Photronics, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Photronix third quarter fiscal year 2024 earnings 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 would need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded on Thursday, August 29th, 2024. I would like now to turn the conference over to Eric Rivera, Chief Financial Officer. Please go ahead.

Thank you, Michelle. Good morning, everyone. Welcome to our review of Fortronix fiscal 2024 third quarter results. Joining me this morning are Frank Lee, our Chief Executive Officer, and Chris Progler, our Chief Technology Officer. The press release we issued earlier this morning, together with the presentation material that accompanies our remarks, are available on the investor relations sections of our webpage. Comments made by any participants on today's calls may include forward-looking statements that include such words as anticipate, believe, estimate, expect, forecast, and interview. These forward-looking statements are based upon a number of risks, uncertainties, and other factors that are difficult to predict. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We're 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'll turn the call over to Frank.

Thank you, Eric, and good morning, everyone. Third quarter sales came in lighter than we expected. due to soft demand from Azure Foundry as a strong order rate at the beginning of the quarter lost momentum. Lingering macro uncertainty and customer concern on elevated inventory caused some to limit or defer releasing new designs. As a result, photomask demand slowed, reloading in lower sales for both IC and FPD. High-end logic mask orders decreased while our memory business improved in the quarter. High-end APD improved due to demand for AMOLED masks used for mobile displays as companies prepare for model release in the recovering smartphone market. Compared with the second quarter, gross margin decreased due to the impact of lower revenue. operation expenses were slightly lower than the second quarter. EPS was $0.55. After adjusting for an FX gain, long gap EPS was $0.51, higher than last quarter and the same as last year. We continue to generate strong operation cash, giving us added flexibility to invest in growth while also maintaining a strong balance sheet. As a result, we are announcing an increase of our existing share repurchase program to $100 million. Eric will share details in a few minutes, but we believe this is the right time to restart our share repurchase activity and enhance our capital allocation framework. Based on our optimism in the long-range photo mass market, we are also evaluating several growth options, including strategic expansion, partnerships, and other possibilities in the US, Europe, and Asia. We are maintaining flexibility to act quickly in support of our global customers and partners. while remaining disciplined to ensure our investment meets financial objectives. I am very pleased with the way our team has performed during the quarter. They have taken care of the customers while managing costs and maximizing cash to maintain financial strength. We have a great team at Fortranis. and they are navigating the challenges well. Turning to the market, I would like to comment on the trend we are seeing. Photon mask demand is driven mostly by design activity. Several long-term trends such as AI, mobile computing, and increased IC content in automotive, energy, and consumer applications drive new designs in both leading-edge and legacy technology nodes, all requiring new photo masks. As the global leader in IC mask units, we see a high level of new product qualification across the node spectrum, each with projected revenue opportunities. These all play with to our multi-node strengths and is a positive long-term trend for our business. In addition to new designs, photomask demand is driven by an increase in wafer manufacturing capacity. New fares are being built globally to meet the growth in applications such as data centers that are needed to support AI. And to support an increase in supply chain regeneration. This is a positive long-term trend for photo mass demand. Due to our broad geographical footprint, capacity, and suite of technologies, we are able to provide all of our customers photo mass needs. We supply nearly all leading logic web with strong market share especially in Taiwan, China, and Korea. In U.S. and Europe, we are seeing the initial signs of growing demand for regionalization. Turning to display, innovation is mostly due to new features in mobile displays and to a lesser degree, new TV technologies that improve performance. On the mobile display, this trend was largely supported by new premium smartphones, higher screen resolution, and the need to add additional functions such as fingerprint sensor and cameras, while reducing power required new advanced mask sets. AMOLED continues to be introduced into larger size screens. such as tablets and laptops, and the development is underway to produce AMOLED on G8.6 glass. These trends all require high-quality photo masks. As the technology leader in FCD masks, we are well-positioned to benefit from these trends and grow. demand is being challenged by dynamic market conditions, we remain optimistic regarding the long-term market outlook. Our competitive advantages, including strong customer relations, long-term purchase agreements, leading technology, and broad global capacity, position us to continue to outgrow the photo mass industry. Our ability to control costs and manage cash should allow us to continue to invest in profitable growth and deliver shareholder value. At this moment, I will turn the call to Eric to review our third quarter results and provide fourth quarter guidance.