Photronics, Inc.
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| ITEM 1. |
BUSINESS
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Specific industry and technical terms used in this section are defined in the subsection entitled “Glossary of Terms and Acronyms,” found below the Table of Contents.
Business Overview
Photronics, Inc. (and its subsidiaries, collectively referred to herein as “Photronics”, the “Company”, “we”, “our”, or “us”) is one of the world’s leading manufacturers of photomasks, which are high precision
photographic quartz or glass plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of ICs and FPDs and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD
substrates during the fabrication of ICs, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. We have eleven manufacturing facilities, which are located in Taiwan (3), China (2), South Korea (1), the United
States (3), and Europe (2).
Our principal executive offices are located at 15 Secor Road, Brookfield, Connecticut, 06804, telephone (203) 775-9000. Our website address is http://www.photronics.com. We make available, free of charge through our
website, our Forms 10-K, Definitive Proxy Statements on Schedule 14A, Forms 10-Q, Current Reports on Form 8-K, and any amendments to these reports as soon as reasonably practicable after such materials are electronically filed with or furnished to
the SEC. The information found on, or incorporated into, our website is not part of this or any other report we file with or furnish to the SEC. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and
other information regarding SEC registrants, including Photronics.
Segment
We operate as a single reporting segment as a manufacturer of photomasks, which are high precision quartz or glass plates containing microscopic images of electronic circuits for use in the fabrication of IC’s and
FPDs. In accordance with the ASC 280 – “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources
and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide
disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer
base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can
be found in the accompanying consolidated financial statements.
Industry
We manufacture photomasks, which are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates. The photomasks we manufacture incorporate circuit designs provided to us on a confidential
basis by our customers. Photomasks are typically sold in sets comprised of layers, with each layer having a distinct pattern that is etched onto a different photomask. The resulting series of photomasks is then used to image the circuit patterns
onto each successive layer of a semiconductor wafer or FPD substrate. The typical manufacturing process for a photomask involves the receipt and conversion of circuit design data to manufacturing pattern data. A lithography system then exposes the
circuit pattern onto a photomask blank. The exposed areas are developed and etched to imprint the pattern on the photomask. The photomask is then inspected for defects and conformity to the customer’s design data. After the repair of any defects,
the photomask is cleaned, any required pellicles (protective translucent membranes) are applied and, after final inspection, the photomask is shipped to the customer.
“High-end” photomasks support 28 nanometer and smaller design nodes for ICs and Generation 10.5+, AMOLED, and LTPS display-based process technologies for FPDs. However, 32 nanometer and above geometries for
semiconductors and Generation 8 and below (excluding AMOLED and LTPS) process technologies for displays, which we refer to as “mainstream” photomasks, constitute the majority of designs currently being fabricated in volume. At these geometries and
at various high-end nodes, we can produce full lines of photomasks. Moreover, there is no significant technology employed by our competitors that is not available to us. We expect advanced-generation designs to continue to be developed, and we
believe we are well positioned to service an increasing volume of this business as a result of our ongoing investments in manufacturing processes and technology in the regions where our customers are located.
Generally, Photronics and each of its customers engage in a qualification and correlation process before we become an approved supplier. Thereafter, based on the customer’s specifications, we typically negotiate
pricing parameters for the customer’s order. Some prices may remain in effect for an extended period of time. In many instances, we enter into sales arrangements with an understanding that, as long as our performance is competitive, we will receive
a specified percentage of that customer’s photomask orders.
The first several layers of photomasks are sometimes required to be delivered to customers within twenty-four hours from the time we receive customer design data. Because of the short period
between order and shipment dates (typically from one day to three weeks) for a significant amount of our revenue, the dollar amount of our current backlog is not a reliable indicator of future revenue. However, the demand for some IC photomasks can
extend beyond the traditional time period; thus, for some products, our backlog can expand to as long as two to three months.
The ability to manufacture high-quality photomasks within short time periods is dependent upon robust processes, efficient manufacturing methods, high production yield, available manufacturing capacity, and high
equipment reliability. We work to meet these requirements by making significant investments in research and development, manufacturing capacity, preventive and on-going equipment maintenance programs, manufacturing and data processing systems, and
by utilizing statistical process control methods to optimize our manufacturing processes and reduce cycle times.
