Photronics, Inc. Q1 FY2026 earnings call

• Accelerating demand during fiscal Q4 continued into fiscal Q1, sales increased 4% sequentially to $225 million. • George has prioritized strengthening operating efficiency, making pinpoint actions to drive continuous improvement, focusing on elevating quality, improving yield, accelerating cycle times, and enhancing customer experience. • In IC business, revenue of $165 million increased 7% year over year, high-end business grew 19%. • Ongoing expansion projects in U.S. and Korea to enter volume production in 2027. In U.S., healthy customer qualification activity across advanced logic and memory technologies. Allen facility expansion on track. • In FPD, took delivery of most advanced mask writer in Korea, improving resolution and accuracy, extending technology leadership for G8.6 AMOLED photo masks

IC business: Revenue of $165 million increased 7% year over year, with high-end business growing 19%. High-end IC revenue was $71 million, a second consecutive quarterly record. FPD business: Revenue of $60 million increased 3% year over year. In IC, $94 million was mainstream revenue, flat year over year. FPD had a mixed shift towards strong demand in the mainstream category targeted at the China IT display market, featuring larger size screens. IC revenue contribution: $165 million out of $225 million total revenue, so ~73.3% contribution. FPD revenue contribution: $60 million out of $225 million total revenue, so ~26.7% contribution

• Fiscal Q2 revenue expected to be in the range of $212 and $220 million. • Fiscal Q2 operating margin estimated between 22% and 24%. • Fiscal Q2 non-GAAP diluted EPS estimated between $0.49 and $0.55 per share. • Reiterating fiscal 2026 CAPEX guidance of $330 million with elevated CAPEX focused on special project investments in U.S. and Korea, along with accelerated end-of-life tool upgrades

• Demand for products is inherently variable with limited visibility (typical backlog of only one to three weeks). • High-end mass sets carry significantly higher ASPs, so small number of orders can materially influence revenue and earnings. • Demand affected by IC and display design activity, and wafer and panel capacity dynamics

Q: Just with that slight sequential decrease in revenue and operating margin, Is there anything else we should be thinking about besides the Chinese New Year? And then follow-up on what are some things that need to happen to kind of hit that higher end of that guided range.

A: Chinese New Year fell in mid-February, customers took long holidays, customer table forecast resumes in early March, slight impact on output. The EDM project's cleaning room ready, equipment being installed, once qualification complete, Allen can contribute to business, Boise capacity can be spared for high-end business.

Q: On the margins, risk of temporarily over-earning or normalization as more capacity comes online.

A: From product mix perspective, Q2 expected similar to Q1. Entering stage of elevated CapEx investments, increased depreciation but revenue will increase for projects, end-of-life tools improve product mix, margins not expected to fall off a cliff.

Q: On Asia side in China, local competitors adjusting behavior.

A: Focused on high end where less competition, entry barrier for newcomers to high-end business is high, focusing on high-end product mix in China.

Q: Color on Asia demand under the hood and if mix is structurally different from a year or two ago.

A: Main driving force is diversification due to geopolitical reasons like onshoring and regionalization, Chinese customers migrating to 22, 28 nanometer