Q1 2024 Photronics Inc Earnings Call
Okay.
Unknown Executive: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Photronics' first quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode.
Good day, ladies and gentlemen, thank you for standing by welcome to Photronics first quarter fiscal 'twenty 'twenty four earnings conference call.
At this time, all participants on a listen only mode. After the speaker's presentation. There will be a question and answer session. Just a question during the session you will need to lifestyle. One one on your telephone you will then hear an automatic message advising you had this waste.
Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising that your hand is raised.
Unknown Executive: As a reminder, this conference is being recorded today, Wednesday, February 21st, 2024. I would now like to turn the conference over to Richelle Burr, Chief Administrative Officer. Please go ahead.
As a reminder, this conference is being recorded today Wednesday February 21st 2024.
I would now like to turn the conference over to Michelle for Chip administrative officer. Please go ahead.
Richelle E. Burr: Thank you, Livia. Good morning, everyone. Welcome to our review of Photronics' Fiscal 2024 First Quarter Results. Joining me this morning are Frank Lee, our Chief Executive Officer; Chris Progler, our Chief Technology Officer; John Jordan, our Chief Financial Officer; and Eric Rivera, our Chief Accounting Officer and Corporate Controller. The press release we issued earlier this morning, together with the presentation materials that accompany our remarks, are available in the Investor Relations section of our website. Comments made by any participants on today's call may include forward-looking statements that include such words as anticipate, believe, estimate, expect, forecast, and in our view. These forward-looking statements are based on a number of risks, uncertainties, and other factors that are difficult to predict. The actual results may differ materially from those expressed or implied, and we assume no obligation to update any forward-looking information.
Thank you Lydia good morning, everyone. Welcome to our review also trailing fiscal 'twenty 'twenty four first quarter results. Joining me. This morning are frankly, our chief Executive Officer, Chris probably blur, our Chief Technology Officer, John Jordan, Our Chief Financial Officer, and Eric are there.
Chief Accounting officer, and corporate controller at the press release, we issued earlier this morning together with the presentation materials that accompany our remarks are available on the Investor Relations section.
Comments made by any participant on today's call May include forward looking statements that include such words as anticipate believe estimate expect forecast and in our view.
These forward looking statements are based upon a number of risks uncertainties and other factors that are difficult to predict.
Actual results may differ materially from those expressed or implied and we assume no obligation to update any forward looking information.
Richelle E. Burr: During the course of our discussion, we will refer to certain non-GAAP financial metrics. These numbers are useful for analysts, investors, and management to evaluate ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation material. At this time, I will turn the call over to Frank. Thank you, Richelle, and good morning, everyone.
During the course of our discussion we will refer to certain non-GAAP financial metrics. These numbers are useful for analysts investors and management evaluate ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials.
At this time I will turn the call over to Frank Thank you Michelle and good morning, everyone.
KangJyh Lee: We achieved sales growth compared with last year as both IC and SPD increased, with high end growth being partially offset by soft mainstream demand in both sectors. However, compared with the fourth quarter, sales were down due to seasonal trends and four fewer days in the first quarter. Demand was weaker, and sales were softer than we expected during the first month of the quarter for both IC and MPD. Demand improves during a quarter, increasing our revenue run rate and giving us confidence that revenue will improve in the second quarter. Earnings improved over last year as operations leveraged towards higher growth margins. [inaudible] No Barring Causes Gross Margin to Go to War. Once again, our team has done well to control expenses and deliver a solid budget, even with lower sales compared with the fourth quarter. The first quarter earnings were $0.42 per share on a gap basis and $0.48 per share on a non-gap basis.
We got a chance to ask growth compared with last year.
I see an MPD inquiries.
With higher gross.
Partially offset by mainstream demand in both sectors.
Compared with the fourth quarter.
What I'll do to either not a trend.
Fewer days in the first quarter.
And then once a week.
It was sold to a dance.
You read the first miles over the quarter for both the I C N N P D.
You May you put you in a quarter.
We've been on a revenue run rate and given us confidence.
That revenue will improve.
Second quarter.
And he has improved over last year.
Richard and beverage drove higher gross margins.
On a quarter over quarter comparison.
Barring of course gross margin walk.