Quality control is an integral part of the photomask manufacturing process. Photomasks are manufactured in temperature, humidity, and particulate-controlled clean rooms because of the high level of precision, quality
and manufacturing yield required. Each photomask is inspected several times during the manufacturing process to ensure compliance with customer specifications. We continue to make substantial investments in equipment to produce, inspect and repair
photomasks to ensure that customer specifications are met.
Sales and Marketing
We conduct our sales and marketing activities primarily through a staff of full-time sales personnel and customer service representatives who work closely with the Company’s management and technical personnel. We
support non-U.S. customers through both our domestic and foreign facilities and consider our presence in non-U.S. markets to be an important factor in attracting new customers, as it provides global solutions to our customers, minimizes delivery
time, and allows us to serve customers that utilize manufacturing foundries outside of the United States, principally in Asia. See Note 10 – Revenue and Note 19 – Risks and Concentrations to our consolidated financial statements in Part II, Item 8
of this report for the amount of revenue and long-lived assets attributable to each of our geographic areas of operations.
Research and Development
We primarily conduct research and development activities for IC photomasks at our Boise, Idaho, facility. Research and development for FPD photomasks is primarily conducted at Photronics Korea, Ltd., our subsidiary
in South Korea. Additionally, we conduct region specific applications development programs to support local, strategic customer roadmaps. All of these research and development programs and activities are undertaken to advance our competitiveness
in technology and manufacturing efficiency. We also conduct data and service technology development efforts to support the integration of photomasks into customer processes at regions worldwide. Currently, research and development for IC
photomasks are primarily focused on photomasks enabling wafer geometries of 7 nanometer node and smaller, including EUV and, for FPDs on Generation 8.6 AMOLED and photomasks for more advanced FPD display integration across all sizes. In addition,
we note the role AI is playing in driving the technology roadmap for IC devices and our technology program covers multiple initiatives to deliver AI grade photomasks in IC and advanced packaging applications. We believe these core competencies
will continue to be a critical part of semiconductor and FPD manufacturing, as wafer and FPD substrate optical lithography continues to enable new high-end ICs and displays. We incurred research and development expenses of $15.8 million, $16.6
million, and $13.7 million in 2025, 2024 and 2023, respectively. It is our belief that we own, control, or license the proprietary information (including trade secrets and patents) that we need to continue to meet our customers’ requirements.
Accordingly, we devote a significant portion of our human and financial resources to R&D programs and seek to maintain close relationships with customers to remain responsive to their needs. We also believe that our intellectual property and
trade secret know-how will continue to be important to maintaining our technical leadership and competitive position in the field of photomasks.
Markets
The customers for photomasks are primarily semiconductor and FPD manufacturers and to a lesser degree fabless design and equipment companies serving those industries. The size of the photomask market is driven by the
number of designs released to support IC and FPD product introductions and manufacturing expansions. The photomasks required for those designs are manufactured by independent merchant manufacturers like Photronics and by semiconductor and FPD
manufacturers that produce photomasks for their own use (captive manufacturers). In rare instances, captive manufacturers also sell to other semiconductor or FPD manufacturers.
The production value of photomasks produced by merchant suppliers has transitioned from a period when there was a trend toward the divestiture or closing of captive photomask operations by semiconductor manufacturers,
and to an increase in the share of the market served by independent merchant manufacturers, like Photronics. This trend was driven by the increased complexity and cost of capital equipment used in manufacturing photomasks, and the lack of economy
of scale for many semiconductor and FPD manufacturers to effectively utilize the equipment.
That period was followed by a period during which, in order to reach certain roadmap milestones, some captive mask facilities invested at faster rates than independent manufacturers, and the revenue share of market
transitioned back to photomasks being majority captive-supplied. More recently, there has been a tendency of more production being directed to the independent merchant manufacturers, with market share moving toward the independents. Nevertheless,
most captive manufacturers maintain business and technology relationships with independent photomask manufacturers for ongoing support.
We support customers across the full spectrum of IC Production by manufacturing photomasks using electron beam or optical (laser-based) lithography systems. In addition, we have added the most advanced electron beam
mask writing system for IC mask writing that employs a multi-beam writing architecture to deliver speed and performance improvements over existing systems. For FPD, the mask fabrication utilizes only optical writing systems to write the mask
patterns. These systems are capable of producing the most advanced semiconductor and display photomasks for use in an array of products. End markets served with IC photomasks include devices used for artificial intelligence, cloud computing,
microprocessors, memory, telecommunications, internet connected devices, automotive, industrial and other applications. We own a number of both high-end and mature electron beam and laser-based lithography systems.
