Q2 2025 Photronics Inc Earnings Call

Okay.

Operator: Good day, and thank you for standing by.

Good day, and thank you for standing by.

Operator: Welcome to the Photronics second quarter physical 2025 earnings conference call. At this time, all participants are in a listen only mode. 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 automated message advising your hand is frayed. To withdraw your question, please press star 1 1 again.

I think to the Photronics second quarter fiscal 2025 earnings conference call. At this time all participants are in a listen only mode. 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 one one of your telephone.

You will then hear lot admitted message passing your handle traced to withdraw your question. Please press star one again.

Operator: Please be advised that today's conference is being recorded.

Please be advised that today's conference is being recorded.

Ted Moreau: I would now like to hand the conference over to your speaker today, Ted Moreau, Vice President of Investor Relations. Please go ahead. Thank you, Operator. Good morning, everyone.

I would now like to hand, the conference over to your Speaker today, Ted Moreau Vice President of Investor Relations. Please go ahead.

Thank you operator, good morning, everyone welcome to our review of Photronics fiscal second quarter 2025 financial results. Joining me. This morning are frankly, CEO, George macro cost Us Chairman, Eric Rivera, CFO and Chris progress CTO.

Ted Moreau: Welcome to our review of Photronics' fiscal second quarter 2025 financial results. Joining me this morning are Frank Lee, CEO, George Megacostas, Chairman, Eric Rivera, CFO, and Chris Progler, CTO. The press release we issued earlier this morning, together with the presentation material that accompanies our remarks, are available on 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 subject to various risks and uncertainties and other factors that are difficult to predict.

This release, we issued earlier this morning together with the presentation material that accompanies our remarks are available on 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 subject to various risks and uncertainties and other factors that are difficult to predict although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance or achievements.

Ted Moreau: Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievement. We are under no duty to update any of the forelooking statements after the date of the presentation to conform these statements to actual results. Photronics has provided additional information in its most recent Form 10-K and other subsequent reports filed with the SEC concerning factors that could cause actual results to differ materially.

We are under no duty to update any of the forward looking statements. After the date of the presentation to conform. These statements to actual results Photronics has provided additional information in its most recent Form 10-K and other subsequent reports filed with the SEC concerning factors that could cause actual results to differ materially.

Ted Moreau: During the course of our discussion, we will refer to certain non-GAAP financial measures. These numbers may be useful for analysts, investors, and management to evaluate ongoing performance. A reconciliation of these metrics to gap financial results is provided in our presentation materials.

During the course of our discussion we will refer to certain non-GAAP financial measures.

These numbers may be useful for analysts investors and management to evaluate ongoing performance.

A reconciliation of these metrics to GAAP financial results is provided in our presentation materials.

Ted Moreau: During the third quarter, we will be participating in the T.D. Cowan TMT Conference, the D.A. Davidson Consumer and Technology Conference, the Three-Part Advisors East Coast Conference, and the Singular Research Investor Conference.

During the third quarter, we will be participating in the TD Cowen TMT conference.

Davidson consumer and Technology conference. The three part Advisors East Coast Conference in a singular research Investor Conference I will now turn the call over to Frank.

Frank Lee: I will now turn the call over to Frank. Thank you, Ted, and good morning, everyone. We achieved second quarter sales of $211 million, which was in the middle of our guidance range. Long gap W EPS was 40 cents. We took the advantage of financial market opportunity during the quarter by spending $72 million to repurchase 3.6 million shares. which should give to our greater earnings leverage in the future. In our ICM market, chip designs are migrating to higher-end nodes. These nodes require more photomask per design. which generate higher ASPs per mass set. In the United States, our 2025 capacity expansion plan targets this no-migration opportunity.

Frank: Thank you Ted and good morning, everyone.

Frank: We achieved second quarter sales of $211 million, which was in the middle of our guidance range.

Frank: non-GAAP diluted EPS was <unk> 40 cents.

Frank: We took advantage of financial market opportunity during the quarter by spending $72 million to repurchase 3.6 million shares.

Frank: Which should give.

Frank: Greater earnings leverage in the future.

Frank: In our ICEE and market chip designs migrating to higher end nodes.

Frank: These notes.

Frank: Require more photo mask per design.

Frank: Which generate higher asp's per mass effect.

Frank: In the United States, our 'twenty to 'twenty five capacity expansion plan.

