• Revenue: $223 million in Q4, up 5% sequentially; full-year revenue of $867 million.
• Net Income: $34 million in Q4; record net income of $131 million for the full year.
• Gross Margin: 37% in Q4, flat year over year.
• Operating Margin: 25% in Q4.
• Cash and Short-term Investments: Increased by $128 million to $641 million over the year.
• Operating Cash Flow: $68 million in Q4; $261 million for the full year, representing 30% of revenue.
• Capital Expenditures (CapEx): $43 million in Q4; $131 million for the year; projected $200 million for 2025.
• Debt: Total debt decreased by 27% to $18 million.
• Share Repurchase Authorization: Increased to $100 million.
• Q1 Revenue Guidance: Expected to be in the range of $208 million to $216 million.
• Q1 Non-GAAP EPS Guidance: Estimated to be between $0.43 to $0.49 per diluted share.

• Warning! GuruFocus has detected 4 Warning Signs with TUIFF.

Release Date: December 11, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Photronics Inc (NASDAQ:PLAB) delivered a strong fourth quarter with sales of $223 million, exceeding the high end of guidance.
• The company achieved record net income of $131 million for the full year, contributing to strong cash flow and a strengthened balance sheet.
• Photronics Inc (NASDAQ:PLAB) increased cash and short-term investments by $128 million, reaching $641 million, providing financial flexibility for strategic initiatives.
• The company plans to invest $200 million in 2025, focusing on expanding IC capacity and capability in the US to capture regional growth opportunities.
• Photronics Inc (NASDAQ:PLAB) has positioned itself as a market leader in China, with long-term purchase agreements securing its market-leading position in the region.

Negative Points

• Full-year sales of $867 million were slightly down from the record level established in 2023.
• Mainstream IC demand experienced a slight reduction, partially offsetting high-end sales growth.
• Operating expenses increased due to higher R&D costs and SG&A expenses, impacting overall profitability.
• The company faces competition in the mainstream market in China, which could affect future growth.
• Photronics Inc (NASDAQ:PLAB) anticipates typical seasonality impacting first-quarter demand, with revenue expected to be lower than the fourth quarter.

Q & A Highlights

Q: Can you provide more details on the increase in operating expenses year over year? A: Eric Rivera, CFO: The increase in operating expenses was primarily due to higher SG&A and R&D costs. SG&A saw increased labor and benefits, as well as outside services. About half of the increase was non-recurring. Chris Progler, CTO, added that R&D expenses were driven by a robust pipeline of new qualifications and development projects, including a 7-nanometer node optical qualification and EUV high NA product development.

Q: What is the focus of the $200 million CapEx planned for 2025? A: Eric Rivera, CFO: The majority of the CapEx is for new capacity expansion, particularly in the US, driven by regionalization trends. Some funds will also replace older tools, but the focus is on expanding capacity to meet increasing customer demand.

Q: How do you view the mainstream IC business over the next few years? A: Christopher Progler, CTO: The mainstream IC business remains healthy, particularly in Asia. While growth has leveled off, the market is stable and growing in the US and Europe. Frank Lee, CEO, noted that despite some competition in China, the mainstream market continues to grow.

Q: What is your outlook for the photomask industry growth in 2025 and beyond? A: Frank Lee, CEO: The industry is expected to grow due to regionalization and increasing demand for semiconductors, particularly driven by AI. Photronics is focusing on capturing high-end business in China and expanding US capacity to meet new project demands.

Q: How is the AI ecosystem impacting demand for Photronics' products? A: Christopher Progler, CTO: While main processors like GPUs are typically produced by TSMC, there is demand for peripheral circuitry and edge network chips driven by AI. Photronics is involved in ASIC projects for AI inference, contributing to a broad ecosystem from GPUs to network edges.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.