Photronics, Inc. (PLAB) Q1 2026 Earnings Call Transcript
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Overview
The company reported a 6% YoY revenue increase and strong demand, especially in high-end ICs. Despite a flat mainstream IC segment, the focus on high-end growth and strategic expansions in the U.S. and Korea are promising. The Q&A revealed no major concerns, and the company maintains a strong cash position. While the lack of dividend announcements and share repurchase focus shift could be seen negatively, the overall sentiment is positive due to strong financial metrics and growth strategies. Given the market cap, a 2% to 8% stock price increase is expected.
Key Financial Performance
Total Revenue $225 million, increased 6% year-over-year. Reasons: Accelerating demand, particularly in Asia, and a strategic emphasis on high-end opportunities.
IC Revenue $165 million, increased 7% year-over-year. Reasons: Growth in high-end business (19% increase) and demand for AI-driven chip packaging applications and high NA, EUV development projects.
High-end IC Revenue $71 million, increased 19% year-over-year. Reasons: Strength in Asia and strategic emphasis on high-end opportunities.
Mainstream IC Revenue $94 million, flat year-over-year. Reasons: No significant changes in demand.
FPD Revenue $60 million, increased 3% year-over-year. Reasons: Strong demand in the mainstream category targeted at the China IT display market and larger-sized screens.
Gross Margin 35%, at the high end of expectations. Reasons: Higher revenue levels and a greater mix of high-end IC revenue.
Operating Margin 24%. Reasons: Higher operating leverage due to increased revenue and high-end IC mix.
GAAP Diluted EPS $0.74 per share. Reasons: Strong demand in Asia leading up to Chinese New Year.
Non-GAAP Diluted EPS $0.61 per share. Reasons: Excluding foreign exchange impacts and strong demand in Asia.
Operating Cash Flow $97 million, second highest in company history, equating to 43% of revenue. Reasons: Strong demand and operational performance.
CapEx $48 million. Reasons: Investments in equipment to extend technical leadership in FPD.
Total Cash and Short-term Investments $637 million, increased by $49 million sequentially. Reasons: Strong operational performance and cash flow.
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Operating Highlights
High-end IC business: Achieved a second consecutive quarterly record with revenue of $165 million, a 7% year-over-year increase, and high-end business growing 19%. Focused on AI-driven chip packaging applications and high NA, EUV development projects.
FPD (Flat Panel Display): Revenue of $60 million increased 3% year-over-year. Installed the most advanced mask writer in Korea for AMOLED photomasks, targeting G8.6 mask size for improved screen quality.
Geographic diversification: Strengthened sales leadership and focused on high-end opportunities globally, particularly in Asia and the U.S. Expansion projects in the U.S. and Korea to enter volume production in 2027.
China market: Maintained strong competitive positioning, focusing on higher-end nodes with lower competitive intensity.
Operational efficiency: Implemented actions to improve quality, yield, cycle times, and customer experience, aiming for higher revenue and market share gains.
Allen facility expansion: On track with tool installations and customer qualifications expected by the second half of the year, expanding production capabilities for mainstream wafer fabs.
Capital investments: Elevated CapEx of $330 million for 2026, focusing on U.S. and Korea projects, end-of-life tool upgrades, and supporting high-end node migrations and regionalization.
Revenue growth strategy: Leveraging global semiconductor manufacturing regionalization and increased outsourcing to drive capability and capacity expansion.
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Risk or Challenges
Seasonal impact of Chinese New Year: The seasonal effect of the Chinese New Year is expected to impact revenue in fiscal Q2, reflecting a temporary slowdown in demand.
Limited demand visibility: Demand for products is inherently variable with a typical backlog of only 1 to 3 weeks, creating challenges in forecasting and planning.
High-end mask set dependency: High-end mask sets carry significantly higher ASPs, meaning even a small number of orders can materially influence revenue and earnings, adding volatility to financial performance.
Elevated capital expenditures: The company has entered a period of elevated capital investments, including $330 million in fiscal 2026, which could strain financial resources if returns are delayed or market conditions change.
Geopolitical and regional risks: Expansion projects in the U.S. and Korea and reliance on the Chinese market expose the company to geopolitical and regional risks, including regulatory changes and competitive pressures.
Competitive intensity in mainstream IC: Mainstream IC revenue was flat year-over-year, indicating potential challenges in maintaining growth in this segment due to competitive pressures.
Dependence on high-end IC growth: The company’s growth strategy heavily relies on high-end IC revenue, which may face risks if demand for advanced technologies slows or competition intensifies.
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Guidance & Outlook
High-end IC Business Growth: The company expects continued strength in high-end IC business, with order demand remaining healthy to partially mitigate seasonal impacts following the Chinese New Year. Growth is driven by AI-driven chip packaging applications and high NA, EUV development projects.
Expansion Projects in the U.S. and Korea: Ongoing expansion projects in the U.S. and Korea are expected to enter volume production in 2027. These projects aim to meet increasing demand for photomasks and support broader outsourcing strategies.
U.S. Market Developments: The company is supporting high-volume manufacturing at 12 and 14-nanometer technologies and extending qualifications to 8-nanometer and below. Advanced DRAM memory qualifications are also underway for patterns below 20 nanometers.
Allen Facility Expansion: The Allen facility expansion is on track, with tool installations and customer qualifications expected to be completed by the second half of 2026. The facility will expand production capabilities to meet photomask demand for U.S. mainstream wafer fabs.
China Market Position: The company plans to focus on delivering quality masks for higher-end nodes in China, leveraging competitive advantages in this fast-growing market.
FPD Market and AMOLED Adoption: The company expects broader adoption of G8.6 AMOLED technology later in 2026, supported by the installation of advanced mask writers in Korea.
