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What changed in PHOTRONICS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PHOTRONICS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+170 added−168 removedSource: 10-K (2024-12-19) vs 10-K (2023-12-26)

Top changes in PHOTRONICS INC's 2024 10-K

170 paragraphs added · 168 removed · 141 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest change“High-end” photomasks support 28 nanometer and smaller design nodes for ICs and Generation 10.5+, AMOLED, and LTPS display-based process technologies for FPDs. However, 32 nanometer and above geometries for semiconductors and Generation 8 and below (excluding AMOLED and LTPS) process technologies for displays, which we refer to as “mainstream” photomasks, constitute the majority of designs currently being fabricated in volume.
Biggest changeHowever, 32 nanometer and above geometries for semiconductors and Generation 8 and below (excluding AMOLED and LTPS) process technologies for displays, which we refer to as “mainstream” photomasks, constitute the majority of designs currently being fabricated in volume. At these geometries and at various high-end nodes, we can produce full lines of photomasks.
We conduct our sales and marketing activities primarily through a staff of full-time sales personnel and customer service representatives who work closely with the Company's management and technical personnel.
Sales and Marketing We conduct our sales and marketing activities primarily through a staff of full-time sales personnel and customer service representatives who work closely with the Company’s management and technical personnel.
Currently, research and development for IC photomasks are primarily focused on photomasks enabling wafer geometries of 14 nanometer node and smaller, including EUV and, for FPDs, on Generations 8 and 10 substrate size photomasks for new TV technologies, emerging opportunities for micro- and mini-LED displays, and photomask technology for the complex FPD photomasks required in the manufacture of advanced mobile displays, such as AMOLED.
Currently, research and development for IC photomasks are primarily focused on photomasks enabling wafer geometries of 14 nanometer node and smaller, including EUV and, for FPDs, on Generations 8 and 10 substrate size photomasks for new TV technologies, emerging opportunities for micro- and mini-LED displays, and photomask technology needed for the complex FPD photomasks required in the manufacture of advanced mobile displays, such as AMOLED.
The following is a list of major subjects of the regulations that pertain to our business: • Regulations, such as those under the Foreign Corrupt practices Act that prohibit providing remuneration to government officials for the purpose of obtaining or securing business in the jurisdictions in which they serve; • Regulations that require the minimization and proper disposal of the by-products of our manufacturing processes; • Regulations that require us to provide a safe working environment for our employees; • Regulations that restrict our ability to transfer assets between operations not within the same legal jurisdiction; • Regulations that require us to provide information through the submission of government surveys; • Regulations that require us to maintain an effective system of internal accounting controls; • Regulations that prohibit us from engaging in business in specified countries, or with specified customers; • Regulations that require us to protect the personal information of our customers and employees; • Regulations that require us to accurately determine our liabilities to taxing authorities, and to settle such liabilities within their statutorily prescribed time periods; • Regulations that require us to withhold and timely remit taxes on our employees’ compensation to government authorities; • Regulations that require us to contribute to government-sponsored social insurance plans; • Regulations that require us to contribute to employee severance plans; • Regulations that prohibit us from disseminating material nonpublic information prior to the public announcement of such information; • Regulations pertaining to financial reporting, insider transactions, executive compensation, and other areas overseen by the SEC and governing bodies in other countries in which our operations are located.
The following is a list of major subjects of the regulations that pertain to our business: • Regulations, such as those under the Foreign Corrupt Practices Act that prohibit providing remuneration to government officials for the purpose of obtaining or securing business in the jurisdictions in which they serve; • Regulations that require the minimization and proper disposal of the by-products of our manufacturing processes; • Regulations that require us to provide a safe working environment for our employees; • Regulations that restrict our ability to transfer assets between operations not within the same legal jurisdiction; • Regulations that require us to provide information through the submission of government surveys; • Regulations that require us to maintain an effective system of internal accounting controls; • Regulations that prohibit us from engaging in business in specified countries, or with specified customers; • Regulations that require us to protect the personal information of our customers and employees; • Regulations that require us to accurately determine our liabilities to taxing authorities, and to settle such liabilities within their statutorily prescribed time periods; • Regulations that require us to withhold and timely remit taxes on our employees’ compensation to government authorities; • Regulations that require us to contribute to government-sponsored social insurance plans; • Regulations that require us to contribute to employee severance plans; 9 Table of Contents • Regulations that prohibit us from disseminating material nonpublic information prior to the public announcement of such information; • Regulations pertaining to financial reporting, insider transactions, executive compensation, and other areas overseen by the SEC and governing bodies in other countries in which our operations are located.
We have eleven manufacturing facilities, which are located in Taiwan (3), China (2), Korea, the United States (3), and Europe (2). Our principal executive offices are located at 15 Secor Road, Brookfield, Connecticut, 06804, telephone (203) 775-9000. Our website address is http://www.photronics.com.
We have eleven manufacturing facilities, which are located in Taiwan (3), China (2), Korea (1), the United States (3), and Europe (2). Our principal executive offices are located at 15 Secor Road, Brookfield, Connecticut, 06804, telephone (203) 775-9000. Our website address is http://www.photronics.com.
We support customers across the full spectrum of IC production and FPD technologies by manufacturing photomasks using electron beam or optical (laser-based) lithography systems. For IC photomasks, the predominant writing technology used for advanced photomasks with fine-scale resolution requirements is electron beam writing systems, while FPD mask fabrication utilizes optical writing systems.
We support customers across the full spectrum of IC and FPD production by manufacturing photomasks using electron beam or optical (laser-based) lithography systems. For IC photomasks, the predominant writing technology used for advanced photomasks with fine-scale resolution requirements is electron beam writing systems, while FPD mask fabrication utilizes optical writing systems.
More recently, there has been a tendency of more production being directed to the independent merchant manufacturers, and market share has begun moving toward the independents. Nevertheless, most captive manufacturers maintain business and technology relationships with independent photomask manufacturers for ongoing support.
More recently, there has been a tendency of more production being directed to the independent merchant manufacturers, with market share moving toward the independents. Nevertheless, most captive manufacturers maintain business and technology relationships with independent photomask manufacturers for ongoing support.
Sales We manufacture photomasks, which are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates. The photomasks we manufacture incorporate circuit designs provided to us on a confidential basis by our customers. Photomasks are typically sold in sets comprised of layers, with each layer having a distinct pattern that is etched onto a different photomask.
Industry We manufacture photomasks, which are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates. The photomasks we manufacture incorporate circuit designs provided to us on a confidential basis by our customers. Photomasks are typically sold in sets comprised of layers, with each layer having a distinct pattern that is etched onto a different photomask.
We also believe that our intellectual property and trade secret know-how will continue to be important to maintaining technical leadership in the field of photomasks. 6 Table of Contents Markets The customers for photomasks are primarily semiconductor and FPD manufacturers and to a lesser degree fabless design and equipment companies serving those industries.
We also believe that our intellectual property and trade secret know-how will continue to be important to maintaining our technical leadership and competitive position in the field of photomasks. 6 Table of Contents Markets The customers for photomasks are primarily semiconductor and FPD manufacturers and to a lesser degree fabless design and equipment companies serving those industries.
Factors that may affect our ability to attract and retain qualified employees include employee morale, our reputation, competition from other employers, and availability of qualified individuals. As of October 31, 2023, none of our employees at any of our worldwide facilities was represented by a union. We consider our employee relations to be good.
Factors that may affect our ability to attract and retain qualified employees include employee morale, our reputation, competition from other employers, and availability of qualified individuals. As of October 31, 2024, none of our employees at any of our worldwide facilities was represented by a union. We consider our employee relations to be good.
Government Contracts We are party to a limited number of fixed-price contracts with the U.S. government. Revenues earned from these contracts do not comprise a significant portion of our total revenue. 9 Table of Contents Government Regulation We are subject to government regulations within the U.S. and in other countries in which we produce or market our products.
Government Contracts We are party to a limited number of fixed-price contracts with the U.S. government. Revenues earned from these contracts do not comprise a significant portion of our total revenue. Government Regulation We are subject to government regulations within the U.S. and in other countries in which we produce or market our products.
That period was followed by a period during which, in order to reach certain roadmap milestones, some captive mask facilities invested at faster rates than independent manufacturers, and the revenue share of market transitioned to masks being majority captive-supplied.
That period was followed by a period during which, in order to reach certain roadmap milestones, some captive mask facilities invested at faster rates than independent manufacturers, and the revenue share of market transitioned back to photomasks being majority captive-supplied.
However, the demand for some IC photomasks can extend over the traditional time period; thus, for some products, our backlog can expand to as long as two to three months. 5 Table of Contents The ability to manufacture high-quality photomasks within short time periods is dependent upon robust processes, efficient manufacturing methods, high production yield, available manufacturing capacity, and high equipment reliability.
However, the demand for some IC photomasks can extend over the traditional time period; thus, for some products, our backlog can expand to as long as two to three months. The ability to manufacture high-quality photomasks within short time periods is dependent upon robust processes, efficient manufacturing methods, high production yield, available manufacturing capacity, and high equipment reliability.
In addition to salaries, these programs, which vary by country/region, can include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs, and tuition assistance.
In addition to salaries, these programs, which vary by country/region, can include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs, and tuition assistance. 10 Table of Contents
We believe the pressure to reduce prices, together with the significant investment required in capital equipment to manufacture high-end photomasks will continue in the future. International Operations Revenues from our non-U.S. operations were approximately 86%, 85% and 84% of our total revenues in 2023, 2022 and 2021, respectively.
We believe the pressure to reduce prices, together with the significant investment required in capital equipment to manufacture high-end photomasks will continue in the future. International Operations Revenues from our non-U.S. operations were approximately 83%, 86% and 85% of our total revenues in 2024, 2023 and 2022, respectively.
Co., Ltd. accounted for approximately 14%, 15% and 17% of our total revenues in 2023, 2022 and 2021, respectively, and revenue from Samsung Electronics Co., Ltd. accounted for approximately 10%, 11% and 12% of our total revenues in those respective years.
Co., Ltd. accounted for approximately 15%, 14% and 15% of our total revenues in 2024, 2023 and 2022, respectively, and revenue from Samsung Electronics Co., Ltd. accounted for approximately 12%, 10% and 11% of our total revenues in those respective years.
We believe these core competencies will continue to be a critical part of semiconductor and FPD manufacturing, as wafer and FPD substrate optical lithography continues to enable new high-end ICs and displays. We incurred research and development expenses of $13.7 million, $18.3 million, and $18.5 million in 2023, 2022 and 2021, respectively.
We believe these core competencies will continue to be a critical part of semiconductor and FPD manufacturing, as wafer and FPD substrate optical lithography continues to enable new high-end ICs and displays. We incurred research and development expenses of $16.6 million, $13.7 million, and $18.3 million in 2024, 2023 and 2022, respectively.
Human Capital As of October 31, 2023, we had approximately 1,885 full-time and part-time employees worldwide. Our business results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent.
Human Capital As of October 31, 2024, we had approximately 1,878 full-time and part-time employees worldwide. Our business results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent.
Resources Raw materials used by Photronics generally include: high precision quartz plates (including large area plates), which are used as photomask blanks and are primarily obtained from Japanese and Korean suppliers; pellicles and electronic grade chemicals, which are used in the manufacturing process; and compacts, which are durable plastic containers in which photomasks are shipped.
Resources Raw materials used by Photronics generally include: high precision quartz substrates (including large area substrates for FPD ), which are used as photomask starting blanks and are primarily obtained from Japanese and Korean suppliers; pellicles and electronic grade chemicals, which are used in the manufacturing process; and compacts, which are durable plastic containers in which photomasks are shipped.
