Photronics(PLAB) - 2025 Q3 - Quarterly Report

Glossary of Terms and Acronyms This section defines key industry, financial, and regulatory terms and acronyms used throughout the report - The glossary defines key industry terms such as Active-matrix organic light-emitting diode (AMOLED), Flat Panel Display (FPD), Integrated circuit (IC), and Low-Temperature Poly Silicon (LTPS), as well as financial and regulatory terms like Accounting Standards Codification (ASC), Accounting Standards Update (ASU), Securities Exchange Act of 1934 (Exchange Act), Securities and Exchange Commission (SEC), and U.S. GAAP[12] Forward-Looking Statements This section outlines forward-looking statements, emphasizing their non-historical nature and inherent risks that could cause actual results to differ - Forward-looking statements are not historical facts and involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed[13][14] - The company undertakes no obligation to update any forward-looking statements and cautions users not to place undue reliance on them, as various factors may cause actual results to differ materially[15] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets | Metric | August 3, 2025 (in thousands) | October 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $479,521 | $598,485 | | Short-term investments | $96,277 | $42,184 | | Accounts receivable, net | $190,875 | $200,830 | | Inventories | $63,490 | $56,527 | | Total current assets | $872,236 | $931,062 | | Property, plant and equipment, net | $838,988 | $745,257 | | Total assets | $1,752,765 | $1,712,059 | | Current portion of long-term debt | $11 | $17,972 | | Total current liabilities | $174,925 | $183,811 | | Total liabilities | $214,765 | $231,300 | | Total equity | $1,538,000 | $1,480,759 | - Total assets increased by $40,706 thousand from $1,712,059 thousand at October 31, 2024, to $1,752,765 thousand at August 3, 2025[17] - Current portion of long-term debt significantly decreased from $17,972 thousand at October 31, 2024, to $11 thousand at August 3, 2025[17] Condensed Consolidated Statements of Income | Metric (in thousands) | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Nine Months Ended Aug 3, 2025 | Nine Months Ended Jul 28, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Revenue | $210,394 | $210,984 | $633,524 | $644,318 | | Gross profit | $70,855 | $75,138 | $224,296 | $233,644 | | Operating income | $48,161 | $52,148 | $156,054 | $165,690 | | Foreign currency transactions impact, net | $(14,258) | $4,068 | $(26,925) | $9,926 | | Net income attributable to Photronics, Inc. shareholders | $22,891 | $34,388 | $74,604 | $96,819 | | Basic EPS | $0.40 | $0.56 | $1.24 | $1.57 | | Diluted EPS | $0.39 | $0.55 | $1.23 | $1.55 | - Net income attributable to Photronics, Inc. shareholders decreased by 33.4% for the three months ended August 3, 2025, compared to the prior year period, and by 22.9% for the nine months ended August 3, 2025[19] - Foreign currency transactions had a significant negative impact, shifting from a gain of $4,068 thousand in Q3 FY24 to a loss of $14,258 thousand in Q3 FY25, and from a gain of $9,926 thousand in YTD FY24 to a loss of $26,925 thousand in YTD FY25[19] Condensed Consolidated Statements of Comprehensive Income | Metric (in thousands) | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Nine Months Ended Aug 3, 2025 | Nine Months Ended Jul 28, 2024 | | :-------------------------------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Net income | $29,139 | $48,169 | $111,613 | $143,623 | | Foreign currency translation adjustments | $29,171 | $(6,114) | $33,380 | $(13,819) | | Comprehensive income attributable to Photronics, Inc. shareholders | $41,682 | $29,840 | $92,418 | $85,073 | - Comprehensive income attributable to Photronics, Inc. shareholders increased by 39.7% for the three months ended August 3, 2025, and by 8.6% for the nine months ended August 3, 2025, compared to the prior year periods[22] - Foreign currency translation adjustments significantly improved, moving from a loss of $(6,114) thousand in Q3 FY24 to a gain of $29,171 thousand in Q3 FY25, and from a loss of $(13,819) thousand in YTD FY24 to a gain of $33,380 thousand in YTD FY25[22] Condensed Consolidated