Photronics, Inc.

Q1 2026 Earnings Call — February 27, 2026

Analyst (Craig Hallam): Hey, guys. This is Ben Taxdahl in for Christian Schwab. First thing, or my first question is, just with that slight sequential decrease in revenue and operating margin, is there anything else we should be thinking about besides the Chinese New Year? And then my follow-up to that would be, what are some things that need to happen to kind of hit that higher end of that guided range?

Executive (Title): Good morning, Ben. Yes. Christian, I think in this year, the Chinese New Year falls into the middle of February. Most customers, especially the Fairbanks Design House customers, they are taking the long holidays. So we do see the customer table forecast will resume in the early of March. So I believe we do have a lot of active week from the orders before the new year, however, because of the temporary slowdown during the long holidays and the first week after the holiday, there may be slight impact on the output, and that's why our forecast is slightly lower than Q1. Basically, no, we don't see major difference in the market environment by the holiday that can make some impact on our output.

Analyst (Craig Hallam): Okay, thanks. Good context there. Now just with the Allen facility coming online and then just thinking about the high-end Boise facility and also kind of the high-end IC revenue these last, you know, two quarters. Can you kind of talk about that, and then also maybe a little bit of a proxy for, you know, the high-end IC going forward? Is it going to be kind of continued at these same rates these last two quarters, or is it going to be lower, higher, you know?

Executive (Title): The NM project, actually, we kicked off the project several quarters ago in terms of planning the facility, clean room expansion, and the equipment purchasing. Right now our clean room has been ready and we have a tour delivered already. At this moment we are in the process of installing the new equipment which will be complete, and sequentially, we need to do certain customer qualifications. So we believe once the qualification is complete, Allen's side will be able to contribute to our business, especially in the mid-range of mainstream. At the same time, Allen can support our Boise facility, taking some middle or low-end must bear away from Boise so we can spare the Boise capacity for a real high-end business. We will see a lot of high-end opportunities in which we have to maximize our Boise capacity in terms of product mix. Also, I think both George and Eric report we are going to do a lot of CapEx expansion, which includes Boise high-end capacity expansion to meet a strong high-end customer demand.

Analyst (Craig Hallam): All right. Good. And then just my last question here, switch over to flat panel. You know, discussing your leadership in AMOLED and kind of the G8.6 size and the material higher ASPs with that. Can you remind me of, you know, the different applications of that technology and then maybe just help us understand the size and scope of that opportunity over the next few years would be really helpful.

Executive (Title): For G8.6, as George reported, it's in the infant stage of business development. We do receive a very first set of G8.6 photo masks from our Korean customers, and we do see a lot of Chinese customers are in the process of developing G8.6 MRA business. So we believe with our process capability and also the most advanced new writer we just installed in Korea, we will build a data in G8.6 flat panel business.

Executive (Title): Eric, do you have anything to add here?

Executive (Title): Thank you, Franco. I think you covered all areas here, so I have nothing else to add.

Analyst (Singular Research): Can you guys hear me?

Executive (Title): Yes, Gaoshi. How are you doing?

Analyst (Singular Research): Good morning, gentlemen. My first question is on the margins. You've been consistently printing kind of mid-30s, even as mix improves. Do you think there's any risk that we are temporarily over-earning here or because of unusually tight high-end supply, or is that we should expect some more normalization as more capacity, including your own, comes online over the next year or two?

Executive (Title): So, hi, Gachi, this is Eric here. So, we don't see Q2 being much different than Q1 at the moment from a product mix perspective. Of course, you know, the market is going to determine that, but that's what we're expecting it to be similar. In terms of our, you know, CapEx that we are projecting, as I mentioned on our prepared remarks, we're entering a stage of elevated CapEx investments as a result of the opportunities the market is affording us, and we will certainly capitalize on them. With that comes increased depreciation, of course, when the tools are in place, but also revenue will increase for many of those projects. And those CapEx that are related to end-of-life tools, a lot of our end-of-life tools provide additional capabilities that'll enable us to improve our product mix. So in general, I would say that although margins could surely fluctuate, primarily because of product mix, we don't expect our margins to like fall off a cliff.