We sell our products primarily to leading semiconductor and FPD designers and manufacturers. These include integrated device manufacturers, fabless semiconductor companies, and “pure-play” foundries. During 2023, we sold our products to approximately 696 customers. Revenue from United Microelectronics Corp.
We sell our products primarily to leading semiconductor and FPD designers and manufacturers. These include integrated device manufacturers, fabless semiconductor companies, and “pure-play” foundries. During 2024, we sold our products to approximately 675 customers. Revenue from United Microelectronics Corp.
These factors may have a material adverse effect on our ability to generate revenue outside of the United States and may require us to deploy resources where they could otherwise be used to their greatest advantage and, consequently, may adversely affect our financial condition and results of operations.
These factors may have a material adverse effect on our ability to generate revenue outside of the United States and may require us to deploy resources where they could otherwise be used to their greatest advantage.
In addition, revenue from Semiconductor Manufacturing International Corporation accounted for approximately 13%, 5% and 3% of our total revenues in 2023, 2022 and 2021, respectively. Our five largest customers, in the aggregate, accounted for approximately 51%, 45% and 43% of our revenue in 2023, 2022 and 2021, respectively.
In addition, revenue from Semiconductor Manufacturing International Corporation accounted for approximately 9%, 13% and 5% of our total revenues in 2024, 2023 and 2022, respectively. Our five largest customers, in the aggregate, accounted for approximately 50%, 51% and 45% of our revenue in 2024, 2023 and 2022, respectively.
See Notes 9 and 17 to our consolidated financial statements in Part II, Item 8 of this report for the amount of revenue and long-lived assets attributable to each of our geographic areas of operations.
See Note 10 and Note 18 to our consolidated financial statements in Part II, Item 8 of this report for the amount of revenue and long-lived assets attributable to each of our geographic areas of operations.
These systems are capable of producing the most advanced semiconductor and display photomasks for use in an array of products. End markets served with IC photomasks include devices used for microprocessors, memory, telecommunications, the Internet of Things, crypto mining, and other applications. We own a number of both high-end and mature electron beam and laser-based lithography systems.
These systems are capable of producing the most advanced semiconductor and display photomasks for use in an array of products. End markets served with IC photomasks include devices used for artificial intelligence, cloud computing, microprocessors, memory, telecommunications, internet connected devices, automotive, industrial and other applications. We own a number of both high-end and mature electron beam and laser-based lithography systems.
Operations outside of the United States are subject to inherent risks, including fluctuations in currency exchange rates, political and economic conditions in various countries, legal compliance and regulatory requirements, tariffs and other trade barriers, difficulties in staffing and managing international operations, longer accounts receivable collection cycles, potential restrictions on transfers of funds, and potentially adverse tax consequences.
Sales and operations outside of the United States are subject to inherent risks, and may be adversely affected by fluctuations in currency exchange rates, the imposition of government controls, political and economic conditions in various countries, legal compliance and regulatory requirements, tariffs and other trade barriers, difficulties with staffing and managing international operations, longer accounts receivable collection cycles, potential restrictions on transfers of funds, and potentially adverse tax consequences.
ITEM 1. BUSINESS General Photronics, Inc. (and its subsidiaries, collectively referred to herein as “Photronics”, the “Company”, “we”, “our”, or “us”) is the world's leading manufacturer of photomasks, which are high precision photographic quartz or glass plates containing microscopic images of electronic circuits.
(and its subsidiaries, collectively referred to herein as “Photronics”, the “Company”, “we”, “our”, or “us”) is one of the world’s leading manufacturers of photomasks, which are high precision photographic quartz or glass plates containing microscopic images of electronic circuits.
We provide all employees a wide range of career development opportunities, both formal and informal. Our formal offerings include tuition reimbursement, leadership development experiences and vocational training.
We provide all employees a wide range of career development opportunities, both formal and informal. Our formal offerings include tuition reimbursement, leadership development experiences and vocational training. The safety of our employees is a paramount value for us.
Notes 9 and 17 of our consolidated financial statements, in Part II, Item 8 of this report, respectively, present our revenue and long-lived assets by geographic area.
Notes 10 – Revenue and Note 18 – Risks and Concentrations of our consolidated financial statements, in Part II, Item 8 of this report, respectively, present our revenue and long-lived assets by geographic area.
In rare instances, captive manufacturers also sell to other semiconductor or FPD manufacturers. The value of masks produced by merchant suppliers has transitioned from a period when there was a trend toward the divesture or closing of captive photomask operations by semiconductor manufacturers, and an increase in the share of the market served by independent merchant manufacturers.
The production value of photomasks produced by merchant suppliers has transitioned from a period when there was a trend toward the divesture or closing of captive photomask operations by semiconductor manufacturers, and to an increase in the share of the market served by independent merchant manufacturers , like Photronics .
We expect advanced-generation designs to continue to be developed, and we believe we are well positioned to service an increasing volume of this business as a result of our ongoing investments in manufacturing processes and technology in the regions where our customers are located.
Moreover, there is no significant technology employed by our competitors that is not available to us. We expect advanced-generation designs to continue to be developed, and we believe we are well positioned to service an increasing volume of this business as a result of our ongoing investments in manufacturing processes and technology in the regions where our customers are located.
Such programs are designed to support employees' physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors. Additionally, we provide robust compensation and benefits.
We provide our employees with access to a variety of innovative, flexible and convenient health and wellness programs. Such programs are designed to support employees’ physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors. Additionally, we provide robust compensation and benefits.
The safety of our employees is a paramount value for us. 10 Table of Contents We provide mandatory safety trainings in our production facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to minimize risks. Supervisors complete safety management courses as well.
We provide mandatory safety trainings in our production facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to minimize risks. Supervisors complete safety management courses as well. The health and wellness of our employees are critical to our success.
While some of our competitors may have greater financial, sales, marketing, or other resources than Photronics, we believe that we are able to compete effectively because of our dedication to customer service, ongoing investments in state-of-the-art photomask equipment and facilities, and experienced technical employees. 7 Table of Contents We estimate that, for the types of photomasks we manufacture (IC and FPD), the size of the total market (captive and merchant) is approximately $7.5 billion.
While some of our competitors may have greater financial, sales, marketing, or other resources than Photronics, we believe that we are able to compete effectively because of our dedication to customer service, ongoing investments in state-of-the-art photomask equipment and facilities, and experienced technical employees. 7 Table of Contents Using market data from research firm Tech Insights, the total market for IC photomasks is approximately 7.8B USD (2023) and, based on internal estimates, the total market for FPD masks is approximately 930M USD (2023).
The exposed areas are developed and etched to imprint the pattern on the photomask. The photomask is then inspected for defects and conformity to the customer's design data. After the repair of any defects, the photomask is cleaned, any required pellicles (protective translucent cellulose membranes) are applied and, after final inspection, the photomask is shipped to the customer.
The exposed areas are developed and etched to imprint the pattern on the photomask. The photomask is then inspected for defects and conformity to the customer's design data.
It is our belief that we own, control, or license the proprietary information (including trade secrets and patents) that we need to continue to meet our customers’ requirements.
It is our belief that we own, control, or license the proprietary information (including trade secrets and patents) that we need to continue to meet our customers’ requirements. Accordingly, we devote a significant portion of our human and financial resources to R&D programs and seek to maintain close relationships with customers to remain responsive to their needs.
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At these geometries and at various high-end nodes, we can produce full lines of photomasks. Moreover, there is no significant technology employed by our competitors that is not available to us.
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ITEM 1. BUSINESS Specific industry and technical terms used in this section are defined in the subsection entitled “Glossary of Terms and Acronyms,” found below the Table of Contents. Business Overview Photronics, Inc.
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The health and wellness of our employees are critical to our success. We provide our employees with access to a variety of innovative, flexible and convenient health and wellness programs.
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Segment We operate as a single reporting segment as a manufacturer of photomasks, which are high precision quartz or glass plates containing microscopic images of electronic circuits for use in the fabrication of IC’s and FPDs.
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In accordance with ASC 280 – “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.
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Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.
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All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.
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After the repair of any defects, the photomask is cleaned, any required pellicles (protective translucent membranes) are applied and, after final inspection, the photomask is shipped to the customer. 5 Table of Contents “High-end” photomasks support 28 nanometer and smaller design nodes for ICs and Generation 10.5+, AMOLED, and LTPS display-based process technologies for FPDs.
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In rare instances, captive manufacturers also sell to other semiconductor or FPD manufacturers.
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These factors, as well as any of the other risk factors related to our international business and operations that are described in Item 1A “Risk Factors,” could have a material adverse effect on our future business and financial results.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe risk of loss of our intellectual property, trade secrets, or other sensitive business or customer confidential information or disruption of operations due to cyberattacks or data breaches could negatively impact our financial results. Cyberattacks or data breaches could compromise confidential, business-critical information, cause disruptions in our operations, expose us to potential litigation, or harm our reputation.
Biggest changeCyberattacks or data breaches could compromise confidential, business-critical information, cause disruptions in our operations, expose us to potential litigation, or harm our reputation. We have important assets, including intellectual property, trade secrets, and other sensitive, business-critical and/or confidential information which may be vulnerable to such incidents.
In particular, we believe that, as semiconductor geometries continue to become smaller and FPDs become larger or otherwise more advanced, we will be required to manufacture photomasks of increasingly more challenging complexity. Moreover, the demand for photomasks in non-leading-edge nodes may increase beyond our ability to meet our customers’ requirements within adequate response times.
In particular, we believe that, as semiconductor geometries continue to become smaller and FPDs become larger or otherwise more advanced, we will be required to manufacture photomasks of increasingly challenging complexity. Moreover, the demand for photomasks in non-leading-edge nodes may increase beyond our ability to meet our customers’ requirements within adequate response times.
However, we cannot offer assurances that unasserted or potential future assessments would not have a material adverse effect on our financial condition or results of operations. Our products and technology could be subject to U.S. export control laws and the export control laws of the foreign jurisdictions where we operate.
However, we cannot offer assurances that unasserted or potential future assessments would not have a material adverse effect on our financial condition or results of operations. Our products and technology could be subject to U.S. export control laws and /or the export control laws of the foreign jurisdictions where we operate.
If such differences caused a joint venture to deviate from its business plan, or put , change of control or other exit or termination provisions triggered, our results of operations could be materially adversely affected. Our operations in China expose us to substantial risks. In 2019, we commenced operations at our two manufacturing facilities in China.
If such differences caused a joint venture to deviate from its business plan, or put, change of control or other exit or termination provisions are triggered, our results of operations could be materially adversely affected. Our operations in China expose us to substantial risks. In 2019, we commenced operations at our two manufacturing facilities in China.
In addition, as tensions have, from time to time, escalated between the U.S. and China, we believe there is an enhanced risk that our substantial investments in China may be subject to unforeseen restrictions, which may include expropriation of the investments by the Chinese government or restrictions imposed on our operations by the U.S. or other countries.
In addition, as tensions have, from time to time, escalated between the U.S. and China, we believe there is an enhanced risk that our substantial investments in China may be subject to unforeseen or additional restrictions, which may include expropriation of our investments by the Chinese government or restrictions imposed on our operations by the U.S. or other countries.
Factors that may influence the price of our common stock include, but are not limited to, the following: • loss of any of our key customers or suppliers; • additions or departures of key personnel; • third party sales of common stock; • short interest in our common stock; • our ability to execute our business plan, including but not limited to, our expansion into China; • announcements and consummations of business acquisitions; • operating results that fall below or exceed expectations; • announcements of forecasted earnings or material transactions; • issuances or repurchases of our common stock; • intellectual property disputes; • reputational damage suffered with or without merit; • industry developments; • news about or disclosures made by our competitors or customers; • business combinations, divestitures, or bankruptcies by customers, suppliers, or competitors; • economic and other external factors including (but not limited to) inflation, recessions, natural disasters, military actions, political instability, or social unrest; and • period to period fluctuations in our financial results.