Statements of Equity | Metric (in thousands) | Balance as of Oct 31, 2024 | Balance as of Aug 3, 2025 | | :------------------------------------------ | :------------------------- | :------------------------ | | Total Photronics, Inc. shareholders' equity | $1,120,864 | $1,125,551 | | Noncontrolling interests | $359,895 | $412,449 | | Total equity | $1,480,759 | $1,538,000 | - Total equity increased by $57,241 thousand from $1,480,759 thousand at October 31, 2024, to $1,538,000 thousand at August 3, 2025[17][26] - The company repurchased 4,988 thousand common shares at a cost of $97,422 thousand during the nine months ended August 3, 2025, impacting additional paid-in capital and retained earnings[26] Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | Nine Months Ended Aug 3, 2025 | Nine Months Ended Jul 28, 2024 | | :------------------------------------ | :---------------------------- | :---------------------------- | | Net cash provided by operating activities | $159,974 | $193,074 | | Net cash used in investing activities | $(173,599) | $(142,058) | | Net cash used in financing activities | $(115,284) | $(6,428) | | Net change in cash, cash equivalents, and restricted cash | $(118,780) | $38,134 | | Cash and cash equivalents at end of period | $479,521 | $537,331 | - Net cash provided by operating activities decreased by $33,100 thousand (17.1%) in YTD FY25 compared to YTD FY24, primarily due to decreased net income[29][139] - Net cash used in financing activities increased significantly by $108,856 thousand in YTD FY25, primarily driven by $97,422 thousand in common stock repurchases and $13,469 thousand in debt repayments[29][141] Notes to Condensed Consolidated Financial Statements This section details the company's accounting policies, significant estimates, and specific financial statement line items, covering business operations, accounting pronouncements, and key account breakdowns NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION - Photronics, Inc. is a leading manufacturer of high-precision photomasks for Integrated Circuits (ICs) and Flat Panel Displays (FPDs), operating eleven manufacturing facilities globally in Taiwan (3), South Korea (1), China (2), the United States (3), and Europe (2)[31] - The company is currently evaluating the impact of new FASB Accounting Standards Updates (ASU 2024-03, ASU 2023-09, ASU 2023-07) on expense disaggregation, income tax disclosures, and segment reporting, with effective dates ranging from fiscal year 2025 to 2028[35][36][37] NOTE 2 – ACCOUNTS RECEIVABLE, NET | Component | August 3, 2025 (in thousands) | October 31, 2024 (in thousands) | | :---------------------- | :----------------------------- | :----------------------------- | | Accounts Receivable | $161,658 | $172,741 | | Unbilled Receivables | $30,401 | $29,215 | | Allowance for Credit Losses | $(1,184) | $(1,126) | | Total Accounts Receivable, net | $190,875 | $200,830 | - Accounts receivable, net, decreased by $9,955 thousand from $200,830 thousand at October 31, 2024, to $190,875 thousand at August 3, 2025[39] NOTE 3 – CASH, CASH EQUIVALENTS AND INVESTMENTS | Category | August 3, 2025 (in thousands) | October 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Cash | $171,146 | $414,074 | | Level 1 (U.S. Gov Securities, Money Market) | $45,271 | $36,322 | | Level 2 (Commercial paper, Time deposits) | $359,381 | $190,273 | | Total Fair Value | $575,798 | $640,669 | - Total cash, cash equivalents, and short-term investments measured at fair value decreased by $64,871 thousand from $640,669 thousand at October 31, 2024, to $575,798 thousand at August 3, 2025[42] - The company classifies investments based on maturity, with those maturing within three months as cash and cash equivalents, and those maturing between three months and one year as short-term investments, with fair value measurements categorized into Level 1 and Level 2[40][41] NOTE 4 - INVENTORIES | Component | August 3, 2025 (in thousands) | October 31, 2024 (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | | Raw materials | $61,908 | $56,128 | | Work in process | $1,560 | $398 | | Finished goods | $22 | $1 | | Total Inventories | $63,490 | $56,527 | - Total inventories increased by $6,963 