Frank: Is this no migration opportunity.

Frank Lee: In Asia, we are also in a strong position to benefit from a market transition towards higher end nodes. as reflected in our Q2 results. We believe some of the positive no transition trends come from IC serving a growing AI ecosystem. In the LPD market, we are the technology leading mass suppliers to the industry. including to companies that have their own captive mass operations. Condition improved during the quarter due to the seasonal timing of major smartphone and laptop design release. For the first time, these consumer products were produced in larger G8.6 panel size. using AMOLED display technology.

Frank: In Asia.

Frank: We are also in a strong position to benefit from a market transition towards higher end nodes.

Frank: As reflected in our Q2 results.

Frank: We believe some of the positive no transition trends.

Frank: From IC Soviet outgrow in AI ecosystem.

Frank: In a P. D market, we are a technology leader in mass surprise to the industry.

Frank: In quote into companies that have their own captive mass operations.

Frank: Conditions improved during the quarter due.

Frank: Due to a theater in a time in a major smartphone and desktop design release.

Frank: For the first time.

Frank: This consumer products.

Frank: Produce in larger G 8.6 panel size.

Frank: Using MRI this great technology.

Frank Lee: We are optimistic that with more emerging G8.6 related products and R&D activities, our advanced photomask technology will help us get market share in the coming G8.6 MRI era. With the current market dynamics, our geographic footprint is a strategic asset that differentiates photonics position. To support our global customers, we operate 11 cleanroom production facilities, including six in Asia, three in the U.S., and two in Europe. Our manufacturing facilities located close to our customers enables our rapid response advantage and facilitates collaboration with customers. Our global footprint allows Photronics to capitalize on new business opportunities. as the semiconductor industry diversifies its manufacturing footprint.

Frank: We are optimistic that with more emergent <unk> related products and our R&D activities.

Frank: Our advanced photo mask technology will help us gain market share in the coming <unk> MRA era.

Frank: We used to the current market dynamics.

Frank: Graphic footprint is a strategic assets.

Frank: That differentiates photronics position.

Frank: To support our global customers, we operate 11 clean room production facilities, including six in Asia three in the U S and to Europe.

Frank: Our manufacturing facilities located close to our customers.

Frank: In <unk>, our rapid response advantage.

Frank: Facilitate core core reparation with customer.

Frank: Our global footprint allows for Chinese to capitalize on new business opportunities et.

Frank: As for the semiconductor industry Diversifies its manufacturing footprint.

Frank Lee: For example, our strategic capacity and capability expansion in the U.S. coincides with the reshuffling of semiconductor production to the U.S. Our program is progressing as planned. to support this U.S. customer fact and design roadmaps and expansion. U.S. tariff dynamics during the quarter increase global macroeconomic uncertainty. While tariff negotiations remain ongoing, we can leverage our diverse geographic footprint as a strategic asset and a competitive advantage. Our ability to allocate production across our geographic locations. allow us to ship the majority of masks within regions or countries. mitigating potential tariff costs for our customers.

Frank: For example.

Frank: Our strategic capacity and capability, especially in the U S coins.

Frank: Coincides with the re shoring of semiconductor production to the U S.

Frank: Our program is progressing as planned.

Frank: To support this U S customer fab and designed or maps and expansions.

Frank: U S tariff dynamics during the quarter increased global macro economic uncertainty.

Frank: Why a tariff negotiations remain ongoing.

Frank: We can leverage our diverse graphic geographic.

Frank: Geographic footprint as such strategic asset and a competitive advantage.

Frank: Our ability to arrowhead production across our geographic locations.

Frank: Now as to ship, the majority or masked within regions or countries.

Frank: Mitigating potential tariff costs for our customers.

Frank Lee: This morning, as part of a carefully considered succession plan, I have decided to retire from the CEO position after three years. I have truly enjoyed my time and I am proud of the work we have done to move us forward. I will continue to manage the Photronics Asia operations until my retirement.

Frank: This morning.

Frank: As part of our carefully consider succession plan I have decided to retire from the CEO position after three years.

Frank: I have truly enjoyed my time and.

Frank: I am proud of the work we have done to move us forward.

Frank: I will continue to manage the Photronics Asia operations until my retirement.