Factors that may influence the price of our common stock include, but are not limited to, the following: • loss of any of our key customers or suppliers; • additions or departures of key personnel; • third party sales of common stock; • short interest in our common stock; • our ability to execute our business plan, including but not limited to, our expansion into China; • announcements and consummations of business acquisitions; • operating results that fall below or exceed expectations; • announcements of forecasted earnings or material transactions; 19 Table of Contents • issuances or repurchases of our common stock; • intellectual property disputes; • reputational damage suffered with or without merit; • industry developments; • news about or disclosures made by our competitors or customers; • business combinations, divestitures, or bankruptcies by customers, suppliers, or competitors; • economic and other external factors including (but not limited to) inflation, recessions, natural disasters, military actions, political instability, or social unrest; and • period to period fluctuations in our financial results.
In order to remain competitive, we will be required to continually anticipate, respond to, and scale technologies of increasing complexity in both traditional and emerging markets that we serve.
In order to remain competitive, we will be required to continually anticipate, respond to, and scale technologies of increasing complexity in both the traditional and emerging markets that we serve.
Our business could be materially adversely affected by terrorist acts, widespread outbreaks of infectious diseases (such as COVID-19), government responses emplaced to limit the impact of infectious diseases (such as shelter-in-place directives), or the outbreak or escalation of wars including, but not limited to, the invasion of Ukraine by the Russian Federation.
Our business could be materially adversely affected by terrorist acts, widespread outbreaks of infectious diseases , government responses emplaced to limit the impact of infectious diseases (such as shelter-in-place directives), or the outbreak or escalation of wars including, but not limited to, the invasion of Ukraine by the Russian Federation.
We sell substantially all of our photomasks to semiconductor or FPD designers, manufacturers and foundries, as well as to other high-performance electronics manufacturers. We believe that the demand for photomasks depends primarily on design activity rather than sales volume from products using photomask technologies.
We sell substantially all of our photomasks to semiconductor or FPD designers, manufacturers and foundries, or to other high-performance electronics manufacturers. We believe that the demand for photomasks depends primarily on design activity rather than sales volume from products using photomask technologies.
Accordingly, should our sales volumes decline as a result of a decrease in design releases from our customers or for any other reason, we may have excess or underutilized production capacity which could significantly impact our operating margins or result in write-offs from asset impairments. 16 Table of Contents Regulatory Related Risk Factors Additional taxes could adversely affect our financial results.
Accordingly, should our sales volumes decline as a result of a decrease in design releases from our customers or for any other reason, we may have excess or underutilized production capacity which could significantly impact our operating margins or result in write-offs from asset impairments. Regulatory Related Risk Factors Additional taxes could adversely affect our financial results.
The consolidation of semiconductor manufacturers, or an economic downturn in the semiconductor industry, may increase the likelihood of losing a significant customer and could also have an adverse effect on our financial performance and business prospects. Financing Related Risk Factors Our cash flows from operations and current holdings of cash may not be adequate for our current and long-term needs.
The consolidation of semiconductor manufacturers, or an economic downturn in the semiconductor industry, may increase the likelihood of losing a significant customer and could also have an adverse effect on our financial performance and business prospects. 11 Table of Contents Financing Related Risk Factors Our cash flows from operations and current holdings of cash may not be adequate for our current and long-term needs.
As of the end of 2023, one alternative method, direct-write lithography, has not been proven to be a commercially viable alternative to photomasks, as it is considered to be too slow for high-volume semiconductor wafer production.
As of the end of 2024, one alternative method, direct-write lithography, has not been proven to be a commercially viable alternative to photomasks, as it is considered to be too slow for high-volume semiconductor wafer production.
In addition, in future quarters, our operating results could be below guidance we may provide or the expectations of public market analysts and investors, which could have a material adverse effect on the market price of our common stock. 15 Table of Contents Our substantial non-U.S. operations are subject to additional risks.
In addition, in future quarters, our operating results could be below guidance we may provide or the expectations of public market analysts and investors, which could have a material adverse effect on the market price of our common stock. Our substantial non-U.S. operations are subject to additional risks.
Any of the foregoing could have a material adverse effect on our business, results of operations, and financial position. 13 Table of Contents We operate in a highly competitive environment, and, should we be unable to meet our customers’ requirements for product quality, timeliness of delivery or technical capabilities, our revenue could be adversely affected.
Any of the foregoing could have a material adverse effect on our business, results of operations, and financial position. We operate in a highly competitive environment, and, should we be unable to meet our customers’ requirements for product quality, timeliness of delivery or technical capabilities, our revenue could be adversely affected.
Revenues from our non-U.S. operations were approximately 86%, 85% and 84% of our total revenues in 2023, 2022 and 2021, respectively. We believe that maintaining significant international operations requires us to have, among other things, a local presence in the geographic markets that we supply. This requires significant investments in financial, managerial, operational, and other resources.
Revenues from our non-U.S. operations were approximately 83%, 86% and 85% of our total revenues in 2024, 2023 and 2022, respectively. We believe that maintaining significant international operations requires us to have, among other things, a local presence in the geographic markets that we supply. This requires significant investments in financial, managerial, operational, and other resources.
We cannot offer assurance that we can retain our key managerial and technical employees, or that we can attract similar additional employees in the future. 12 Table of Contents The photomask industry is dependent on the semiconductor and display industries, which are subject to rapid technological change and fluctuations in capacity needs.
We cannot offer assurance that we can retain our key managerial and technical employees, or that we can attract similar additional employees in the future. The photomask industry is dependent on the semiconductor and display industries, which are subject to rapid technological change and fluctuations in capacity needs.
Evolving stakeholder expectations and our efforts to manage these issues, report on them, and accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact, including on our reputation and stock price, reputational harm, including damage to our relationships with customers, suppliers, investors, governments, or other stakeholders, adverse impacts on our ability to manufacture and sell products and maintain our market share, the success of our collaborations with third parties, increased risk of litigation, investigations, or regulatory enforcement action, unfavorable environmental, social, and governance ratings or investor sentiment, diversion of resources and increased costs to control, assess, and report on environmental, social, and governance metrics.
Evolving stakeholder expectations and our efforts to manage these issues, report on them, and accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact, including on our reputation and stock price, reputational harm, including damage to our relationships with customers, suppliers, investors, governments, or other stakeholders, adverse impacts on our ability to manufacture and sell products and maintain our market share, the success of our collaborations with third parties, increased risk of litigation, investigations, or regulatory enforcement action, unfavorable environmental, social, and governance ratings or investor sentiment, diversion of resources and increased costs to control, assess, and report on environmental, social, and governance metrics. 17 Table of Contents Ineffective internal controls could impact our business and operating results.
In 2023, we recorded a net gain from changes in foreign currency exchange rates of $2.5 million in our consolidated statement of income, while our net assets increased by $5.6 million as a result of the translation of foreign currency financial statements to U.S. dollars.
In 2024, we recorded a net gain from changes in foreign currency exchange rates of $2.2 million in our consolidated statement of income, while our net assets increased by $8.6 million as a result of the translation of foreign currency financial statements to U.S. dollars.
Ineffective internal controls could impact our business and operating results. Our internal controls over financial reporting may not prevent or detect misstatements because of their inherent limitations in detecting human errors, the circumvention or overriding of controls, or fraud; even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Our internal controls over financial reporting may not prevent or detect misstatements because of their inherent limitations in detecting human errors, the circumvention or overriding of controls, or fraud; even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Our capital expenditure payments for fiscal 2024 are expected to be approximately $140 million, of which approximately $18.7 million was included in Accounts payable and Accrued liabilities on our October 31, 2023, consolidated balance sheet.
Our capital expenditure payments for fiscal 2025 are expected to be approximately $200 million, of which approximately $6.7 million was included in Accounts payable and Accrued liabilities on our October 31, 2024 consolidated balance sheet.
Any failure, or perceived failure, by us to comply with the GDPR or the UK-GDPR, or with any applicable regulatory requirements or orders, including, but not limited to privacy, data protection, information security, or consumer protection related privacy laws and regulations, in one or more jurisdictions within the E.U., the U.K. or elsewhere, could: result in proceedings or actions against us by governmental entities or individuals; subject us to significant fines, penalties, and/or judgments; require us to change our business practices; limit access to our products and services in certain countries, or otherwise adversely affect our business, as we would be at risk to lose both customers and revenue, and incur substantial costs.
Although somewhat less restrictive than the GDPR, the UK-GDPR is similar to the GDPR with respect to both an entity’s obligation to protect personal information and the imposition of significant fines for violations. 18 Table of Contents Any failure, or perceived failure, by us to comply with the GDPR or the UK-GDPR, or with any applicable regulatory requirements or orders, including, but not limited to privacy, data protection, information security, or consumer protection related privacy laws and regulations, in one or more jurisdictions within the E.U., the U.K. or elsewhere, could: result in proceedings or actions against us by governmental entities or individuals; subject us to significant fines, penalties, and/or judgments; require us to change our business practices; limit access to our products and services in certain countries, or otherwise adversely affect our business, as we would be at risk to lose both customers and revenue, and incur substantial costs.
In the past, competition has led to pressure to reduce prices and the need to invest in advanced manufacturing technology, which we believe contributed to the decrease in the number of independent photomask suppliers, several years ago. These pressures may worsen in the future, causing further consolidation.
In the past, competition has led to pressure to reduce prices and the need to invest in advanced manufacturing technology, which we believe contributed to the decrease in the number of independent photomask suppliers, several years ago.
Investment Related Risk Factors Joint ventures may not operate according to their business plans if our partners fail to fulfill their obligations, which may adversely affect our results of operations and compel us to dedicate additional resources to these joint ventures.
These pressures may worsen in the future, causing further consolidation. 13 Table of Contents Investment Related Risk Factors Joint ventures may not operate according to their business plans if our partners fail to fulfill their obligations, which may adversely affect our results of operations and compel us to dedicate additional resources to these joint ventures.
Economic downturns may lead to a decrease in demand for end products whose manufacturing processes involve the use of photomasks, which may result in a reduction in new product design and development by semiconductor or FPD manufacturers and adversely affect our results of operations and cash flows. 18 Table of Contents Technology failures or cyber security breaches could have a material adverse effect on our operations.
Economic downturns may lead to a decrease in demand for end products whose manufacturing processes involve the use of photomasks, which may result in a reduction in new product design and development by semiconductor or FPD manufacturers and adversely affect our results of operations and cash flows.
If we do not accurately forecast our results of operations, execute contracts that do not effectively mitigate our economic exposures to interest rates and currency rates, elect to not apply hedge accounting (when doing so would have mitigated our losses), or fail to comply with the complex accounting requirements for hedging transactions, our results of operations and cash flows could be volatile, as well as negatively impacted. 19 Table of Contents The market price of our common stock is subject to volatility and could fluctuate widely in response to various factors, many of which are beyond our control.
If we do not accurately forecast our results of operations, execute contracts that do not effectively mitigate our economic exposures to interest rates and currency rates, elect to not apply hedge accounting (when doing so would have mitigated our losses), or fail to comply with the complex accounting requirements for hedging transactions, our results of operations and cash flows could be volatile, as well as negatively impacted.
We rely on information technology systems to process, transmit, store, and protect electronic information. For example, a significant portion of the communications between our personnel, customers, and suppliers depends on information technology.
Technology failures or cyber security breaches could have a material adverse effect on our operations. We rely on information technology systems to process, transmit, store, and protect electronic information. For example, a significant portion of the communications between our personnel, customers, and suppliers depends on information technology.