We sell our products primarily to leading semiconductor and FPD designers and manufacturers. These include integrated device manufacturers, fabless semiconductor companies, and “pure-play” foundries. During 2025, we sold our products to
approximately 636 customers. For fiscal year 2025, Customer A, B and C accounted for approximately 16%, 13% and 8%, of consolidated revenue, respectively. For fiscal year 2024, Customer A, B and C accounted for approximately 15%, 12% and 9% of
consolidated revenue, respectively. For fiscal year 2023, Customer A, B and C accounted for approximately 14%, 10% and 13% of consolidated revenue, respectively. No other customer represented 10% or more of consolidated revenue in any of the
three fiscal years. Our five largest customers, in the aggregate, accounted for approximately 50%, 50% and 51% of our revenue in 2025, 2024 and 2023, respectively. A significant decrease in the amount of revenue from any of these customers could
have a material adverse effect on our financial performance and business prospects.
Competition
The photomask industry is highly competitive, and most of our customers utilize multiple photomask suppliers. Our ability to compete depends primarily upon the consistency of our product quality, timeliness of
delivery, competitive pricing, technical capability, and service, which we believe are the principal factors considered by customers in selecting their photomask suppliers. An inability to meet these requirements could adversely affect our
financial condition, results of operations, and cash flows. We also believe that geographic proximity to customers is an important factor in certain markets where cycle time from order to delivery is critical. While some of our competitors may have
greater financial, sales, marketing, or other resources than Photronics, we believe that we are able to compete effectively because of our dedication to customer service, ongoing investments in state-of-the-art photomask equipment and facilities,
and experienced technical employees.
The semiconductor equipment industry is highly competitive and is characterized by a small number of participants ranging in size. Our competitors include Compugraphics International, Ltd., Dai Nippon Printing Co., Ltd
(outside of Taiwan and China), Hoya Corporation, LG Innotek Co., Ltd., Shenzhen Newway Photomask Making Co., Ltd., Shenzhen Qingyi Photomask, Ltd., SK-Electronics Co., Ltd., Taiwan Mask Corporation, and Tekscend Photomask. We also compete with
semiconductor and FPD manufacturers' captive photomask manufacturing operations that supply photomasks for internal use and, in some instances, also for external customers and foundries. We expect to face continued competition which, in the past,
has led to pressure to reduce prices. We believe the pressure to reduce prices, together with the significant investment required in capital equipment to manufacture high-end photomasks will continue in the future.
International Operations
Revenues from our non-U.S. operations were approximately 82%, 83% and 86% of our total revenues in 2025, 2024 and 2023, respectively. We believe that our ability to serve non-U.S. markets is enhanced by
our having, among other things, a local presence in the markets we serve. This requires significant investments in financial, managerial, operational, and other resources.
Sales and operations outside of the United States are subject to inherent risks, and may be adversely affected by fluctuations in currency exchange rates, the imposition of government controls, political and economic
conditions in various countries, legal compliance and regulatory requirements, tariffs and other trade barriers, difficulties with staffing and managing international operations, longer accounts receivable collection cycles, potential restrictions
on transfers of funds, and potentially adverse tax consequences. These factors may have a material adverse effect on our ability to generate revenue outside of the United States and may require us to deploy resources where they could otherwise be
used to their greatest advantage. Note 10 – Revenue and Note 19 – Risks and Concentrations of our consolidated financial statements, in Part II, Item 8 of this report, respectively, present our revenue and long-lived assets by geographic area.
These factors, as well as any of the other risk factors related to our international business and operations including our joint venture operations in China and Taiwan are described in Item 1A “Risk Factors,” could have a material adverse effect on
our future business and financial results.
Resources
Raw materials used by Photronics generally include: high precision quartz substrates (including large area substrates for FPD), which are used as photomask starting blanks and are primarily obtained from Japanese and
South Korean suppliers; pellicles and electronic grade chemicals, which are used in the manufacturing process; and compacts, which are durable plastic containers in which photomasks are shipped. These materials are generally sourced from several
suppliers. We believe that our utilization of a select group of strategic suppliers enables us to access the most technologically advanced materials available. On an ongoing basis, we continue to consider additional supply sources.
