PHOTRONICS INC

Previous wording

Note: All the following tabular comparisons, unless otherwise indicated, are for the three months ended February 2, 2025 (Q1 FY25), October 31, 2024 (Q4 FY24) and January 28, 2024 (Q1 FY24). The tables in this item may not foot due to rounding.

Current wording

Note: All the following tabular comparisons, unless otherwise indicated, are for the three months ended May 4, 2025 (Q2 FY25), February 2, 2025 (Q1 FY25) and April 28, 2024 (Q2 FY24) and for the six months ended May 4, 2025 (YTD FY25) and April 28, 2024 (YTD FY24).

Previous wording

Quarterly Changes in Revenue by Product Type ($ in millions)

Current wording

Changes in Revenue by Product Type ($ in millions)

Previous wording

Quarterly Changes in Revenue by Geographic Origin ($ in millions)

Current wording

Changes in Revenue by Geographic Origin ($ in millions)

Previous wording

Revenue in Q1 FY25 of $212.1 million represented a decrease of 4.7 % compared with Q4 FY24 primarily due to seasonal softness, and a decrease of 1.9% from Q1 FY24, due to mainstream weakness in Asia and Europe.

Current wording

Revenue in Q2 FY25 of $211.0 million represented a decrease of 0.5% compared with Q1 FY25 primarily due to high-end weakness in IC and FPD revenue, and a decrease of 2.8% from Q2 FY24, due to mainstream weakness in IC revenue.

Previous wording

Gross margin decreased by 140 basis points in Q1 FY25 as compared to Q4 FY24, primarily as a result of the decrease in revenue of 4.7%, partially offset by a decrease in material costs of 2.5%, or 55 basis points as a percentage of revenue and a decrease in equipment and other costs of goods sold of 5.0%, or 9 basis points as a percentage of revenue.

Current wording

Gross margin increased by 132 basis points in Q2 FY25 as compared to Q1 FY25, primarily as a result of the decrease in labor and benefits costs of 9.3%, or 103 basis points as a percentage of revenue and a decrease in equipment and other costs of goods sold of 2.3%, or 51 basis points as a percentage of revenue.

Previous wording

Gross margin decreased by 100 basis points in Q1 FY25, from Q1 FY24, primarily as a result of the decrease in revenue of 1.9%, partially offset by a decrease in material costs of 2.7%, or 16 basis points as a percentage of revenue and a decrease in Labor and Benefits of 2.8%, or 10 basis points as a percentage of revenue.

Current wording

Gross margin increased by 40 basis points in Q2 FY25, from Q2 FY24, primarily as a result of the decrease in labor and benefits of 10.8%, or 95 basis points as a percentage of revenue and a decrease in material costs of 1.0%, or 44 basis points as a percentage of revenue. These favorable changes were partially offset by the unfavorable impact caused by the decrease in revenue of 2.8% from Q2 FY24.

Previous wording

Selling, general and administrative expenses were $19.1 million in Q1 FY25, compared with $21.0 million in Q4 FY24, and $18.3 million in Q1 FY24. The $1.9 million decrease from Q4 FY24 was primarily the result of compensation and related expenses of $0.9 million and professional fees of $0.7 million. The $0.8 million increase from Q1 FY24 was primarily the result of increased professional fees of $0.5 million.

Current wording

Selling, general and administrative expenses were $18.1 million in Q2 FY25, compared with $19.1 million in Q1 FY25, and $19.0 million in Q2 FY24. The $1.0 million decrease from Q1 FY25 was primarily the result of decreases in compensation and related expenses of $0.3 million and professional fees of $0.3 million. The $0.9 million decrease from Q2 FY24 was primarily the result of decreased compensation and related expenses of $0.8 million.

Previous wording

Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, decreased $1.0 million to $4.3 million in Q1 FY25 from Q4 FY24; the decrease was primarily caused by reduced qualification activities in Asia. Research and development expenses in Q1 FY25 increased by $0.8 million from Q1 FY24 as a result of increased development activities in the U.S.

