Photronics Inc
NASDAQ:PLAB
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
20.51
33.84
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Photronics Inc
You don't have any saved screeners yet
Good day, and thank you for standing by. Welcome to Photronics' Second Quarter 2024 Earnings Conference Call.
[Operator Instructions]
As a reminder, this conference is being recorded Wednesday, May 22, 2024. I would now like to turn the conference over to Richelle Burr, Chief Administrative Officer. Please go ahead.
Thank you, Olivia. Good morning, everyone. Welcome to our review of Photronics Fiscal 2024 Second Quarter Results. Joining me this morning are Frank Lee, our Chief Executive Officer; Chris Progler, our Chief Technology Officer; and Eric Rivera, our Interim Chief Financial Officer and Chief Accounting Officer. The press release we issued earlier this morning, together with the presentation material that the company's remarks are available on the Investor Relations section of our web page.
Comments made by any participants on today's call may include forward-looking statements that include such words as anticipate, believe, estimate, expect, forecast, and in our view. These forward-looking statements are based upon a number of risks, uncertainties and other factors that are difficult to predict. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of the presentation to conform these statements to actual results.
During the course of our discussion, we will refer to certain non-GAAP financial metrics. These numbers are useful for analysts, investors and management to evaluate ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials. At this time, I will turn the call over to Frank.
Thank you Richelle, and good morning, everyone. Second quarter sales increased slightly from the first quarter as a positive seasonality trends were mostly offset by temporary market soft risk following the Chinese New Year holiday and the impact from earthquake in Taiwan.
On April 3, a major earthquake hit Taiwan where we have 3 manufacturing facilities. I'm happy to report that our people are safe, and there was no significant damage to our size or equipment. The strength of the earthquake and following after shock impact our production through to downtown as we must investigate to ensure there's no damage to our facilities and manufacturing equipment. In addition, we must repair or reject [indiscernible] process as a part of the events.
Our IC and FPD teams in Taiwan are experienced in dealing with these events and nearly all tools were fully recover within a few days. However, the loss of production time and in-process inventory results in a reduction in sales of approximately $3 million. Order rates at the beginning of Q2 was strong. Continuing the positive trend we saw at the end of Q1 and consistent with the high order rates we typically see ahead of the Lunar New Year holiday. Following the holiday, we usually see increasing bookings as customers return to work. This year, the order rate was lower than our expectation. In addition, the timing of earthquake following the holiday further reduced bookings, causing April revenue to be solved. Since then, order rates have increased, and we are entering the third quarter with higher confidence.
These factors contribute to sales of $270 million in the second quarter. IC sales improved quarter-over-quarter while FDC decreased. Compared with the first quarter, gross margin was similar and operation margin was slightly lower as we had higher R&D expense driven by an increase in qualification activity. As a result, reported EPS was $0.58 on an adjusted basis, EPS was $0.46. Cash flow was good during the quarter and we further strengthened our balance sheet to position us to invest in multiple growth opportunity we have, especially in IC.
I would like to recognize the dedication of the global Photronics team this quarter to achieve these results, especially in Taiwan that respond to the added change. Turning to the market, reversing the trend seen over the previous 3 quarters, our IC mainstream sales increased, mainly driven by market share gains. High-end was down primarily due to lower U.S. demand. Consistent with most of the end users within the overall semiconductor environment, actually improving into our fiscal Q3 and Q4 across most IC segments and regions.
High-end FPD was softer as AMOLED design demand has not yet ramped ahead of new premium smartphones that will begin production ahead of launches. Longer term, we remain optimistic regarding positive demand trends for both IC and FPD. IC customers in Asia continue to migrate to smaller design nodes including 22 and 28 nanometers. We are well positioned to capture this business. We also expect mega trends such as AI, to drive chip design activity to handle AI workloads and edge processors.
We expect a wide range of IC type to be developed in support of this AI ecosystem from GPU, CPU and ASIC to high-bar memory and power electronics. We also continue to expect trends in supply chain regionalization to drive market demand, auto mask demand in support of new plan. For this plan, despite near term soft leasing demand, we remain optimistic long-term. Mobile device continues to be introduced with new displays that contain advanced features enabled by higher-value photo market. In addition, panel makers continue development efforts to extend AMOLED technology into bigger displays such as tablets and LED coms. We will see AMOLED produce on G8.5 panels.
Our FPD solution are relying upon for new designs, for new display R&D cycles and the most demanding mass production of advanced displays. Overall, we maintain an optimistic long-term outlook for mass demand and see many positive factors that support market node growth trends across Asia, U.S. and Europe. We believe our strong customer relations, including long-term purchase agreement coupled with leading technology and high output capacity should allow us to outgrow the photomask industry.