thousand (12.3%) from $56,527 thousand at October 31, 2024, to $63,490 thousand at August 3, 2025, primarily driven by increases in raw materials and work in process[45] NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET | Component | August 3, 2025 (in thousands) | October 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Land | $12,298 | $11,419 | | Buildings and improvements | $192,625 | $188,756 | | Machinery and equipment | $2,143,635 | $1,990,610 | | Leasehold improvements | $21,037 | $19,268 | | Furniture, fixtures, and office equipment | $18,598 | $18,091 | | Construction in progress | $108,743 | $91,213 | | Accumulated depreciation and amortization | $(1,657,948) | $(1,574,100) | | Total Property, plant and equipment, net | $838,988 | $745,257 | - Property, plant and equipment, net, increased by $93,731 thousand (12.6%) from $745,257 thousand at October 31, 2024, to $838,988 thousand at August 3, 2025, mainly due to increases in machinery and equipment and construction in progress[47] - The company exercised early buy-out options for a high-end lithography tool and a high-end inspection tool during the first half of fiscal year 2025, significantly reducing ROU assets from finance leases from $32,293 thousand to $5 thousand[47][58][59] NOTE 6 - PDMCX JOINT VENTURE - Photronics' joint venture, PDMCX, in Xiamen, China, is consolidated as a Variable Interest Entity (VIE) because Photronics holds a controlling financial interest (50.01%) and is deemed the primary beneficiary[50][54] | Period | August 3, 2025 (in thousands) | July 28, 2024 (in thousands) | | :-------------------- | :----------------------------- | :----------------------------- | | Net income from PDMCX | $3,485 | $4,369 | - Photronics' maximum exposure to loss from PDMCX is limited to its interest in the net assets of the joint venture, which was $153,437 thousand as of August 3, 2025[56] NOTE 7 - DEBT | Component | August 3, 2025 (in thousands) | October 31, 2024 (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | | Current portion of long-term debt | $11 | $17,972 | | Long-term debt | $16 | $25 | | Total debt | $27 | $17,997 | - Total debt significantly decreased from $17,997 thousand at October 31, 2024, to $27 thousand at August 3, 2025, primarily due to the exercise of early buy-out options on two high-end finance leases[57][58][59] - The PDMCX joint venture has an extended revolving, unsecured credit agreement for CNY 200 million ($25 million) until July 31, 2026, with no outstanding borrowings as of August 3, 2025[60] NOTE 8 – REVENUE - The company recognizes revenue 'over time' for most photomask sales because they are manufactured to customer specifications and the company has an enforceable right to payment for work completed[61] | Product Type | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Nine Months Ended Aug 3, 2025 | Nine Months Ended Jul 28, 2024 | | :---------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | IC High-end | $53,648 | $49,499 | $173,053 | $168,417 | | IC Mainstream | $94,176 | $106,385 | $284,605 | $305,984 | | Total IC | $147,824 | $155,884 | $457,658 | $474,401 | | FPD High-end | $53,486 | $48,394 | $146,778 | $146,987 | | FPD Mainstream | $9,084 | $6,706 | $29,088 | $22,930 | | Total FPD | $62,570 | $55,100 | $175,866 | $169,917 | | Total Revenue | $210,394 | $210,984 | $633,524 | $644,318 | | Geographic Origin | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Nine Months Ended Aug 3, 2025 | Nine Months Ended Jul 28, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Taiwan | $68,429 | $68,182 | $216,524 | $218,557 | | China | $50,618 | $55,301 | $162,919 | $172,131 | | South Korea | $43,716 | $38,412 | $121,547 | $118,033 | | United States | $37,754 | $38,833 | $105,379 | $104,880 | | Europe | $9,050 | $9,759 | $25,143 | $29,390 | | Other | $827 | $497 | $2,012 | $1,327 | NOTE 9 - SHARE-BASED COMPENSATION - The company's 2025 Equity Incentive Compensation Plan was approved, authorizing 5 million shares for various awards to officers, employees, directors, consultants, advisors, and independent contractors[78] | Expense Type | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Nine Months Ended Aug 3, 2025 | Nine Months Ended Jul 28, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Cost of goods sold | $816 | $683 | $2,378 | $1,946 | | Selling, general, and administrative | $2,174 | $2,388 | $6,729 | $7,126 | | Research and development | $304 | $271 | $896 | $769 | | Total expense incurred | $3,294 | $3,342 | $10,003 | $9,841 | - Restricted stock units were first granted in Q2 FY25, with 162,666 units granted in YTD FY25 at a weighted-average grant-date fair value of $19.61 per share[82][83] NOTE 10 - INCOME TAXES | Reporting Period | U.S. Statutory Tax Rates | Effective Tax Rates | | :-------------------------- | :----------------------- | :------------------ | | Three months ended Aug 3, 2025 | 21.0% | 24.8% | | Three months ended Jul 28, 2024 | 21.0% | 22.7% | | Nine Months Ended Aug 3, 2025 | 21.0% | 23.5% | | Nine Months Ended Jul 28, 2024 | 21.0% | 25.4% | - The effective income tax rate for Q3 FY25 increased to 24.8% from 22.7% in Q3 FY24, primarily due to changes in the jurisdictional mix of earnings[89][131] - The company is evaluating the effect of the newly enacted U.S. One Big Beautiful Bill Act (OBBBA), which includes tax provisions effective in fiscal year 2026, and has been notified of a routine income tax audit in a foreign jurisdiction[90][92] NOTE 11 - EARNINGS PER SHARE | Metric | Three Months Ended Aug 3, 2025 | Three Months Ended Jul 28, 2024 | Nine Months Ended Aug 3, 2025 | Nine Months Ended Jul 28, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Net income attributable to Photronics, Inc. shareholders | $22,891 | $34,388 | $74,604 | $96,819 | | Weighted-average common shares outstanding (Basic) | 57,937 | 61,815 | 60,274 | 61,681 | | Basic EPS | $0.40 | $0.56 | $1.24 | $1.57 | | Diluted EPS | $0.39 | $0.55 | $1.23 | $1.55 | - Basic EPS decreased from $0.56 in Q3 FY24 to $0.40 in Q3 FY25, and from $1.57 in YTD FY24 to $1.24 in YTD FY25, primarily due to lower net income attributable to Photronics, Inc. shareholders[93] - Weighted-average common shares outstanding (basic) decreased by 6.3% in Q3 FY25 and 2.3% in YTD FY25 compared to the prior year periods[93] NOTE 12 - COMMITMENTS AND CONTINGENCIES - As of August 3, 2025, unrecognized commitments for the acquisition of property, plant and equipment totaled $147.2 million, with approximately $32.5 million having a remaining term in excess of one year[95] - The company believes that potential liability under various claims arising in the ordinary course of business will not have a material effect on its consolidated financial statements[96] NOTE 13 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT | Component | Balance at Oct 31, 2024 | Other comprehensive (loss) income (YTD Aug 3, 2025) | Balance at Aug 3, 2025 | | :------------------------------------------ | :-------------------------- | :------------------------------------------------ | :----------------------- | | Foreign Currency Translation Adjustments | $(85,587) | $33,380 | $(67,762) | | Other | $(732) | $(20) | $(742) | | Total | $(86,319) | $33,360 | $(68,504) | - Accumulated other comprehensive loss improved from $(86,319) thousand at October 31, 2024, to $(68,504) thousand at August 3, 2025, primarily driven by positive foreign currency translation adjustments of $33,380 thousand for the nine months ended August 3, 2025[98] NOTE 14 – SHARE REPURCHASE PROGRAM - During the three-month period ended August 3, 2025, the company repurchased 1.2 million shares at a cost of $20.7 million[100] - For the nine-month period ended August 3, 2025, the company repurchased 5 million shares at a cost of $97.4 million[100] - In June 2025, the Board of Directors authorized an additional $25 million share repurchase, leaving $27.6 million available under this authorization as of August 3, 2025[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results of operations, analyzing revenue, gross margin, operating expenses, liquidity, cash flows, and critical accounting estimates Overview - Photronics sells photomasks primarily to semiconductor designers and manufacturers, and FPD manufacturers, with demand driven by design activity rather than sales volumes[103] - The microelectronics industry is volatile, with cycles tied to consumer-driven high-performance devices, and the company's success depends