Our ability to implement this component of our growth strategy may be limited by both our ability to identify appropriate acquisition or joint venture candidates and our financial resources, including our available cash and borrowing capacity.
Our future efforts to grow the Company may include expanding into new or related markets or industries. Our ability to implement this component of our growth strategy may be limited by both our ability to identify appropriate acquisition or joint venture candidates and our financial resources, including our available cash and borrowing capacity.
The expense incurred in consummating acquisitions or entering into joint ventures, the time it takes to integrate an acquisition, or our failure to integrate businesses successfully, could result in unanticipated expenses and losses. Furthermore, we may not be able to realize any of the anticipated benefits from acquisitions or joint ventures.
The expense incurred in consummating acquisitions or entering into joint ventures, the time it takes to integrate an acquisition, or our failure to integrate businesses successfully, could result in unanticipated expenses and losses.
However, should direct-write or any other alternative method of transferring IC or FPD designs without the use of photomasks achieve market acceptance, and if we are unable to anticipate, respond to, or utilize these or other technological changes, due to resource, technological, or other constraints, our business and results of operations could be materially adversely affected.
However, should direct-write or any other alternative method of transferring IC or FPD designs without the use of photomasks achieve market acceptance, and if we are unable to anticipate, respond to, or utilize these or other technological changes, due to resource, technological, or other constraints, our business and results of operations could be materially adversely affected. 12 Table of Contents The risk of loss of our intellectual property, trade secrets, or other sensitive business or customer confidential information or disruption of operations due to cyberattacks or data breaches could negatively impact our financial results.
Our five largest customers accounted for an aggregate of 51%, 45% and 43% of our revenue in 2023, 2022 and 2021, respectively.
During 2024, 2023 and 2022, our two largest customers accounted for an aggregate of 27%, 27% and 25%, respectively, of our revenue. Our five largest customers accounted for an aggregate of 50%, 51% and 45% of our revenue in 2024, 2023 and 2022, respectively.
The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties, and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations.
Furthermore, we may not be able to realize any of the anticipated benefits from acquisitions or joint ventures. 14 Table of Contents The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties, and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations.
We have important assets, including intellectual property, trade secrets, and other sensitive, business-critical and/or confidential information which may be vulnerable to such incidents. While we have a comprehensive cybersecurity program that is continually reviewed, maintained, and upgraded, we cannot assure that we are invulnerable to cyberattacks and data breaches which, if significant, could negatively impact our business and financial results.
While we have a comprehensive cybersecurity program that is continually reviewed, maintained, and upgraded, we cannot assure that we are invulnerable to cyberattacks and data breaches which, if significant, could negatively impact our business and financial results.
The fluctuation of foreign currency exchange rates, with respect to prices of equipment and raw materials used in manufacturing, could also have a material adverse effect on our business and results of operations. 11 Table of Contents We have been dependent on sales to a limited number of large customers; the loss of any of these customers or a significant reduction in orders from these customers could have a material adverse effect on our revenues and results of operations.
The fluctuation of foreign currency exchange rates, with respect to prices of equipment and raw materials used in manufacturing, could also have a material adverse effect on our business and results of operations.
Changes in these laws and regulations may have a material adverse effect on our financial position and results of operations, and inadequate compliance with their requirements could give rise to significant liabilities. 17 Table of Contents If we violate environmental, health or safety laws or regulations, in addition to being required to correct such violations, we can be held liable in administrative, civil, or criminal proceedings, and substantial fines and other sanctions could be imposed that could disrupt or limit our operations.
If we violate environmental, health or safety laws or regulations, in addition to being required to correct such violations, we can be held liable in administrative, civil, or criminal proceedings, and substantial fines and other sanctions could be imposed that could disrupt or limit our operations.
As part of our business growth strategy, we have acquired businesses and entered into joint ventures in the past, and we may pursue acquisitions and joint venture opportunities in the future. Our future efforts to grow the Company may include expanding into new or related markets or industries.
We may not be able to consummate future acquisitions or joint ventures or integrate acquisitions into our business, which could result in unanticipated expenses and losses. As part of our business growth strategy, we have acquired businesses and entered into joint ventures in the past, and we may pursue acquisitions and joint venture opportunities in the future.
We cannot provide assurance that there will not be facility closures, restructurings, or forfeitures in the near or long term, nor can we assure that we will not incur significant charges should there be any future facility closures, restructurings, or forfeitures. 14 Table of Contents We may not be able to consummate future acquisitions or joint ventures or integrate acquisitions into our business, which could result in unanticipated expenses and losses.
We cannot provide assurance that there will not be facility closures, restructurings, or forfeitures in the near or long term, nor can we assure that we will not incur significant charges should there be any future facility closures, restructurings, or forfeitures.
Based on the complex relationships between the United States and certain foreign countries including, but not limited to China, there is inherent risk that political, diplomatic and national security influences might lead to trade disputes, impacts and/or disruptions to our operations or our ability to sell our photomasks.
However, trade policies and disputes and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect the Company’s business, particularly if these measures occur in regions where the Company derives a significant portion of its revenues. 16 Table of Contents Based on the complex relationships between the United States and certain foreign countries including, but not limited to China, there is inherent risk that political, diplomatic and national security influences might lead to trade disputes, impacts and/or disruptions to our operations or our ability to sell our photomasks.
These factors may have a material adverse effect on our costs or our ability to generate revenues outside of the United States and, consequently, on our business and results of operations.
These factors may have a material adverse effect on our costs or our ability to generate revenues outside of the United States and, consequently, on our business and results of operations. 15 Table of Contents We could be subject to damages based on claims brought against us by our customers, or lose customers as a result of the failure of our products to meet certain quality specifications.
Upon leaving the E.U. on January 31, 2021, the U.K. enacted a new domestic data privacy law called the “U.K. – General Data Protection Regulation” (“UK-GDPR”). Although somewhat less restrictive than the GDPR, the UK-GDPR is similar to the GDPR with respect to both an entity’s obligation to protect personal information and the imposition of significant fines for violations.
Upon leaving the E.U. on January 31, 2021, the U.K. enacted a new domestic data privacy law called the “U.K. – General Data Protection Regulation” (“UK-GDPR”).
Removed
Historically, we have sold a significant proportion of photomasks to a limited number of IC and FPD manufacturers. During 2023, 2022 and 2021, our two largest customers accounted for an aggregate of 27%, 25% and 29%, respectively, of our revenue.
Added
We have been dependent on sales to a limited number of large customers; the loss of any of these customers or a significant reduction in orders from these customers could have a material adverse effect on our revenues and results of operations. Historically, we have sold a significant proportion of photomasks to a limited number of IC and FPD manufacturers.
Removed
We could be subject to damages based on claims brought against us by our customers, or lose customers as a result of the failure of our products to meet certain quality specifications. Our products provide important performance attributes for our customers’ products.
Added
Our products provide important performance attributes for our customers’ products.
Removed
However, trade policies and disputes and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect the Company’s business, particularly if these measures occur in regions where the Company derives a significant portion of its revenues.
Added
Changes in these laws and regulations may have a material adverse effect on our financial position and results of operations, and inadequate compliance with their requirements could give rise to significant liabilities.
Added
The market price of our common stock is subject to volatility and could fluctuate widely in response to various factors, many of which are beyond our control.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−2 removed0 unchanged
Biggest changeIn September 2020, the Company’s Board of Directors authorized the repurchase of up to $100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act. The most recent 10b5-1 plan expired on September 15, 2022, and has not been renewed. Share repurchases under this authorization commenced on September 16, 2020.
Biggest changeThe repurchase authorization by the Board of Directors has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions. Share repurchases under this authorization commenced on September 16, 2020. The most recent 10b5-1 plan expired on September 15, 2022, and has not been renewed.
The 2024 Definitive Proxy Statement will be filed within 120 days after our fiscal year ended October 31, 2023.
The 2025 Definitive Proxy Statement will be filed within 120 days after our fiscal year ended October 31, 2024.
All shares repurchased under the program have been retired. Securities authorized for issuance under equity compensation plans The information regarding our equity compensation required to be disclosed by Item 201(d) of Regulation S-K is incorporated by reference from the Photronics, Inc. 2024 Definitive Proxy Statement in Item 12 of Part III of this report.
(d) Securities Authorized for Issuance Under Equity Compensation Plans The information regarding our equity compensation required to be disclosed by Item 201(d) of Regulation S-K is incorporated by reference from the Photronics, Inc. 2025 Definitive Proxy Statement in Item 12 of Part III of this report.
Based on available information, we have 229 registered shareholders. To date, we have not paid any cash dividends on Photronics shares, and, for the foreseeable future, we anticipate that earnings will continue to be retained for use in our business.
(b) Approximate Number of Holders of Common Stock Based on available information, we have 215 registered shareholders. (c) Dividends To date, we have not paid any cash dividends on Photronics shares, and, for the foreseeable future, we anticipate that earnings will continue to be retained for use in our business.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NASDAQ Global Select Market ("NASDAQ") under the symbol PLAB. On December 14, 2023, the closing sale price of our common stock, per the NASDAQ Global Select Market, was $29.09.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (a) Market Information Our common stock is traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol PLAB. On December 12, 2024, the closing sale price of our common stock, per the NASDAQ Global Select Market, was $26.27.
In 2022, we repurchased 0.2 million shares at a cost of $2.5 million (an average of $13.43 per share) and, since the program’s inception, we have repurchased 5.8 million shares at a cost of $68.3 million (an average of $11.70 per share). There is $31.7 million remaining under the Board of Director authorization.
In 2022, we repurchased 0.2 million shares at a cost of $2.5 million (an average of $13.43 per share) and, since the program’s inception, we have repurchased 5.8 million shares at a cost of $68.3 million (an average of $11.70 per share). All shares repurchased under the program have been retired.
Removed
The repurchase authorization by the Board of Directors has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions. In 2023, we did not repurchase any further shares as part of this program.
Added
(e) Stock Price Performance Graph 23 Table of Contents (f) Purchase of Equity Securities by Registrant and Affiliated Purchasers In September 2020, the Company’s Board of Directors authorized the repurchase of up to $100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act.
Removed
The 2024 Definitive Proxy Statement will be filed within 120 days after our fiscal year ended October 31, 2023. Stock Price Performance The information regarding our stock price performance required to be disclosed by Item 201(e) of Regulation S-K is incorporated by reference from the Photronics, Inc. 2024 Definitive Proxy Statement in Item 12 of Part III of this report.