We typically enter into annual pricing agreements with our suppliers, some of which include volume-based incentives that have resulted in substantial cost savings; these agreements do not require us to purchase minimum
dollar amounts or quantities of their subject materials.
We rely on a limited number of equipment suppliers to develop and provide the equipment used in the photomask manufacturing process. Although, historically, we have been able to obtain equipment on a timely basis, an
inability to obtain or repair equipment when required could have a material adverse effect on our business and results of operations.
Intellectual Property Rights
We have developed and hold ownership interests in intellectual property (“IP”) rights, in the forms of patents issued in the U.S., and other trademark and trademark registrations in the U.S. and other countries.
Patents in which we hold ownership interests generally relate to the manufacture of photomasks or the use of photomasks to manufacture other products. While we believe that our IP rights are, and will continue to be, important to our technical
leadership in the field of photomasks, our operations are not dependent on any one individual IP right. In addition to patenting, when practicable, we further protect our IP rights, and our other proprietary processes and trade secrets, by
utilizing non-disclosure agreements with employees, customers, and vendors.
Seasonality
Our business is typically impacted during the first quarter of our fiscal year by the North American, European, and Asian holiday periods, as some customers reduce their development and buying activities during those
periods.
Government Contracts
We are party to a limited number of fixed-price contracts with the U.S. government. Revenues earned from these contracts do not comprise a significant portion of our total revenue.
Government Regulation
We are subject to government regulations within the U.S. and in other countries in which we produce or market our products. The effects of compliance with these regulations are currently not material to our results of operations, capital
expenditures, or competitive position. However, compliance with changes to existing or new regulations may have a material adverse effect on our future results of operations, capital expenditures, or competitive position. We discuss the potential
impact of our not adhering to a number of these regulations in Item 1A. “Risk Factors”, of this Form 10-K. The following is a list of major subjects of the regulations that pertain to our business:
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Regulations, such as those under the Foreign Corrupt Practices Act, that prohibit providing remuneration to government officials for the purpose of obtaining or securing business in the jurisdictions in which they serve;
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Regulations that require the minimization and proper disposal of the by-products of our manufacturing processes;
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Regulations that require us to provide a safe working environment for our employees;
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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| Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Overview
Management’s discussion and analysis (“MD&A”) of the Company’s financial condition and results of operations should be read in conjunction with its condensed consolidated financial statements and related notes.
Various sections of this MD&A contain forward-looking statements, all of which are presented based on current expectations, which may be adversely affected by uncertainties and risk factors (presented throughout this filing and in the Company’s
Form 10-K for fiscal year 2025), that may cause actual results to materially differ from these expectations. See “Cautionary Statement Regarding Forward-Looking Statements”.
We sell substantially all of our photomasks to designers and manufacturers of IC and FPD electronic devices. Photomask technology is also being applied to the fabrication of other high-technology products including
advanced packaging modules, micro-optical components for applications such as virtual reality/augmented reality and silicon photonics, micro-electronic mechanical systems (MEMS), and diverse nanotechnology applications. Our selling cycle is tightly
interwoven with the development and release of new semiconductor and display designs and applications, particularly as they relate to the semiconductor industry’s migration to more advanced design nodes and fabrication processes. The demand for
photomasks is primarily correlated with new product design activity and to a lesser extent scaling up of manufacturing of end products. Consequently, an increase in semiconductor or display sales does not always result in a corresponding increase in
photomask sales. To the extent integrated circuit and flat panel display applications rely less on new design activity, it could result in a reduction in demand for photomasks. In addition, new design methodologies driving a reduction in complexity
of photomasks could also reduce demand for photomasks ‒ even if the demand for semiconductors and FPDs increases. More broadly, advances in semiconductor, display, and photomask design and production methods that shift the burden of achieving device
performance away from lithography could also reduce the demand for photomasks. While there is no indication today that such diminishing of long-range photomask demand is occurring or will occur, the microelectronics industry has been volatile,
experiencing periodic downturns and slowdowns in design activity. These negative trends have been characterized by, among other things, diminished product demand, excess production capacity, and accelerated erosion of selling prices with a
concomitant effect on revenue and profitability.
