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PI

PHOTRONICS INC (PLAB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue of $222.6M rose 6% q/q and came in above the high end of prior guidance ($213–$221M); non-GAAP EPS of $0.59 also exceeded the guided range ($0.48–$0.54) as high-end IC and G10.5+ FPD drove mix, while GAAP EPS was $0.54 .
  • Operating margin was 25.1% in Q4 (flat-to-up q/q), with gross margin ~37%; opex elevated on R&D qualification activity and outside services, though management targets opex returning to ~10% of revenue going forward .
  • Q1 FY25 guidance embeds typical seasonality and Lunar New Year: revenue $208–$216M, operating margin 23–25%, non-GAAP EPS $0.43–$0.49, taxes $17–$19M; full-year FY25 capex planned at ~$200M, focused on expanding U.S. IC capacity to capture regionalization-driven demand .
  • Balance sheet remains a strength: cash and ST investments $640.7M vs. $606.4M in Q3; debt down to $18.0M. $100M repurchase authorization in place supports capital return optionality alongside growth investments .

What Went Well and What Went Wrong

  • What Went Well

    • High-end IC strength: +21% q/q high-end IC sales on stronger logic foundry demand in the U.S. and Asia; overall IC revenue +5% q/q to $163.7M .
    • Execution vs guidance: Q4 revenue ($222.6M) and non-GAAP EPS ($0.59) both exceeded guided ranges; management cited favorable photomask demand into year-end .
    • Cash generation and liquidity: Q4 OCF $68.4M; cash & ST investments $640.7M; debt reduced to $18.0M, providing flexibility for U.S. capacity expansion and buybacks .

  • What Went Wrong

    • Year-over-year declines: Revenue -2% y/y; GAAP EPS fell to $0.54 from $0.72; FPD revenue -7% y/y on softer premium smartphone demand .
    • Opex uptick: SG&A and R&D rose due to qualification activity and outside services; management expects normalization to ~10% of revenue, but near-term headwind persisted in Q4 .
    • Limited visibility and uneven demand: Management emphasized 1–3 week backlog and high ASP sensitivity to a small number of high-end orders; mainstream IC mid-quarter softness, though stabilized late in quarter .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$227.5 $211.0 $222.6
GAAP Diluted EPS ($)$0.72 $0.55 $0.54
Non-GAAP Diluted EPS ($)$0.60 $0.51 $0.59
Gross Profit ($M)$84.9 $75.1 $82.3
Gross Margin (%)37.3% (84.9/227.5) 35.6% (75.1/211.0) ~37.0% (82.3/222.6)
Operating Income ($M)$64.8 $52.1 $55.8
Operating Margin (%)28.5% (64.8/227.5) 24.7% (slide) 25.1% (slide)
Cash from Operations ($M)N/A$75.1 $68.4

Notes:

  • Q4 results vs estimates: Wall Street consensus from S&P Global was unavailable at time of analysis due to data access limits; comparisons to consensus are therefore not shown (see “Estimates Context”) [GetEstimates error].

Segment revenue (Q4 2024):

  • IC: $163.7M (-1% y/y, +5% q/q); High-end $60.1M (+4% y/y, +21% q/q), Mainstream $103.7M (-3% y/y, -3% q/q) .
  • FPD: $58.9M (-7% y/y, +7% q/q); High-end $48.4M (-9% y/y, flat q/q), Mainstream $10.5M (+8% y/y, +57% q/q) .
Segment ($M)Q3 2024Q4 2024Q/QY/Y (Q4)
IC Total$155.9 $163.7 +5% -1%
- IC High-End$49.5 $60.1 +21% +4%
- IC Mainstream$106.4 $103.7 -3% -3%
FPD Total$55.1 $58.9 +7% -7%
- FPD High-End$48.4 $48.4 Flat -9%
- FPD Mainstream$6.7 $10.5 +57% +8%

KPIs and balance sheet (quarter-end):

KPI ($M)Q3 2024Q4 2024
Operating Cash Flow$75.1 $68.4
Capital Expenditures$24.4 $43.2
Cash & ST Investments$606.4 $640.7
Debt$20.1 $18.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Revenue ($M)Q4 2024$213–$221 $222.6 Above high end (beat)
Non-GAAP EPS ($)Q4 2024$0.48–$0.54 $0.59 Above high end (beat)
Operating Margin (%)Q4 202425–27 25.1 In line
Taxes ($M)Q4 202415–17 14.6 Lower than guide
Revenue ($M)Q1 2025—$208–$216 New guide (seasonal)
Operating Margin (%)Q1 2025—23–25 New guide
Taxes ($M)Q1 2025—17–19 New guide
Non-GAAP EPS ($)Q1 2025—$0.43–$0.49 New guide
Full-year Capex ($M)FY25—200 Higher vs FY24 actual $131