George Makrokastas: I will now introduce you George Makrokastas, our chairman and newly appointed CEO. Thank you Frank. On behalf of the board and the entire company, I wish to thank you for your 20 years of dedication to Photronics, including the last three years as CEO. You have played a significant role in our success, particularly in our Asia expansion. and I look forward to continuing to work with you at Photronics and on the board.

Speaker Change: I will now introduce you judge macro cost us, our chairman and newly appointed CEO.

Speaker Change: Thank you Frank on behalf of the board and the entire company.

I wish to thank you for your 20 years of dedication to photronics, including the last three years as CEO you have played a significant role in our success, particularly in our Asia expansion.

Speaker Change: And I look forward to continuing to work with you at Photronics and on the board.

George Makrokastas: By way of introduction, I started my career at Photronics at an entry-level role and worked my way up to a senior leadership position, giving me a thorough understanding of the business and underlying technology. In 2000, I founded Raging Wire Data Centers, which became a highly respected data center provider, leading to its ultimate sale to NTT in 2018. I've been a member of Photronics Board of Directors for approximately 20 years and earlier this year was named Executive Chairman. I look forward to driving Photronics towards the next leg of profitable growth. as I focus intensely on operational execution.

Speaker Change: By way of introduction I started my career at Photronics at an entry level role.

Frank: And work my way up to a senior leadership position, giving me a thorough understanding of the business and underlying technology.

Speaker Change: In 2000, I found a ragingwire data centers.

Frank: Which became a highly respected datacenter provider leading to its ultimate sale to NTT in 2018.

Frank: I've been a member of Photronics Board of directors for approximately 20 years and earlier this year. It was named executive Chairman.

Frank: I look forward to driving photronics towards the next leg of profitable growth.

Frank: As I focus intensely on operational execution.

Eric Rivera: I will now turn the call over to Eric to review our second quarter results and provide third quarter guidance. Thank you, George. Good morning, everyone. As Frank stated, our second quarter revenue was in line with expectations at $211 million, which was essentially flat sequentially and down 3% year over year. I see revenue of $156 million decline 3% year over year. We noted a continuation of favorable design node migration trends in the quarter, which should continue in the future. High-end revenue increased 2% year-over-year, representing 38% of our IC revenue. We saw healthy foundry demand for both 22 and 28 nanometer Photomass Products in Asia.

Frank: I will now turn the call over to Eric to review, our second quarter results and provide third quarter guidance.

Eric: Thank you George good morning, everyone.

Eric: As <unk> stated our second quarter revenue was in line with expectations at $211 million, which was essentially flat sequentially and down 3% year over year.

Frank: IC revenue of $156 million declined 3% year over year.

Frank: We noted a continuation of favorable design node migration trends in the quarter, which should continue in the future.

Frank: High end revenue increased 2% year over year, representing 38% of our IC revenue.

Frank: We saw healthy foundry demand for both 22 and 28 nanometer.

Frank: Photo mask products in Asia.

Eric Rivera: Our mainstream IC revenue declined 6% year-over-year with the largest decline in photo masks serving the oldest generation design notes indicating continued weakness in this segment. This reduction was partially offset by design node migration to smaller IC geometries within mainstream, which require higher value photomastery. By application, revenue from memory applications declined sequentially due to the timing of projects. On the logic side, photomass sets serving mobile communications such as Wi-Fi, Bluetooth and Baseband IC were strong along with OLED driver ICs. Lower end design nodes serving power electronics, automotive and industrial applications remain in a weaker recovery state.

Frank: Our mainstream IC revenue declined 6% year over year with the largest decline in photo mask, serving the oldest generation design nodes, indicating continued weakness in this segment.

Frank: This reduction was partially offset by design node migration to smaller IC geometries within mainstream which require higher value formats.

Frank: By application revenue from memory applications declined sequentially due to the timing of projects.

Frank: On the logic side photo mass sets, serving mobile communications, such as Wi Fi Bluetooth and baseband IC was strong along with OLED driver Ics.

Frank: Lower end design nodes, serving power electronics automotive and industrial applications remain in a weaker recovery state.

Eric Rivera: Turning to FPD. Revenue of $55 million declined 2% year over year. FPD revenue experienced a low early in the quarter before the anticipated seasonal demand uplift. Higher mobile applications and continued adoption of advanced math technologies supporting innovative new designs were areas of strength. Geographically, revenue was led by our IC joint ventures in China and Taiwan, where business remained healthy as customers rely on Photronics' scale and product mix to support expansion of their product offerings. Revenue from the U.S. declined sequentially due to lower end design node weakness and the timing of customer advanced node projects. We reported gross margin of 37% in line with our quarterly average over the past 3 years and well above historical levels as elevated operational controls drove greater than expected leverage across our infrastructure.