We are typically required to fulfill customer orders within a short period of time, sometimes within twenty-four hours. This results in a minimal level of backlog orders, typically one to two weeks of backlog for IC
photomasks and two to three weeks of backlog for FPD photomasks. However, the demand for some IC photomasks can extend longer than the traditional time period; thus, for some products, our backlog can expand to as long as two to three months.
The global semiconductor and FPD industries are driven by end markets which have broad application in the global economy including but not limited to consumer-driven applications, data centers that support AI
implementation, electric vehicles and national security. While we cannot predict the timing of the industry’s transition to volume production of next-generation technology nodes, or the timing of up and down-cycles with precise accuracy, we believe
that such transitions and cycles will continue into the future, beneficially and adversely affecting our business, financial condition, and operating results as they occur. We believe our ability to remain successful in these environments is
dependent upon the achievement of our goals of being a service and technology leader and efficient solutions supplier, which we believe should enable us to continually reinvest in our global infrastructure.
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.
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.
The photomask industry has been and is expected to continue to be characterized by technological change and evolving industry standards. In order to remain competitive, we will be required to continually anticipate,
respond to, and utilize changing technologies. In particular, we believe that, as semiconductor geometries continue to become smaller and/or more complex, and display designs become larger or otherwise more advanced, we will be required to
manufacture even more complex products, including photomasks with advanced optical proximity correction, insertion of curvilinear patterning and EUV photomasks. Additionally, demand for photomasks has been, and could in the future be, adversely
affected by changes in high-performance electronics fabrication methods that affect the type or quantity of photomasks used, such as changes in semiconductor demand that favor programmable IC devices and other approaches that replace
application-specific ICs, or the use of certain chip-stacking methodologies that lessen the emphasis on conventional lithography technology. Furthermore, increased market acceptance of alternative methods of transferring circuit designs onto
semiconductor wafers could reduce or eliminate the need for photomasks in the production of semiconductors.
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.
The manufacture of photomasks for use in fabricating ICs, FPDs, and other related products built using comparable photomask-based process technologies has been, and continues to be, capital intensive. Our employees and
our integrated global manufacturing network represent a significant portion of our fixed operating cost base. Should our revenue decrease as a result of a decrease in design releases from our customers, we may have excess or underutilized production
capacity, which could significantly impact our operating margins, or result in write-offs from asset impairments.
Results of Operations
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.
The following tables present selected operating information expressed as a percentage of revenue.
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Three Months Ended
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|||||||||||
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February 1,
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October 31,
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February 2,
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|||||||||
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2026
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2025
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2025
|
|||||||||
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Revenue
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100.0
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%
|
100.0
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%
|
100
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%
|
|||||
|
Cost of goods sold
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65.0
|
65.0
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64.4
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||||||||
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Gross profit
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35.0
|
35.0
|
35.6
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||||||||
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Selling, general, and administrative expenses
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9.5
|
9.3
|
9.0
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||||||||
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Research and development expenses
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1.1
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1.5
|
2.0
|
||||||||
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Operating income
|
24.4
|
24.1
|
24.6
|
||||||||
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Other income (expense), net
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8.7
|
11.1
|
11.8
|
||||||||
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Income before income tax provision
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33.1
|
35.2
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36.4
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||||||||
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Income tax provision (benefit)
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6.4
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(1.2
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)
|
8.9
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|||||||
|
Net income
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26.7
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36.4
|
27.5
|
||||||||
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Net income attributable to noncontrolling interests
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7.7
|
7.8
|
7.3
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||||||||
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Net income attributable to Photronics, Inc. shareholders
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19.1
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%
|
28.6
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%
|
20.2
|
%
|
|||||
Revenue
Our quarterly revenues can be affected by the seasonal purchasing practices of our customers. As a result, demand for our products is typically impacted during the first quarter of our fiscal year by the North American,
European, and Asian holiday periods, as some of our customers may adjust their buying activities during those periods.
The following tables present changes in revenue disaggregated by product type and geographic origin, in Q1 FY26 from revenue in prior reporting periods.