Once again, our team has somewhere to controlling expenses and you'd be very solid project.
You bet, we should always there as compared with fourth quarter.
The first quarter is or what it was that push you I'm a good basis.
48 cents per share.
Okay.
KangJyh Lee: Operation Cashflow improved from the first quarter of last year, allowing us to further strengthen our balance sheet to support our growth plan. I would now like to offer some comments on the overall mass market and demand environment. As I stated earlier... Much demand was sought at the start of the first quarter for both IC and LPD. It may improve throughout the quarter, including the U.S. spike in orders we see ahead of Chinese New Year, which started on February 9, while still early following the holiday break. We do expect demand trends we saw prior to Chinese New Year to continue in Q2. Well, I think we are seeing a growing trend in no migration from customers in Asia as they move to 28 and 22 nanometers to improve performance.
Operation cash flow improved from the first quarter of last year.
Allowing us to further strengthen our balance sheet to support our grocery brands.
I would now like to offer some comments on the overall market.
Market and demand environment.
As I stated earlier.
Must be a man what so ever.
And to start off first quarter for both IC and P T.
It may improve through the quarter.
Including a spike.
We see it.
It's a new year.
Which started on February nine.
Why us.
Are you following the holiday break we do expect demand trends, we sold prior to Chinese new year to continue in Q2.
Well I see we are seeing a growing trend no migration from customer you're an issue there.
It moved to 28 and 22 nanometers to improve performance.
KangJyh Lee: The trend is driving type R demand for our high-end business. In memory, the industry is seeing a recovery in demand. Our memory exposure is with Tier 2 providers, which are typically high-volume applications.
That trend is driving and tape out demand for our high end piece of news.
Good memory.
Sorry.
And a recovery in demand.
Our memory exposure is with tier two providers.
Typically high volume applications.
KangJyh Lee: They are seen encouraging demand trends as well. For F&T, our business outlook looks good, even as the overall display industry remains soft, as a technology leader with a strong market presence in the more advanced AMOLED displays. We have a competitive advantage that keeps demand high for our display market. Displays for premium smartphones are continually asking for new features.
Yeah, I see encourage you give men trends elsewhere.
Well everybody.
All of those good even if at all or it gets great industry remain so.
As a technology leader with a strong market presence.
Mrna is a phrase.
We have a competitive advantage that keeps demand high for all of these great mask.
The spread for premium smartphones are continually asking new features in your futures.
KangJyh Lee: It is your future, and panel makers are innovating to gain market share. This benefits us as we have a greater relationship with the large panel makers and can provide high quality masks to help them achieve their goals. There will be momentum during the second half of the first quarter, and we expect our revenue to grow in the second quarter. As this happens, we will remain focused on controlling costs to increase margins and increasing cash flow to support growth investment. I'm optimistic about the rest of the year.
And I don't think.
And to gain market share.
These benefits are hard at work.
We have great we have great relationship with them, they're large panel makers.
Cause I hired quite a few months to help them achieve their goals.
We'd be a moment until really the second half of the first quarter.
I expect our revenue to grow in the second quarter.
As this happens we weigh every bank focus on controlling costs to increase margins and increasing cash flow to support growth investments.
I'm optimistic about the rest of that year.
KangJyh Lee: We expect the semiconductor industry to transition to the next phase of growth, leading to an increase in photo mass demand during our second to third physical quarter. We believe our technology, strong customer relations, and global presence will position us to continue to perform well. Before turning the call over to John to review Q1 Resort, Before turning the call over to John to review Q1 Resort, I would like to publicly congratulate John on his upcoming retirement. John has been an important member of our executive team since joining Photronics in 2017, and has been a great partner to me over the entire time, especially during my time as CEO. He has led us through tremendous growth and geographic expansion. On behalf of the entire organization, I wish him well in his retirement. [inaudible] Thank you, Frank, for those kind words. I am looking forward to retirement and spending more time with my family and some favorite projects. Oh, I'm leaving now.
It's back in the semi conductor industry short and transition to the next phase of growth.
Dig into an increase in book who must be met.
Our second to third Crazy cold corridors.
We believe our technology.
Customer relation and global presence will position us to continue to perform well.
Before turning the call over to John to review Q1 results.
I would like to poverty complementary already I jumped on his upcoming retirement.