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
AI/Technology initiativesAI/IoT cited as secular drivers; maintained pricing in favorable dynamics AI/IoT, EUV outsourcing expanding TAM AI ecosystem driving demand around GPUs (edge chips, memory); EUV record revenue in FY24 Strengthening demand adjacency to AI
Supply chain/regionalizationRegionalization driving global fab investments; TAM lift for merchant masks Regionalization supports investments; planning capacity to capitalize $200M FY25 capex skewed to U.S. sites to meet regionalization-driven demand Capex accelerating in U.S.
Product performance (IC)IC $160.9M; high-end down q/q, up y/y; strong Asia foundry demand IC $155.9M; high-end down q/q on Asia; memory up q/q/y/y IC $163.7M; high-end +21% q/q, strong U.S./Asia logic; mainstream softer mid-quarter Mix shift back to high-end
Product performance (FPD)FPD $56.1M; high-end down on low-end smartphones FPD $55.1M; high-end +1% q/q; mainstream -17% q/q FPD $58.9M; mainstream +57% q/q; high-end flat as G10.5+ offset soft premium smartphones Sequential improvement led by mainstream
Regional trendsChina recovery slower post-LNY; Taiwan earthquakes impact Asia softness impacted demand China remains growth engine; LT purchase agreements; U.S. expansion a priority China profitable growth focus; U.S. capacity build
R&D executionIncreased qual activity raised opex Lower sequential opex aided EPS Elevated R&D (7nm optical qual; EUV high-NA; multi-beam tool) with revenue payoffs ahead Investing through downturn
Macro/geopoliticalHeadwinds and uncertainty cited in outlook Similar caution Q1 guide embeds seasonality; outlook “cautiously optimistic” Cautious stance maintained

Management Commentary

  • “We delivered a strong fourth quarter with sales above the high end of guidance... demand turned positively this quarter, primarily for high-end designs in Asia and the U.S.” – Frank (KangJyh) Lee, CEO .
  • “Gross margin of 37% in Q4 was flat year-over-year... We anticipate operating expenses returning to our target of 10% of revenue.” – Eric Rivera, CFO .
  • “In 2025, we anticipate CapEx will grow to $200 million with most of the increase earmarked to expand our IC investment in the U.S.” – Eric Rivera .
  • “AI ecosystem... peripheral circuitry around the GPU... edge network chips... memory in data centers... ASICs for inference.” – Christopher Progler, executive .

Q&A Highlights

  • OpEx normalization: Elevated SG&A and R&D in Q4 (some nonrecurring labor/benefits and outside services). Management expects OpEx to revert to ~10% of revenue .
  • FY25 capex ($200M): Majority for new capacity (not greenfield) primarily in the U.S.; some tool replacements; supports both current and new fabs over next ~3 years .
  • Mainstream IC health: Supply-demand imbalances have rationalized; mainstream remains healthy, with stable to growing demand in U.S./Europe/Taiwan; some competitive pressure in China .
  • Industry growth: Photomask demand seen growing over next three years, with AI and regionalization as drivers; focus on raising mix in China, and U.S. capacity/capability expansion .
  • AI exposure: Commercial opportunities in edge/network chips, AI-tuned memory, and ASICs for inference, even as leading-edge GPU masks remain largely captive .

Estimates Context

  • S&P Global consensus for Q4 FY2024 (revenue and EPS) was not available at time of analysis due to data access limits; as a result, explicit comparisons to Wall Street consensus are not shown. We anchored evaluation to company guidance and actuals (beats vs prior guidance) and will update estimates context upon access restoration [GetEstimates error].

Key Takeaways for Investors

  • Mix recovery and execution: Sequential rebound led by high-end IC (+21% q/q) and mainstream FPD; both revenue and non-GAAP EPS beat the high end of guidance, underscoring execution in an uneven demand environment .
  • Margin resilience: Operating margin held 25.1% despite higher opex from qualification activity; management targets OpEx normalization to ~10% of revenue, a potential EPS tailwind as volumes grow .
  • Capacity-led growth strategy: FY25 capex of ~$200M focused on U.S. multi-site IC capacity/capability is a key medium-term growth lever tied to regionalization and customer commitments; expect returns as new projects ramp through mid-2026 .
  • Liquidity strength: $640.7M cash & ST investments with only $18.0M debt provides ample flexibility for capex, M&A, and up to $100M buybacks; balance sheet de-risks execution .
  • Near-term seasonality: Q1 FY25 guide reflects Lunar New Year and typical seasonality; investors should expect a softer first quarter before potential reacceleration with AI/ASIC projects and U.S. capacity adds .
  • Demand drivers broadening: AI-related edge/network chips, data center memory, and inference ASICs offer accessible growth vectors for merchant photomasks beyond captive GPU masks .
  • Watch items: Visibility remains limited (1–3 week backlog) and premium smartphone demand softness can weigh on high-end FPD; competitive dynamics in China mainstream warrant mix discipline .

Other relevant Q4 period press releases:

  • Participation in 13th Annual NYC Summit (Dec 12, 2024) .
  • Board member appointment (Dec 18, 2024) .
  • Hiring of VP & General Counsel (Nov 21, 2024) .

Citations:

  • Q4 FY24 8-K press release, financials, and slides .
  • Q4 FY24 standalone press release mirror .
  • Q4 FY24 earnings call transcript .
  • Q3 FY24 8-K, financials, and slides for prior-quarter comparisons and guidance .
  • Q2 FY24 8-K and slides for trend analysis .