Executive (Title): Let me also, I'm sorry, go ahead, Gauchi.

Analyst (Singular Research): No, no, no, go ahead.

Executive (Title): Yeah, I was gonna just ask something. Who was that? Eric, sorry. Please go ahead.

Executive (Title): I can comment afterwards.

Executive (Title): Oh, I'm passing it on to you, Frank. Go ahead.

Executive (Title): All right. Thank you. Thank you. Gosh, actually, we do have a lot of high-end business, and as I just mentioned, we need to maximize our most advanced side of Boise output, and that's one reason we need to have an advanced side to take some loading away. At the same time, to increase the capacity in Boise side, we are working with many customers to qualify a new writer called multi-bin writer. This writer has a much, much higher throughput, which can improve our overall diesel capacity. So right now, it's not really so-called business constraint. It's actually a little bit capacity constraint. So, with the CAPEX and also with the market being qualification in Boise side, we will try to increase our high-end capacity and, of course, the high-end capacity will contribute greatly to the growth margin.

Analyst (Singular Research): Awesome. Thanks, Dollar. And on the Asia side in China, you said that, you know, that it's kind of stabilized stuff mainstream. Now it's been a couple of quarters. Are you seeing any of the local competitors adjust their behavior or either moving up the node themselves or becoming aggressive on pricing in the segments? Or is it still deemphasizing, and could that change the economics of your stabilized soft mainstream outlook?

Executive (Title): Go ahead. I'm sorry. Go ahead, Frank.

Executive (Title): Sorry. We should not talk. I think you talk first. I talk later.

Executive (Title): No problem here. No problem. So with respect to Asia and China specifically, I think we're focused on the high end where there's less competition. That's where we have a competitive advantage from the new entrants and the increased competition there. They're more focused on the mainstream as they learn the business, if you will. So given our strategy, we see our margins relatively flat or slightly improving. It all depends on our product mix. But we're focused on the product mix on the high end where there's less competition. Frank, would you like to add something to that?

Executive (Title): Sure, sure. I think in the China market, even there are several, many newcomers, but because for customers, the high-end qualification requires a lot of human resource, wafer resource from the wafer fab. So most of our high-end customers, they just have one or two. They are not really interested to spend a lot of resources to qualify number four, number five. And so we believe the entry barrier for the newcomers to the high-end business is very high. So for ourselves, for Chinese, we do have a facility locally in Xiamen and we are focusing on the high-end business in China. We have a business from major Chinese high-end wafer fab, so we will continue to improve our cycle time, the delivery, and so on, and also to maximize our high-end product mix. So we believe the newcomers may have some negative impact on the mainstream, but on the high-end side, we do have a lot of advantages.

Analyst (Singular Research): Got you. Thanks a lot. So since Asia was the stronger demand, the key driver to the beat, can you give us a little bit of color on what that demand looks like under the hood, and does that mix look structurally different from what you were seeing a year or two ago?

Executive (Title): Okay. I think the main driving force is the diversification because due to the geopolitical reason, the unshoring, the regionalization, the customer, the design house, they have to manufacture their product in different countries. So for example, if they need to sell their chip to China, they need to make their wafers in China, Chinese companies. So with this, a lot of duplicate happens because of this issue. At the same time, for Chinese customers, the migration to 22, 20 nanometer happened in this year. A lot of companies are doing technology migration as compared to a couple of years ago. So we do see a lot of new type of in 22, 28 nanometer from our China customers. Thank you.

Executive (Title):

At this time, I would now like to turn the conference back over to Ted Moreau for closing remarks.

Executive (Title): Thank you, Gigi, and thank you, everyone, for joining us today. We appreciate your interest in Portronics and look forward to catching up with everyone throughout the quarter. Have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you.

Q4 2025 Earnings Call — December 10, 2025

Analyst (DA Davidson): Hi. Good morning. This is Linda on for Tom Diffley. Thank you for letting us ask questions. My first question is on the market share. Not that your largest competitor just went public. What is your relative size and or trends in share? Any color there will be very helpful.