John has been a member.
A member of our executive team is he is joined by strong as in 2017.
And that's been a great partner to me, although it out in pilot time, especially you'll read my time as CEO.
He has a really tremendous gross NGL rapid expansion.
On behalf of the entire organization.
Wish him well in retirement.
John that's felt is yours.
Thank you Frank for those kind words, I am looking forward to retirement.
Spending more time with my family and some favorite projects.
Although.
Yeah.
John P. Jordan: I'm confident in the company's continued success. The CFO role in any company is a challenging position. In our case, I believe we have met that challenge with the strong support of an excellent finance organization. Eric, our Corporate Controller, who will assume the role of Interim CFO, as well as our Treasurer and both their staffs, and our international CFOs and their staff.
Oh boy, leaving.
I'm confident in the company's continued success.
The CFO role in any company is a challenging position.
In our case I believe we have met that challenge with the strong support of it.
Excellent the finance organization.
Eric <unk>, our corporate controller, who will assume the role of interim CFO as.
As all of our treasurer, and treasurer and both of those stuffs.
And our international Cfos and their staffs.
John P. Jordan: [inaudible] and the cohesiveness and commitment of the leadership team to a well-defined strategy of targeted investment and consistent execution will help ensure that success. Now turning to first quarter results, revenue is $216.3 million, up 2% year-over-year and 5% less than last quarter. As Frank mentioned, our first quarter began slowly but gained momentum as end market demand seemed to recover. The first quarter is typically the seasonally slowest quarter in our fiscal year. Slower demand at the beginning of the first quarter exacerbated the seasonal decrease, and there were four fewer days than in the previous quarter, all combining for the sequential decrease. First quarter I.C.
So photronics board is demanding and supportive.
And the cohesiveness and commitment of the leadership team to a well defined strategy of targeted investment.
And consistent execution will help ensure the success.
Now turning to first quarter results revenue was $216 $3 million up 2% year over year, and 5% less than last quarter.
As Frank mentioned, our first quarter began slowly.
But gained momentum as end market demand seem to recover.
The first quarter is typically the seasonally slowest quarter.
For fiscal year <unk>.
Slower demand at the beginning of the first quarter exacerbated the seasonal decrease.
And there were four fewer days than the previous quarter.
Combining for the sequential decrease.
First quarter, IC revenue was $157.6 million up 1% year over year.
John P. Jordan: revenue was $157.6 million, up 1% year-over-year and 4% lower sequentially. High-end revenue increased led by strong foundry logic demand in Asia and high end revenue in the U.S. Mainstream revenue was lower due to softness in Asia, in part related to the stronger high-end demand resulting from customers' migration to the more advanced node. [inaudible] as we support customers, technology roadmaps, and investors as they expand capacity to support supply chain regionalization. FPD revenue of $58.7 million increased 8% compared with last year and was down 7% from Q4's record level. However, high-end FPD revenue improved year-over-year on an increase in demand for AMOLED displays used in mobile applications. Although it was the lowest sequentially in normal seasonal soccer.
And 4% lower sequentially.
High end revenue increase led by strong foundry logic demand in Asia.
And high end revenue in the U S.
Mainstream revenue was lower due to softness in Asia in part related to the stronger high end demand, resulting from customers' migration to the more advanced nodes.
Long term growth drivers remain intact.
Support customers' technology, Roadmaps and investments.
As they expand capacity to support supply chain.
Regionalization.
MPD revenue of $58 $7 million improved 8% compared with last year.
It was down 7% from Q4s record level.
I ended up could be revenue improved year over year on an increase in demand.
Displays used in mobile applications.
Although it was lower sequentially, our normal seasonal softness.
John P. Jordan: The mainstream FPD decline was attributable to the slow start to Q1 we alluded to before. However, we remain the technology leader, which gives us confidence in our ability to continue to outgrow the market as panel makers release innovative products to gain market share. Gross margin was 36.6%, slightly higher year-over-year and slightly lower quarter-over-quarter. Consistent with changes in revenue and the effect of high operating leverage in both direct and indirect, operating expenses were higher this quarter, primarily related to higher employee compensation. The resulting operating margin was 26.6%. That income in the quarter was $26.2 million, or $0.42 per diluted share.