on being a service and technology leader[103][105] - Typical backlog for FPD photomasks is two to three weeks, and for IC photomasks, one to two weeks, though some IC backlogs can extend to two to three months[104] Results of Operations This section analyzes the company's operating performance, highlighting a slight revenue decrease driven by IC weakness, declining gross margin, mixed operating expense trends, and significant foreign currency impacts Revenue | Metric | Q3 FY25 vs Q2 FY25 | Q3 FY25 vs Q3 FY24 | YTD FY25 vs YTD FY24 | | :---------------- | :------------------ | :------------------ | :------------------- | | Total Revenue | $(0.6) (-0.3%) | $(0.6) (-0.3%) | $(10.8) (-1.7%) | | IC Revenue | $(8.1) (-5.2%) | $(8.1) (-5.2%) | $(16.8) (-3.5%) | | FPD Revenue | $7.5 (13.5%) | $7.5 (13.6%) | $6.0 (3.5%) | - IC revenue decreased by $8.1 million (5.2%) in Q3 FY25 compared to both Q2 FY25 and Q3 FY24, primarily due to reduced high-end and mainstream demand in Asia, influenced by geopolitical trade restrictions and tariff negotiations[116] - FPD revenue increased by $7.5 million (13.5%) in Q3 FY25 compared to Q2 FY25, and by $7.5 million (13.6%) compared to Q3 FY24, driven by increased high-end and mainstream demand, particularly in South Korea[117] Gross Margin | Metric | Q3 FY25 | Q2 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :---------- | :------ | :------ | :------ | :------- | :------- | | Gross profit | $70.9 | $77.9 | $75.1 | $224.3 | $233.6 | | Gross margin | 33.7% | 36.9% | 35.6% | 35.4% | 36.3% | - Gross margin decreased by 320 basis points in Q3 FY25 compared to Q2 FY25, primarily due to an unfavorable product mix, leading to an 8.2% increase in material costs (207 basis points as a percentage of revenue) and a 6.3% increase in labor and benefits costs (70 basis points as a percentage of revenue)[118] - Gross margin decreased by 90 basis points in YTD FY25 compared to YTD FY24, mainly due to a 1.7% decrease in revenue and an unfavorable product mix resulting in a 2.5% increase in material costs (102 basis points as a percentage of revenue)[120] Selling, General and Administrative Expenses | Period | Q3 FY25 | Q2 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :-------------------- | :------ | :------ | :------ | :------- | :------- | | SG&A Expenses | $18.4 | $18.1 | $19.4 | $55.6 | $56.8 | - Selling, general and administrative (SG&A) expenses increased by $0.3 million in Q3 FY25 from Q2 FY25 due to higher professional fees, but decreased by $1.0 million from Q3 FY24 due to reduced professional fees[121] - SG&A expenses decreased by $1.2 million in YTD FY25 compared to YTD FY24, primarily due to a $1.1 million decrease in labor and benefits costs[122] Research and Development Expenses | Period | Q3 FY25 | Q2 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :-------------------- | :------ | :------ | :------ | :------- | :------- | | R&D Expenses | $4.3 | $4.1 | $3.6 | $12.6 | $11.3 | - Research and development (R&D) expenses increased in Q3 FY25 compared to Q2 FY25 and Q3 FY24, primarily due to increased qualification activities in Asia[123] - R&D expenses increased by $1.3 million in YTD FY25 compared to YTD FY24, driven by increased development activities in the U.S.[124] Other Income (Expense), net | Metric | Q3 FY25 | Q2 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :---------------------------------- | :------ | :------ | :------ | :------- | :------- | | Foreign currency transactions impact, net | $(14.3) | $(31.1) | $4.1 | $(26.9) | $9.9 | | Interest income and other income, net | $4.8 | $5.3 | $6.1 | $16.8 | $17.3 | | Other income (expense), net | $(9.4) | $(25.8) | $10.1 | $(10.2) | $26.9 | - Other Expense, net, decreased by $16.4 million in Q3 FY25 from Q2 FY25, primarily due to favorable movements of the New Taiwan dollar and South Korean won against the U.S. dollar[127] - Other Expense, net, increased by $19.5 million in Q3 FY25 from Q3 FY24 and by $37.1 million in YTD FY25 from YTD FY24, mainly driven by unfavorable foreign currency impacts[127][128] Income Tax Provision | Period | Q3 FY25 | Q2 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :-------------------- | :------ | :------ | :------ | :------- | :------- | | Income