strong IC and FPD demand that expanded margins **Revenue by Product Type - Q2 FY23 vs. Q2 FY22 (in millions)** | Product Type | Q2 FY23 Revenue | Change vs Q2 FY22 | % Change | | :--- | :--- | :--- | :--- | | Total IC | $167.0 | $21.3 | +14.6% | | Total FPD | $62.3 | $3.5 | +6.0% | | **Total Revenue** | **$229.3** | **$24.8** | **+12.1%** | - IC revenue increases were driven by **strong demand in Asia for mainstream products** used in consumer goods, IoT, 5G, and cryptocurrency mining, leading to a favorable pricing environment[123](index=123&type=chunk)[124](index=124&type=chunk) - FPD revenue growth was driven by **strong high-end demand for AMOLED panels** used in advanced mobile displays[125](index=125&type=chunk) - **Gross margin for Q2 FY23 increased by 4.3 percentage points** year-over-year to 38.6%, primarily due to higher revenue and favorable product mix[127](index=127&type=chunk) - Non-operating income was significantly impacted by foreign currency fluctuations, with a **net gain of $10.7 million in Q2 FY23**, primarily from favorable movements of the South Korean won and New Taiwan dollar against the USD[133](index=133&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $367.5 million in cash and plans capital expenditures of $130.0 million for FY23 - **Cash and cash equivalents were $367.5 million** as of April 30, 2023, with $352.4 million held by foreign subsidiaries[142](index=142&type=chunk) - Estimated **capital expenditures for the full fiscal year 2023 are approximately $130.0 million** to support customer demand[144](index=144&type=chunk) - As of April 30, 2023, the company had **outstanding capital commitments of $113.1 million**[144](index=144&type=chunk) - The share repurchase program has approximately **$31.7 million remaining** under its authorization[145](index=145&type=chunk) [Non-GAAP Financial Measures](index=36&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures are used to clarify performance, with Net Cash increasing to $339.1 million as of April 30, 2023 **Reconciliation of GAAP to Non-GAAP EPS (Q2 FY23)** | Metric | Amount | | :--- | :--- | | GAAP diluted earnings per share | $0.65 | | Effects of adjustments (FX, tax, NCI) | ($0.11) | | **Non-GAAP diluted earnings per share** | **$0.54** | **Net Cash Calculation (in millions)** | Component | April 30, 2023 | October 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $367.5 | $319.7 | | Current portion of Long-term debt | ($7.0) | ($10.0) | | Long-term debt | ($21.3) | ($32.3) | | **Net cash** | **$339.1** | **$277.3** | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is foreign currency exposure, with a potential $48.0 million pre-tax loss from a 10% adverse shift - The company's primary market risk is **foreign currency exchange rate risk**, with functional currencies including the South Korean won, New Taiwan dollar, RMB, Singapore dollar, British pound, and euro[162](index=162&type=chunk) - As of April 30, 2023, a hypothetical **10% adverse movement in foreign currency exchange rates would result in a net unrealized pre-tax loss of $48.0 million**[164](index=164&type=chunk) - The most significant currency exposures at quarter-end were the **South Korean won, RMB, and New Taiwan Dollar** against the U.S. dollar[164](index=164&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of the end of the period covered by the report[167](index=167&type=chunk) - **No changes in internal control over financial reporting** occurred during the second fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[168](index=168&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings beyond those arising in the ordinary course of business - For information on legal proceedings, the report refers to Note 11 in Item 1[170](index=170&type=chunk) - Note 11 details a customs audit in China, for which a **$2.2 million contingent loss was recorded in May 2022** and a $1.0 million reversal was made upon settlement in November 2022[96](index=96&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K - **No material changes** have been made to the risk factors previously disclosed in the 2022 Form 10-K[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the public program in Q2 2023, leaving $31.7 million available under the authorization - The company's board authorized a **$100 million share repurchase program** in September 2020[172](index=172&type=chunk) - **No shares were repurchased** under the publicly announced program during the second quarter of 2023, with a remaining authorized amount of **$31.7 million**[173](index=173&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including Sarbanes-Oxley certifications and XBRL data - Exhibits filed include **CEO and CFO certifications under Sarbanes-Oxley Sections 302** (Exhibit 31.1, 31.2) and 906 (Exhibit 32.1, 32.2)[175](index=175&type=chunk) - The filing includes **Inline XBRL** Instance, Schema, Calculation, Definition, Label, and Presentation documents as required[175](index=175&type=chunk)

OTRONICS, I Total Revenue ($M) 69% 460.2 72% 593.0 74% 641.1 31% 203.6 28% 231.5 26% 229.5 663.8 824.5 870.6 2021 2022 Q2 2023 LTM IC FPD Total may differ due to rounding PHOTRONICS, INC. PHOTRONICS, INC. 5/24/2023 14 IC Photomask Revenue ($M) 641.1 65% 297.2 67% 397.7 70% 452.1 35% 163.0 33% 195.3 30% 189.0 460.2 593.0 PHOTRONICS, INC. PHOTRONICS, INC. Mainstream High-End High-End: 28nm and smaller; Total may differ due to rounding 2021 2022 Q2 2023 LTM PHOTRONICS, INC. PHOTRONICS, INC. 5/24/2023 18 Non-GA ...