Frank: Turning to SPD <unk>.

Frank: Revenue of $55 million declined 2% year over year.

Frank: Our PD revenue experienced a low early in the quarter before the anticipated seasonal demand uplift.

Frank: Higher mobile applications and continued adoption of advanced mass technologies supporting innovative new designs where areas of strength.

Frank: Geographically revenue was led by our IC joint ventures in China, and Taiwan, where business remained healthy as customers rely on photronics scale and product mix to support expansion of their product offerings.

Frank: Revenue from the U S declined sequentially due to lower end design node weakness and the timing of customer advanced node projects.

Frank: We reported gross margin of 37% in line with our quarterly average over the past three years and well above historical levels as elevated operational controls drove greater than expected leverage across our infrastructure.

Eric Rivera: We recently performed an analysis of the impact of tariffs on our supply chain and based on current expectations, we have determined that these costs will have a negligible impact to our financial results. Operating margin of 26% in Q2 was above our guidance range and improved 180 bps. Diluted Gap EPS attributable to Photronics shareholders was $0.15 per share After removing the impact of foreign exchange, fully diluted non-GAAP EPS, attributable to Photronics shareholders, was $0.40 a share. Our overall profitability reflects a greater contribution from our joint ventures in China and Taiwan. During the second quarter, we generated $31 million in operating cash flow, which represented 15% of total revenue.

Frank: We recently performed an analysis of the impact of tariffs on our supply chain and based on current expectations. We have determined that these costs will have a negligible impact to our financial results.

Frank: Operating margin of 26% in Q2 was above our guidance range and improved 180 basis points sequentially.

Frank: Diluted GAAP EPS attributable to photronics shareholders was <unk> 15 per share.

Frank: After removing the impact of foreign exchange fully diluted non-GAAP EPS attributable to photronics shareholders was 40 cents a share.

Frank: Our overall profitability reflects a greater contribution from our joint ventures in China and Taiwan.

Frank: During the second quarter, we generated 31 million in operating cash flow, which represented 15% of total revenue.

Eric Rivera: CapEx was $61 million in the quarter, which included our planned expansion in the U.S. We remain on track to spend $200 million in CapEx in fiscal 2025 on a combination of capacity, capability, and end-of-life tool initiatives. Based on current investment plans, we estimate that our CapEx in Fiscal 2026 will normalize from elevated Fiscal 2025 levels. Total cash and short-term investments at the end of the quarter was $558 million.

Frank: Capex was 61 million in the quarter, which included our planned expansion in the U S.

Frank: We remain on track to spend $200 million in Capex in fiscal 2025 on a combination of capacity capability and end of life two initiatives.

Frank: Based on current investment plans, we estimate that our capex in fiscal 2026 will normalize from elevated fiscal 2025 levels.

Frank: Total cash and short term investments at the end of the quarter was $558 million.

Eric Rivera: We have three elements to our capital allocation strategy, including organic growth, strategic investments or returning cash to shareholders. During the quarter, we spent $72 million to opportunistically repurchase 3.6 million shares and now have $23 million remaining under our existing repurchase authorization. This is a significant endorsement of our confidence in the long-term health of photonics and we will remain strategic with respect to future share repurchase.

Frank: We have three elements to our capital allocation strategy include.

Frank: Including organic growth strategic investments or returning cash to shareholders.

Frank: During the quarter, we spent $72 million to Opportunistically repurchased three 6 million shares and now have $23 million remaining under our existing repurchase authorization.

Frank: This significant endorsement of our confidence in the long term health of Photronics, and we will remain strategic with respect to future share repurchases.

Eric Rivera: Before providing guidance, I remind you that demand for our products is inherently uneven and difficult to predict, with limited visibility and typical backlog of 1 to 3 weeks. In addition, ASPs for high-end assets are high, meaning a relatively low number of high-end orders can have a significant impact on our quarterly revenue and earnings. Additionally, and as we have highlighted previously, our business is influenced by IC and display design activity, and to a lesser degree, by wafer and panel capacity dynamics. Given market conditions and tariff uncertainty, we remain cautious about the near-term demand environment. We expect third quarter revenue to be in the range of $200 million and $208 million.