tax provision | $9.6 | $5.7 | $14.1 | $34.2 | $49.0 | | Effective income tax rate | 24.8% | 19.1% | 22.7% | 23.5% | 25.4% | - The effective income tax rate increased in Q3 FY25 compared with Q2 FY25 and Q3 FY24, primarily due to changes in the jurisdictional mix of earnings[131] - The company is monitoring the EU's Pillar Two Directive (minimum 15% effective tax rate) and evaluating the impact of the U.S. One Big Beautiful Bill Act (OBBBA), effective in fiscal year 2026[129][130] Net Income Attributable to Noncontrolling Interests | Period | Q3 FY25 | Q2 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :-------------------- | :------ | :------ | :------ | :------- | :------- | | Net income attributable to noncontrolling interests | $6.2 | $15.4 | $13.8 | $37.0 | $46.8 | - Net income attributable to noncontrolling interests decreased in Q3 FY25 compared to Q2 FY25 and Q3 FY24, and in YTD FY25 compared to YTD FY24, as a result of decreased net income from the company's joint ventures[133] Liquidity and Capital Resources This section discusses the company's financial position, cash management, and capital allocation strategies, detailing cash flow changes, capital expenditures, and significant share repurchases Cash Flows | Activity | YTD FY25 | YTD FY24 | Change | | :-------------------------------- | :------- | :------- | :------- | | Net cash provided by operating activities | $160.0 | $193.1 | $(33.1) | | Net cash used in investing activities | $(173.6) | $(142.1) | $(31.5) | | Net cash used in financing activities | $(115.3) | $(6.4) | $(108.9) | - Net cash provided by operating activities decreased by $33.1 million in YTD FY25 compared to YTD FY24, primarily due to decreased net income[139] - Net cash used in financing activities increased by $108.9 million in YTD FY25, primarily driven by $97.4 million in common stock repurchases and $13.5 million in debt repayments[141] Non-GAAP Financial Measures - The company uses non-GAAP financial measures (Net Income and Diluted EPS attributable to Photronics, Inc. shareholders) to provide a more meaningful comparison of its core business performance, excluding items like FX gain/loss and their estimated tax and noncontrolling interest effects[143] | Metric | Three Months Ended Aug 3, 2025 | Three Months Ended May 4, 2025 | Three Months Ended Jul 28, 2024 | | :---------------------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | U.S. GAAP Net Income attributable to Photronics, Inc. shareholders | $22,891 | $8,861 | $34,388 | | FX (gain) loss | $14,258 | $31,111 | $(4,068) | | Non-GAAP Net Income attributable to Photronics, Inc. shareholders | $29,356 | $24,259 | $31,915 | | U.S. GAAP diluted earnings per share attributable to Photronics, Inc. shareholders | $0.39 | $0.15 | $0.55 | | Non-GAAP diluted earnings per share attributable to Photronics, Inc. shareholders | $0.51 | $0.40 | $0.51 | Business Outlook - The company's current business outlook and guidance were provided in its Q3 FY25 earnings press release, earnings presentation, and financial results conference call, accessible on its investor website[146] - Future results of operations and forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations, as discussed in the 2024 Form 10-K and this Form 10-Q[147] Critical Accounting Estimates - There have been no material changes to the company's critical accounting estimates since the filing of its Form 10-K for the year ended October 31, 2024[148] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces foreign currency exchange rate risk, primarily from the South Korean won, New Taiwan dollar, and Chinese yuan, with a 10% adverse movement potentially causing a $69.7 million pre-tax loss - The company's primary net foreign currency exposures as of August 3, 2025, included the South Korean won ($24.9 million), Japanese yen, New Taiwan dollar ($36.1 million), and Chinese yuan ($5.4 million)[151] - A 10% adverse movement in the value of currencies different from the functional currencies of its subsidiaries would have resulted in a net unrealized pre-tax loss of $69.7 million as of August 3, 2025[151] - The company attempts to minimize foreign currency transaction losses by producing products in the same country where they