Quarter 1
Q2 2026 Earnings Call — May 28, 2026
Analyst Maxwell Michaelis (Lake Street Capital Markets): In terms of visibility, when did things really start to get cloudy in the quarter? Just given the guidance for Q2, came in a little bit below that. So really, when did visibility become cloudy in the quarter?
Executive Eric (Title): So it really started becoming cloudy when the conflict in, you know, with Iran and the U.S. started during the quarter. Then after that, we started seeing fab utilization was also affecting us.
Executive Frank (Title): Typically, we have a very strong booking before Chinese New Year, and after Chinese New Year, there will be a temporary slowdown. But this year, the slowdown after Chinese is much longer than we anticipate. Of course, the headwinds, as George and Eric highlight, may be the factors causing this longer slowdown in the tap out after Chinese New Year. So we do see the slowdown right after Chinese New Year, which is in the end of February.
Analyst Maxwell Michaelis (Lake Street Capital Markets): And then I guess my second question and follow up to that would be when you're talking to your customers, I mean have they given you any sort of rough timeline of when they expect to bring in these new designs or they still have no idea either?
Executive Eric (Title): Our customers actually are still optimistic about a mid-term outlook; however, in the near terms, the visibility remains kind of limited. So we see a lot of delay in the tap out in Q2. However, at the beginning of Q3, we did see some recovery of those delays. A lot of tap outs have happened since the beginning of May. However, going forward, we remain very cautious. But at this moment, customers are still optimistic about the midterm outlook.
Analyst Ghoshy Sri (Singular Research): I just wanted to get these customers that are deferring designs. Are they, were they already in the pipeline or is this more about new designs that are starting to slow down and do those recovery times differ?
Executive Eric (Title): Yes, actually they are. Whenever a customer makes a new design, they tap out the data to the Foundry FAB, then the Foundry FAB gives the order to the mass house they select. This time, the new design slowdown actually happened at the end of the Foundry customer, namely the design house. It actually has a slower new design release. So it's not in the pipeline. It's at the very beginning of the new design release.
Analyst Ghoshy Sri (Singular Research): Eric, on the margin compression side, are there any specific levers you guys can pull if the demand kind of stays soft for another couple of quarters? Are there any variable cost reductions available, or is it fundamentally a cost business that needs utilization to recover?
Executive Eric (Title): Yeah, very little. Very little levers we can pull. I mean, it's really the product mix that will be available that the market gives us is what we'll have. Most of our cost is fixed, or a big portion of it anyway is very fixed, so we don't have much leverage to pull there.
Analyst Ghoshy Sri (Singular Research): And on the Allen side, if Allen begins delivering qualifications masks in Q3 as planned and the demand kind of stays up till early 2027, does bringing the new Allen capacity online to a weak demand environment kind of add depreciation costs, making margins even more compressed? Or is the Allen cost structure kind of light enough at the qualification stage that it doesn't meaningfully impact P&L until commercial production begins?
Executive Eric (Title): Yeah, so the Allen expansion already started. We started qualifications already in Q3. So everything is moving, you know, according to our timeline. We expect revenue generation to occur later in the year, and we do not expect that the current economic environment will depress the returns that we're expecting on our Allen expansion in the current year or in the next at the moment.
Executive Frank (Title): Our Allen expansion is not only capacity expansion. We are upgrading our technology. So the qualification basically is for the technology which Allen cannot do at this moment. Once we qualify the customer, I think we will increase our market share in the technology node, which Allen cannot produce right now. Also, another purpose of Allen expansion is we are planning to transfer some lower end of the high end order from our Boise side to Allen. So we can spare more capacity in our Boise side to take higher ASP orders. So this is a win for Boise side and also a win for the Allen side.
Analyst Ghoshy Sri (Singular Research): And in terms of the memory supply constraints and OEM cost pressure headwinds, I'm curious as to see whether you're seeing this evenly across your geography. For example, are your U.S. customers, Korean customers, behaving differently to your Chinese and Taiwan-founded customers in terms of deferring designs, or is the cost kind of fairly based across all regions?
Executive Eric (Title): Yes, the memory shortage and especially also the price surging has huge negative impact on the consumer product, especially the low-end consumer product. So those are mainly in Asia. So I think this impact happened in Taiwan and also in China.
Analyst Christian Schwab (Craig Halem): I understand the delays that you're seeing as design starts, and thanks for all that clarity. But as we increase our capacity capabilities on lower geometry nodes, chips on a medium-term basis. Can you give us an idea of either a yearly revenue target or a market share goal? And then my second question along those lines is, on the advanced node side, is seven or eight nanometers the best that we're going to be able to make or do we have aspirations to get down below that?
Executive Eric (Title): So starting with your last question first in terms of our aspirations to go eight nanometers, seven nanometers, you know, we're going to continue going down node. I mean if we have to do that because that's our industry, we have to continue investing and we see a lot of opportunity there. So definitely we plan to go below those ranges. Now with respect to the revenue that we expect to get out of our Allen facility with our recent investments, I'm not going to get into detail of revenue by site from that perspective, but that should give us an opportunity to expand our market share in the U.S., and we expect the U.S. to be, at least in 27, to be heading us from a revenue expansion perspective. Our percentage of increase should be larger in the U.S. than anywhere else. We're working with customers to that end.
Executive Frank (Title): I think our investments are not necessary for the capacity only, because we are seeing a lot of ongoing unsure semiconductor manufacturing in the States. And for Trowness, we have a very unique strong position in the country because we have the Boise side where we have the very advanced photo mask technology. And also we have where we can make mainstream photo masks. So the capacity expansion and the technology upgrade by our CAPEX is to serve our company's goal. We like to be the main photo mask supplier in the United States.
Analyst Christian Schwab (Craig Halem): Great. Thank you for that clarity. No other questions.
Executive Ted (Title): Thank you, Tanya, and thanks, everyone, for joining us on the call today. We really appreciate your interest in Fortronics. Look forward to connecting with everybody throughout the quarter. Have a great day. And this concludes today's program. Thank you for participating. You may now disconnect.
Quarter 2
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.