Photronics, Inc. · NASDAQ:PLAB
Photronics — 21st Annual Needham Growth Conference (January 2019)
25 slides from Photronics's conference presentation, Jan 16, 2019
Slide 1: Photronics, Inc. Global Leader in the Merchant Photomask Industry
Photronics, Inc.Global Leader in the Merchant Photomask Industry 21st Annual Needham Growth ConferenceJanuary 16, 2019
Slide 2: Safe Harbor Statement
Safe Harbor Statement 2 This presentation and some of our comments may contain projections or other forward-looking statements regarding future events, our future financial performance, and/or the future performance of the industry. These statements are predictions, and contain risks and uncertainti
Slide 3: A Compelling Investment Thesis
Global leader in merchant photomask industryDelivering growth by leveraging core competencies: Operational Excellence, Low Cost Producer, Technology Leadership, Customer IntimacyInvesting aggressively to exploit secular growth opportunitiesChina industry expansion – Made in China 2025Technology infl
Slide 4: Photronics at a Glance
Largest merchant photomask manufacturerUnmatched global footprintInvesting to exploit market disruptions with reciprocal customer commitments Strong balance sheet to fund growth Photronics at a Glance 4
Slide 5: Photomasks are Critical to Electronic Manufacturing
Photomasks are Critical to Electronic Manufacturing 5 ComponentDesign End User Manufacturing Process Photomask
Slide 6: Core Competencies Underpin Sustainable Growth
Cost controlSupply chain optimization Low Cost Producer Flexible deliveryHigh yields Operational Excellence Trusted partnerWafer yield enhancement Customer Intimacy Process know-howAdvanced PoR Technology Leader Core Competencies Underpin Sustainable Growth 6
Slide 7: Delivering on Growth Commitments
Repositioned the CompanyChinaTotal TAM ~$700M by 2022Region with strongest growth potentialSupported by new manufacturing facilities in 2019IC CaptiveApproximately $2.4B TAMWe are seen as trusted partnerCommitments strengthen sustainabilityHigh-end revenue growthHigh value and high growthSupports Ch
Slide 8: Technology as a Tool to Support Business Growth
Technology as a Tool to Support Business Growth 8 High-End39% Mainstream61% High-End64% Mainstream36% Growth Investment Cycle
Slide 9: Driving Sustainable, Profitable Growth
Repositioning the companyImproving high-end revenue China investmentsFPD technology inflections Strategic photomask partnershipsAdjacent market M&A Driving Sustainable, Profitable Growth 9 Short term (6-12 months) Medium term (12-36 months) Long term (36+ months) Implemented Ongoing Future
Slide 10: Developing and Growing China Business
We already have growing business in China19% of total revenue in 201813% of IC revenue39% of FPD revenueGrowing strong since 2015IC +51% CAGRFPD +67% CAGRManufacturing presence in China aims to accelerate growthCustomer contracts will help quickly ramp facilitiesInvestment incentives reduce risk and
Slide 11: Investing in China Operations
IC FPD Location Xiamen Hefei Investment Amount $160M $160M Cleanroom Size ~2,500 m2 ~4,500 m2 Ownership Structure Majority-owned (50.01%) JV Wholly-owned Technology High-end, mainstream, logic, memory Up to G10.5+, AMOLED Production Start First half of 2019 First half of 2019 Incremental Revenue $15
Slide 12: Reducing Risk of China Investment
Reducing Risk of China Investment 12
Slide 13: Leveraging Technology Leadership for Mobile Display AMOLED Adoption
Mobile devices moving from LCD to AMOLEDSuperior visual characteristicsLower power consumptionEnables flexible formatPreferred for VR/AR devicesIncreases mask complexityMore mask layers per setTighter specs on each layerExtending technology leadership with P-800 in KoreaOnly firm with this advanced
Slide 14: Improved Glass Efficiency for Ultra-Large Screen TV
65” 65” 65” 65” 65” 65” 65” 65” 95% G10.5+ Improved Glass Efficiency for Ultra-Large Screen TV 14 2940 mm x 3370 mm 2200 mm x 2500 mm 1950 mm x 2250 mm 1500 mm x 1850 mm 75” 75” 75” 75” 75” 75” 94% 65” 65” 65” 64% 75” 75” 73% 65” 65” 88%
Slide 15: "Made in China 2025" Driving Growth in FPD Market
China represents fastest growing display region64 fabs in production, under construction or being plannedLargest display producer (Korea 2nd)Photomask opportunities in China are attractiveWide range of display technology, including AMOLED & G10.5+No merchant photomask producer with high-end experien
Slide 16: China Display Fabs in Production by 2022
64 China Display Fabs in Production by 2022 16 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png LCD (7)AMOLED (15)G10.5+ (7) Photronics LocationsFPD KoreaFPD HefeiFPD Taiwan LCD (25)AMOLED (9)G10.5+ (1) New (29) Existing (35)
Slide 17: "Made in China 2025" Driving Growth in IC Market
China represents fastest growing semiconductor regionGrowing domestic producersInvestments by multi-nationalsMore investment needed to meet national targets2022 forecast is 17%China government target is 40% by 2020, 70% by 2025Photomask opportunities in China are attractiveWide range of nodes in log
Slide 18: New China 12" IC Fabs
23 New China 12” IC Fabs 18 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png Photronics LocationsIC KoreaIC XiamenIC TaiwanIC Boise (not shown) Logic (17)Memory (6) Innotron (M) Nexchip (L) YMTC (M) Samsung (M) AOS (L) Unigroup (L) GF (L) SMIC (L) Intel (M) SMIC (L) Cansemi (L)
Slide 19: Strategic Priorities to Improve Shareholder Value
Top line growth combined with continued focus on driving costs outDisciplined focus on investments to improve ROICMaintain strong balance sheet while returning cash to shareholdersLaunched two buy-back programs in FY18Financial stability through economic downturnFlexibility to invest in other growth
Slide 20: Solid Financial Fundamentals
Powerful operating leverage: target 50%Strong operating cash flow generatorPositive free cash flow every fiscal year since 2009Solid balance sheet Solid Financial Fundamentals 20
Slide 21: On Our Way to 2020 Target
Key Success Factors“Made in China 2025” – new facilitiesFPD technology inflectionsRepositioning the companyNode migration (logic & memory)Growing business with captive producersIC JV’s in China and TaiwanStable mainstream businessCross-site collaboration to serve global customers On Our Way to 2020
Slide 22: Clear Capital Deployment Priorities
Fund organic growthGeographic expansion into ChinaTechnical investments to maintain leadership positionExplore strategic M&APhotomask industry – IC & FPDAdjacencies to increase revenue diversificationDebt repaymentConverts mature in April 2019Established $75M loan agreements in ChinaShare repurchase
Slide 23: Financial Summary
Clear path to accelerate profitable growthPrudent stewardship of balance sheetFinancial model to grow income faster than revenueOn track to achieve financial targetsRevenue $630M & EPS $0.80 by 2020Operating margin > 15%Minimum $100M net cashImprove ROIC – no projects accepted below hurdle rate Fina
Slide 24: A Compelling Investment Thesis
Global leader in merchant photomask industryDelivering growth by leveraging core competencies: Operational Excellence, Low Cost Producer, Technology Leadership, Customer IntimacyInvesting aggressively to exploit secular growth opportunitiesChina industry expansion – Made in China 2025Technology infl
Slide 25: Thank you for your interest!
Thank you for your interest! For Additional Information:R. Troy Dewar, CFAVice President, Investor Relations203.740.5610tdewar@photronics.com
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