Quarterly Changes in Revenue by Product Type ($ in millions)
|
Q1 FY26 compared with Q4 FY25
|
Q1 FY26 compared with Q1 FY25
|
|||||||||||||||||
|
Revenue in
|
Increase
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Percent
|
Increase
|
Percent
|
||||||||||||||
|
Q1 FY26
|
(Decrease)
|
Change
|
(Decrease)
|
Change
|
||||||||||||||
|
IC
|
||||||||||||||||||
|
High-end *
|
$
|
71.3
|
$
|
5.5
|
8.3
|
%
|
$
|
11.2
|
18.6
|
%
|
||||||||
|
Mainstream
|
94.0
|
2.4
|
2.6
|
%
|
0.2
|
0.2
|
%
|
|||||||||||
|
Total IC
|
$
|
165.3
|
$
|
7.9
|
5.0
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%
|
$
|
11.4
|
7.4
|
%
|
||||||||
|
FPD
|
||||||||||||||||||
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High-end *
|
$
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46.9
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$
|
(1.8
|
)
|
(3.7
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%)
|
$
|
(2.7
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)
|
(5.5
|
%)
|
||||||
|
Mainstream
|
12.8
|
3.2
|
33.9
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%
|
4.3
|
50.8
|
%
|
|||||||||||
|
Total FPD
|
$
|
59.8
|
$
|
1.4
|
2.5
|
%
|
$
|
1.6
|
2.7
|
%
|
||||||||
|
Total Revenue
|
$
|
225.1
|
$
|
9.3
|
4.3
|
%
|
$
|
13.0
|
6.1
|
%
|
||||||||
* High-end photomasks typically have higher ASPs than mainstream products.
Quarterly Changes in Revenue by Geographic Origin ($ in millions) **
|
Q1 FY26 compared with Q4 FY25
|
Q1 FY26 compared with Q1 FY25
|
|||||||||||||||||
|
Revenue in
|
Increase
|
Percent
|
Increase
|
Percent
|
||||||||||||||
|
Q1 FY26
|
(Decrease)
|
Change
|
(Decrease)
|
Change
|
||||||||||||||
|
Taiwan
|
$
|
74.3
|
$
|
7.0
|
10.4
|
%
|
$
|
1.3
|
1.8
|
%
|
||||||||
|
China
|
62.7
|
4.6
|
8.0
|
%
|
9.2
|
17.1
|
%
|
|||||||||||
|
South Korea
|
41.1
|
4.1
|
11.1
|
%
|
0.8
|
2.1
|
%
|
|||||||||||
|
United States
|
37.4
|
(6.1
|
)
|
(14.1
|
%)
|
0.5
|
1.4
|
%
|
||||||||||
|
Europe
|
8.8
|
(0.2
|
)
|
(1.7
|
%)
|
0.8
|
10.6
|
%
|
||||||||||
|
Other
|
0.8
|
(0.1
|
)
|
(16.8
|
%)
|
0.4
|
62.8
|
%
|
||||||||||
|
Total revenue
|
$
|
225.1
|
$
|
9.3
|
4.3
|
%
|
$
|
13.0
|
6.1
|
%
|
||||||||
** This table disaggregates revenue by the location in which it was earned.
Revenue in Q1 FY26 of $225.1 million represented an increase of 4.3% compared with Q4 FY25 and an increase of 6.1% from Q1 FY25 primarily due to year-over-year growth in more advanced geometries and overall semiconductor industry growth.
IC revenue increased $7.9 million or 5.0% in Q1 FY26 from Q4 FY25 primarily due to an increase in high-end of $5.5 million or 8.3% as a result of the accelerated demand in Asia before Chinese New Year. Comparing Q1 FY26
to Q1 FY25, IC revenue increased $11.4 million or 7.4% mainly due to higher demand for high-end products in Asia.
FPD revenue increased $1.4 million or 2.5% in Q1 FY26 from Q4 FY25 and $1.6 million or 2.7% from Q1 FY25 as a result of strong demand in mainstream from the China IT display market.
Gross Margin ($ in millions)
|
Percent
|
Percent
|
||||||||||||||
|
Q1 FY26
|
Q4 FY25
|
Change
|
Q1 FY25
|
Change
|
|||||||||||
|
Gross profit
|
$
|
78.7
|
$
|
75.5
|
4.2
|
%
|
$
|
75.5
|
4.2
|
%
|
|||||
|
Gross margin
|
35.0
|
%
|
35.0
|
%
|
35.6
|
%
|
|||||||||
Gross margin remained unchanged in Q1 FY26 compared with Q4 FY25, as a favorable product mix was offset by higher labor and benefits costs.