As we do, our proven ability and commitment to keep cost low should enable us to expand margins and generate strong cash flow allowing us to continue invest in growth. At this time, I will turn the call over to Eric to review our second quarter results and provide third quarter guidance.
Thank you, Frank, and good morning, everyone. Second quarter revenue of $217 million was slightly higher than the first quarter. There were headwinds that limited growth in a period that is typically up on seasonality, including the Taiwan earthquakes and soft demand following the Chinese New Year. IC revenue growth was mixed. Quarter-over-quarter improved as robust mainstream demand more than offset high-end weakness primarily in the U.S.
On a year-over-year comparison, IC was down as strong high-end volumes shipped to foundries in Asia were more than offset by lower mainstream demand. Order rates at the beginning of Q3 give us confidence for the upcoming quarter, and we remain confident on the long-term outlook for IC photomask demand. FPD revenue was lower sequentially and year-over-year with softness in both high-end and mainstream. Seasonally soft high-end trends are heightened due to the earthquake and FX headwinds.
Looking into the third quarter, demand for mobile display mask is expected to pick up on seasonality trends ahead of anticipated all launches of new premium smartphones. Gross margin was 36.5%, essentially the same as the first quarter and down from last year primarily due to lower premium charges. The resulting operating margin was 25.8%, down from last quarter and last year.
Operating expenses were higher this quarter due to increased R&D as we had a high level of qualification activity. This bodes well for future demand as most qualifications result in incremental revenues. On that note, on the IC side, we process qualification masks from EUV and sub-14-nanometer through midrange and mainstream nodes in logic and memory. We also plan to enter qualifications of our new TP mask writer in Q3 representing Photronics commitment to the highest end of IC mask making.
On SPD, we saw increasing utilization of our advanced phase shift mask indicating higher-value lithography processes under development by our customers, as Frank highlighted. Net income in the quarter was $36.3 million or $0.58 per diluted share on a GAAP basis. After adjusting for nonoperating FX gain, non-GAAP net income was $28.7 million or $0.46 per diluted share. We generated $76.5 million in operating cash flow and CapEx was $20 million in the quarter.
We still expect total CapEx of $140 million in 2024, primarily in both high-end and mainstream IC to address anticipated demand growth while ensuring we're increasing our return on invested capital. We ended the quarter with a cash balance of $539.2 million, short-term investments of $20.7 million and debt of $21.8 million, allowing sufficient liquidity to fund investments in organic growth. Before I provide guidance, I'll remind you that our visibility is always limited as our backlog is typically only 1 to 3 weeks and demand for some of our products is inherently uneven and difficult to predict.
Additionally, the ASPs for high-end mask sets are high. And as this segment of the business grows, a relatively low number of high-end orders can have a can have a significant impact on our quarterly revenue and earnings. Given those caveats, we expect the third quarter revenue to be in the range of $221 million to $229 million. We expect positive photomask demand momentum that was interrupted by the Chinese New Year to resume and continue through the third quarter. Based on those revenue expectations in our current operating model, we estimate non-GAAP earnings per share for the third quarter to be in the range of $0.53 to $0.59 per diluted share. This assumes an operating margin of between 28% and 30% as we continue to keep costs under control and maximize profitability.
We faced some unique challenges in the second quarter. Despite this, we achieved sales slightly above Q1 levels and were able to maintain good margins. Positive order rates as we exited the second quarter are encouraging for our third quarter and full year outlook. We continue to perform well and build on our solid financial foundation to profitably grow and create shareholder value in 2024 and beyond. I'll now turn the call over to the operator for your questions.
[Operator Instructions]
Our first question coming from the line of Tom Diffely with DA Davidson.
This is Linda Umwali on behalf of Tom Diffely. So to start, very sorry to hear about the impact of the earthquake, and we're glad to hear everyone there was safe. So it's a good thing to hear.
So my first question will be on that. If I heard you correctly, the impact on the quarter from the earthquake was $3 million? Or it was that just on production and inventory? And maybe if you could clarify and quantify how much the earthquake impact was? And how much of it is embedded in your guidance for the July quarter?
Hello, Linda, thank you for asking the question. This is Eric. So we had a $3 million impact, like we mentioned related to the earthquake. Most of that was production lost time. In terms of materials or anything else, it was not significant. The majority of it was production last time.
Okay. And so no impact, go ahead.
Yes. So with respect to -- is that embedded in our forecast. That was a onetime event for us as the earthquake just impacted this quarter.
Okay, I see. And still on the earthquake impact, I might have missed it, but is there any impact on the CapEx plans for this year? Or are you still thinking the $140 million that you had mentioned last quarter? Because I'm thinking given the repairs that might have to take place as you are still investigating. Would that have any change on that? And what could be that in FPD?