Management: Thank you, Linda. This is Eric. So we see the market share being as we had perceived in the past, the fact that TechSend now is public helps us get a little bit more detail, but we see our market share being exactly what we thought before. NIC, they have more market share than we do, for sure. When you consider our FPD business that they don't participate in, we're about the same size when you combine them.

Analyst: So same size on FPD and different elsewhere?

Management: So TechSend doesn't participate in FPD. Photronics does. TechSend is larger, has a larger market share than Photronics does. NIC. NIC. NIC. However, when you consider our FPD business, we're around the same size.

Analyst: Got it. And then looking at the overall competitive environment, what is your view on the overall health of the environment? Yeah, any comment there would be helpful.

Management: Yes, we are seeing a lot of no migration, and especially in the States. In the past, we have our major operation facilities in Asia, but right now with the ensuring of semiconductor industry in the United States, our Boise side, which has the high-end capability, we are the only high-end merchant mass supplier in the country, and with all the growing high-end demand in the country, we believe we are on the right track to capture more high-end shares. So this also answers your first question that our market share with the growing U.S. demand, especially in the high-end and trusted product, we believe our market share will continue to increase. And it'll be supported by our investments in our Allen facility as well, which is supporting the reshoring efforts as well.

Analyst: Thank you. That makes sense. And then I also wanted to touch on the mainstream business. You say that there's continued softness there, but you're seeing it stabilizing. Just curious if you're seeing any kind of basically what you're seeing on the supply and demand side of things and how that has impacted margins and maybe how that is impacting your capital spend for next year.

Management: Our mainstream market, we are referring to mainly our mainstream business in China. As most people are aware that in China, due to the geopolitical issue, they do have some met in China policy, so there are quite a few new local mass house in China. However, for Chinese, as a market and technology leader in China, we try to differentiate ourselves from our local competitors. We are focusing more on our anchor key customers. We build a relationship with these key customers with better product quality, support, and so on. Also, we utilize our capacity better, mainly for a more higher value product mix. I think there are some competition in the mainstream, especially the low end of the mainstream. with our capability and also with our tour capacity and so on, we are moving ourselves to higher value product mix.

Analyst: Great. Thank you for your time this morning.

Management: Thank you, Linda.

Analyst (Single Research): Great. Thanks for taking my questions. Fantastic quarter. So just to follow up on the mainstream, is it fair to say that the new market entrance in China, you know, on the, I guess, higher, the less complicated nodes, is where you're seeing, I would assume, increased pricing competition. And so as we think about that business and your shift to higher MEG, should we think about that business potentially being under any gross margin pressure, or should we assume we're going to focus where quality and support and better products stand out, and the growth rate there could be a little muted. I guess I'm trying to kind of put all the pieces of the puzzle together.

Management: Okay. As I reported in China, right now there are very strong demand for our high-end product, especially in 22 and 28 nanometer technology. So for this technology, there are many, many layers in one set of device. So our capacity in our China facility, we are using most of the capacities for the high end, not necessarily for critical layers, but also for the semi and non-critical layers. So those critical and those are non-critical or semi-critical layers. Actually, they have a much better ASP than the so-called typical mainstream. In summary, our capacity need to be optimized, so higher value for higher gross margin and profit margin is the way we are doing business and the way we are working on the market.

Analyst: Great. That's clear. Thank you for that. As GA adoption and flat panel display eventually begins to broaden out into more mainstream applications, your ASPs there are believe they are anyway materially higher given the layer count when would you expect that to begin to be a meaningful percentage of that business is that something that happens in 26 fiscal year 26 or is that something that's in 27 and beyond?

Management: Yeah hi this is Chris. Yeah, so the GA 8.6 is at the early stage of production ramp. There's only a few fabs that are running that, but we're seeing additional fabs come online, actually in multiple regions, for GA.6 display. The application space is, just as you said, it's larger format OLED displays and IT, automotive, medical applications, so the application space is fairly broad. So we do expect that to be a strong opportunity for us because we have a leadership position there. As far as when it will have material impact on revenues and things like that, we don't really want to talk about that here. But I think 2026, you'll see gradual increases in the component of our display revenue driven by GA.6. I think that's all we'll probably say at the moment.