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.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $21.3 million in Q1 FY26, compared with $20.0 million in Q4 FY25, and $19.1 million in Q1 FY25. The $1.3 million increase from Q4 FY25 and $2.2 million increase from Q1 FY25 were primarily the
result of higher labor and benefits costs.
Research and Development Expenses
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 $1.7 million from Q1 FY25, as a result of less labor and benefits costs and less development activity in the U.S.
Other Income (Expense), net ($ in millions)
|
Q1 FY26
|
Q4 FY25
|
Q1 FY25
|
||||
|
Foreign currency transactions impact, net
|
$
|
12.9
|
$
|
18.6
|
$
|
18.4
|
|
Interest income and other income, net
|
6.8
|
5.3
|
6.6
|
|||
|
Other income (expense), net
|
$
|
19.7
|
$
|
23.9
|
$
|
25.0
|
Other Income decreased $4.2 million in Q1 FY26 from Q4 FY25 and $5.3 million from Q1 FY25, primarily due to foreign currency impacts. The foreign currency impacts were primarily driven by less favorable movements of the South Korean won and the
New Taiwan dollar, against the U.S. dollar.
Income Tax Provision ($ in millions)
|
Q1 FY26
|
Q4 FY25
|
Q1 FY25
|
|||||||
|
Income tax provision
|
$
|
14.4
|
$
|
(2.7
|
)
|
$
|
18.9
|
||
|
Effective income tax rate
|
19.3
|
%
|
(3.5
|
)%
|
24.5
|
%
|
|||
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for
Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates were January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries continue to implement similar
legislation with varying effective dates. The Company is currently subject to Pillar Two, but we estimate that the financial impact is currently immaterial. We will continuously evaluate the potential impact of the Pillar Two Framework as future
changes in legislation are enacted.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes significant changes to federal tax law and other regulatory provisions that may impact the Company. As the
legislation enacted applies to tax years beginning after December 31, 2024, the impacts are effective starting in FY26. The Company has evaluated applicable provisions of the OBBBA for FY26 and has included the estimated impacts within the FY26
provision.
The effective income tax rate is sensitive to the jurisdictional mix of earnings.
The effective income tax rate increased in Q1 FY26, compared with Q4 FY25, primarily due to the U.S. federal and state valuation allowance releases recorded in Q4 FY25.
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.
Net Income Attributable to Noncontrolling Interests
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.
Liquidity and Capital Resources
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.
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.
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.
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.
As discussed in Note 6 – PDMCX Joint Venture of 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 $169.4 million.
Cash Flows ($ in millions)
|
Q1 FY26
|
Q1 FY25
|
|||||
|
Net cash provided by operating activities
|
$
|
97.3
|
$
|
78.5
|
||
|
Net cash (used in) provided by investing activities
|
$
|
(40.3
|
)
|
$
|
6.8
|
|
|
Net cash provided by (used in) financing activities
|
$
|
0.7
|
$
|
(20.5
|
)
|
|
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.
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.
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.
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.
Non-GAAP Financial Measures
Non-GAAP Net Income attributable to Photronics, Inc. shareholders and non-GAAP diluted earnings per share attributable to Photronics, Inc. shareholders are “non-GAAP financial measures” as such term is defined by
Regulation G of the Securities and Exchange Commission and may differ from similarly named non-GAAP financial measures used by other companies. The financial tables below reconcile Photronics, Inc. financial results under U.S. GAAP to our non-GAAP
financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate the Company’s on-going performance because they enable a more meaningful comparison of historical results
of the Company’s core business. These non-GAAP metrics are not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to Net income (loss), Net income (loss) per share, or any other measure of
consolidated results under U.S. GAAP. The items excluded from these non-GAAP metrics but included in the calculation of their closest U.S. GAAP equivalent, are significant components of the condensed consolidated statement of income and must be
considered in performing a comprehensive assessment of overall financial performance.