Frank: Before providing guidance I remind you that demand for our products is inherently uneven and difficult to predict with limited visibility in typical backlog of one to three weeks.

Frank: Addition, asps for high end mass sets or high meaning a relatively low number of high end orders can have a significant impact on our quarterly revenue and earnings.

Frank: Additionally, and as we have highlighted previously our business is influenced by IC and display design activity and to a lesser degree by wafer and panel capacity dynamics.

Frank: Given market conditions and tariff uncertainty, we remain cautious about the near term demand environment.

Frank: We expect third quarter revenue to be in the range of 200 and $208 million.

Eric Rivera: Based on those revenue expectations in our current operating model, we estimate non-GAAP earnings per share for the third quarter to be in the range of $0.35 to $0.41 per diluted share. This equates to an operating margin between 20 and 22%.

Frank: Based on those revenue expectations in our current operating model, we estimate non-GAAP earnings per share for the third quarter to be in the range of 35 to 41 cents per diluted share.

Frank: This equates to an operating margin between 2022%.

Operator: I'll now turn the call over to the operator for your questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Frank: I'll now turn the call over to the operator for your questions.

Frank: Thank you.

Frank: As a reminder to ask a question. Please press star one one of your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Frank: Please standby, what we compile the Q&A roster.

Frank: Okay.

Tom Diffely: Our first question comes from the line of Tom Diffely with D.A. Davidson and Company. Your line is now open. Yes, good morning. Thank you for taking my questions. So first, maybe a little more color on the mainstream business. You said there's continued softness there.

Speaker Change: Our first question comes from the line of Tom <unk> with da Davidson <unk> Company. Your line is now open.

Speaker Change: Yes, good morning, and thank you for taking my questions. So.

Speaker Change: So first maybe somewhat of a little more color on the mainstream business. You said, there's continued softness there I'm curious what you're seeing in kind of the overall supply demand of mainstream mask, making capacity today and how that has impacted the margins.

Frank Lee: I'm curious what you're seeing in kind of the overall supply demand of mainstream mass making capacity today and how that has impacted the margins, and maybe perhaps how that influences your capital spending plan this year. Thank you Tom. The mainstream market, as we highlighted in the previous course, remains Dear Remains Week many because a lot of our age fab customers have a very low wafer fab utilization. And, uh, I think, uh, this trend, uh, something related to the industry, especially I think. I will still put up more focus. We are our capacity and capability. I am of.

Frank: And maybe perhaps how that influences your cash.

Frank: Spending plan this year.

Frank: Okay.

Frank: Thank you Tom.

Frank: Mainstream market.

Frank: As we highlight in.

Frank: On previous calls.

Frank: It remains.

Frank: Still remains weak.

Frank: Mandy because.

Frank: Our age.

Frank: Fab customers.

Frank: Steve.

Frank: Have a very low wafer fab utilization.

Frank: And.

Frank: I think.

Frank: This trend.

Frank: <unk>.

Tom: As Tom said related to the industry, especially in the.

Frank: Power in Austria and.

Tom: Consumer Pos.

Frank: Business so.

Frank: I think.

Frank:

Frank: And while we.

Frank: We're still putting out more focus towards.

Frank: Our capacity and capability.

Frank: Capability.

Frank: Hi, Ed and also.

Frank: I am of the mainstream.

Frank: Chris you want to add some comments.

Eric Rivera: Yeah, thanks, Frank. I can say, you know, Tom, we've talked quite a bit about end-of-life tools impacting kind of organic supply of matter. We definitely saw that, but that cycle is starting to move forward and many companies are replacing those end-of-life tools with new equipment. There has been, because of that, a fair amount of capacity also added to the network globally. I don't think it's an oversupply situation, but the muted demand Frank talked about and lower utilizations and wafer fabs combined with some capacity. driven by end-of-life tool turnover.

Chris: Thanks, Brian I can say you know Tom we've talked quite a bit about end of life tools impacting kind of organic supply of masks to the mainstream we definitely saw that but that cycle is starting to move forward and many companies are replacing those end of life tools with new equipment.

Chris: There has been because of that a fair amount of capacity also added to the network globally for mainstream masks I don't think its an over supply situation, but the muted demand Frank talked about and lower utilizations in wafer fabs combined with some capacity increases that were driven by end of life tool turnovers.