Added
On August 28, 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the remaining $31.7 million up to $100 million under the Board of Director authorization. In 2024, we did not repurchase any further shares as part of this program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

56 edited+13 added−20 removed32 unchanged
Biggest changeThree Months ended Year ended Oct 31, July 30, Oct 31, Oct 31, Oct 31, Oct 31, 2023 2023 2022 2023 2022 2021 Reconciliation of GAAP to Non-GAAP Non-operating (loss) Income: GAAP Non-operating (loss) income, net $ 18,660 $ (911 ) $ 10,797 $ 16,896 $ 27,167 $ 7,452 FX (gain) loss (13,234 ) 4,543 (10,369 ) (2,466 ) (27,344 ) (7,972 ) Non-GAAP Non-operating (loss) income, net $ 5,426 $ 3,632 $ 428 $ 14,430 $ (177 ) $ (520 ) Reconciliation of GAAP to Non-GAAP Income tax provision: GAAP Income tax provision $ 20,288 $ 16,098 $ 16,074 $ 70,312 $ 59,791 $ 23,190 Estimated tax effects of FX (gain) loss 3,437 (1,193 ) 2,522 317 5,933 1,829 Non-GAAP Income tax provision $ 16,851 $ 17,291 $ 13,552 $ 69,995 $ 53,858 $ 21,361 Reconciliation of GAAP to Non-GAAP Noncontrolling interests: GAAP Noncontrolling interests $ 18,545 $ 21,296 $ 18,204 $ 74,149 $ 60,456 $ 23,367 Estimated noncontrolling interest effects of above 2,431 1,328 1,990 2,676 4,275 (481 ) Non-GAAP Noncontrolling interests $ 16,114 $ 19,968 $ 16,214 $ 71,473 $ 56,181 $ 23,848 Reconciliation of GAAP to Non-GAAP Net Income: GAAP Net Income $ 44,611 $ 26,959 $ 37,060 $ 125,485 $ 118,786 $ 55,449 FX (gain) loss (13,234 ) 4,543 (10,369 ) (2,466 ) (27,344 ) (7,972 ) Estimated tax effects of above 3,437 (1,193 ) 2,522 317 5,933 1,829 Estimated noncontrolling interest effects of above 2,431 1,328 1,990 2,676 4,275 (481 ) Non-GAAP Net Income $ 37,245 $ 31,637 $ 31,203 $ 126,012 $ 101,650 $ 48,825 Weighted-average number of common shares outstanding - Diluted 62,067 61,974 61,374 61,755 61,189 61,999 Reconciliation of GAAP to Non-GAAP EPS: GAAP diluted earnings per share $ 0.72 $ 0.44 $ 0.60 $ 2.03 $ 1.94 $ 0.89 Effects of the above adjustments (0.12 ) 0.07 (0.10 ) 0.01 (0.28 ) (0.10 ) Non-GAAP diluted earnings per share $ 0.60 $ 0.51 $ 0.51 $ 2.04 $ 1.66 $ 0.79 32 Table of Contents The following table reconciles Net cash provided by operating activities to Free Cash Flow for FY23, FY22, and FY21.
Biggest changeThe columns may not foot due to rounding. 33 Table of Contents Three Months ended Year ended Oct 31, 2024 July 28, 2024 Oct 31, 2023 Oct 31, 2024 Oct 31, 2023 Oct 31, 2022 Reconciliation of GAAP to Non-GAAP Net Income: GAAP Net Income attributable to Photronics, Inc. shareholders $ 33,869 $ 34,388 $ 44,611 $ 130,688 $ 125,485 $ 118,786 FX loss (gain) 7,758 (4,068 ) (13,234 ) (2,168 ) (2,466 ) (27,344 ) Estimated tax effects of above (1,936 ) 914 3,437 477 317 5,933 Estimated noncontrolling interest effects of above (2,637 ) 681 2,431 (1,407 ) 2,676 4,275 Non-GAAP Net Income attributable to Photronics, Inc. shareholders $ 37,054 $ 31,915 $ 37,245 $ 127,590 $ 126,012 $ 101,650 Weighted-average number of common shares outstanding - Diluted 62,456 62,414 62,067 62,391 61,755 61,189 Reconciliation of GAAP to Non-GAAP EPS: GAAP diluted earnings per share $ 0.54 $ 0.55 $ 0.72 $ 2.09 $ 2.03 $ 1.94 Effects of the above adjustments 0.05 (0.04 ) (0.12 ) (0.04 ) 0.01 (0.28 ) Non-GAAP diluted earnings per share $ 0.59 $ 0.51 $ 0.60 $ 2.05 $ 2.04 $ 1.66 Business Outlook Our current business outlook and guidance was provided in our Full Year and Fourth Quarter Fiscal 2024 Results earnings call, and related slide deck.
We believe the following to be the more critical areas that require judgment when applying our accounting policies: • Revenue Recognition : The application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates, including the determination of whether we should recognize revenues as we perform or upon the completion of our performance, as these determinations impact the timing and amount of our reported revenues and net income.
We believe the following to be the more critical areas that require judgment when applying our accounting policies: • Revenue Recognition : The application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates, including the determination of whether we should recognize revenue as we perform or upon the completion of our performance, as these determinations impact the timing and amount of our reported revenue and net income.
As of the end of 2023, one alternative method, direct-write lithography, has not been proven to be a commercially viable alternative to photomasks, as it is considered to be too slow for high-volume semiconductor wafer production, and we have not experienced a significant loss of revenue as a result of this or other alternative semiconductor design methodologies.
As of the end of 2024, one alternative method, direct-write lithography, has not been proven to be a commercially viable alternative to photomasks, as it is considered to be too slow for high-volume semiconductor wafer production, and we have not experienced a significant loss of revenue as a result of this or other alternative semiconductor design methodologies.
Should our revenue decrease as a result of a decrease in design releases from our customers, we may have excess or underutilized production capacity, which could significantly impact our operating margins, or result in write-offs from asset impairments. 24 Table of Contents Results of Operations The following tables present selected operating information expressed as a percentage of revenue.
Should our revenue decrease as a result of a decrease in design releases from our customers, we may have excess or underutilized production capacity, which could significantly impact our operating margins, or result in write-offs from asset impairments. 26 Table of Contents Results of Operations The following tables present selected operating information expressed as a percentage of revenue.
Please refer to Part II, Item 7 of our 2022 Form 10-K for comparative discussion of our fiscal years ended October 31, 2022, and October 31, 2021. The tables in this item may not foot due to rounding. Revenue Our quarterly revenues can be affected by the seasonal purchasing practices of our customers.
Please refer to Part II, Item 7 of our 2023 Form 10-K for comparative discussion of our fiscal years ended October 31, 2023, and October 31, 2022. The tables in this item may not foot due to rounding. Revenue Our quarterly revenues can be affected by the seasonal purchasing practices of our customers.
Other significant judgments include the estimation of the point in the manufacturing process at which we are entitled to recognize revenue, as well as the measurement of our progress towards satisfying our performance obligations, which determine the amount of revenue we are entitled to recognize. 33 Table of Contents • Property, Plant and Equipment : Significant judgment and assumptions are employed when we establish the estimated useful lives of asset classes, and determine when depreciation should commence for individual assets, as these determinations can significantly impact our gross margin and research and development expenses.
Other significant judgments include the estimation of the point in the manufacturing process at which we are entitled to recognize revenue, as well as the measurement of our progress towards satisfying our performance obligations, which determine the amount of revenue we are entitled to recognize. • Property, Plant and Equipment : Significant judgment and assumptions are employed when we establish the estimated useful lives of asset classes, and determine when depreciation should commence for individual assets, as these determinations can significantly impact our gross margin and research and development expenses.
The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future.
The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates.
Changes in estimates related to, and resolutions of, contingencies may have a material impact on our financial performance. • Income Taxes : Our annual tax rate is determined based on our income and the jurisdictions where it is earned, statutory tax rates, and the tax impacts of items treated differently for tax purposes than for financial reporting purposes.
Changes in estimates related to, and resolutions of, contingencies may have a material impact on our financial performance. 34 Table of Contents • Income Taxes : Our annual tax rate is determined based on our income and the jurisdictions where it is earned, statutory tax rates, and the tax impacts of items treated differently for tax purposes than for financial reporting purposes.
We expect advanced-generation designs to continue to move to production throughout fiscal 2024, and we believe we are well positioned to service an increasing volume of this business as a result of our investments in manufacturing processes and technology in the regions where our customers are located. 23 Table of Contents The photomask industry has been, and is expected to continue to be characterized by technological change and evolving industry standards.
We expect advanced-generation designs to continue to move to production throughout fiscal 2025, and we believe we are well positioned to service an increasing volume of this business as a result of our investments in manufacturing processes and technology in the regions where our customers are located. 25 Table of Contents The photomask industry has been, and is expected to continue to be characterized by technological change and evolving industry standards.
The effective income tax rate increase in Q4 FY23, as compared with Q4 FY22, is primarily due to changes in the jurisdictional mix of earnings as well as an increase in foreign tax as compared to the prior year.
The effective income tax rate increase in Q4 FY24, as compared with Q4 FY23, is primarily due to changes in the jurisdictional mix of earnings as well as an increase in foreign tax as compared to the prior year.
The following tables present changes in revenue disaggregated by product type and geographic origin, in Q4 FY23 and YTD FY23 from revenue in prior reporting periods.
The following tables present changes in revenue disaggregated by product type and geographic origin, in Q4 FY24 and YTD FY24 from revenue in prior reporting periods.
We estimate capital expenditures for our fiscal year 2024 will be approximately $140 million; these investments will be targeted towards high-end and mainstream “point” tools that will increase our operating capacity and efficiency, and enable us to support our customers’ near-term demands.
We estimate capital expenditures for our fiscal year 2025 will be approximately $200 million; these investments will be targeted towards high-end and mainstream “point” tools that will increase our operating capacity and efficiency and enable us to support our customers’ near-term demands.
The financial tables below reconcile Photronics, Inc. financial results under GAAP to non-GAAP financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate our future on-going performance because they enable a more meaningful comparison of our projected performance with our historical results.
The financial tables below reconcile Photronics, Inc. financial results under GAAP to non-GAAP financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate our on-going performance because they enable a more meaningful comparison of historical results of our core business.
Nonetheless, we intend to continue to make the required investments to support the technological requirements of our customers that we believe will continue to enable our growth. In support of this effort, we expect capital expenditure payments to be approximately $140 million in fiscal year 2024.
Nonetheless, we intend to continue to make the required investments to support the technological requirements of our customers that we believe will continue to enable our growth. In support of this effort, we expect capital expenditure payments to be approximately $200 million in fiscal year 2025.
Our revenues have benefitted, and our costs, including depreciation, have been affected by the increased demand for high-end-technology photomasks that require more advanced manufacturing capabilities, but generally command higher ASPs. Our capital expenditure payments were $131.3 million, $112.3 million and $109.1 million in 2023, 2022 and 2021, respectively.
Our revenues have benefitted, and our costs, including depreciation, have been affected by the increased demand for high-end-technology photomasks that require more advanced manufacturing capabilities, but generally command higher ASPs. Our capital expenditure payments were $130.9 million, $131.3 million and $112.3 million in 2024, 2023 and 2022, respectively.
Our future results of operations and the other forward-looking statements contained in this filing and in our “ Full Year and Fourth Quarter Fiscal 2023 Results ” earnings call and presentation involve a number of risks and uncertainties, some of which are discussed in Part I, Item 1A of this report.
Our future results of operations and the other forward-looking statements contained in this filing and in our “Full Year and Fourth Quarter Fiscal 2024 Results” earnings call and presentation involve a number of risks and uncertainties, some of which are discussed in Part I, Item 1A of this report.
Three Months Ended October 31, 2023 July 30, 2023 October 31, 2022 Revenue 100.0 % 100.0 % 100.0 % Cost of goods sold 62.7 61.3 61.8 Gross profit 37.3 38.7 38.2 Selling, general and administrative expenses 7.4 8.0 7.5 Research and development expenses 1.5 1.6 1.9 Operating income 28.5 % 29.1 % 28.8 % Non-operating income (expense), net 8.2 -0.4 5.1 Income before income tax provision 36.7 28.7 33.9 Income tax provision 8.9 7.2 7.6 Net income 27.8 21.5 26.3 Net income attributable to noncontrolling interests 8.2 9.5 8.7 Net income attributable to Photronics, Inc. shareholders 19.6 % 12.0 % 17.6 % Year Ended October 31, 2023 October 31, 2022 October 31, 2021 Revenue 100.0 % 100.0 % 100.0 % Cost of goods sold 62.3 64.3 74.8 Gross profit 37.7 35.7 25.2 Selling, general and administrative expenses 7.8 7.8 8.7 Research and development expenses 1.5 2.2 2.8 Other operating income, net 0.0 0.0 0.5 Operating income 28.4 % 25.7 % 14.2 % Non-operating income (expense), net 1.9 3.3 1.1 Income before income tax provision 30.3 29.0 15.4 Income tax provision 7.9 7.3 3.5 Net income 22.4 21.7 11.9 Net income attributable to noncontrolling interests 8.3 7.3 3.5 Net income attributable to Photronics, Inc. shareholders 14.1 % 14.4 % 8.4 % 25 Table of Contents Note: All the following tabular comparisons, unless otherwise indicated, are for the three months ended October 31, 2023 (Q4 FY23), July 30, 2023 (Q3 FY23) and October 31, 2022 (Q4 FY22), and for the fiscal years ended October 31, 2023 (YTD FY23) and October 31, 2022 (YTD FY22).
