Photronics, Inc.

Good day, and welcome to the Photronics Q4 FY24 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference is being recorded Wednesday, December 11, 2024. I would now like to turn the conference over to Ted Moreau, Vice President, Investor Relations.

Thank you, Operator. Good morning, everyone. Welcome to our review of Fortronics' fiscal 2024 fourth quarter results. Joining me this morning are Frank Lee, CEO, Eric Rivera, CFO, and Chris Progler, CTO. The press release we issued earlier this morning, together with the presentation material that accompanies our remarks, are available on the Investor Relations section of our website. 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 that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. We are under no duty to update any of the four looking statements after the date of the presentation to conform these statements to our actual results. During the course of our discussion, we will refer to certain non-GAAP financial metrics. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials. During our fiscal first quarter, we will be participating in the New York CEO Summit on December 17th and the Needham Growth Conference in New York on January 14th. I will now turn the call over to Frank.

Thank you, Ted, and good morning, everyone. Before we begin, I would like to take a moment to welcome Ted Murrow, who joined us during our fourth quarter as the head of investor relations. Ted has extensive experience in capital markets and the technology industry. having previously worked on both the sales side and investor relations. We are excited to have him as part of our team as we expand our engagement with investors. We deliver a strong fourth quarter with sales above the high end of guidance. Sales of $223 million were driven by high-end IC and G10.5 plus FPD. Four-year sales of 867 million were down slightly from the record level we established in 2023, with 2024 coming in as the second highest sales in our history. Regarding the ICM markets, demand turned positively this quarter primarily for high-end designs in Asia and the U.S. Leading-edge AI chips are driving marginal mass demand to support a rapidly expanding AI ecosystem. This, combined with government-subsidized supply chain expansion of ICs into all corners of the digital economy, will push the mass industry forward for the next several years. As one of the largest merchant ICMAS producers, with strong global presence, leading market share, process expertise, and broad marketing technology, we have positioned ourselves to benefit from these favorable long-term trends. Turning to Disprex. Similar to IC masks, FPD mask demand is driven by new designs, product roadmaps, and panel manufacturing capacity. Compressed high-end ASP mask sets are needed to support AMOLED and LTPS mobile display manufacturing. Larger display size, such as those built on G10.5 plus panel lines, requires larger photo masks which are difficult to manufacture and hence command higher ASPs. As the largest global MPD mask supplier, our broad set of MPD mask solutions allow panel makers to design new features in their products. We are excited about a future opportunity in MPD and are well positioned to maintain and extend our leadership. Q4 net income of $34 million contributed to record net income of $131 million for the full year. These results translate once again into strong cash flow for both the quarter and full year, further strengthening our balance sheet. Over the past 12 months, We have increased cash and short-term investment by $128 million up to $641 million. We have the financial flexibility to invest in strategic initiatives such as global footprint expansion, product development, and MMA as we continue to evolve our existing network and capture growth opportunities. In 2024, we spent $131 million on CapEx. We are mainly deploying this capital to expand IC capacity and capability in the growing US and Asia markets, while also replacing end-of-life equipment to improve network reliability and productivity. In 2025, we plan to spend 200 million with a large focus on our U.S. multi-site capacity and capability to capture regional IC growth opportunities. Coming to the China market, eight years ago, we had little presence in China as we did not have production in the country. We have successfully installed and scaled our operations in China from our IC facility in Xiamen and FDD facility in Hefei. China is one of the largest and 30th growing region for semiconductor and display production, with mass demand projected to all growth supply. We expect China to continue to be a profitable growth engine for the company, thanks to our sustainable competitive advantages. Furthermore, as evidence of our local customer support, our long-term purchase agreements have secured our market leading position. As the largest U.S. S-Photomart producer, we have positioned ourselves as a market leader, to benefit from long-term industry drivers including regionalization trends. We will continue to invest in profitable growth. We will also leverage our competitive advantage to maintain our status as a trusted source of photo masks and help our customers achieve their technology roadmap. I will now turn the call to Eric to review our fourth quarter results and provide first quarter guidance.