The mainstream S. P. D decline was attributable to the slow start to Q1.
We alluded to before.
We remain the technology leader, which gives us confidence in our ability to continue to outgrow the market as panel makers release.
Innovative products to gain market share.
Gross margin was 36, 6%.
Lately higher year over year, and slightly lower quarter over quarter.
Consistent with changes in revenue and the effect of high operating leverage in both directions.
Operating expenses were higher this quarter, primarily related to higher employee compensation expense.
The resulting operating margin was 26, 6%.
Net income in the quarter was $26 $2 million or 42 cents per diluted share.
Adjusted for the Nonoperating loss net income was $29 $9 million or 48 cents per diluted share.
Proven from last year, and somewhat lower than a very strong Q4.
We generated $41 million in operating cash flow, 50% higher.
John P. Jordan: Adjusted for the non-operating loss, net income was $29.9 million, or $0.48 per diluted share, an improvement from last year and somewhat lower than our very strong Q4 earnings. We generated $41.5 million in operating cash flow, 50% higher than last year due to higher net income and effective working capital management. Our CapEx investments for growth were $43.3 million in the quarter. Our CapEx guidance for the year will remain at $140 million, primarily in both high-end and mainstream IC to address anticipated demand. We ended the quarter with a cash balance of $508.5 million.
Last year due to higher net income and effective working capital management.
Our capex investments for growth were $43 $3 million in the quarter, our capex guidance for the year will remain at 140 billion, primarily in both high end and mainstream IC to address anticipated demand.
We ended the quarter with a cash balance of 508.
Dollars.
Short term investments of 13 million and debt of $23 $4 million.
Putting us with ample liquidity to fund investments.
Organic growth.
Before I provide guidance I'll remind you that our visibility is always limited as our.
Backlog is typically only one to three weeks and demand for some of our products is inherently uneven and difficult to predict.
Additionally, the Asp's and mask sets are high and.
As this segment of the business grows a relatively low number of high end orders can have a significant impact on our.
John P. Jordan: Short-term investments of $13 million and debt of $23.4 million, providing us with ample liquidity to fund investments in Organic Growth. Before I provide guidance, I'll remind you that our visibility is always limited as our backlog is typically only one to three weeks. And demand for some of our products is inherently uneven and difficult to predict. Additionally, the ASPs for high-end mask sets are high.
Quarterly revenue and earnings.
Given those caveats, we expect second quarter revenue to be in the range of $226 million to $236 million.
We believe the momentum that built during the first quarter will continue into Q2, driven by solid long term demand drivers across our markets.
Our pricing environment has stabilized around the mid thirties.
Mid to high Thirty's percentage gross margin levels.
The midpoint of our guidance for Q2, we anticipate that gross margin in the 38% range somewhat better than the margin in Q1.
John P. Jordan: And as this segment of the business grows, a relatively low number of high-end orders can have a significant impact on our quarterly revenue and earnings. Given those caveats, we expect second quarter revenue to be in the range of $226 to $236 million. We believe the momentum that built during the first quarter will continue into Q2, driven by solid, long-term demand drivers across our market. Our pricing environment has stabilized around the mid-30s. We are at a mid to high 30s percentage gross margin level, and at the midpoint of our guidance for Q2, we anticipate a gross margin in the 38% range, somewhat better than the margin in Q1. Based on those revenue expectations and our current operating model, we estimate non-gap earnings per share for the second quarter to be in the range of 50 to 58 cents per diluted share.
Based on those revenue expectations in our current operating model, we estimate non-GAAP earnings per share for the second quarter to be in the range of 50 to 58 cents per diluted share.
After a slow start to the year, we're encouraged by strengthening demand during the quarter and into second quarter.
We anticipate the continuation of these trends along with the performance of our global team to provide the sequential improvement in the second quarter and continued growth through 2024.
I will now turn the call over to the operator for your questions.
Thank you.
Ladies and gentlemen to ask a question you wanted to press Star one one on your telephone and wait.
For your name to be announced to withdraw your question. Please press star one again.
Again, if you would like to ask a question. Please press star one.
Please standby for your first question.
Yeah.
Our next question coming from the line of Tom.
Definitely with D. A Davidson your line is now open.