Three Months Ended October 31, 2024 July 28, 2024 October 31, 2023 Revenue 100.0 % 100.0 % 100.0 % Cost of goods sold 63.0 64.4 62.7 Gross profit 37.0 35.6 37.3 Selling, general and administrative expenses 9.4 9.2 7.4 Research and development expenses 2.4 1.7 1.5 Operating income 25.2 24.7 28.5 Non-operating (expense) income, net (0.5 ) 4.8 8.2 Income before income tax provision 24.7 29.5 36.7 Income tax provision 6.5 6.7 8.9 Net income 18.2 22.8 27.8 Net income attributable to noncontrolling interests 2.9 6.5 8.2 Net income attributable to Photronics, Inc. shareholders 15.3 % 16.3 % 19.6 % Year Ended October 31, 2024 October 31, 2023 October 31, 2022 Revenue 100.0 % 100.0 % 100.0 % Cost of goods sold 63.6 62.3 64.3 Gross profit 36.4 37.7 35.7 Selling, general and administrative expenses 9.0 7.8 7.8 Research and development expenses 1.9 1.5 2.2 Operating income 25.6 28.4 25.7 Non-operating income 3.0 1.9 3.3 Income before income tax provision 28.5 30.3 29.0 Income tax provision 7.3 7.9 7.3 Net income 21.2 22.4 21.7 Net income attributable to noncontrolling interests 6.1 8.3 7.3 Net income attributable to Photronics, Inc. shareholders 15.1 % 14.1 % 14.4 % 27 Table of Contents Note: All the following tabular comparisons, unless otherwise indicated, are for the three months ended October 31, 2024 (Q4 FY24), July 28, 2024 (Q3 FY24) and October 31, 2023 (Q4 FY23), and for the fiscal years ended October 31, 2024 (YTD FY24), October 31, 2023 (YTD FY23), and October 31, 2022 (YTD FY22).
Included in the balance of unrecognized tax benefits as of October 31, 2023 and October 31, 2022, are $8.9 million and $5.6 million respectively, recorded in Other liabilities in the consolidated balance sheets that, if recognized, would impact the effective tax rates.
Included in the balance of unrecognized tax benefits as of October 31, 2024 and October 31, 2023, are $14.7 million and $8.9 million respectively, recorded in Other liabilities in the consolidated balance sheets that, if recognized, would impact the effective tax rates.
Although payment timing could vary, primarily as a result of the timing of tool delivery, installation and testing, we currently estimate that we will fund $88.6 million of our total $125.5 million committed and recognized obligations for capital expenditures over the next twelve months.
Although payment timing could vary, primarily as a result of the timing of tool delivery, installation and testing, we currently estimate that we will fund $98.1 million of our total $112.1 million committed and recognized obligations for capital expenditures over the next twelve months.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We sell substantially all of our photomasks to semiconductor designers and manufacturers, and manufacturers of FPDs. Photomask technology is also being applied to the fabrication of other higher-performance electronic products such as virtual reality/augmented reality advanced IC packages, photonics, micro-electronic mechanical systems, and certain nanotechnology applications.
Overview We sell substantially all of our photomasks to semiconductor designers and manufacturers, and manufacturers of FPDs. Photomask technology is also being applied to the fabrication of other higher-performance electronic products such as virtual reality/augmented reality advanced IC packages, photonics, micro-electronic mechanical systems, and certain nanotechnology applications.
We continually evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. These reviews may result in our engagement in a variety of investing and financing transactions, in the transfer of cash among subsidiaries, and/or the repatriation of cash to the U.S.
Our primary sources of liquidity are our cash on hand and cash we generate from operations. We continually evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. These reviews may result in our engagement in a variety of investing and financing transactions, in the transfer of cash among subsidiaries, and/or the repatriation of cash to the U.S.
The columns presented above may not foot due to rounding. Income Tax Provision On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework.
Income Tax Provision On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework.
Net cash provided by operating activities increased by $27.0 million in FY23, compared with FY22, primarily due to increased net income and net cash-favorable changes in working capital, predominantly in Asia.
Net cash provided by operating activities decreased by $40.8 million in FY24, compared with FY23, primarily due to decreased net income and net cash-favorable changes in working capital, predominantly in Asia.
Net income attributable to noncontrolling interests increased by $0.3 million in Q4 FY23 from Q4 FY22, and by $13.7 million in YTD FY23 from YTD FY22, as a result of increased net income at both our Taiwan-based and China-based IC facilities.
Net income attributable to noncontrolling interests decreased by $12.1 million in Q4 FY24 from Q4 FY23, and by $21.0 million in YTD FY24 from YTD FY23, as a result of decreased net income at both our Taiwan-based and China-based IC facilities.
Q4 FY23 Q3 FY23 Q4 FY22 Income tax provision $ 20.3 $ 16.1 $ 16.1 Effective income tax rate 24.3 % 25.0 % 22.5 % The effective income tax rates are sensitive to the jurisdictional mix of our earnings, due, in part, to the non-recognition of tax benefits on losses in jurisdictions with valuation allowances where the tax benefits of losses are not available.
Q4 FY24 Q3 FY24 Q4 FY23 Income tax provision $ 14.6 $ 14.1 $ 20.3 Effective income tax rate 26.6 % 22.7 % 24.3 % The effective income tax rates are sensitive to the jurisdictional mix of our earnings, due, in part, to the non-recognition of tax benefits on losses in jurisdictions with valuation allowances.
The items excluded from these non-GAAP metrics but included in the calculation of their closest GAAP equivalent, are significant components of the consolidated statements of income, consolidated balance sheets and statement of cash flows and must be considered in performing a comprehensive assessment of overall financial performance. 31 Table of Contents The following table reconciles GAAP to Non-GAAP Income at the balance sheet dates.
The items excluded from these non-GAAP metrics, but included in the calculation of their closest GAAP equivalent, are significant components of the condensed consolidated statement of income and must be considered in performing a comprehensive assessment of overall financial performance. The following table reconciles GAAP to Non-GAAP Income for the indicated periods.
On a year-to-date basis, research and development expenses decreased $4.7 million, to $13.7 million, primarily due to decreased development activities in the U.S. 28 Table of Contents Non-Operating Income (Expense) Q4 FY23 Q3 FY23 Q4 FY22 Foreign currency transactions impact, net $ 13.2 $ (4.5 ) $ 10.4 Interest expense, net (0.1 ) (0.1 ) (0.4 ) Interest income and other income, net 5.6 3.7 0.8 Non-operating income (expense), net $ 18.7 $ (0.9 ) $ 10.8 Non-operating income (expense) increased in Q4 FY23 from Q3 FY23 by $19.6 million, primarily due to foreign currency impacts, driven by favorable movements of the South Korean won, the New Taiwan dollar, RMB dollar against the U.S. dollar offsetting unfavorable movements of the Singapore dollar against the U.S. dollar.
On a year-to-date basis, research and development expenses increased $2.9 million, to $16.6 million, primarily due to increased development activities in the U.S. 30 Table of Contents Non-Operating Income (Expense) Q4 FY24 Q3 FY24 Q4 FY23 Foreign currency transactions impact, net $ (7.7 ) $ 4.1 $ 13.2 Interest expense, net (0.1 ) (0.1 ) (0.1 ) Interest income and other income, net 6.8 6.1 5.6 Non-operating (expense) income, net $ (1.0 ) $ 10.1 $ 18.7 Non-operating (expense) income decreased in Q4 FY24 from Q3 FY24 by $11.1 million and from Q4 FY23 by $19.7 million, primarily due to foreign currency impacts.
Research and Development Expenses Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, decreased $0.1 million to $3.4 million in Q4 FY23, from Q3 FY23; the decrease was primarily caused by a decline in development activities in Asia.
Research and Development Expenses Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, increased $1.7 million to $5.3 million in Q4 FY24, from Q3 FY24; the increase was primarily caused by increased qualification activities.
Research and development expenses in Q4 FY23 decreased by $0.7 million from Q4 FY22 as a result of decreased development activities in the U.S. and Asia.
Research and development expenses in Q4 FY24 increased by $1.9 million from Q4 FY23 as a result of increased development activities in the U.S. and Asia.
Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests was $18.5 million in Q4 FY23, compared with $21.3 million in Q3 FY23; the decrease was the result of a net decrease in the net incomes of our joint venture operations.
Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests was $6.4 million in Q4 FY24, compared with $13.8 million in Q3 FY24; the decrease was the result of a net decrease in the net incomes of our joint venture operations.
Non-GAAP Financial Measures Non-GAAP Non-operating (loss) income, Non-GAAP Income tax provision, Non-GAAP Noncontrolling interests, Non-GAAP Net Income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share, Free Cash Flow, and Net Cash are "non-GAAP financial measures" as such term is defined by the Securities and Exchange Commission and may differ from similarly named non-GAAP financial measures used by other companies.
Non-GAAP Financial Measures Non-GAAP Net Income attributable to Photronics, Inc. shareholders and non-GAAP diluted earnings per share are “non-GAAP financial measures” as such term is defined by Regulation G of the Securities and Exchange Commission, and may differ from similarly named non-GAAP financial measures used by other companies.
Cash Flows Year Ended October 31, 2023 October 31, 2022 October 31, 2021 Net cash provided by operating activities $ 302.2 $ 275.2 $ 150.8 Net cash used in investing activities $ (101.5 ) $ (147.8 ) $ (103.5 ) Net cash used in financing activities $ (18.5 ) $ (38.7 ) $ (53.9 ) Operating Activities : Net cash provided by operating activities reflects net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, and the effects of changes in operating assets and liabilities.
As of October 31, 2024, Photronics and DNP each had net investments in this joint venture of approximately $140.6 million. 32 Table of Contents Cash Flows Year Ended October 31, 2024 October 31, 2023 October 31, 2022 Net cash provided by operating activities $ 261.4 $ 302.2 $ 275.2 Net cash used in investing activities $ (156.5 ) $ (101.5 ) $ (147.8 ) Net cash used in financing activities $ (7.7 ) $ (18.5 ) $ (38.7 ) Operating Activities : Net cash provided by operating activities reflects net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, and the effects of changes in operating assets and liabilities.
Year-over-Year Changes in Revenue by Product Type YTD FY23 compared with YTD FY22 Revenue in Increase Percent YTD FY23 (Decrease) Change IC High-end * $ 195.0 $ (0.4 ) (0.2 )% Mainstream 456.3 58.6 14.7 % Total IC 651.3 $ 58.3 9.8 % FPD High-end * 200.8 $ 13.9 7.4 % Mainstream 40.0 (4.6 ) (10.3 )% Total FPD 240.8 $ 9.3 4.0 % Total Revenue 892.1 $ 67.5 8.2 % * High-end photomasks typically have higher ASPs than mainstream photomasks.