Current wording

Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, were $4.1 million in Q2 FY25, compared with $4.3 million in Q1 FY25, and $4.3 million in Q2 FY24. The decrease from Q1 FY25 was primarily caused by reduced qualification activities in Asia.

Previous wording

Other Income (expense) increased in Q1 FY25 from Q4 FY24 by $26.0 million and from Q1 FY24 by $28.7 million, primarily due to foreign currency impacts. The foreign currency impacts were primarily driven by favorable movements of the New Taiwan dollar and the South Korean won, against the U.S. dollar.

Current wording

Other Income (expense) decreased in Q2 FY25 from Q1 FY25 by $50.8 million and from Q2 FY24 by $46.3 million, primarily due to foreign currency impacts. The foreign currency impacts were primarily driven by unfavorable movements of the New Taiwan dollar and the South Korean won, against the U.S. dollar.

Previous wording

The effective income tax rate is sensitive to the jurisdictional mix of earnings, due in part to the non-recognition of tax benefits on losses in jurisdictions with valuation allowances.

Current wording

The effective income tax rate is sensitive to the jurisdictional mix of earnings, due in part to the non-recognition of tax benefits on losses in jurisdictions with valuation allowances where the tax benefits of the losses are not available.

Previous wording

The effective income tax rate decrease in Q1 FY25, compared with Q4 FY24, is primarily due to changes in the jurisdictional mix of earnings and a decrease in foreign taxes in Q1 FY25.

Current wording

The effective income tax rate decrease in Q2 FY25, compared with Q1 FY25 and with Q2 FY24, is primarily due to a decrease in foreign taxes as well as changes in the jurisdictional mix of earnings.

Previous wording

The effective income tax rate decrease in Q1 FY25, compared with Q1 FY24, is primarily due to changes in the jurisdictional mix of earnings and a decrease in foreign taxes in Q1 FY25.

Current wording

The effective income tax rate decrease in YTD FY25 compared with YTD FY24, is primarily due to a decrease in foreign taxes as well as changes in the jurisdictional mix of earnings.

Previous wording

Net income attributable to noncontrolling interests was $15.4 million in Q1 FY25, compared with $6.4 million in Q4 FY24; the increase was the result of a net increase in the net income of the Company’s joint venture operations. Net income attributable to noncontrolling interests increased by $2.5 million in Q1 FY25 from Q1 FY24, as a result of increased net income at the Company’s Taiwan-based IC facilities.

Current wording

Net income attributable to noncontrolling interests was $15.4 million in Q2 FY25, compared with $15.4 million in Q1 FY25 and $20.1 million in Q2 FY24; the decrease year over year was the result of a net decrease in the net income of the Company’s joint venture operations. Net income attributable to noncontrolling interests was $30.8 million in YTD FY25, compared with $33.0 million in YTD FY24. The decrease was a result of decreased net income at the Company’s joint-venture operations.

Previous wording

Cash and cash equivalents were $642.2 million and $598.5 million as of February 2, 2025, and October 31, 2024, respectively. During Q1 2025 all our short-term investments matured. As of February 2, 2025, total cash and cash equivalents included $550.2 million held by foreign subsidiaries, including an aggregate of $366.8 million held by our joint ventures in Taiwan and China. In addition, we currently have CNY 200 million (approximately $27.7 million) of borrowing capacity in China to support local operations. See Note 7– Debtto the consolidated financial statements for additional information on the Company’s outstanding debt and currently available financing. The Company’s primary sources of liquidity are the Company’s cash on hand and cash we generate from operations.

Current wording

Cash and cash equivalents were $530.7 million and $598.5 million as of May 4, 2025, and October 31, 2024, respectively. As of May 4, 2025, total cash and cash equivalents included $431.9 million held by foreign subsidiaries, including an aggregate of $349.9 million held by our joint ventures in Taiwan and China. In addition, we currently have CNY 200 million (approximately $27.5 million) of borrowing capacity in China to support local operations. See Note 7– Debtto the consolidated financial statements for additional information on the Company’s outstanding debt and currently available financing. The Company’s primary sources of liquidity are the Company’s cash on hand and cash we generate from operations.

