PHOTRONICS INC

Previous wording

We are focused on improving our competitiveness by advancing our technology and reducing costs and, in connection therewith, have invested and plan to continue to invest in manufacturing equipment to serve both the high-end photomask and mainstream markets. As we face challenges that require us to make significant improvements in our competitiveness, we continue to implement programs to streamline, drive efficiency and reduce costs in our infrastructure.

Current wording

We are focused on improving our competitiveness by advancing our technology and reducing costs and, in connection therewith, have invested and plan to continue to invest in manufacturing equipment to serve both the high-end and mainstream photomask markets. As we face challenges that require us to make significant improvements in our competitiveness, we continue to implement programs to streamline, drive efficiency and reduce costs in our infrastructure.

Previous wording

State-of-the-art production for semiconductor masks is considered to be 4 or 5 nanometer and smaller including EUV lithography for ICs and Generation 8.6 AMOLED display-based process technologies for FPDs. However, we define our high-end product category as 28nm and below for semiconductors and Generation 10.5 plus, Generation 6 and 8 AMOLED and LTPS for displays. This is consistent with current merchant mask industry definitions. Moreover, design nodes above 28nm and FPD processes for standard LCD displays below Generation 10 are considered mainstream or standard products.

Current wording

State-of-the-art production for semiconductor masks is considered to be 4 or 5 nanometer and smaller including EUV lithography for ICs and Generation 8.6 AMOLED display-based process technologies for FPDs. However, we define our high-end product category as 28nm and below for semiconductors and Generation 10.5 plus, Generation 6 and 8 AMOLED and LTPS for displays. This is consistent with current merchant mask industry definitions. Moreover, design nodes above 28nm and FPD processes for standard LCD displays below Generation 10 are considered mainstream or standard products. At these geometries and various high-end nodes, we can produce full lines of photomasks, and there is no significant technology employed by our competitors that is not available to us. We expect advanced-generation designs to continue to move to production throughout fiscal 2026, and we believe we are well positioned to service an increasing volume of this business as a result of our investments in manufacturing processes and technology in the regions where our customers are located.

Previous wording

Our revenues have benefited, and our costs, including depreciation, have been affected by the increased demand for high-end-technology photomasks that require more advanced manufacturing capabilities, but generally command higher ASPs. Our year-to-date capital expenditure payments were $47.6 million and $35.2 million in Q1 FY26 and Q1 FY25, respectively. Nonetheless, we intend to continue to make the required investments to support the technological and production requirements of our customers that we believe will continue to enable our growth. This includes investments to replace end-of-life mask-making equipment with higher-performing systems that better serve our customers. In support of this effort, we expect capital expenditure payments to be approximately $330 million in fiscal year 2026.

Current wording

Our revenues have benefited, and our costs, including depreciation, have been affected by the increased demand for high-end-technology photomasks that require more advanced manufacturing capabilities, but generally command higher ASPs. Our year-to-date capital expenditure payments were $93.4 million and $95.7 million in Q2 FY26 and Q2 FY25, respectively. Nonetheless, we intend to continue to make the required investments to support the technological and production requirements of our customers that we believe will continue to enable our growth. This includes investments to replace end-of-life mask-making equipment with higher-performing systems that better serve our customers. In support of this effort, we expect capital expenditure payments to be approximately $330 million in fiscal year 2026.

Previous wording

All the following tabular comparisons, unless otherwise indicated, are for the three months ended February 1, 2026 (Q1 FY26), October 31, 2025 (Q4 FY25) and February 2, 2025 (Q1 FY25). The tables in this section may not foot due to rounding.

Current wording

All the following tabular comparisons, unless otherwise indicated, are for the three-month and six-month periods ended May 3, 2026 (Q2 FY26), February 1, 2026 (Q1 FY26) and May 4, 2025 (Q2 FY25). The tables in this section may not foot due to rounding.

Previous wording

Gross margin decreased slightly to 35.0% in Q1 FY26 from 35.6% in Q1 FY25, primarily due to changes in product mix, which resulted in higher material costs.