Yeah. Good morning, and thank you for taking my question first of all John It's been a pleasure working with you and I wish you well in your retirement.
John P. Jordan: After a slow start to the year, we're encouraged by strengthening demand during the quarter and into the second quarter. We anticipate the continuation of these trends, along with the performance of our global team, to provide sequential improvement in the second quarter and continued growth through 2024. [inaudible] Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.
Thank you.
And then I guess I'd like to just kind of back up here and hopefully ask a little bit about just the health of the mainstream business and how you see that playing out.
A pricing supply demand seasonality just focused on the mainstream if he could.
Yeah.
Yes com. Thank you.
I'm not sure it sector.
Right.
He doesn't know, especially in China, and Taiwan market and Intel.
In terms of pricing and that he has to have some newcomers into the market in a mainstream.
Unknown Executive: To withdraw your question, please press star 11 again. Again, if you'd like to ask a question, please press star 11. Please stand by for our first question. Another question coming from the lineup: Tom Diffely with DA Davidson, your line is open.
However, we don't see a magistrate business impact I, there's a neo compensation are in areas outside of China.
China and Taiwan so.
That impact our mainstream pricing and so on.
Ratio is.
In the greater China area. However, our men B. The news has been migrating them to 40 22 28 nanometer. So I have that portion all mainstream businesses in our Asia operation Ah Ah Ah.
Thomas Robert Diffely: Yeah, good morning. Thank you for taking my question. First of all, John, it's been a pleasure working with you and I wish you well in your retirement. And then, you know, I guess I'd like to just kind of back up here and hopefully ask a little bit about just the health of the mainstream business and how you see that playing out in terms of pricing, supply, demand, seasonality, just focused on the mainstream, if you could. Yes, Tom, thank you.
Not in a pick up a portion so the increase in product mix has offset.
Mastering price pressure in terms of Oh boy branded S. P.
Okay. So when you look at the last few years, you had the nice ramp up in.
First this demand and then because there were supply constraints in industry you had nice pricing.
Unknown Executive: You know, the manufacturing sector, the seasonal low, especially in the China and Taiwan market, and, in terms of pricing, there are still some newcomers into the market in the mainstream. However, we don't see the mainstream business impact of this new composition in areas outside of China and Taiwan. So the impact of mainstream pricing; there is some pressure in the Great China area. However, our main business has been migrating to 40 and 20 to 28 nanometers. So the portion of mainstream business in our Asia operation is not in a bigger portion. So the increase in product mean has offset the measuring pressure in terms of over-operated ASP.
Nice margins and then it seemed like the March got a little saturated.
At this point do you feel like the the pricing or the margins from the mainstream isn't a kind of a stable area, where if you look at over the next few quarters. It feels pretty stable for you or are we going back to the kind of the history and mainstream when we have kind of a seasonal or a yearly decline in pricing.
Actually the price here and I'll mention a went up and Tucson in 'twenty, one 'twenty two so even we adjust our price that they love it.
Now however, they are still much higher than they had before but.
At this moment the pricing I'll mention has been stabilized and we are not.
Unknown Executive: Okay, so when you look at the last few years, you know, you had a nice ramp-up in, you know, versus demand. And then, because there were supply constraints in the industry, you had nice pricing, nice margins. And then it seemed like the market got a little saturated.
<unk> tried to adjust for that price because of that that market.
In the high end of the mention.
Mention, especially in 14 nanometer area are growing so that consumed a lot of capacity and and we have no need to.
Unknown Executive: At this point, they feel like the pricing of the margins from the mainstream is in a kind of a stable area where, you know, if you look at it over the next few quarters, it feels pretty stable for you. Or are we going back to kind of the history in mainstream where we have a kind of a seasonal or yearly decline in pricing? Actually, the price of menstruation went up in 2021 and 2022. So even if we adjust the price a little bit right now, it is still much higher than before. But at this moment, the price of menstruation has been stabilized, and we are not trying, mentioned, especially in the 40 nanometer area growing.
Just all at a price in a bedroom so going forward, we won't keep all of the mainstream a pricing stable are of course, a premium charge at this moment disappear.
As I mentioned.
We are focusing on the branded SP, which are basically dependent.
Product mix.
Okay, no that sounds good that's encouraging.
