PHOTRONICS INC

Previous 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).

Current wording

Note: All the following tabular comparisons, unless otherwise indicated, are for the three months ended August 3, 2025 (Q3 FY25), May 4, 2025 (Q2 FY25) and July 28, 2024 (Q3 FY24) and for the nine months ended August 3, 2025 (YTD FY25) and July 28, 2024 (YTD FY24).

Previous wording

IC revenue increased $1.9 million or 1.2 % in Q2 FY25 from Q1 FY25 primarily due to an increase in mainstream of $2.7 million or 2.9%. Comparing Q2 FY25 to Q2 FY24, IC revenue decreased $5.0 million or 3.1% mainly due to reduced mainstream demand in Asia and the United States. IC revenue decreased $8.7 million or 2.7 % in YTD FY25 from YTD FY24, mainly due to reduced mainstream demand in Asia and Europe, partially offset by high-end demand.

Current wording

IC revenue decreased $8.1 million or 5.2% in Q3 FY25 from Q2 FY25, primarily due to a decrease in both high-end and mainstream revenue in Asia reflecting continued headwinds experienced in 2025, including geopolitical trade restrictions and unresolved tariff negotiations. Comparing Q3 FY25 to Q3 FY24, IC revenue decreased $8.1 million or 5.2%, mainly due to reduced mainstream demand in Asia, partially offset by strong high-end order patterns in the United States. IC revenue decreased $16.8 million or 3.5% in YTD FY25 from YTD FY24, mainly due to reduced mainstream demand in Asia and Europe, partially offset by increased high-end demand in the United States.

Previous 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.

Current wording

Gross margin decreased by 320 basis points in Q3 FY25 compared to Q2 FY25, primarily as a result of an unfavorable product mix, reflected in material costs increase of 8.2%, or 207 basis points as a percentage of revenue as well as an increase in labor and benefits costs of 6.3%, or 70 basis points as a percentage of revenue.

Previous wording

Gross margin decreased by 31 basis points in YTD FY25 as compared to YTD FY24, primarily as a result of the decrease in revenue of 2.4%, partially offset by decreased labor and benefits costs of 6.8%, or 52 basis points as a percentage of revenue.

Current wording

Gross margin decreased by 90 basis points in YTD FY25 as compared to YTD FY24, mainly due to the decrease in revenue of 1.7% as well as an unfavorable product mix resulting in material costs increase by 2.5% or 102 basis points as a percentage of revenue, partially offset by decreased labor and benefits costs of 4.3%, or 31 basis points as a percentage of revenue.

Previous 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.

Current wording

Selling, general and administrative expenses were $18.4 million in Q3 FY25, compared with $18.1 million in Q2 FY25, and $19.4 million in Q3 FY24. The $0.3 million increase from Q2 FY25 was primarily the result of an increase in professional fees of $0.2 million. The $1.0 million decrease from Q3 FY24 was primarily the result of decreased professional fees 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, 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.

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 $4.3 million in Q3 FY25, compared with $4.1 million in Q2 FY25, and $3.6 million in Q3 FY24. The increase from Q2 FY25 and Q3 FY24 was primarily caused by increased qualification activities in Asia.

Previous wording

Research and development expenses were $8.3 million in YTD FY25, compared with $7.7 million in YTD FY24. The $0.6 million increase from YTD FY24 was a result of increased development activities in the U.S.

Current wording

Research and development expenses were $12.6 million in YTD FY25, compared with $11.3 million in YTD FY24. The $1.3 million increase from YTD FY24 was a result of increased development activities in the U.S.

Previous 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.

Current wording

Other Expense, net decreased in Q3 FY25 from Q2 FY25 by $16.4 million primarily driven by favorable movements of the New Taiwan dollar and the South Korean won, against the U.S. dollar. Other Expense, net increased in Q3 FY25 from Q3 FY24 by $19.5 million primarily driven by unfavorable movements of the New Taiwan dollar and the South Korean won, against the U.S. dollar.

Previous wording

Other Income (expense) decreased in YTD FY25 from YTD FY24 by $17.6 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.

Current wording

Other Expense, net increased in YTD FY25 from YTD FY24 by $37.1 million, primarily due to foreign currency impacts which were driven by unfavorable movements of the New Taiwan dollar and the South Korean won, against the U.S. dollar.

Previous wording

On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates. The Company is currently subject to Pillar Two, but we estimate that the financial impact is immaterial. We will continuously evaluate the potential impact of the Pillar Two Framework to ensure we are compliant in the future.

Current wording

On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates. The Company is currently subject to Pillar Two, but we estimate that the financial impact is immaterial. We will continue to monitor further developments to determine any potential impact in the countries in which we operate.

Previous 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.

Current wording

The effective income tax rate increases in Q3 FY25, compared with Q2 FY25 and Q3 FY24, are primarily due to changes in the jurisdictional mix of earnings.

Previous 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.

Current wording

The effective income tax rate decrease in YTD FY25 compared with YTD FY24 is primarily due to changes in the jurisdictional mix of earnings.