Financial Data and Key Metrics Changes - The company achieved record revenue of $229 million in Q2 2023, representing a 9% sequential increase and a 12% year-over-year increase, marking the ninth consecutive quarter of revenue growth [14][10][61] - Gross and operating margins increased by more than 260 and 270 basis points, respectively, to 38.6% and 29.2%, which were 430 and 500 basis points higher than the margins reported in the same quarter last year [55][61] - Non-GAAP EPS was $0.54 for Q2, compared to $0.40 in the previous quarter and $0.38 in the same quarter last year [57][61] Business Line Data and Key Metrics Changes - Integrated Circuit (IC) revenue was $167.1 million, up 7% sequentially and 15% year-over-year, with strong demand across all regions [27][61] - Flat Panel Display (FPD) revenue also reached a record, improving 14% quarter-over-quarter and 6% year-over-year, driven by demand for AMOLED panels [38][61] - Demand for mainstream ICs in the 40 to 55-nanometer range was particularly strong, while some softness was observed in high-end segments [24][27] Market Data and Key Metrics Changes - Shipments to China represented 51% of second quarter revenue, with no material impact from geopolitical tensions reported so far [14][7][5] - The company noted that the photomask market demand is strong, driven by new designs and capacity expansions, which tend to make demand more sustainable [25][26] Company Strategy and Development Direction - The company is focused on maintaining its leading position as a photomask supplier, with strategic investments in technology and advanced process know-how [12][15] - The management emphasized the importance of working closely with customers to support their technology and product enrollment, particularly in the EUV product line [15][26] - The company plans to continue investing in growth while maintaining a strong balance sheet to provide liquidity against uncertainties [26][59] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong design activity and a positive outlook for continued demand in the semiconductor environment [61][26] - The company is monitoring geopolitical tensions closely but has not experienced significant impacts on operations thus far [7][5] - There is an expectation for continued strong demand in the latter half of 2023, particularly from advanced DRAM customers [41][61] Other Important Information - The company generated $82 million in cash from operating activities and has a cash balance of $367 million, providing ample liquidity for growth investments [59][61] - The forecast for 2023 CapEx remains approximately $130 million, primarily for increased IC capacity and end-of-life tool replacements [42][59] Q&A Session Summary Question: What impact have geopolitical tensions had on operations? - Management stated that there has not been a material impact from export control regulations and geopolitical issues between China and the U.S. so far [7][5] Question: Can you quantify any headwinds from China? - Management acknowledged the geopolitical tensions but emphasized that they are working closely with suppliers to manage any potential impacts [7][5] Question: What is the outlook for memory demand? - Management noted that while memory demand has been sluggish, there is optimism among key customers about recovery in the second half of 2023 [41][61] Question: What is the CapEx plan for this year? - The majority of the planned $130 million CapEx is targeted at IC, with investments aimed at high-end mainstream business and tool replacements [42][59]