We don't expect that to change our $140 million expected CapEx for the year.
Okay. So could you remind me again what the split would be FPD and IC?
It's mostly, IC. There is no FPD there, but it's mostly IC.
Got it. And going to overall revenue, it remains around 5% below your prior year levels. And you mentioned that the rent in order rate was lower than expectations following the Lunar New Year. Could you cast through what is happening here. Why do you continue to see such low levels of growth? And are you seeing impacts primarily from end market weakness, share losses, given notice to new competitors or do a new program?
Linda, thank you. In the past, a lot of customers, like the desirous customers, they tapeout before the New Year holiday. So people can take off for the holiday. And we see a very heavy bookings both in high-end and mainstream before the holidays. And normally, after the holiday, the order will recover step by step.
But this year, it seems to be slower than the past and so we still have very strong first 2 months in the quarter, but mainly because of the order before the New Year. And in the month of April, the new order come in, the rate of new order coming kind of slow, especially in the high end. So it do impact the April output. And the market seems to be very volatile. It's not quarter-by-quarter. It's a month-to-month, especially in the high end because the higher order, every single set is a much higher price. So the impact is bigger than mainstream business.
However, at the end of April and going into Q3, we do see orders start to recover and based on the seasonality. Q3 typically is a good month, s a good quarter for Taiwan. So we are expecting the high-end order, especially we reached to the good level in this quarter.
So seems like high-end is expected to be doing well in the upcoming quarters. So if you think about mainstream, you mentioned a softer demand environment this quarter. Is that what you're expecting in the next quarter as well? Or -- and would the softness there? Is it in certain segments or across the board? Maybe give us more color on how the demand environment looks like there, maybe current lead times and maybe touch on pricing as well?
In the mainstream segment, because a lot of new fabs, especially in China, they are ramping up in the mainstream business. So compared to the previous quarters, mainstream demand actually very consistent and increasing quarter-by-quarter. And in the past several quarters, we do increase our capacity to support our mainstream business.
In previous 2 years because of capacity limitation, our lead time for mainstream product kind of relative low and so we did not take as many mainstream order as we can.
By starting this year, we do have some mainstream new capacity and we start to take more order and that reflect in our growth in the mainstream IC business.
Okay. Got it. And then maybe, Eric, to looking at gross margins, quite flat from first quarter and down from last year. And I believe you mentioned it was due to some premium charges, lower premier charges. Could you touch on that? And then are you thinking for next quarter?
Sure. So yes, as you mentioned, our premium charges are much lower this year than they were last year. And that explains the decrease in revenue and our margin. With respect to our margin levels, for the rest of the year, I don't expect them to be much different than what they are at the current level.
Okay. So if the demand environment changes, are you still expecting same levels?
I'm sorry, say it again, I'm sorry.
Even when expecting an upturn on the horizon. Are you thinking the same for next year and second half this year as well?
The premium may not come back. However, because of the better product mix more high end, especially in 22 and 28-nanometer product. Our branded ASP to increase quarter-by-quarter. So if we compare with last year, even the premium disappear our overall gross margin actually increased quarter-by-quarter. So it's nice to have premium charge. But we know it's not a long-term event. So we put a lot of effort to improve our product mix such that the branded ASP can be higher.
Our next question coming from the line of Eric Gregg with Four Tree Island Advisory.
Good to hear about the orders recovering at the end of April and looking good and going into May and the minimal impact despite the earthquake. And I guess the first question is on the earthquake. I'm not too familiar with how photomasks might fare in a disruptive earthquake like that.
Do you expect that there was some damage to photo mask that were being used in the market at the time and that, that should lead to some photomasks to be scrapped or serviced and that could lead to a potential bump in future quarter revenues?
Yes. During the earthquake, most of our equipment has a safe protection system. So if the earthquake is over a certain scale, the tool will shut down automatically to protect the tool. And at the same time, if there are any photomask in the process inside the tool, that photomask will be considered incomplete. So it cannot continue the process. It has to be rejected.
And certain photomasks, for example, if it is in a cleaning process, then we may have to check that is any defect or contamination on the mask and some can be repaired, some cannot be repaired. We have to reject it. So none of the damaged or impact mask will go to customers However, there will be a reject or repair in the production line.
Thank you and ladies and gentlemen, there are no further questions at this time. I will now turn the call back over to Mr. Frank Lee for closing comments.
Okay. Thank you for joining us this morning. We had a slower than expected start to 2024 and the earthquake in early April impact our results. Yet, we remain optimistic that we can achieve another year of solid results. The team is performing well. The long-term outlook for our market is supported by positive mega trends such as AI, and we are in a good position to benefit due to our global presence and advanced technology. I look forward to updating you on our progress. Thank you.
Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line at this time.