Analyst: Okay. That's great. And then as we're adding new capacity and geographical expansion and replacing end-of-life tools, I know that brings new capabilities and probably a different pricing structure. Is there any puts or takes to gross margin over a multi-year basis, given those significant investments that we should be thinking about?

Management: Hello, Christian. Eric here. So as we invest in our tools, we do so understanding the market and where we see growth being. And basically, we do expect to have increased revenue, and as a result, contributions to gross margin. Our CapEx also includes purchases of end-of-life tools, which provide also increased capabilities. So we do expect to see increased revenue, increased depreciation as well associated with it. We expect our gross margins to continue at the same rate and perhaps grow as we make these investments.

Management: Fantastic, fantastic. And this is George's, you know, no different than the past. I mean, we've always had end-of-life tools, you know, in the past and replacing them, et cetera. I mean, the new tools have better throughput, better capabilities, et cetera. So, it should not be anything material changes as far as the depreciation that, you know, is associated with the new tools.

Analyst: Great. Fantastic. And then, have you guys, my last question here, sorry for asking so many. As we wrap up the Allen, Texas facility, can you give us an idea of revenue potential? I don't need to know exactly where you could give capacity. I could figure it out. But what should we assume the revenue capabilities of additional US capacity over a multi-year time frame could add to the company? Is that fair?

Management: I understand the question, Christian. So let me address the question into what I can – I don't want to go to the level of granularity where we're disclosing how much revenue we're going to have by site. So what I can say is that as a result of these investments, we're going to go into sort of the mid-range nodes or the higher end of the mainstream, depending on how we define that, right? And we're going to have more capabilities that is going to have incremental revenue and profitability to Fortronics in the U.S. We expect gross margins to improve. We expect revenue to start on these investments towards the second half of the fiscal year, 26. And we expect those to continue on to 27 when we're fully ramped. And one other point, Christian, we might make is kind of a knock-on effect to this Allen project in that it'll free up more capacity in our Boise site, which is our most leading edge facility, because some of those mid-range masks we run there. So as Allen ramps, its revenue, of course, will go up, but the Boise will have more capacity to deploy for higher-end applications. So it's really a combination net benefit of both sites as far as the opportunity.

Analyst: Great, great. No other, well, let me sneak one more question in. Given the significant reshoring activities that are potentially going to be going on on a multi-year basis here in the United States, there are certain manufacturers who are going to be adding additional capacity who source photo masks from outside of the United States which some applications it may seem to me that they might be cost prohibitive to get all the way over here did you have any idea or aspirations that you're willing to share with us what you think the opportunity for captive guys going to the merchant market over a multi-year time frame or is that am I just saying the obvious because we're adding capacity everywhere but if there's any clarity on the movement from captive to merchant that you're anticipating other than just semiconductor unit growth any clarity there would be helpful.

Management: I think so. To be clear, is your question, do we expect the captives to be entering the merchant market effectively competing with us, or did I misunderstand?

Analyst: No, I'm saying giving up market, you know, giving market share, looking to merchant market suppliers versus doing it internally. Do you think that that is a trend that could come to the marketplace, in particular in the U.S. geography?

Management: I was going to say, I mean, unless it's a capability issue that they can't get it here. I mean, typically the cycle time is a big issue. They would want to have a more locally sourced, for cycle time reasons, a more locally sourced mask shop. So I think we have the local advantage. I think the issue could be, if there was one, would be under capabilities. But I'll let some of the other folks on the team here chime in.

Management: And I think we can broadly answer the question that we've seen over the last year, maybe a little longer, the tendency of the captives overall as a group to look at more outsourcing opportunities. And that's not just in the U.S., that's in other regions as well. So generally we're seeing an increase in interest and desire for the captives to outsource. This could be less critical layers of very advanced sets. It could be memory products that historically were done internally. But let's say broadly there's more outsourcing opportunity. Particularly related to photonics, we're well positioned in regions that have some of the largest captives and also some of the largest fabs. So we do expect to capitalize on that increased outsourcing trend of captives. I think beyond that, we won't be more specific

at this time.

But we do see it as an opportunity.

Management: Fantastic. That was extremely helpful.

Analyst: Go ahead, I'm sorry.