Previous wording

We estimate capital expenditures for the Company’s fiscal year 2025 will be approximately $200 million mainly in Asia and the U.S.; these investments will be targeted towards high-end and mainstream capacity that will increase the Company’s operating capability and efficiency and enable us to support the Company’s customers’ near-term demands. As of February 2, 2025, we had outstanding capital commitments of approximately $170.3 million and accrued liabilities related to capital equipment purchases of approximately $13.9 million. Although payment timing could vary, primarily as a result of the timing of tool delivery, installation and testing, we currently estimate that we will fund $175.4 million of the Company’s total $184.2 million committed and recognized obligations for capital expenditures over the next twelve months.

Current wording

We estimate capital expenditures for the Company’s fiscal year 2025 will be approximately $200 million mainly in Asia and the U.S.; these investments will be targeted towards high-end and mainstream capacity that will increase the Company’s operating capability and efficiency and enable us to support customers’ near-term demands. As of May 4, 2025, we had outstanding capital commitments of approximately $164.8 million and accrued liabilities related to capital equipment purchases of approximately $14.5 million. Although payment timing could vary, primarily as a result of the timing of tool delivery, installation and testing, we currently estimate that we will fund $152.3 million of the Company’s total $179.3 million committed and recognized obligations for capital expenditures over the next twelve months.

Previous wording

On August 28, 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the remaining $31.7 million to $100 million. During Q1 FY25, the Company repurchased 195,079 shares for $4.6 million. As of February 2, 2025, there was $95.4 million remaining under the August 28, 2024 authorization. Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares.

Current wording

On August 28, 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the remaining $31.7 million to $100 million. During the six-month period ended May 4, 2025, the Company repurchased 3.8 million shares for $76.7 million. As of May 4, 2025, there was $23.3 million remaining under the August 28, 2024 authorization. Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares.

Previous wording

As discussed in Note 6– PDMCX Joint Ventureof the Company’s consolidated financial statements, DNP, the noncontrolling interest in the Company’s China-based joint venture has, under certain circumstances, the right to put its interest in the joint venture to Photronics, or to purchase the Company’s interest in the joint venture. Under all such circumstances, the sale of DNP’s interest would be at its ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance. As of the date of issuance of this report, DNP had not indicated its intention to exercise this right. As of February 2, 2025, Photronics and DNP each had net investments in this joint venture of approximately $141.8 million.

Current wording

As discussed in Note 6– PDMCX Joint Ventureof the Company’s consolidated financial statements, DNP, the noncontrolling interest in the Company’s China-based joint venture has, under certain circumstances, the right to put its interest in the joint venture to Photronics, or to purchase the Company’s interest in the joint venture. Under all such circumstances, the sale of DNP’s interest would be at its ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance. As of the date of issuance of this report, DNP had not indicated its intention to exercise this right. As of May 4, 2025, Photronics and DNP each had net investments in this joint venture of approximately $148.5 million.

Previous wording

Operating Activities: Net cash provided by operating activities reflects net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, and the effects of changes in operating assets and liabilities. Net cash provided by operating activities increased by $37.0 million in the first quarter of FY25, compared with the same period of FY24, primarily due to increased net cash-favorable changes in working capital, predominantly in Asia.

Current wording

Operating Activities: Net cash provided by operating activities reflects net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, and the effects of changes in operating assets and liabilities. Net cash provided by operating activities decreased by $8.1 million in FY25, compared with the same period of FY24, primarily due to decreased net income.

Previous wording

Investing Activities: Net cash flows provided by investing activities increased by $49.0 million in the first quarter of FY25, compared to the cash flows used in investing activities in the same period of FY24, primarily driven by an additional maturity of short-term investments of $39.0 million, partially offset by a decrease of purchases of property, plant and equipment of $8.1 million.