Current wording

Gross margin decreased to 31.3% in Q2 FY26 from 36.9% in Q2 FY25, primarily due to higher labor and benefits costs, material costs and manufacturing costs.

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 $0.6 million to $2.6 million in Q1 FY26 from Q4 FY25; the decrease was primarily caused by reduced labor and benefits costs. Research and development expenses in Q1 FY26 decreased by $1.7 million from Q1 FY25, as a result of less labor and benefits costs and less development activity 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 $2.8 million in Q1 FY26 and $4.1 million in Q2 FY25. The $0.2 million increase from Q1 FY26 was primarily due to increased qualification activities in Asia. The $1.3 million decrease from Q2 FY25 was primarily due to reduced development activities in the U.S.

Previous wording

Other Income decreased $4.2 million in Q1 FY26 from Q4 FY25 and $5.3 million from Q1 FY25, primarily due to foreign currency impacts. The foreign currency impacts were primarily driven by less favorable movements of the South Korean won and the New Taiwan dollar, against the U.S. dollar.

Current wording

Other Income decreased $8.0 million in Q2 FY26 compared with Q1 FY26 and increased $37.5 million compared with Q2 FY25, primarily due to foreign currency transaction gains and losses. These foreign currency impacts were primarily driven by fluctuations in the New Taiwan dollar and the South Korean won relative to the U.S. dollar.

Previous wording

The effective income tax rate decreased in Q1 FY26, compared with Q1 FY25, primarily due to an investment tax credit in a non‑U.S. jurisdiction in FY26.

Current wording

The effective income tax rate decrease in YTD FY26 compared with YTD FY25, is primarily due to an investment tax credit in a non-U.S. jurisdiction in FY26.

Previous wording

Net income attributable to noncontrolling interests was $17.2 million in Q1 FY26, compared with $16.8 million in Q4 FY25; the increase was the result of an increase in the net incomes of our joint venture operations. Net income attributable to noncontrolling interests increased by $1.8 million in Q1 FY26 from Q1 FY25, as a result of increased net income at the Company’s China-based IC facility.

Current wording

Net income attributable to noncontrolling interests was $11.8 million in Q2 FY26, compared with $17.2 million in Q1 FY26; the decrease was the result of a reduction in net income at the Company’s Taiwan-based joint venture. Net income attributable to noncontrolling interests decreased by $3.5 million in Q2 FY26 from Q2 FY25, as a result of decreased net income at the Company’s China-based IC facility.

Previous wording

Our primary sources of liquidity are our cash on hand and cash we generate from operations. Cash and cash equivalents were $544.1 million and $492.3 million as of February 1, 2026, and October 31, 2025, respectively. As of February 1, 2026, total cash and cash equivalents included $472.2 million held by foreign subsidiaries, including an aggregate of $391.5 million held by our joint ventures in Taiwan and China. In addition, we currently have CNY 200 million or $25 million of borrowing capacity, at our discretion, in China to support local operations. This facility is subject to annual reviews and extensions with a current expiration date of July 31, 2026. As of February 1, 2026, PDMCX had no outstanding borrowings against the facility.

Current wording

Our primary sources of liquidity are our cash on hand and cash we generate from operations. Cash and cash equivalents were $511.5 million and $492.3 million as of May 3, 2026, and October 31, 2025, respectively. As of May 3, 2026, total cash and cash equivalents included $464.9 million held by foreign subsidiaries, including an aggregate of $389.2 million held by our joint ventures in Taiwan and China (consisting of $323.4 million held by our joint venture in Taiwan and $65.8 million held by our joint ventures in China). In addition, we currently have CNY 200 million or $25 million of borrowing capacity, at our discretion, in China to support local operations. This facility is subject to annual reviews and extensions with a current expiration date of July 31, 2026. As of May 3, 2026, PDMCX had no outstanding borrowings against the facility.