are sold and by managing working capital, and may use derivative contracts for significant obligations or receivables[150] - Interest rate risk is not material as there were no variable rate borrowings outstanding as of August 3, 2025[152] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of August 3, 2025, with no material changes in internal control over financial reporting - Management, under the supervision of the CEO and CFO, evaluated and concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of August 3, 2025[154] - There were no changes in the company's internal control over financial reporting during the third fiscal quarter ended August 3, 2025, that materially affected or are reasonably likely to materially affect it[155] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information on legal proceedings is referenced in Note 12 of Part I, Item 1, which states that potential liabilities will not have a material effect on consolidated financial statements - Information on legal proceedings is cross-referenced to Note 12 within Part I, Item 1 of this report[156] - The company believes that its potential liability under various claims arising in the ordinary course of business will not have a material effect on its consolidated financial statements[96] Item 1A. Risk Factors No material changes to risk factors since the 2024 Form 10-K, except for new risks related to tariffs and global trade policies that may increase costs and reduce demand - There have been no material changes to the company's risk factors as set forth in its 2024 Form 10-K, except for the addition of risks related to tariffs and global trade policies[157] - New tariffs and trade restrictions, such as those from the U.S. One Big Beautiful Bill Act (OBBBA) and Section 232 investigations, may increase supply chain costs, reduce demand, and negatively affect customer purchasing behavior, potentially impacting the company's business, financial condition, and results of operations[158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Under its share repurchase program, Photronics repurchased 1.2 million shares for $20.7 million in Q3 FY25 and 5 million shares for $97.4 million in YTD FY25 - During the three-month period ended August 3, 2025, the company repurchased 1.2 million shares at a cost of $20.7 million under its share repurchase program[159] - For the nine-month period ended August 3, 2025, the company repurchased 5 million shares at a cost of $97.4 million[159] - In June 2025, the Board of Directors authorized an additional $25 million share repurchase, resulting in $27.6 million remaining available under this authorization as of August 3, 2025[159] | Period | Total Number of Shares Purchased | Average Price Paid Per share | Dollar Value of Shares That May Yet Be Purchased (in millions) | | :-------------------------- | :----------------------------- | :--------------------------- | :------------------------------------------------------------- | | May 5, 2025 – June 1, 2025 | 366,900 | $17.34 | $16.9 | | June 2, 2025 – June 29, 2025 | 810,630 | $17.72 | $27.6 | | June 30, 2025 – August 3, 2025 | - | $- | $27.6 | | Total | 1,177,530 | | | Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities reported for the period - No defaults upon senior securities were reported[162] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to Photronics, Inc.[163] Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted or terminated by any director or officer during the quarter ended August 3, 2025 - No Rule 10b5-1 trading arrangements were adopted or terminated, including by modification, by any director or officer during the quarter ended August 3, 2025[164] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer and various Inline XBRL documents - Exhibits filed include certifications of the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[165] SIGNATURES The report is duly signed on behalf of Photronics, Inc. by Eric Rivera, Executive Vice President and Chief Financial Officer, on September 9, 2025 - The report was signed by Eric Rivera, Executive Vice President, Chief Financial Officer (Principal Financial Officer/Principal Accounting Officer) on behalf of Photronics, Inc. on September 9, 2025[167]