Unknown Executive: Unknown Executive, KangJyh Lee, Eric Rivera, Photronics Inc So Chris, are you seeing more of the weakness in Asia right now? And does that have anything to do with some of these kind of startup photomass companies there? And then maybe to follow up on that, in the US, you're still seeing a migration, it sounds like, of the mainstream to higher end mainstream. And I guess that is the driver of your increased capital spending this year? Yes, on the first question, not necessarily confined to Asia, the and Mainstream on the wafer side. It's pretty broad-based. Europe may be the strongest example of it.

Chris: <unk> has made us somewhat a little bit on favorable supply demand balance, but it's not a long we don't think that's a long term issue. It's just a point in the evolution of the mainstream mask supply.

Chris: So Chris are you seeing.

Speaker Change: More of the weakness in Asia, right now and does that have anything to do with some of these kind of startup photo mask companies. There and then maybe to follow up on that in the U S. Youre still seen a migration it sounds like it was a mainstream to higher end mainstream.

Frank: That is the driver of your increased capital spending this year.

Frank: Yes, so on the first question not necessarily confined to Asia.

Frank: And main stream on the wafer side, it's pretty broad based Europe, maybe the strongest example of it because there.

Unknown Executive: wafer supplies very much hinge to automotive Industrial microcontrollers and things like that. So so that's pretty weak It's not necessarily confined to Asia or. New Up Starts in China, it's pretty broad based. If you look at the projections for fab utilization and supply for the customers. Strong Recoveries and Not Really Projected. later in 2026, so there's a fair amount. Supply sloshing around As far as our projects in the U.S., so that's correct. Marginal amount of capacity, but also node migration. to the higher end of the mainstream applications was one of our strategic goals. I do think that's a growing part.

Frank: Wafer supply is very much hinged to automotive and industrial microcontrollers and things like that so so thats pretty weak for mainstream in general.

Frank: So it's not necessarily confined to Asia or new upstart in China, It's pretty broad based all the weakness in mainstream and if you look at the <unk>.

Frank: Projections for fab utilization and supply for the customers.

Frank: Strong recoveries are not really projected pill.

Frank: Later in 2026, so there is a fair amount of.

Frank: Supply sloshing around still for mainstream applications in the industry.

Frank: As far as our projects in the U S.

Frank: That's correct we had.

Frank: A marginal amount of capacity, but also node migration to let's say the higher end of the mainstream applications was one of our strategic goals for those investments and we do think thats.

Frank: Growing part of the market in the U S. So that's what we're targeting there.

Frank: Yeah.

Tom Diffely: Great, thanks. And then just looking at the earnings on a year-over-year basis is the largest impact year-over-year on roughly the same amount of revenue. Just the margins of the pricing in the mainstream world or would you say there's other factors?

Frank: Great. Thanks, and then just looking at the earnings.

Frank: On a year over year basis is the largest.

Frank: The impact year over year on roughly the same amount of revenue.

Frank: The margins of the our pricing in the mainstream world or would you say, there's other factors in there as well.

Frank: Correct.

Frank: Sure.

Eric Rivera: Hi Tom, this is Eric here. So with respect to pricing, I mean, we're trying Discussed previously, we are focusing on product. There is a bit of pressure on.

Frank: Hi, Tom This is Erik here.

Frank: With respect to pricing.

Frank: We're trying to as we discussed previously we are focusing on product mix. There is a bit of pressure on pricing overall, but we are mirroring that with product mix. So we're trying to focus on the higher end of mainstream.

Frank: Node migration as Chris just mentioned a few seconds ago.

Tom Diffely: Okay, um, and then Joe George, looking forward to work. Go ahead. I'm sorry. In addition to what Eric just commented, we do have several long-term agreements with many of our main... not only guarantee the order. also provide us Yeah, and Tom, maybe I can make one more comment on There's another there's a positive trend we're seeing also with some of the regionalization. Shipmakers found Page 1 Starting to look a little more seriously at it. Lower End Layers Regionalization of fabs is starting to open up some So that's kind of a positive side. Okay, great. And I appreciate all the extra color there.

Frank: Okay.

Frank: And then.

Frank: George looking forward to go.

Frank: Go ahead Im sorry.

Frank: In addition to what Eric just comment.

Frank: For Chinese we do have.

Frank: Several long term agreements with many of our main customers. So it is a long term agreement not only guarantee.