Previous 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.

Current wording

Net income attributable to noncontrolling interests was $6.2 million in Q3 FY25, compared with $15.4 million in Q2 FY25 and $13.8 million in Q3 FY24; the decrease from Q2 FY25 and Q3 FY24 was the result of the decrease in net income of the Company’s joint ventures. Net income attributable to noncontrolling interests was $37.0 million in YTD FY25, compared with $46.8 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 $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.

Current wording

Cash and cash equivalents were $479.5 million and $598.5 million as of August 3, 2025, and October 31, 2024, respectively. As of August 3, 2025, total cash and cash equivalents included $416.1 million held by foreign subsidiaries, including an aggregate of $328.2 million held by our joint ventures in Taiwan and China. In addition, we currently have CNY 200 million or USD 25 million of borrowing capacity in China to support local operations. See Note 7 – Debt to 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 continually evaluate alternatives for efficiently funding the Company’s capital expenditures and ongoing operations. These reviews may result in the Company’s engagement in a variety of investing and financing transactions, in the transfer of cash among subsidiaries, and/or the repatriation of cash to the U.S. The transfer of funds among subsidiaries could be subject to foreign withholding taxes; in certain jurisdictions, repatriation of these funds to the U.S. may subject them to U.S. state income taxes and/or local country withholding taxes. We believe that the Company’s liquidity, including available financing, is sufficient to meet the Company’s requirements through the next twelve months and thereafter for the foreseeable future. Through the utilization of the Company’s existing liquidity, cash we generate from operations and short-term investments, we plan to continue to invest in the Company’s business, with the Company’s investments targeted to align with the Company’s customers’ technology road maps. In addition, we stand ready to invest in mergers, acquisitions, or strategic partnerships, should a suitable opportunity arise.

Current wording

We continually evaluate alternatives for efficiently funding the Company’s capital expenditures and ongoing operations. These reviews may result in the Company’s engagement in a variety of investing and financing transactions, in the transfer of cash among subsidiaries, and/or the repatriation of cash to the U.S. The transfer of funds among subsidiaries could be subject to foreign withholding taxes; in certain jurisdictions, repatriation of these funds to the U.S. may subject them to U.S. state income taxes and/or local country withholding taxes. We believe that the Company’s liquidity, including available financing, is sufficient to meet the Company’s requirements through the next twelve months and thereafter for the foreseeable future. Through the utilization of the Company’s existing liquidity, the cash we generate from operations and short-term investments, we plan to continue to invest in the Company’s business, with the Company’s investments targeted to align with the Company’s customers’ technology road maps. In addition, we stand ready to invest in mergers, acquisitions, or strategic partnerships, should a suitable opportunity arise.

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 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.

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 August 3, 2025, we had outstanding capital commitments of approximately $147.2 million and accrued liabilities related to capital equipment purchases of approximately $28.3 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 $154.8 million of the Company’s total $175.5 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 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.

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 nine-month period ended August 3, 2025, the Company repurchased 5 million shares for $97.4 million. In June 2025, the Board of Directors authorized an additional $25 million share repurchase. As a result, as of August 3, 2025, $27.6 million remained available under this 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 May 4, 2025, Photronics and DNP each had net investments in this joint venture of approximately $148.5 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 August 3, 2025, Photronics and DNP each had net investments in this joint venture of approximately $153.4 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 decreased by $8.1 million in FY25, compared with the same period of FY24, primarily due to decreased net income.

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 $33.1 million in FY25, compared with the same period of FY24, primarily due to decreased net income.

Previous 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.

Current wording

Investing Activities: Net cash flows used in investing activities increased by $31.5 million in FY25, compared to the same period in FY24, primarily driven by an increase of purchases of property, plant and equipment of $32.9 million partially offset by a decrease in purchases of short term investments of $4.0 million.

Previous 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.

Current wording

Financing Activities: Net cash used in financing activities increased by $108.9 million in 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 $97.4 million and increase of debt repayments of $13.5 million.

Previous wording

Effects of exchange rate changes on the Company’s cash, cash equivalents, and restricted cash balances decreased by $2.1 million from unfavorable $3.8 million during the first half of FY24 to unfavorable $1.7 million during the same period of FY25.

Current wording

Effects of exchange rate changes on the Company’s cash, cash equivalents, and restricted cash balances increased by $16.6 million from unfavorable $6.5 million during YTD FY24 to favorable $10.1 million during the same period of FY25.

Previous 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.

Current wording

Non-GAAP Net Income attributable to Photronics, Inc. shareholders and non-GAAP diluted earnings per share attributable to Photronics, Inc. shareholders 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.

Previous wording

The following table reconciles U.S. GAAP to Non-GAAP Income for the indicated periods. The columns may not foot due to rounding.

Current wording

The following table reconciles U.S. GAAP Net Income and Earnings per Share attributable to Photronics, Inc. shareholders to the Non-GAAP Net income and Earnings per Share attributable to Photronics, Inc. shareholders for the indicated periods. The columns may not foot due to rounding.