Previous wording

We continually evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. These reviews may result in our 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 our liquidity, including available financing, is sufficient to meet our requirements through the next twelve months and thereafter for the foreseeable future. Through the utilization of our existing liquidity, the cash we generate from operations and short-term investments, we plan to continue to invest in our business, with our 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 our capital expenditures and ongoing operations. These reviews may result in our 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 our liquidity, including available financing, is sufficient to meet our requirements through the next twelve months and thereafter for the foreseeable future. Through the utilization of our existing liquidity, the cash we generate from operations and short-term investments, we plan to continue to invest in our business, with investments targeted to align with our 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 our capital expenditures for fiscal year 2026 will be approximately $330 million mainly in Asia and the U.S.; these investments will be targeted towards high-end and mainstream capacity that will increase the operating capability and efficiency, and enable us to support our customers’ near-term demands. As of February 1, 2026, we had outstanding capital commitments of approximately $190.6 million and accrued liabilities related to capital equipment purchases of approximately $29.3 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 $180.2 million of our total $219.9 million committed and recognized obligations for capital expenditures over the next twelve months.

Current wording

We estimate our capital expenditures for fiscal year 2026 will be approximately $330 million mainly in Asia and the U.S.; these investments will be targeted towards high-end and mainstream capacity that will increase the operating capability and efficiency, and enable us to support our customers’ near-term demands. As of May 3, 2026, we had outstanding capital commitments of approximately $172.0 million and accrued liabilities related to capital equipment purchases of approximately $39.3 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 $199.0 million of our total $211.3 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. In June 2025, the Board of Directors authorized an additional $25 million share repurchase. During the fiscal year ended October 31, 2025, the Company repurchased 5.0 million shares for $97.4 million. During the three month period ended February 1, 2026, the Company did not repurchase any shares. As a result, $27.6 million remained available under this authorization as of February 1, 2026. 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. In June 2025, the Board of Directors authorized an additional $25 million of share repurchases. During the fiscal year ended October 31, 2025, the Company repurchased 5.0 million shares for $97.4 million. During the three-month and six-month periods ended May 3, 2026, the Company did not repurchase any shares. As a result, $27.6 million remained available under this authorization as of May 3, 2026. 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 condensed 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 1, 2026, Photronics and DNP each had net investments in this joint venture of approximately $169.4 million.

Current wording

As discussed in Note 6– PDMCX Joint Ventureof the Company’s condensed 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 3, 2026, Photronics and DNP each had net investments in this joint venture of approximately $177.1 million.

Previous wording

Operating Activities: Net cash from 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 $18.8 million in the first quarter of FY26, compared with the same period of FY25, primarily due to changes in working capital.

Current wording

Operating Activities: Net cash from 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 $34.4 million in YTD FY26, compared with the same period of FY25, primarily due to the increased net income and positive changes in working capital.

Previous wording

Investing Activities: Net cash flows from investing activities decreased by $47.1 million in the first quarter of FY26, compared to the same period in FY25, primarily driven by an increase in purchases of property, plant and equipment of $12.4 million and purchases in short-term investments of $36.6 million.

Current wording

Investing Activities: Net cash flows used in investing activities increased by $37.0 million in YTD FY26, compared to the same period in FY25, primarily driven by an increase in purchases of short-term investments of $78.1 million, partially offset by $37.4 million increase in proceeds from maturities and sales of short-term investments.

Previous wording

Financing Activities: Net cash from financing activities increased by $21.2 million in the first quarter of FY26, compared to the same period in FY25. This was primarily driven by a decrease in debt repayments of $15.3 million and common stock repurchases of $4.6 million.

Current wording

Financing Activities: Net cash used in financing activities decreased by $94.7 million in YTD FY26, compared to the same period in FY25. This was primarily driven by a decrease in debt repayments of $18.0 million and common stock repurchases of $76.7 million.

Previous wording

The Company’s cash, cash equivalents, and restricted cash balances were negatively impacted by changes in foreign currency exchange rates during the first quarter of FY26 by $5.9 million.

Current wording

The Company’s cash, cash equivalents, and restricted cash balances were negatively impacted by changes in foreign currency exchange rates in YTD FY26 by $6.7 million.