Current wording

Investing Activities: Net cash flows used in investing activities decreased by $33.9 million in FY25, compared to the cash flows used in investing activities in the same period of FY24, primarily driven by an increase in proceeds from short-term investments of $28.3 million and a decrease of purchases of short term investments of $38.3 million, partially offset by an increase of purchases of property, plant and equipment of $32.4 million.

Previous wording

Financing Activities: Net cash used in financing activities increased by $17.6 million in the first quarter FY25, compared to the same period of FY24. This was primarily driven by an increase in debt repayment of $14.1 million and share repurchase of $4.6 million.

Current wording

Financing Activities: Net cash used in financing activities increased by $90.4 million in the first half of FY25, compared to the same period of FY24. This was primarily driven by the repurchase of the Company’s common shares as part of the Share Repurchase Program of $76.7 million and increase of debt repayments of $15.2 million.

Previous wording

Non-GAAP Net Income attributable to Photronics, Inc. shareholders and non-GAAP diluted earnings per share are “non-GAAP financial measures” as such term is defined by Regulation G of the Securities and Exchange Commission and may differ from similarly named non-GAAP financial measures used by other companies. The financial tables below reconcile Photronics, Inc. financial results under U.S. GAAP to our non-GAAP financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate the Company’s on-going performance because they enable a more meaningful comparison of historical results of the Company’s core business. These non-GAAP metrics are not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to Net income (loss), Net income (loss) per share, or any other measure of consolidated results under U.S. GAAP. The items excluded from these non-GAAP metrics but included in the calculation of their closest U.S. GAAP equivalent, are significant components of the condensed consolidated statement of income and must be considered in performing a comprehensive assessment of overall financial performance.

Current wording

Non-GAAP Net Income attributable to Photronics, Inc. shareholders and non-GAAP diluted earnings per share are considered as “non-GAAP financial measures” as such term is defined by Regulation G of the Securities and Exchange Commission and may differ from similarly named non-GAAP financial measures used by other companies. The financial tables below reconcile Photronics, Inc. financial results under U.S. GAAP to our non-GAAP financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate the Company’s on-going performance because they enable a more meaningful comparison of historical results of the Company’s core business. These non-GAAP metrics are not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to Net income (loss), Net income (loss) per share, or any other measure of consolidated results under U.S. GAAP. The items excluded from these non-GAAP metrics but included in the calculation of their closest U.S. GAAP equivalent, are significant components of the condensed consolidated statement of income and must be considered in performing a comprehensive assessment of overall financial performance.

Previous wording

Our current business outlook and guidance was provided in the Photronics Q1 FY25 earnings release, earnings presentation, and financial results conference call, but is not incorporated herein. These can be accessed in the investor section of our website -www.photronics.com. Information included on our website is not incorporated in this Form 10-Q.

Current wording

Our current business outlook and guidance was provided in the Photronics Q2 FY25 earnings press release, earnings presentation, and financial results conference call, but is not incorporated herein. These can be accessed in the investor section of our website -www.photronics.com. Information included on our website is not incorporated in this Form 10-Q.

Previous wording

Our future results of operations and the other forward-looking statements contained in this filing and in the Photronics Q1 FY25 earnings release, and the related financial results conference call and earnings presentation involve a number of risks and uncertainties, some of which were discussed in Part I, Item 1A of our 2024 Form 10-K. These factors and a number of other unforeseeable factors could cause actual results to differ materially from our expectations.

Current wording

Our future results of operations and the other forward-looking statements contained in this filing and in the Photronics Q2 FY25 earnings press release, and the related financial results conference call and earnings presentation involve a number of risks and uncertainties, some of which were discussed in Part I, Item 1A of our 2024 Form 10-K. These factors and a number of other unforeseeable factors could cause actual results to differ materially from our expectations.