Photronics, Inc.

Good day and thank you for standing by. Welcome to Patronix's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. As a reminder, this conference is being recorded Wednesday, May 22, 2024. I would now like to turn the conference over to Rochelle Burr, Chief Administrative Officer. Please go ahead.

Thank you, Livia. 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 materials, that accompanies our remarks are available on the investor relations section of our web page. Comments made by any participant 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 gap financial results is provided in our presentation materials. At this time, I will turn the call over to Frank.

Thank you, Michelle, and good morning, everyone. Second quarter sales increased slightly from the first quarter as a positive seasonality trends were mostly offset by temporary market softness following the Chinese New Year holiday and the impact from earthquake in Taiwan. On April 3rd, a major earthquake hit Taiwan where we have three manufacturing facilities. I'm happy to report that our people are safe and there was no significant damage to our sites or equipment. The strength of the earthquake and following aftershocks 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 masks that were in process at the time of the events. Our IC and FPD teams in Taiwan are experienced in dealing with these events, and nearly all tours were fully recovered 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 were 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 rent in order rates was lower than our expectation. In addition, the terminal earthquake following the holiday further reduced booking, causing April revenue to be soft. Since then, order rates have increased and we are entering the third quarter with higher confidence. These factors contribute to sales of $217 million in the second quarter. IC sales improved quarter over quarter while FPD decreased. Compared with the first quarter, growth 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, Report EPS was $0.58. On an adjusted base, EPS was $0.46. Cash flow was good during the quarter, and we further strengthened our balance sheet to position us to invest in the multiple growth opportunity we have, especially in IC. I would like to recognize the dedication of the global photonics team this quarter to achieve these results, especially those in Taiwan that respond to the added challenge. Turning to the market, reversing the trend seen over the previous three 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, we see the overall semiconductor environment gradually improving into our physical Q3 and Q4 across most IC segments and regions. INAPD wire software as Emily designed demand has not yet ramp ahead on new premium smartphones that will soon begin production ahead of fall launches. Longer term, we remain optimistic regarding positive demand trend for both IC and LPD. 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 megatrends such as AI to drive chief design activity to handle AI workloads and edge processes. We expect a wide range of IC types to be developed in support of this AI ecosystem, from GPU, CPU, and ASIC, to high-band memory and power electronics. We also continue to inspect transient supply chain regionalization to drive market demand, biomass demand, in support of new FEM. For display, despite near-term softness in demand, we remain optimistic long-term. Mobile devices continue to be introduced with new displays that contain advanced features. enabled by higher-value photo masks. In addition, panel makers continue development efforts to extend AMOLED technology into bigger displays, such as tablets and laptops. We will soon see AMOLED produce GA-positive panels. Our MPD mask solutions are relied upon for new design for new displays on these 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 multi-node growth trends across Asia, US, 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 photo mass industry. As we do, our proven ability and commitment to keep costs low should enable us to expand margins and generate strong cash flow. allowing us to continue investing in growth. At this time, I will turn the call over to Eric to review our second quarter results and provide third quarter benefits.