Fiscal Q2 Revenue and Earnings Guidance: Revenue for fiscal Q2 is expected to range between $212 million and $220 million. Operating margin is projected between 22% and 24%, with non-GAAP diluted EPS estimated between $0.49 and $0.55 per share.
Fiscal 2026 Capital Expenditures: The company reiterates its fiscal 2026 CapEx guidance of $330 million, focusing on U.S. and Korea projects, end-of-life tool upgrades, and other growth initiatives.
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Shareholder Return Plan
Dividends: No specific mention of dividends or dividend programs was made in the transcript.
Share Repurchase: The company opportunistically repurchased 5 million shares in fiscal 2025 for an average purchase price of $19.52 per share. For 2026, the company plans to continue emphasizing internal investments for growth rather than focusing on share repurchase programs.
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Key Q&A
Q:What caused the slight sequential decrease in revenue and operating margin?
A:The Chinese New Year, which fell in the middle of February, caused a temporary slowdown as customers, especially fab design house customers, took long holidays. This led to a slight impact on output, but there were no major differences in the market environment.
Q:What is the status and future contribution of the Allen facility?
A:The Allen facility's clean room is ready, and equipment installation is in progress. Once customer qualification is complete, the Allen site will contribute to the midrange mainstream business and support the Boise facility by taking on middle or low-end mass layers, allowing Boise to focus on high-end business.
Q:What are the applications and potential of G8.6 AMOLED technology?
A:G8.6 AMOLED technology is in the early stages of business development. The company received its first G8.6 photomask from a Korean customer and sees Chinese customers developing this technology. With advanced process capabilities and new equipment in Korea, the company aims to lead the G8.6 flat panel business.
Q:Is there a risk of overearning due to tight high-end supply, and how will margins evolve?
A:The company does not expect significant changes in product mix for Q2 compared to Q1. While margins could fluctuate due to product mix, they are not expected to drop significantly. Investments in CapEx and new tools like the multi-beam writer will increase high-end capacity and contribute to gross margins.
Q:What is the competitive landscape in China, and how does it affect the company's strategy?
A:The company focuses on high-end business in China, where competition is lower due to high entry barriers. Newcomers are more focused on the mainstream market. The company has a local facility in Xiamen and works with major Chinese high-end wafer fabs to improve cycle time and delivery, maximizing high-end product mix.
Q:What is driving demand in Asia, and how has the mix changed compared to previous years?
A:Demand in Asia is driven by diversification due to geopolitical reasons and regionalization. Customers need to manufacture products in different countries, leading to duplicate tape-outs. Additionally, Chinese customers are migrating to 22, 28-nanometer technology, resulting in new tape-outs.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the size and scope of the G8.6 AMOLED opportunity over the next few years, using vague language and lacking numerical data.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Angeles opportunity
Asia Chinese
Asia press
Chief
China positioning
Chinese New
DRAM memory
EUV development
FPD end
Financial
Form SEC
IP process
Korea delivery
Korea volume
Los Angeles
NA EUV
New end
New footprint
New mid
OFC trade
Officer Head
Officer President
SEC statement
States customer
Wednesday presentation
accuracy throughput
action improvement
application mask
customer qualification
efficiency
logic
mask size
mask writer
qualification activity
quality
PLAB Transcript
Photronics, Inc. (PLAB) Q1 2026 Earnings Call Transcript
Positive2-27
The company reported a 6% YoY revenue increase and strong demand, especially in high-end ICs. Despite a flat mainstream IC segment, the focus on high-end growth and strategic expansions in the U.S. and Korea are promising. The Q&A revealed no major concerns, and the company maintains a strong cash position. While the lack of dividend announcements and share repurchase focus shift could be seen negatively, the overall sentiment is positive due to strong financial metrics and growth strategies. Given the market cap, a 2% to 8% stock price increase is expected.
Photronics, Inc. (PLAB) Q4 2025 Earnings Call Transcript
Positive12-10
The earnings call reflects a positive sentiment, with strong financial performance, exceeded operating margin guidance, and optimistic growth strategies. The Q&A highlighted Photronics' strategic positioning in high-end markets, with potential revenue growth from new facilities and reshoring trends. Despite some uncertainties, the overall sentiment is optimistic, especially with the potential for increased market share and profitability. The company's market cap suggests a moderate reaction, leading to a positive stock price movement prediction.
Photronics, Inc. (PLAB) Q3 2025 Earnings Call Transcript
Positive8-27
The company reported strong financial performance, exceeding guidance for operating margin and EPS, and strong operational cash flow. The Q&A highlighted strategic investments in advanced technology, positioning the company well for future growth, despite some tariff impacts. The market's positive sentiment is supported by the company's strategic focus on capacity expansion and advanced technology, as well as a robust shareholder return plan through share repurchases. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8%.
Photronics, Inc. (NASDAQ:PLAB) Q2 2025 Earnings Call Transcript
Unknown5-29
The earnings call reveals several concerns: declining revenue and IC revenue, competitive pressures, and market demand uncertainties. Despite a slight improvement in operating margins and ongoing share repurchases, the cautious outlook for 2025 and weak guidance for Q3 weigh heavily. The Q&A highlighted unclear management responses, particularly on demand recovery, contributing to negative sentiment. The market cap suggests a moderate reaction, likely resulting in a negative stock price movement in the range of -2% to -8% over the next two weeks.
PLAB Slides
Photronics Q1 2026 slides: record IC revenue, stock slides 11%2026-02-25
Photronics Q4 2025 slides: Record IC revenue drives earnings beat, stock surges2025-12-10
Photronics Q3 2025 slides: Revenue rebounds as company expands US capacity2025-08-27
Photronics Q2 2025 slides: Revenue dips as company maintains cautious outlook2025-05-28
PLAB Report
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