The following table reconciles U.S. GAAP net income and diluted earnings per share attributable to Photronics, Inc. shareholders to the non-GAAP net income and diluted earnings per share attributable to Photronics, Inc.
shareholders for the indicated periods. The columns may not foot due to rounding.
|
Three Months ended
|
|||||||||||
|
Feb 1,
|
Oct 31,
|
Feb 2,
|
|||||||||
|
2026
|
2025
|
2025
|
|||||||||
|
Reconciliation of U.S. GAAP to non-GAAP net income:
|
|||||||||||
|
U.S. GAAP net income attributable to Photronics, Inc. shareholders
|
$
|
42,939
|
$
|
61,801
|
$
|
42,851
|
|||||
|
FX (gain) loss
|
(12,865
|
)
|
(18,615
|
)
|
(18,443
|
)
|
|||||
|
Estimated tax effects of FX (gain) loss
|
2,553
|
4,781
|
|||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-04-17 | ZHANG RUI | VP, CAO & Corporate Controller | Sell | -4,556 | $46.70 | -$212,765 |
| 2026-04-16 | Lee Kang Jyh | Director | Sell | -20,000 ×2 | $45.92 | -$918,500 |
| 2026-04-15 | Lee Kang Jyh | Director | Sell | -10,000 | $45.10 | -$451,000 |
| 2026-04-14 | Wang Hsueh-Chun | SVP/COO IC & US/EU Mnstrm Ops | Sell | -19,250 | $45.30 | -$872,025 |
| 2026-04-14 | MACRICOSTAS CONSTANTINE S indirect | Director | Sell | -50,000 | $45.35 | -$2,267,500 |
| 2026-04-13 | Rivera Eric | President, CFO | Sell | -1,000 | $44.77 | -$44,770 |
| 2026-04-13 | Lee Kang Jyh | Director | Sell | -5,000 | $45.00 | -$225,000 |
| 2026-04-09 | Lee Kang Jyh | Director | Sell | -5,000 | $44.00 | -$220,000 |
| 2026-04-09 | Rivera Eric | President, CFO | Sell | -41,517 ×2 | $44.00 | -$1,826,748 |
| 2026-04-09 | Wang Hsueh-Chun | SVP/COO IC & US/EU Mnstrm Ops | Sell | -11,875 | $44.25 | -$525,469 |
| 2026-04-08 | Lee Kang Jyh | Director | Sell | -5,000 | $43.27 | -$216,350 |
| 2026-04-08 | Wang Hsueh-Chun | SVP/COO IC & US/EU Mnstrm Ops | Sell | -10,000 | $42.69 | -$426,900 |
| 2026-04-08 | ZHANG RUI | VP, CAO & Corporate Controller | Sell | -1,752 | $43.50 | -$76,212 |
| 2026-04-08 | MACRICOSTAS GEORGE | CEO | Sell | -121,194 ×3 | $42.94 | -$5,203,718 |
| 2026-04-06 | Lee Kang Jyh | Director | Sell | -5,000 | $40.53 | -$202,650 |
| 2026-04-01 | Lee Kang Jyh | Director | Sell | -5,000 | $42.00 | -$210,000 |
| 2026-04-01 | Wang Hsueh-Chun | SVP/COO IC & US/EU Mnstrm Ops | Sell | -10,000 ×3 | $42.08 | -$420,831 |
| 2026-04-01 | TYSON MITCHELL G | Director | Sell | -10,000 | $42.31 | -$423,100 |
| 2026-03-26 | Lee Kang Jyh | Director | Sell | -5,000 | $40.80 | -$204,000 |
| 2026-03-23 | Lee Kang Jyh | Director | Sell | -10,000 | $39.00 | -$390,000 |
| 2026-03-19 | Lee Kang Jyh | Director | Sell | -10,000 | $35.80 | -$358,000 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-09-09 10-Q expected by 2026-09-10 (in 90 days)
- ~2026-12-18 10-K expected by 2026-12-25 (in 190 days)
- ~2027-03-11 10-Q expected by 2027-03-12 (in 273 days)
- ~2027-06-11 10-Q expected by 2027-06-12 (in 365 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-28 8-K Earnings Release; Financial Statements and Exhibits
- 2026-03-11 10-Q Quarterly Report
- 2026-02-25 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-13 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-01-07 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-01-02 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-12-17 10-K Annual Report
- 2025-12-10 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-09 10-Q Quarterly Report
- 2025-08-27 8-K Earnings Release; Financial Statements and Exhibits
- 2025-07-02 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-06-11 10-Q Quarterly Report
- 2025-05-28 8-K Earnings Release; Officer/Director Change; Financial Statements and Exhibits
- 2025-05-02 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-04-17 8-K Officer/Director Change; Financial Statements and Exhibits