Photronics outlines $201M–$209M Q4 revenue target as geographic diversification advances

Earnings Call Insights: Photronics, Inc. (PLAB) Q3 2025

MANAGEMENT VIEW

* CEO George C. Macricostas stated that "we had another solid quarter with sales of $210 million ahead of expectations, and flat both year-over-year and sequentially." He highlighted that the flat panel display business is performing well, offsetting challenging demand in the integrated circuits (IC) sector. Non-GAAP diluted EPS was reported at $0.51, which Macricostas noted was "well ahead of guidance."
* Macricostas discussed the company's strategy to capitalize on geographic diversification, noting, "We are leveraging our strong balance sheet to reinvest in our business, driving competitive advantages, revenue and earnings growth in the future." He also referenced U.S. expansion plans, including enhancements at the Texas cleaning facility and installation of a multi-beam mask writer in Idaho for high-end production.
* The CEO added, "We have recently hired a new Head of Global Sales, who will drive a coordinated global sales strategy designed to capture market share in this continuously evolving global semiconductor landscape."
* CFO Eric Rivera stated, "Third quarter revenue was above expectations at $210 million, which was relatively flat both sequentially and year-over-year." Rivera reported, "Gross margin of 34%, which was higher than expectations, and our operating margin of 23% was above our guidance range."

OUTLOOK

* Rivera forecasted fourth quarter revenue to be in the range of $201 million and $209 million. He said, "Based on those revenue expectations and our current operating model, we estimate our fiscal Q4 operating margin to be between 20% and 22%. Our non-GAAP earnings per share for the fourth quarter are expected to be in the range of $0.42 to $0.48 per diluted share."
* Management remains cautious about the near-term demand environment, citing "current market conditions and continued geopolitical uncertainty."

FINANCIAL RESULTS

* The company reported $148 million in IC revenue, reflecting a 5% year-over-year decline, while high-end IC revenue increased 8% year-over-year and represented 36% of total IC revenue. Mainstream IC revenue declined 12% year-over-year, primarily in Asia.
* Flat panel display (FPD) revenue was $63 million, up 14% year-over-year, led by demand in Korea. Rivera stated, "FPD continued to benefit from the uplift in seasonal demand particularly for higher-end applications utilizing our advanced AMOLED technologies."
* Gross margin was 34%, operating margin was 23%, diluted GAAP EPS was $0.39 per share, and non-GAAP diluted EPS was $0.51 per share.
* The company generated $15 million in operating cash flow, representing 24% of total revenue. CapEx was $25 million for the quarter, and total cash and short-term investments reached $576 million.
* Photronics repurchased 1.2 million shares for $21 million and increased its repurchase authorization by $25 million, now totaling $28 million available.

Q&A

* Thomas Robert Diffely, D.A. Davidson: Asked about the revenue mix for the fourth quarter and potential impacts from tariffs and trade restrictions. Rivera answered, "We see the mix in the fourth quarter to be similar to that of the third quarter, correct." Regarding tariffs, he explained, "The trade restrictions...doesn't impact us directly. It does impact our customers as you suggested."
* Diffely inquired about multi-beam investments and customer targets. Rivera responded, "It would be for the higher end nodes for customers similar to...Samsung, which we've talked about that in the past."
* Diffely asked about moving to 6-nanometer, 8-nanometer nodes in Asia. Rivera clarified, "Our restrictions for those type of nodes would be in China...if we were to invest in Asia, it would be in a non-China location."
* Christian David Schwab, Craig-Hallum: Sought details on end markets for new nodes and market share potential. Progler stated, "It's mostly high-end processors starting to see edge AI devices...EVs and AI embedded into cars, these sorts of things."
* Schwab asked about CapEx normalization. Macricostas responded, "We're looking at about a 3-year higher-than-normal CapEx...after 3 years, we'll be more normalized because that end of life tool cycle will be behind us."
* Schwab raised FPD growth and ASP potential. Lee said, "We are -- we have the technology for G8.6 AMOLED. And our customer in Korea has been working with us."
* Gowshihan Sriharan, Singular Research: Asked about gross margin shifts and new technology adaptation. Rivera noted, "The biggest factors would be just a mix -- overall business mix, primarily in Asia." Progler added, "The qualifications are well underway...we have, let's say, 3 to 5 customers already qualified on it, we're ramping the utilization."
* Sriharan questioned flexibility in redeploying JV cash. Rivera explained, "We control the cash for sure...if needed, we can certainly dividend it out to the U.S."
* Sriharan inquired about U.S. government involvement with Intel. Rivera: "If the government helps Intel, that strengthens Intel. Intel is a customer of ours...that can only be better for merchants like Photronics."

SENTIMENT ANALYSIS

* Analysts directed detailed questions toward revenue mix, technology investments, CapEx normalization, and geographic strategy, with a generally positive and inquisitive tone, frequently congratulating management for performance and guidance.
* Management maintained a confident and optimistic tone, emphasizing ongoing investments, opportunities for diversification, and readiness to support customer growth, using phrases such as "we are leveraging our strong balance sheet" and "we remain relentless in our efforts to improve efficiencies."
* Compared to the previous quarter, analysts appeared more engaged with strategic growth questions, while management's tone shifted from cautious to more assertively optimistic about long-term opportunities, although caution about near-term demand persisted.

QUARTER-OVER-QUARTER COMPARISON

* The Q3 call emphasized a more robust U.S. and Asian expansion strategy, compared to the prior quarter's focus on succession and operational transition.
* Q3 guidance for revenue and EPS was higher than Q2's, with Q4 revenue targeted at $201 million–$209 million and non-GAAP EPS at $0.42–$0.48 per diluted share, compared to Q3's guidance of $200 million–$208 million revenue and $0.35–$0.41 EPS.
* The new Head of Global Sales appointment and targeted high-end node investments mark a strategic shift toward capturing global market share.
* Analysts' questions shifted from operational transition and macro uncertainties to specifics on growth drivers, CapEx, and market share opportunities.
* Management's confidence appeared elevated, supported by clear capital allocation and expansion plans.

RISKS AND CONCERNS

* Management cited persistent headwinds in the IC market, including "uncertainty associated with geopolitical trade restrictions, particularly in the Asia region that are muting demand."
* Rivera noted, "ASPs for high-end mask sets are high, meaning a relatively low number of high-end orders can have a significant impact on our quarterly revenue and earnings."
* The company remains cautious about "limited visibility and typical backlog of 1 to 3 weeks" and highlighted that "demand for our products is inherently uneven and difficult to predict."

FINAL TAKEAWAY

Photronics management remains focused on expanding its geographic footprint, investing in advanced technology for high-end nodes, and prudently allocating capital to drive future growth and profitability. Despite ongoing macroeconomic and geopolitical uncertainties, the company expects to maintain stable revenue, margin, and earnings levels in the coming quarter, leveraging its position as a merchant market leader and strong operational foundation to capture emerging opportunities and support long-term shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/plab/earnings/transcripts]

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