Management: I'll just add something quickly there. I guess stating the obvious, right, the regionalization trends, essentially there would be more fabs making more wafers. They'll need more photomasks. So the trend, the regionalization trend is only positive for merchant photomask manufacturers like Photronics.

Analyst: Yep, 100%. Get it. No other questions. Thank you.

Management: Thank you, Kristen. Appreciate the question.

Analyst (Single Research): Thank you. Good morning, guys.

Management: Good morning.

Analyst: Just on that, I'm glad you brought up that outsourcing issue. How do you guys think about the outsourcing increase in sales, about how you think about pricing and margins of those layers relative to traditional mainstream IC?

Management: Well, high-end has higher ASPs. Higher ASPs are good. They generally have a higher margin with them. So any outsourcing that comes out of the captives would generally be on the high-end areas. And generally speaking, the captives, you know, when they're outsourcing, at least my experience is they pay. I mean, I don't want to say, you know, a huge premium, but they're definitely, you know, not bottom fishing for the, you know, for what the merchants can give them. Typically, it's, you know, they're outsourcing and they need it and they're paying a fair price. So I don't see them, you know, being overly cost conscious, if I'm making sense.

Analyst: Gotcha.

Thank you. The first question is, we talked about a few quarters about how the customers were in holding patterns because of tariffs geopolitics. Setting aside Q1, are you seeing any change in the mix of conversation? You're having more long-term planning discussions that would tell you about the sentiment that is quietly improving under the surface.

Management: Okay, so overall with respect to the export restrictions, I think that's what you're referring to, or the tariffs. I guess tariffs are both of them. So we're seeing a little bit more easing of that. I think, as you said, customers have understood the landscape, and as a result, they're able to plan better in such order. Now, that is true for most areas. Perhaps in China, maybe it still remains the same, the issues that you've just described. But for the rest of the world, I think customers have a good plan of where they're going to do their orders. And as a result, we're there to benefit from that.

Management: Does anybody want to add? I guess we can also say the two projects we've announced, the one in the U.S. and the one in Korea, work based on longer-term, both short and longer-term conversations with customers on their future demands and the opportunities. So those projects came out of, I would say, a more robust longer-term opportunity dialogue with key customers. So we are seeing an increase in that, and we're acting on it appropriately by making the right investments in these projects.

Analyst: Yeah. And the high-end IC grew nicely in Q4. How concentrated is that growth towards a handful of programs or customers? And what would you see in the pipeline that gives you confidence that this becomes a broader, more diversified high-end run rate for the rest of fiscal 26?

Management: This is Chris. I can make a few comments. I think the high-end growth was basically from our existing core customer base. There are a few new customers, mostly our core customer base that expanded production and capacity as well. So that was memory customers, Foundry Logic probably being the strongest, and Recovery in Asia. So it's broad-based. It's a broad product mix coming out of Foundry and memory. And it's our existing, mostly our existing customer base, but more robust order patterns that match up to their improving demand cycles as well. So we think it's sustainable. It's consistent with the market generally improving and we're well positioned with some of the stronger IC players. So we do think it's sustainable. And if anything, we see more opportunities there in the high end for sure.

Analyst: Gotcha. Thank you. And I'll just make this my last question. On Korea specifically, with the capability extension and an increased exposure to the leading edge chips, how does the commercial model in Korea compare to US? Are the customers inclined to sign longer term agreements, or is it a more transactional kind of quarter to quarter work?

Management: We don't want to be very specific on this one, but as Chris just mentioned, our customer, especially the Advanced Logic Foundry customer, they continue their outsourcing policy, not necessary for a mature node, but going to a higher end and more higher end. So I think even there are no long-term agreements, but the trend is continuing. So we do have a lot of conversation and communication with the customer about their roadmap and their outsourcing demand. And that's one of the reasons we are doing the career side capacity and capability expansion.

Analyst: Thank you, guys. I'll take the rest offline.

Management: Thank you, Goshen.

Management: Thank you. And I'm showing down for the questions in the queue. I will now turn the call back over to Ted for any closing comments.

Management: Well, thank you for joining us today. We really appreciate your interest in Fortronics. Look forward to catching up with everyone throughout the quarter. Have a great day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.