Frank: The order from the customer also.

Frank: A stable pricing.

Frank: Yeah, maybe I can make one more comment on the mainstream because we don't want it sounds like.

Frank: It's all there's another positive trend we are seeing also with some of the regionalization of the high end chip.

Frank: Chipmakers foundries and things like that we're.

Frank: Starting to look a little more seriously at outsourcing of the lower end layers of the advanced mask sets. So for example, this might be a five nanometer node and there's lots of mainstream escalators in that.

Frank: Regionalization of Fabs are starting to open up some opportunities in mainstream demand for those applications as well so.

Frank: So thats kind of a positive side.

Frank: Further demand.

Frank: Okay, Great and I appreciate all the extra color there.

Tom Diffely: And George, look forward to working with you. I worked with your dad for many, many years and always a good experience.

George: And then George look forward to working with you I worked with your dad for many many years and always it could experience.

George Makrokastas: Can you give us a hint as to what your first You know, focus will be on? Is it, you know, cost structure? Is it, you know, is it driving revenue? Is it saving costs? What, what in particular do you think you'll be focused on first? Probably all of the above with Frank. Frank has been leading the organization for the last three years and obviously has more than 20 years. So I'm looking forward to working with Frank to learn more about Asia, that's not an area that I... I know more about U.S. and Europe. So I'm going to be working with Frank going forward.

Speaker Change: Can you give us a hint as to what your first.

Speaker Change: And our focus will be on it.

Frank: Cost structure is it.

Frank: Driving revenue as it saving costs with what in particular do you think you'll be focused on first.

Frank: Probably all of the above with Frank.

Speaker Change: Frank has been leading the organization for the last three years, and obviously has more than 20 years with the company.

Speaker Change: Looking forward to working with Frank to learn more about Asia, that's not an area that.

Speaker Change: Have tremendous experience and I know more about U S and Europe and the business overall.

Speaker Change: So I'm going to be working with Frank going forward and how to do.

Speaker Change: More of an orderly type of a transition disciplined.

Speaker Change: Disciplined by disciplined so this is not a wholesale change it's more of an evolution.

Frank Lee: This is not a wholesale change, it's more of an evolution. I would say right now my focus has been more on Back of House Administrative Type Matters and Governance, etc., HR Legal, Finance, and you know. Transcription by https://otter.ai Cost Reduction Containment Growing Revenue by Growing Market. We know that the market is finite, so we can't necessarily create. Appreciate that. And Frank, it's been a pleasure working with you the last three years as CEO and, you know, decade plus as the head of Asia before that.

Speaker Change: So.

Speaker Change: I would say right now my focus has been more on the <unk>.

Speaker Change: Back of house administrative type matters, and governance et cetera, HR legal finance and <unk>.

Speaker Change: Weighing into more Franks.

Speaker Change: Responsibilities, but.

Speaker Change: Definitely we are cost conscious and want to drive market share. So I think it's both levers.

Speaker Change: Cost reduction containment slash.

Speaker Change: Growing revenue by growing market share because as we know the market is finite so.

Speaker Change: We can't necessarily create demand so we're going to have to go and.

Speaker Change: Gain market share.

Frank: I appreciate that and Frank it's been a pleasure working with you over the last three years as CEO and.

Frank: Plus.

Frank: Head of Asia before that.

Tom Diffely: Well, thank you, everybody. I appreciate your ability to answer my questions today and talk to you soon. Thank you.

Speaker Change: Well. Thank you everybody I appreciate your ability to answer my questions today.

Frank: Talk to you soon.

Tom: Thanks, Tom. Thank you. Thank you. Thank you Tom.

Nalina Ghoshishri: Our next question comes from Nalina Ghoshishri with Singular Research. Your line is now open. Good morning, guys. Can you hear me?

Speaker Change: Thank you. Our next question comes from the line of Joseph <unk> with singular research. Your line is now open.

Joseph: Good morning, guys can you hear me.

Speaker Change: Yes, we can.

George Makrokastas: George, congratulations on your new role. Could you share your kind of your priorities with regards to U.S. capacity expansion versus balancing your regionalization efforts with ongoing growth in Asia? Well, there's definitely going to be appears anyway, there'll be some opportunities here in the US. TSMC and others, and you know, reshoring and obviously the geopolitical issue. driving that thought process and, you know, creating action. by our customer base that we're going to have to react to. So I would say we're Evaluate the opportunities and deploy capital. may have mentioned.

