• Revenue: $212 million for the first quarter, a 5% sequential decline.
• IC Revenue: $154 million, a 6% quarter-over-quarter decline.
• FPD Revenue: Stable at $58 million, both sequentially and year-over-year.
• Operating Margin: 25%, at the high-end of guidance range.
• Gross Margin: 36%, slightly declined due to lower sales volumes.
• Non-GAAP Diluted EPS: $0.52, above the high-end of guidance.
• Operating Cash Flow: $78 million, representing 37% of total revenue.
• CapEx: $35 million in the quarter, with a commitment of $200 million for 2025.
• Total Cash: $642 million at the end of the quarter.
• Debt: Modest $3 million remaining.
• Second Quarter Revenue Guidance: $208 million to $216 million.
• Second Quarter Non-GAAP EPS Guidance: $0.44 to $0.50 per diluted share.

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

Release Date: February 26, 2025

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

Positive Points

• Photronics Inc (NASDAQ:PLAB) achieved first-quarter sales of $212 million, aligning with expectations and seasonal trends.
• Non-GAAP diluted EPS of $0.52 exceeded the high-end of guidance, demonstrating strong financial performance.
• The company reported a robust operating cash flow of $78 million, representing 37% of total revenue.
• Photronics Inc (NASDAQ:PLAB) maintained its market leadership in FPD photomasks due to technological superiority and manufacturing footprint.
• The company is strategically expanding capacity in the U.S. to meet regional demand, leveraging competitive advantages in capability, cost, scale, and time-to-market.

Negative Points

• Total revenue declined 5% sequentially, with IC revenue dropping 6% quarter-over-quarter.
• Mainstream IC business faced a 9% decline, reflecting broader semiconductor industry softness.
• Sales from European facilities were weaker than anticipated, with expectations of continued weakness.
• The company expressed caution about fiscal 2025 due to current market conditions and geopolitical uncertainties.
• Increased competition from local Chinese suppliers in the low-end mainstream segment poses a challenge.

Q & A Highlights

Q: The outlook for the next quarter is flat, which is unusual as we typically see a 5% increase. Is the weakness mainly due to the mainstream in China, or is it due to a lack of visibility and conservatism? A: Frank Lee, CEO: The weakness is primarily in the very low-end mainstream, particularly from six-inch and eight-inch wafers, with no signs of recovery soon. This is affecting both Asia and Europe. While this segment is small, it impacts our revenue outlook. We remain cautious but optimistic about the long-term outlook, focusing on high-end segments to improve ASPs.

Q: How do you view the supply/demand equation in the mainstream business, and are you seeing any pricing weakness? A: Frank Lee, CEO: We maintain firm pricing in the mainstream segment, but the overall market size seems smaller due to weakness in automotive and industrial applications. Increased competition from local Chinese suppliers is noted, but our focus is on higher-end segments like 55, 40, 28, and 22 nanometers, which keeps our ASPs stable.

Q: What challenges did you face in developing the Gen 8.6 AMOLED screen, and how significant will this be for your flat panel business? A: Chris Progler, CTO: Scaling specs to the larger Gen 8.6 substrate size was challenging, requiring advanced IC-like technology. We've been preparing for this for a year, and the masks are for production-level applications, not just prototypes. While it's too early to quantify its impact, it has the potential to scale significantly.

Q: With a strong cash position, what is your strategy regarding buybacks versus acquisitions? A: Eric Rivera, CFO: Our capital allocation strategy prioritizes CapEx, followed by M&A or share repurchases. We are cautious given current conditions but ready to act on M&A opportunities if they are accretive. We have a $100 million buyback authorization and will be aggressive with repurchases if conditions are favorable.

Q: How much of the US IC capacity expansion is tied to long-term agreements, and what drives this demand? A: Eric Rivera, CFO: The expansion is driven by customer demand to service them in the US, not tied to specific agreements or the CHIPS Act. We have customer commitments indicating support for our US investments, which are based on organic demand rather than CHIPS funding.

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