Year-over-Year Changes in Revenue by Product Type ($ in millions) YTD FY24 compared with YTD FY23 Revenue in YTD FY24 Increase (Decrease) Percent Change IC High-end * $ 228.5 $ 33.5 17.2 % Mainstream 409.6 (46.7 ) (10.2 )% Total IC $ 638.1 $ (13.2 ) (2.0 )% FPD High-end * $ 195.4 $ (5.5 ) (2.7 )% Mainstream 33.4 (6.5 ) (16.3 )% Total FPD $ 228.8 $ (12.0 ) (5.0 )% Total Revenue $ 866.9 $ (25.2 ) (2.8 )% * High-end photomasks typically have higher ASPs than mainstream photomasks.
As of October 31, 2023, we had outstanding capital commitments of approximately $106.8 million and recognized liabilities related to capital equipment purchases of approximately $18.7 million.
As of October 31, 2024, we had outstanding capital commitments of approximately $105.4 million and accrued liabilities related to capital equipment purchases of approximately $6.7 million.
FY23 FY22 Income tax provision $ 70.3 $ 59.8 Effective income tax rate 26.0 % 25.0 % 29 Table of Contents The increase in the effective income tax rate on a full-year basis in FY23, compared with FY22, is primarily due to an increase of unremitted earnings tax in a non-US jurisdiction, as well as changes in the jurisdictional mix of earnings.
FY24 FY23 Income tax provision $ 63.6 $ 70.3 Effective income tax rate 25.7 % 26.0 % 31 Table of Contents The decrease in the effective income tax rate on a full-year basis in FY24, compared with FY23, is primarily due to changes in the jurisdictional mix of earnings.
Quarterly Changes in Revenue by Product Type Q4 FY23 compared with Q3 FY23 Q4 FY23 compared with Q4 FY22 Revenue in Increase Percent Increase Percent Q4 FY23 (Decrease) Change (Decrease) Change IC High-end * $ 57.7 $ 12.4 27.4 % $ 13.4 30.2 % Mainstream 106.8 (11.0 ) (9.3 )% (5.1 ) (4.5 )% Total IC $ 164.5 $ 1.4 0.8 % $ 8.3 5.3 % FPD High-end * $ 53.3 $ 3.3 6.6 % $ 9.9 22.8 % Mainstream 9.7 (1.4 ) (12.5 )% (0.9 ) (8.9 )% Total FPD $ 63.0 $ 1.9 3.1 % $ 9.0 16.5 % Total Revenue $ 227.5 $ 3.3 1.5 % $ 17.2 8.2 % * High-end photomasks typically have higher ASPs than mainstream products.
Quarterly Changes in Revenue by Product Type ($ in millions) Q4 FY24 compared with Q3 FY24 Q4 FY24 compared with Q4 FY23 Revenue in Q4 FY24 Increase (Decrease) Percent Change Increase (Decrease) Percent Change IC High-end * $ 60.1 $ 10.6 21.3 % $ 2.4 4.1 % Mainstream 103.6 (2.8 ) (2.5 )% (3.2 ) (2.9 )% Total IC $ 163.7 $ 7.8 5.0 % $ (0.8 ) (0.5 )% FPD High-end * $ 48.4 $ - 0.0 % $ (4.9 ) (9.2 )% Mainstream 10.5 3.8 56.6 % 0.8 8.3 % Total FPD $ 58.9 $ 3.8 6.9 % $ (4.1 ) (6.5 )% Total Revenue $ 222.6 $ 11.6 5.5 % $ (4.9 ) (2.1 )% * High-end photomasks typically have higher ASPs than mainstream products.
The effective income tax rate decreased slightly in Q4 FY23, compared with Q3 FY23, primarily due to changes in the period-to-period mix of jurisdictional earnings.
The effective income tax rate increased in Q4 FY24, compared with Q3 FY24, primarily due to changes in the period-to-period mix of jurisdictional earnings as well as an increase in foreign tax as compared to the prior quarter.
Quarterly Changes in Revenue by Geographic Origin** Q4 FY23 compared with Q3 FY23 Q4 FY23 compared with Q4 FY22 Revenue in Increase Percent Increase Percent Q4 FY23 (Decrease) Change (Decrease) Change Taiwan $ 79.3 $ (2.3 ) (2.8 )% $ 3.0 3.9 % China 59.2 (2.9 ) (4.6 )% 6.8 12.9 % Korea 42.2 1.4 3.3 % 4.2 11.2 % United States 36.8 7.1 23.9 % 2.8 8.2 % Europe 9.3 (0.2 ) (2.2 )% 0.3 3.0 % Other 0.7 0.2 34.4 % 0.1 24.7 % Total revenue $ 227.5 $ 3.3 1.5 % $ 17.2 8.2 % ** This table disaggregates revenue by the location in which it was earned.
Quarterly Changes in Revenue by Geographic Origin ($ in millions) ** Q4 FY24 compared with Q3 FY24 Q4 FY24 compared with Q4 FY23 Revenue in Q4 FY24 Increase (Decrease) Percent Change Increase (Decrease) Percent Change Taiwan $ 69.7 $ 1.5 2.3 % $ (9.6 ) (12.1 )% China 60.8 5.5 10.0 % 1.6 2.7 % Korea 40.0 1.6 4.1 % (2.2 ) (5.2 )% United States 41.7 2.9 7.6 % 5.0 13.5 % Europe 9.9 0.1 1.0 % 0.5 5.7 % Other 0.5 - (1.2 )% (0.2 ) (27.9 )% Total revenue $ 222.6 $ 11.6 5.5 % $ (4.9 ) (2.1 )% ** This table disaggregates revenue by the location in which it was earned. 28 Table of Contents Revenue in Q4 FY24 of $222.6 million represented an increase of 5.5% compared with Q3 FY24, and a decrease of 2.1% from Q4 FY23.
Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares. 30 Table of Contents As discussed in Note 6 of our consolidated financial statements, DNP, the noncontrolling interest in our China-based joint venture has, under certain circumstances, the right to put its interest in the joint venture to Photronics, or to purchase our interest in the joint venture.
As discussed in Note 6 – PDMCX Joint Venture of our consolidated financial statements, DNP, the noncontrolling interest in our China-based joint venture has, under certain circumstances, the right to put its interest in the joint venture to Photronics, or to purchase our interest in the joint venture.
Year-over-Year Changes in Revenue by Geographic Origin** YTD FY23 compared with YTD FY22 Revenue in Increase Percent YTD FY23 (Decrease) Change Taiwan $ 316.9 $ 25.5 8.8 % China 245.4 32.8 15.4 % Korea 162.2 6.1 3.9 % United States 128.9 2.7 2.1 % Europe 36.6 0.2 0.5 % Other 2.1 0.3 13.5 % $ 892.1 $ 67.5 8.2 % ** This table disaggregates revenue by the location in which it was earned.
Year-over-Year Changes in Revenue by Geographic Origin ($ in millions)** YTD FY24 compared with YTD FY23 Revenue in YTD FY24 Increase (Decrease) Percent Change Taiwan $ 288.3 $ (28.6 ) (9.0 )% China 232.9 (12.4 ) (5.1 )% Korea 158.0 (4.2 ) (2.6 )% United States 146.7 17.7 13.8 % Europe 39.2 2.6 7.1 % Other 1.8 (0.3 ) (14.3 )% $ 866.9 $ (25.2 ) (2.8 )% ** This table disaggregates revenue by the location in which it was earned. 29 Table of Contents Overall revenue decreased $25.2 million or 2.8% in YTD FY24 from YTD FY23.
Gross margin decreased by 0.9 percentage points in Q4 FY23, from Q4 FY22, primarily as a result of the increase in material costs as a percentage of revenue from the prior year quarter. Equipment and other overhead costs increased 9.7%, or 37 basis points, as a percentage of revenue.
Gross margin decreased by 30 basis points in Q4 FY24, from Q4 FY23, primarily as a result of the decrease in revenue of 2.1% and increased equipment and other overhead costs of 4.6%, or 185 basis points as a percentage of revenue.
Liquidity and Capital Resources Cash and cash equivalents was $499.3 million and $319.7 million as of October 31, 2023, and October 31, 2022, respectively. As of the most recent balance sheet date, total cash and cash equivalents included $473.2 million held by foreign subsidiaries.
Liquidity and Capital Resources Cash and cash equivalents was $598.5 million and $499.3 million as of October 31, 2024, and October 31, 2023, respectively. As of October 31, 2024, total cash and cash equivalents included $562.1 million held by foreign subsidiaries.
Please refer to Notes 1, 10, 13, and 15 to our consolidated financial statements for additional information related to these critical accounting estimates. Effect of Recent Accounting Pronouncements See Note 22 to our consolidated financial statements of this report for recent accounting pronouncements that may affect our financial reporting. 34 Table of Contents
Effect of Recent Accounting Pronouncements See Note 1 to our consolidated financial statements of this report for recent accounting pronouncements that may affect our financial reporting. 35 Table of Contents
Revenue in Q4 FY23 of $227.5 million represented an increase of 1.5% compared with Q3 FY23, and an increase of 8.2% from Q4 FY22. 26 Table of Contents Overall IC revenue increased 0.8 % from Q3 FY23, and increased 5.3% from Q4 FY22 due to stronger high-end foundry and logic demand in Asia.
Overall IC revenue increased $7.8 million or 5.0% in Q4 FY24 from Q3 FY24 due to stronger high-end foundry and logic demand in Asia. Overall IC revenue decreased $0.8 million or 0.5% in Q4 FY24 from Q4 FY23.
Revenue from mainstream products decreased 12.5% from Q3 FY23 as more production capacity was dedicated to meet strong high-end demand.
FPD revenue decreased $4.1 million or 6.5% in Q4 FY24 from Q4 FY23 due to slower demand in high-end products. Revenue from mainstream products increased $3.8 million or 56.6% in Q4 FY24 from Q3 FY24 as more production capacity was dedicated to meet strong demand.
Selling, general and administrative expenses increased $5.5 million to $69.5 million in YTD FY23, from $64.0 million in YTD FY22, primarily due to an increase in compensation and related expenses, professional fees, travel and entertainment and insurance expenses in the respective amounts of $4.1 million, $1.2 million, $0.4 million and $0.3 million.
The $4.3 million increase from Q4 FY23 was primarily the result of increased compensation and related compensation expenses of $2.1 million and increased professional fees of $1.4 million. Selling, general and administrative expenses were $77.8 million in YTD FY24, compared with $69.5 million in YTD FY23.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $16.7 million in Q4 FY23, compared with $18.0 million in Q3 FY23, and $15.7 million in Q4 FY22.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $21.0 million in Q4 FY24, compared with $19.4 million in Q3 FY24, and $16.7 million in Q4 FY23. The $1.6 million increase from Q3 FY24 was primarily the result of compensation and related expenses of $1.1 million.
Percent YTD FY23 YTD FY22 Change Gross profit $ 336.2 $ 294.2 14.3 % Gross margin 37.7 % 35.7 % Gross margin increased by 2.0 percentage points in YTD FY23, from YTD FY22, primarily as a result of the increase in revenue from the prior year period, offset somewhat by the following net cost increases: Material costs increased 2.8% from the prior year period, but decreased 129 basis points as a percentage of revenue.
YTD FY24 YTD FY23 Percent Change Gross profit $ 315.9 $ 336.2 (6.0 )% Gross margin 36.4 % 37.7 % Gross margin decreased by 130 basis points in YTD FY24, from YTD FY23, primarily as a result of the decrease in revenue of 2.8% and increased equipment and other overhead costs of 2.5%, or 148 basis points as a percentage of revenue.
IC mainstream decreased in Q4 FY23 by 9.3% from Q3 FY23, and 4.5% from Q4 FY22 primarily the result of reduced mainstream demand in Asia. FPD revenue increased 3.1% and 16.5% in Q4 FY23, compared, respectively, with Q3 FY23 and Q4 FY22. The increases were caused by continued strong AMOLED demand in mobile display during Q4 FY23.