Moving over to the flat panel business, you talked about some OLED strength and how that helped your advance I'm curious what are you seeing in the Gen 10, five range is that still fairly lights are fairly soft for you.
Unknown Executive: So that consumes a lot of our capacity, and we have no need to further adjust our price in the mainstream. Going forward, we will keep our mainstream. Pricing stable. Of course, the premium charge at this moment disappears. However, as I mentioned, we are focusing on the branded ASP, which basically depends on the product. Okay, that sounds good.
Yes.
You've got very light.
Most of the customers are full because he and mrna product and are.
The total of Pip, Oh, Gee 10.5 remain very very low so actually in Penn solid profit margin and Ah Ah Ah.
And.
Overall, Oh pedestrian I'll put it it's more of a beneficiary like you we all focus in on.
Unknown Executive: It's encouraging. Moving over to the flat panel business, you talked about some OLED strength and how that helped your advance. I'm curious, what are you seeing in the Gen 10.5 range? Is that still fairly light or fairly soft for you?
MRI product instead of G 10, five.
Okay, Great and then I'm not sure if Chris progress on the line, but I did have a question.
You know as you start to look at mini and micro Leds for flat panel displays how that impacts the photo mass market.
Christopher J. Progler: It's still very light. Most customers are focusing on MLA products, and the total capital of G10.5 remains very, very low. So actually, in terms of profit margin and overall production output, it is more beneficial if we are focusing on the MLA product instead of G10.4. Okay, great. And I'm not sure if Chris Progler is on the line, but I had a question about how, you know, as you start to look at mini and micro LEDs for flat panel displays, how that impacts the photomass market. Let's see, so the mini-LEDs, that's just a more sophisticated backlight; there's not a big impact on those in the photomass market, except for the switching layer, the transistor layer; those mini-LEDs let you take advantage of more advanced TFTs or transistor levels, so it's driving, I think, a more sophisticated and advanced photomask.
Let's see so the mini Leds, that's just a more sophisticated back like there's not a big impact on those in the photo mass market, except for the switching layer of the transistor lay those mini Leds, let you take advantage of more advanced.
Cft's transistor level. So it is driving I think a more sophisticated and advance switching later, thanks to mini Leds, although the formation of the mini Leds is not really photo mask intensive for micro Leds you know it started off to be a relatively simple technology to integrate that as relatively few.
Returning steps are what we're seeing in most of those products are in prototype for early production phase actually fairly a den set of photo mask and patterning requirements to build those micro Leds are proving to be a little harder to control.
Than initially anticipated. So you know I think it's a it's a good trend positive trend on the microwave decisive photo mask, especially if it drives more applications for displays not a game changer by any means or a tremendous driver, but I think it's a it should be viewed as a positive trend for the display basketmaking.
Christopher J. Progler: For micro-LEDs, you know, which started off as a relatively simple technology to integrate, that is, relatively few patterning steps, what we're seeing in most of those products are in the prototype or early production phase, actually a fairly dense set of photomask and patterning requirements to build those micro-LEDs. They're proving to be a little harder to control than initially anticipated, so, you know, I think it's a good trend, a positive trend on the micro-LED side for photomask, especially if it drives more applications for displays. Not a game-changer by any means or a tremendous driver, but I think it should be viewed as a positive trend for display mask-making.
Alright, Thanks, Chris and thank you since I have you on the line.
Any update on activity, that's going on with you and E V. I know you've been part of some consortiums, but curious if.
Theres any yeah, what we call regular business in that space at all for you.
Yeah, I think it's you know in 'twenty, three 'twenty, four or <unk> customer base expanded modestly there are a couple of more companies. We work with that are starting to dip their toes in the water uneasy using a pilot and masks and things like that so we see the customer base.
Expanding a we're doing a few.
Demonstrations on running flows with easy masks versus optical masks for one memory customer either compare with the yields might be under easy. So I think the customer base is starting to expand a bit are the strongest part of that business for us has been our primary customer was it OEM.