Speaker Change: Okay.

Speaker Change: George Congratulations on your new role.

Speaker Change: Could you share your kind of your priorities.

Speaker Change: With regards to U S capacity expansion versus balancing your regionalization efforts do with ongoing growth in Asia.

Speaker Change: Well, there's definitely going to be appears any way there'll be some opportunities here in the U S.

Speaker Change: TSMC and others and re shoring and obviously the geopolitical issues are driving that thought process and the.

Speaker Change: Creating action.

Speaker Change: By our customer base that we're going to have to react to so I would say we're going to.

Speaker Change: You evaluate the opportunities and deploy capital as we see fit.

Speaker Change: I think we May have mentioned that we're expanding our U S capacity as it is.

Speaker Change: So we're going to continue to monitor that and invest appropriately. We also have of course end of life tools that we have to.

Speaker Change: No.

Speaker Change: Spend capex on but also on pure capability on the high end as well.

Speaker Change: Okay.

Nalina Ghoshishri: Given that your top line was just around the midpoint guidance and then you're forecasting a sequential decline, you talked a little bit about the efforts that you need to take to maybe address the weaker demand. Are these just customers delaying orders due to macroeconomic concerns and what is that what will it take to kind of lift it?

Speaker Change: Given that your topline was just around the midpoint guidance and.

Speaker Change: Forecasting a sequential decline.

Speaker Change: Talked a little bit about the efforts that you need to take to maybe address the weaker demand.

Speaker Change: Or are these just customers delaying orders due to macroeconomic concerns.

Speaker Change: Is that what would it take to kind of lifted.

Speaker Change: Sure.

Eric Rivera: Hello Goshi, this is Eric here. So I think you hit the nail on the head. We are seeing. So, you know, the current tariff... That is the reason for our caution.

Speaker Change: Hello grocery this is Eric So I think you hit the nail on the head. So we are seeing.

Speaker Change: Customers.

Speaker Change: Feeling the uncertainty thats reflected in the market right. So the current tariff environment is creating that uncertainty.

Speaker Change: So that is the reason for our cautious outlook for the rest of the year.

Eric Rivera: And just my last question before, given that you guys repurchase $72 million, even during kind of weaker earnings, how do you prioritize? Are you looking to authorize any expansion of the buyback program if conditions remain challenging? Well, we have $23 million remaining under our...

Speaker Change: Okay.

Speaker Change: And just my last question before.

Speaker Change: Given that you guys repurchased $72 million, even during kind of weaker earnings how do you prioritize looking to authorize any.

Speaker Change: Expansion of the buyback program.

Speaker Change: Conditions remain challenging.

Speaker Change: Well, we have $23 million remaining under our existing authorization and we'll continue to be opportunistic.

Speaker Change: With that.

Speaker Change: Remaining authorization that we have in it.

Speaker Change: In terms of looking forward to increasing that authorization.

Nalina Ghoshishri: © The Bulletproof Executive 2013 https://www.kangjyh.com https://www.kangjyh.com http://TheBusinessProfessor.com That's all I have. Thank you guys for taking my questions. Thank you.

Speaker Change: Share repurchases are part of our capital allocation.

Speaker Change: Allocation strategy and in doing so.

Speaker Change: We need to compare against other investment opportunities that could use a favorable.

Speaker Change: Return to photronics to ensure long term continued growth.

Speaker Change: All of those considered we keep our eyes open and then we will act appropriately.

Speaker Change: At appropriate time.

Speaker Change: So all I had thank you guys for taking my questions.

Louise: Thanks Louise.

Operator: And I'm currently showing no further questions at this time.

Speaker Change: And I'm currently showing no further questions at this time I would like to turn the call back over to Ted Moreau for closing remarks.

Ted Moreau: I'd like to turn the call back over to Ted Moreau for a closing remark. Thank you, Shannon. Thank you, everybody, for joining us today. We really appreciate your interest in Photronics, and we will be available throughout the quarter to speak with all investors.

Ted Moreau: Thank you Shannon and thank you everybody for joining US today, we really appreciate your interest in photronics, and we will be available throughout the quarter to speak with all investors.

Ted Moreau: Have a great day.

Speaker Change: Have a great day.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Operator: Thanks for watching!

Speaker Change: [music].