IC mainstream decreased in Q4 FY24 by $2.8 million or 2.5% from Q3 FY24, and $3.2 million or 2.9% from Q4 FY23 primarily the result of reduced mainstream demand in Asia. FPD revenue increased $3.8 million or 6.9% in Q4 FY24 from Q3 FY24 due to stronger demand for mainstream products.
Please refer to Notes 10 and 15 to our consolidated financial statements for additional information on our lease liabilities and unrecognized commitments, respectively. In September 2020, the Company’s board of directors authorized the repurchase of up to $100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act.
Please refer to Notes 11 - Leases and 16 – Commitments and Contingencies to our consolidated financial statements for additional information on our lease liabilities and unrecognized commitments, respectively. On August 28, 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the remaining $31.7 million up to $100 million.
YTD FY23 YTD FY22 Foreign currency transactions impact, net $ 2.5 $ 27.3 Interest expense, net (0.4 ) (1.9 ) Interest income and other income, net 14.8 1.7 Non-operating income (expense), net $ 16.9 $ 27.2 Non-operating income (expense) decreased $10.3 million in full year FY23, compared with full year FY22, due to foreign currency transactions, driven by unfavorable movements of the South Korean won, the New Taiwan dollar, and the Singapore dollar offsetting favorable movements of the RMB against the U.S. dollar, partially offset by increased interest income in the current year resulting from higher average cash, cash equivalents and short-term investments balances in FY23, compared with FY22 and lower interest expense, net of subsidies, due to receiving a lower amount of interest subsidies on our China-based debt in FY23, the effect of which was partially mitigated by lower average interest-bearing debt balance in FY23 than in the prior year.
YTD FY24 YTD FY23 Foreign currency transactions impact, net $ 2.2 $ 2.5 Interest expense, net (0.3 ) (0.4 ) Interest income and other income, net 24.0 14.8 Non-operating income, net $ 25.9 $ 16.9 Non-operating income (expense) increased $9.0 million in YTD FY24, compared with YTD FY23, due to increased interest income and other income of $9.2 million, resulting from higher average cash, cash equivalents and short-term investments balances in FY24 as compared with FY23.
Our cash, cash equivalents, and restricted cash balances were negatively impacted by changes in foreign currency exchange rates in FY23 by $2.7 million.
Financing Activities : Net cash used in financing activities decreased by $10.8 million in FY24, compared to FY23. This was driven by a decrease in repayments of debt of $11.8 million Our cash, cash equivalents, and restricted cash balances were positively impacted by changes in foreign currency exchange rates in FY24 of $2.1 million.
Revenue in YTD FY23 of $892.1 million surpassed our prior record revenue set in YTD FY22 by $67.5 million, or 8.2%. IC revenue increased by 9.8%, due to strong demand for mainstream products earlier in the year.
IC revenue decreased $13.2 million or 2.0% in YTD FY24 from YTD FY23 due to less demand for mainstream products earlier in the year which was partially offset by strong demand for high-end products.
This authorization does not obligate the Company to repurchase any dollar amount or number of shares of common stock. As of October 31, 2023, there was approximately $31.7 million remaining under that authorization.
As of October 31, 2024, there was $100 million remaining under that authorization. Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares.
Labor costs increased 10.3% from the prior year, and increased 30 basis points as a percentage of revenue, primarily due to increased labor costs in Asia.
Equipment and other overhead costs increased 2.7% from Q3 FY24 or 77 basis points as a percentage of revenue, mainly due to higher equipment cost in US high-end location.
Labor costs increased 4.5%, or 30 basis points as a percentage of revenue, due to increased costs in some locations. Equipment and other overhead costs increased 3.0%, or 41 basis points as a percentage of revenue, with increased equipment maintenance costs, partially offset by lower outsourced manufacturing costs, most significantly contributing to the net cost increase.
The gross margin favorable impact resulting from the increase in revenue in Q4 FY24 compared to Q3 FY24 was partially offset by increased material costs of 5.2%, or 6 basis points as a percentage of revenue. Labor costs increased 1.3%, or 45 basis points as a percentage of revenue.
Removed
FPD revenue increased by 4.0%, driven by a 7.4% increase in revenue from high-end products due to increased AMOLED demand in mobile displays, which offset decreased mainstream resulting from shifting capacity to meet strong high-end demand.
Added
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following should be read in conjunction with “Cautionary Statement Regarding Forward Looking Statements” and our combined consolidated financial statements and notes thereto included in Item 8 of this Annual Report on Form 10-K.
Removed
We believe that strong demand for AMOLED photomasks will continue, as expected technology advances drives increasing overall demand for higher-value masks. 27 Table of Contents Gross Margin Percent Percent Q4 FY23 Q3 FY23 Change Q4 FY22 Change Gross profit $ 84.9 $ 86.8 (2.2 )% $ 80.3 5.7 % Gross margin 37.3 % 38.7 % 38.2 % Gross margin was 37.3% for Q4 FY23, representing a slight decrease from the Q3 FY23 gross margin of 38.7%, as increase in revenue of 1.5% was offset by increased material costs of 4.2%, or 69 basis points as a percentage of revenue.
Added
For a comparison of results of operations for the fiscal years ended October 31, 2023 and 2022, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Photronics Inc.’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023, filed with the SEC on December 26, 2023.
Removed
Increased depreciation expense, utilities expenses, and outsourced manufacturing costs, which were partially offset by decreased equipment maintenance costs, were the primary contributors to the overall increase.
Added
FPD revenue decreased by $12.0 million or 5.0%, driven by a $6.5 million or 16.3% decrease in revenue from mainstream products due to a decrease in G8 products.
Removed
Equipment and other overhead costs increased by 4.5% but decreased 95 basis points as a percentage of revenue, with increased utilities, equipment service contract costs, and less transfer of research and development cost from cost of goods sold to research and development expense, as well as increases in computer software costs, offset by decreased importation costs most significantly contributing to the overall cost increase.
Added
Gross Margin Q4 FY24 Q3 FY24 Percent Change Q4 FY23 Percent Change Gross profit $ 82.3 $ 75.1 9.6 % $ 84.9 (3.1 )% Gross margin 37.0 % 35.6 % 37.3 % Gross margin increased by 140 basis points in Q4 FY24 as compared to Q3 FY24, primarily as a result of the increase in revenue.
Removed
The decrease from Q3 FY23 was primarily the result of decreased compensation and related expenses of $1.5 million offset partially by increased insurance expenses and outside services of $0.1 million and $0.1 million, respectively.
Added
This was partially offset by a decrease in material cost of 5.2%, or 77 basis points as a percentage of revenue, and labor costs of 8.5%, or 74 basis points as a percentage of revenue.
Removed
The increase from the prior year quarter was primarily the result of increased compensation and related expenses of $1.0 million and increased insurance expenses of $0.2 million.
Added
This was partially offset by a decrease in material cost of 3.8%, or 24 basis points as a percentage of revenue, and labor costs of 2.8%, but remained flat as a percentage of revenue.
Removed
Non-operating income (expense) increased from Q4 FY22, by $7.9 million, primarily due to higher interest and investment income earned on our cash balances, in addition to foreign currency transactions impact.
Added
The increase of $8.3 million is primarily due to an increase in compensation and related expenses of $3.8 million and professional fees of $2.5 million.
Removed
The Company is continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries.
Added
The foreign currency impacts were primarily driven by unfavorable movements of the New Taiwan dollar and the South Korean won, against the U.S. dollar for both periods.
Removed
Net Cash, a non-GAAP financial measure as defined and discussed in the Non-GAAP Financial Measures section below, was $474.7 million and $277.3 million as of October 31, 2023, and October 31, 2022, respectively. Our primary sources of liquidity are our cash on hand and cash we generate from operations.
Added
The Company is currently not subject to Pillar Two but is continuously evaluating the potential impact of the Pillar Two Framework to ensure we are compliant in the future.
Removed
As of October 31, 2023, Photronics and DNP each had net investments in this joint venture of approximately $117.1 million.
Added
The October 31, 2024 valuation allowance was reduced by $(2.0) million dollars which was offset by additional FIN 48 reserve of $5.8 million.
Removed
Free Cash Flow, which is a non-GAAP financial measure as discussed in the “Non-GAAP Financial Measures” section below, increased by $8.0 million in FY23, compared with FY22, and $121.2 million in FY22, compared with FY21, primarily due to increases in net cash provided by operating activities.
Added
In addition, we currently have $42.2 million in short-term investments and RMB 200 million (approximately $28.1 million) of borrowing capacity in China to support local operations. See Note 8 – Debt to the consolidated financial statements for additional information on our outstanding debt and currently available financing.
Removed
Investing Activities : In FY23, net cash flows used in investing activities primarily consisted of purchases of $131.3 million of property, plant and equipment. Net cash flows used in investing activities decreased by $46.2 million in FY23, compared with FY22, primarily as a result of $47.5 million in proceeds from the maturity of available-for-sale debt securities.
Added
Investing Activities : Net cash flows used in investing activities increased by $55.0 million in FY24, compared to FY23, primarily driven by an increase of purchases of short-term investments of $80.4 million. This was partially offset by an increase in proceeds from the maturity of short-term investments of $25.3 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+2 added−0 removed5 unchanged
Biggest changeAs of October 31, 2023, a 10% adverse movement in the value of these currencies against the functional currencies of our subsidiaries would have resulted in a net unrealized pre-tax loss of $52.0 million, which represents an increase of $17.3 million from the same movement as of October 31, 2022.
Biggest changeAs of October 31, 2024, a 10% adverse movement in the value of the non-functional currencies against the functional currencies of our subsidiaries would have resulted in a net unrealized pre-tax loss of $61.3 million, which represents an increase of $9.3 million from the same movement as of October 31, 2023.
However, in some instances, we sell products in a currency other than the functional currency of the country where it was produced, or purchase products in a currency that differs from the functional currency of the purchasing entity.
However, in some instances, we sell products in a currency other than the functional currency of the entity where it was produced, or purchase products in a currency that differs from the functional currency of the purchasing entity.
The increase in foreign currency rate change risk is primarily the result of increased net exposures of the New Taiwan dollar and South Korean won against the U.S. dollar. We do not believe that a 10% change in the exchange rates of other non-U.S. dollar currencies would have had a material effect on our October 31, 2023, consolidated financial statements.
The increase in foreign currency rate change risk is primarily the result of increased net exposures of the New Taiwan dollar and South Korean won against the U.S. dollar. We do not believe that a 10% change in the exchange rates of other non-U.S. dollar currencies would have had a material effect on our October 31, 2024, consolidated financial statements.
Our primary net foreign currency exposures as of October 31, 2023, included the South Korean won, the Japanese yen, the New Taiwan dollar, the Chinese renminbi, the Singapore dollar, the British pound sterling, and the euro.
Our primary net foreign currency exposures as of October 31, 2024, included the South Korean won, the Japanese yen, the New Taiwan dollar, the Chinese renminbi, the Singapore dollar, the British pound sterling, and the euro.
Interest Rate Risk A 10% adverse movement in the interest rates on our variable rate borrowings would not have had a material effect on our October 31, 2023, consolidated financial statements. 35 Table of Contents
Interest Rate Risk A 10% adverse movement in the interest rates on our variable rate borrowings would not have had a material effect on our October 31, 2024, consolidated financial statements.
Added
Inflation Risk Inflationary factors generally affect us by increasing our labor and overhead costs, as well as costs associated with certain risks identified above, which may adversely affect our results of operations and financial position.
Added
We have historically been able to recover the impacts of inflation through sales price increases, however we cannot reasonably estimate our ability to successfully recover any impact of inflation through price increases in the future. Our inability to do so could harm our results of operations and financial position. 36 Table of Contents

Other PLAB 10-K year-over-year comparisons