Christopher J. Progler: All right, thanks, Chris. And since I have you on the line, any update on the activity that's going on with you and EUV? I know you've been part of some consortiums, but I'm curious if there's any, you know, what we call regular business in that space at all for you. Yeah, I think, you know, in 23 and 24, our EUV customer base expanded modestly. There are a couple more companies we work with that are starting to dip their toes in the water with EUV using pilot masks and things like that. So we see the customer base expanding. We're doing a few demonstrations on running flows with EUV masks versus optical masks for one memory customer to compare what the yields might be under EUV.
That business has been very strong consistent with what they are.
The OEM products and the take up in the industry.
And then as far as the advance nodes, we did strike up one new relationships.
Which is we're not at Liberty to talk about on this call, but it's.
It has so far been a fruitful interaction and maybe you'll have a little more to say about it over the next few calls.
Great I appreciate it Chris and then last question for John When you look at the capital spending of $140 million. This year, how much of that is.
I guess sponsored R&D of contracts to guarantee a certain level of production, if we're going to spend that level of money.
Christopher J. Progler: So I think the customer base is starting to expand a bit. The strongest part of that business for us has been our primary customer, who's an OEM. That business has been very strong, consistent with their OEM products and their take up in the industry.
Yeah, so as we've discussed.
Over the last several years, Tom for every major capital investment we get.
John P. Jordan: And then, as far as the advanced nodes are concerned, we did strike up one new relationship on EUV, which at least we're now at liberty to talk about on this call. But it's so far been a fruitful interaction, and maybe we'll have a little more to say about that over the next few calls. Great, I appreciate it, Chris. And then last question for John, when you look at the capital spending of $140 million this year, how much of that is, I guess, sponsored, or do you have contracts to kind of guarantee a certain level of production if you're going to spend that level of money? And so, as we've discussed, over the last several years, Tom, for every major capital investment we get, we have, first of all, an investment analysis that supports at least our threshold IRR, and we drill down on the revenue line in those analyses to make sure that the revenues aren't just numbers on an Excel spreadsheet. They're supported by either customer commitments or pretty good assurances that that business is going to be there, requests from customers for us to increase capacity, and, you know, not promises but assurances of future orders to support the investments.
We have first of all we have an investment analysis that supports at least our threshold IRR.
And we drill down on the revenue line and those analyses to make sure that the revenues are just not our numbers on an excel spreadsheet, they're supported by cut either customer commitments or a pretty good assurances that that business is going to be there the requests from customers for us.
To increase capacity and there.
Not promises, but assurances of future orders to support the investments and of course as you've seen Oh I see from our two.
2017 at about 1%.
This increase to 13% to 14%.
Over the last several years so.
That strategy of supporting the investments and making sure that we've got the the revenues to support them.
But effective and the total turnaround and Oh I see.
Yeah.
Great well. Thank all three of you for your time today and John once again congratulations.
Thanks, Tom Thanks for the questions.
Yeah.
Okay.
Yeah.
Thank you and there are no further questions in the queue. At this time I will now turn the call over to Frank Lee for any closing comments.
Thank you for joining us this morning.
<unk> entered into our second quarter from a strong position with demand across all our markets and I saw the financial position to support our approach to investments.
We have great market position with Cindy.
Sure and technology.
We expect to grow to continue to grow your market share and improving profit margins.
Thomas Robert Diffely: And, of course, as you've seen, our ROIC from 2017 at about 1.5% has increased to 13% to 14% over the last several years. So that strategy of supporting the investments and making sure that we've got the revenues to support them has been effective in the total turnaround in our ROIC. Great. Well, thank all three of you for your time today. And John, once again, congratulations. Thanks, Tom. Thanks again for the call and for the questions. (Inaudible) Thank you. And there are no further questions in the queue at this time. I will now turn the call over to Franklin for any closing comments. Thank you for joining us this morning. We are entering the second quarter from a strong position, with demand growing across our markets and a solid financial position to support our growth investment. We have a great market position with leading share and technology. We expect to grow to continue growing market share and improving the pro-profit market. I'm proud of our team's performance and confident we are on the way to another new record year in 2024.
I'm proud of all volunteers performance and comfort that we are on the way to another.
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Ladies and gentlemen that concludes the conference call for today, we thank you for your participation and Anthony. Please disconnect. Your line at this time.
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KangJyh Lee: Thank you. Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line at this time. John Diffely, Unknown Executive, Linda Umwali, KangJyh Lee, Photronics Inc., [inaudible]
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