Photronics(US:PLAB)2025-12-17 19:22Financial Performance - Total revenue for the fiscal year 2025 was $849.3 million, a decrease of $17.6 million or 2.0% compared to fiscal year 2024[143]. - Net income for the year ended October 31, 2025, was $190.234 million, a decrease of 4.4% compared to $199.634 million in 2023[209]. - Net income attributable to Photronics, Inc. shareholders increased to $136,405,000 in 2025, compared to $130,688,000 in 2024, marking a growth of 4.0%[202]. - The company reported a foreign exchange loss of $18.6 million for the three months ended October 31, 2025[175]. - The gross profit margin for Q4 FY25 was 35.0%, compared to 33.7% in Q3 FY25 and 37.0% in Q4 FY24[135]. - Operating income decreased to $208,161,000 in 2025 from $221,518,000 in 2024, representing a decline of 6.0%[202]. - Cash and cash equivalents were $492.3 million as of October 31, 2025, down from $598.5 million as of October 31, 2024[165]. - Net cash provided by operating activities decreased to $247.798 million in 2025 from $302.176 million in 2023, reflecting a decline of 18%[209]. Research and Development - Photronics incurred research and development expenses of $15.8 million, $16.6 million, and $13.7 million in 2025, 2024, and 2023, respectively[32]. - Significant investments in research and development, manufacturing capacity, and equipment maintenance are made to ensure high-quality photomasks[29]. - Research and development expenses decreased by $0.8 million to $15.8 million in YTD FY25, primarily due to decreased development activities in Asia[151]. Customer and Market Dynamics - Approximately 82%, 83%, and 86% of total revenues were generated from non-U.S. operations in 2025, 2024, and 2023, respectively[40]. - The five largest customers accounted for approximately 50%, 50%, and 51% of revenue in 2025, 2024, and 2023, respectively[37]. - The company sold products to approximately 636 customers during 2025[37]. - The demand for photomasks is closely tied to new product design activity, with potential impacts from changes in semiconductor demand and design methodologies[127]. - The company expects to face continued competition from other photomask suppliers, which may pressure pricing and require investment in advanced technology[65]. Manufacturing and Operations - The company operates eleven manufacturing facilities located in Taiwan (3), China (2), South Korea (1), the United States (3), and Europe (2)[22]. - The company has a high level of fixed costs due to the capital-intensive nature of photomask manufacturing, which could significantly impact operating margins if sales volumes decline[80]. - The company has manufacturing facilities in multiple locations, including owned facilities in Hefei, Taichung, and Xiamen, China[110]. - The company commenced operations at two manufacturing facilities in China in 2019, exposing it to substantial risks including intellectual property protection and foreign currency exchange risk[69]. Financial Risks and Liabilities - The company relies on a limited number of equipment suppliers for the photomask manufacturing process, which poses a risk if equipment cannot be obtained or repaired timely[44]. - The company relies on a limited number of suppliers for equipment and raw materials, which could adversely affect operations if there are delays[56]. - Compliance with government regulations may have a material adverse effect on future results of operations[48]. - Environmental laws and regulations may impose significant liabilities, and changes in these laws could materially affect financial performance[87]. - The company has been subject to various contingencies that may impact financial performance, requiring significant judgment in estimating potential losses[181]. Shareholder and Capital Management - The company repurchased 5.0 million shares at a cost of $97.4 million in fiscal year 2025, averaging $19.52 per share, with $27.6 million remaining available for additional repurchases as of October 31, 2025[121]. - The company has not paid any cash dividends on its shares to date and plans to retain earnings for business use in the foreseeable future[116]. - Capital expenditures for fiscal 2026 are expected to be approximately $330 million, with $13 million included in accounts payable and accrued liabilities[60]. Economic and Regulatory Environment - New tariffs and trade restrictions announced in FY25 may increase costs and complexity in the supply chain, negatively affecting customer purchasing behavior[82]. - The company faces potential regulatory risks related to GDPR compliance, which could result in significant fines and impact business operations[95]. - The company operates in a competitive global environment, facing risks from economic downturns that may reduce demand for photomasks[93]. Currency and Foreign Exchange - A 10% adverse movement in foreign currency exchange rates as of October 31, 2025, would have resulted in a net unrealized pre-tax loss of $70.1 million, an increase of $8.8 million from the previous year[184]. - The estimated tax effects of foreign exchange gains and losses for the year ended October 31, 2025, were $2.1 million, compared to $0.5 million in the previous year[175]. - The company aims to minimize foreign currency transaction losses by producing products in the same country where they are sold[183].