Photronics(PLAB) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved first quarter sales of $212 million, in line with expectations and normal seasonal trends [8] - Diluted GAAP EPS attributable to Photronics shareholders was$ 0.68, while non-GAAP EPS was $0.52, above the high end of guidance [21][22] - Total revenue declined 5% sequentially, with IC revenue down 6% quarter over quarter to$ 154 million [17] - Operating margin was 25%, at the high end of guidance, while gross margins declined slightly to 36% due to lower sales volumes [20] Business Line Data and Key Metrics Changes - Within the IC segment, mainstream revenue declined 9% year over year, reflecting overall semiconductor industry softness, while high-end IC showed strength, particularly in the 14 to 22 nanometer geometry ranges [9][18] - FPD revenue remained stable at $58 million, with the company maintaining its market leadership due to technological superiority [19][20] - The high-end business represented 39% of ASPs in Q1 2025, up from 36% in FY 2024 [18] Market Data and Key Metrics Changes - The IC market experienced a 2% year-over-year decline, primarily due to weakness in Asia and Europe [9] - The FPD market saw slight declines year over year, but demand from customers in China remained strong [10] Company Strategy and Development Direction - The company is focusing on high-end segments to improve blended ASPs and leverage competitive strengths [30] - Investments are being made in regional capacity close to customer locations to mitigate potential tariff impacts [14] - The company plans to spend$ 200 million in CapEx in 2025, focusing on capacity, capability, and end-of-life tool initiatives [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the outlook for 2025 due to current market conditions and limited visibility [27] - The AI landscape is seen as a long-term growth driver, with expectations for increased photomask demand from AI-related applications [12][63] - The automotive and industrial sectors remain weak, with no significant signs of recovery [68] Other Important Information - The company generated $78 million in operating cash flow, representing 37% of total revenue [22] - Total cash at the end of the quarter was$ 642 million, with a modest $3 million of debt remaining [25] Q&A Session Summary Question: Why is the guidance flat quarter over quarter? - Management indicated weakness in the low-end mainstream business, particularly from 6-inch wafer fabs, impacting revenue outlook [30] Question: How is the supply-demand equation in mainstream? - Pricing remains firm, but the overall market size appears smaller due to weakness in automotive and industrial applications [34] Question: Is there increased competition from local Chinese suppliers? - Yes, there is increased competition, but the company is focusing on middle and high-end segments to maintain stable ASPs [36] Question: What challenges were faced in scaling up to Gen 8.6% AMOLED screens? - Challenges included scaling specifications and integrating advanced mask technologies onto larger substrates [38] Question: What is the current mindset on buybacks versus acquisitions? - The company remains cautious but has a war chest for potential M&A opportunities while also considering share repurchases [46] Question: How is the demand for 22 and 28 nanometer nodes trending? - There is positive traction from AI-driven business, particularly in support chips for the AI ecosystem [62] Question: What are the top risks for 2025? - The top risks identified are macroeconomic conditions and geopolitical tensions [80]