Photronics, Inc. · NASDAQ:PLAB
Photronics — 22nd Annual Needham Growth Conference (January 2020)
31 slides from Photronics's conference presentation, Jan 15, 2020
Slide 1: Global Leader in the Merchant Photomask Industry
Photronics, Inc.Global Leader in the Merchant Photomask Industry 22nd Annual Needham Growth ConferenceJanuary 15, 2020
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 IntimacyGrowing more quickly than the marketTechnology aligned with secular growth trendsChina industry expansion (IC & FPD) – Mad
Slide 4: Photronics at a Glance
Photronics at a Glance 4 Unmatched Global Footprint11 Strategically Located Manufacturing Facilities
Slide 5: Photomasks: Essential for Electronics Manufacturing
Photomasks: Essential for Electronics Manufacturing 5 Component Design End User Manufacturing Process Photomask BRINGS DESIGN TOMANUFACTURING FLOOR
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: Repositioned for Growth
ChinaTotal TAM ~$700M by 2022Region with strongest growth potentialSupported by new manufacturing facilities since 2019IC CaptiveApproximately $2.6B TAMWe are seen as trusted partnerCommitments improve sustainabilityHigh-end revenue growthHigh value and high growthSupports China & captive initiative
Slide 8: Driving Sustainable, Profitable Growth
Repositioned the companyGrew high-end revenue Investing in ChinaPhase I – 2019-2020Phase II – 2020-2021 Leveraging FPD technology inflections Entering strategic photomask partnershipsExploring adjacent market M&A Driving Sustainable, Profitable Growth 8 Past (2017 – 2018) Recent and Present (2019 –
Slide 9: Developing and Growing China Business
We already have growing business in China27% of total revenue in 201918% of IC revenue52% of FPD revenueGrowing strong since 2016IC +83% CAGRFPD +59% CAGRManufacturing presence in China aims to accelerate growthCustomer contracts help ramp facilities more quicklyInvestment incentives reduce risk and
Slide 10: Leveraging Technology Leadership for Mobile Display AMOLED Adoption
Mobile devices moving from LCD to AMOLEDSuperior visual characteristicsLower power consumptionEnables flexible formatPreferred for VR/AR devicesIncreasing mask complexityMore mask layers per setTighter specs on each layerEstablished technology leadership1st firm with P-800 mask writerProduces highes
Slide 11: 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 11 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 12: Made in China 2025 Driving Growth in FPD Market
China represents fastest growing display region51 fabs in production or under constructionLargest LCD display producer (Korea 2nd)Photomask opportunities in China are attractiveWide range of display technologiesNo merchant photomask producer with high-end experienceWe are aligned with fastest growin
Slide 13: China Display Fabs in Production by 2022
51 China Display Fabs in Production by 2022 13 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png G10.5+ (5)AMOLED (16)LCD (30) Photronics LocationsFPD KoreaFPD HefeiFPD Taiwan
Slide 14: 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 targets2023 forecast is 21%China government target is 40% by 2020, 70% by 2025Photomask opportunities in China are attractiveWide range of nodes in log
Slide 15: New China 12” IC Fabs 2018-2022
22 New China 12” IC Fabs 2018-2022 15 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png Photronics LocationsIC KoreaIC XiamenIC TaiwanIC Boise (not shown) Logic (16)Memory (6)
Slide 16: Strategic Priorities to Improve Shareholder Value
Top line growth with continued focus on driving costs outDisciplined focus on investments to improve ROICMaintain strong balance sheet while returning cash to shareholdersShare repurchasesFlexibility to invest in other growth opportunities (organic or M&A) Strategic Priorities to Improve Shareholder
Slide 17: Solid Financial Fundamentals
Powerful operating leverage: target 50%Strong operating cash flow generatorDisciplined investment approachSolid balance sheet Solid Financial Fundamentals 17
Slide 18: On Our Way to 2020 Target
Key Success Factors“Made in China 2025” – new facilitiesFPD technology inflectionsRepositioned 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 T
Slide 19: Clear Capital Deployment Priorities
Fund organic growthGeographic expansion into ChinaInvestments to maintain technical leadershipCapacity expansion when reciprocated by customer commitmentExplore strategic M&APhotomask industry – IC & FPDAdjacencies to increase revenue diversificationShare repurchaseRepurchased 4.7M shares ($44.8M) s
Slide 20: 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 21: A Compelling Investment Thesis
Global leader in merchant photomask industryDelivering growth by leveraging core competencies: Operational Excellence, Low Cost Producer, Technology Leadership, Customer IntimacyGrowing more quickly than the marketTechnology aligned with secular growth trendsChina industry expansion (IC & FPD) – Mad
Slide 22: Thank you for your interest!
Thank you for your interest! For Additional Information:R. Troy Dewar, CFAVice President, Investor Relations203.740.5610tdewar@photronics.com
Slide 23: Appendix
Appendix
Slide 24: Q4 2019 Summary
Record revenue, up 13% Q/Q and 8% Y/YRecord FPD revenue driven by mobile displays and Hefei production rampRecord IC revenue as China design activity acceleratesRecord revenue of products shipped to China, representing 33% of total revenueOperating margin expanded to 13.7% on operating leverage and
Slide 25: Income Statement Summary
$M (except EPS) Q419 Q319 Q/Q Q418 Y/Y Revenue $ 156.3 $ 138.1 13% $ 144.7 8% Gross Profit $ 38.2 $ 30.6 25% $ 35.4 8% Gross Margin 24.4% 22.1% 230 bps 24.5% (10 bps) Operating Income $ 21.5 $ 13.4 60% $ 18.0 19% Operating Margin 13.7% 9.7% 400 bps 12.5% 120 bps Other income (expense) ($ 6.1) ($ 0.3
Slide 26: IC Photomask Revenue
Revenue grew with increase in broad-based design activityChina revenue rebounded as firms accelerate product development+72% Q/Q; +32% Y/YRepresents 22% of Q419 IC revenueOutlookExpect stable to improving high-end demandAnticipate production ramping in XiamenPotential impact from US-China trade disc
Slide 27: IC Photomask Revenue chart
IC Photomask Revenue 27 Mainstream High-End High-End: 28nm and smaller; total may differ due to rounding
Slide 28: FPD Photomask Revenue
Record FPD revenue driven by mobile displays and China production ramp, including G10.5+China revenue +32% Q/Q; +118% Y/YRepresents 61% of Q419 FPD revenueOutlookMobile display demand expected to remain highLCD industry downturn continuesHefei shipments should continue to ramp $M Q419 Q319 Q/Q Q418
Slide 29: FPD Photomask Revenue chart
FPD Photomask Revenue 29 Mainstream High-End High-End: ≥G8 and AMOLED; total may differ due to rounding
Slide 30: Select Financial Data
$M Q419 Q319 Q418 Cash $ 207 $ 197 $ 329 Debt $ 53 $ 49 $ 57 Net Cash* $ 154 $ 148 $ 272 Operating Cash Flow $ 48 $ 26 $ 44 Capital Expenditures $ 17 $ 20 $ 28 Share repurchase $ 11 - $ 16 Deploying cash balance to fund China investmentsDebt is local China borrowing to finance fixed assetsFY 2019 ca
Slide 31: Total Revenue
Total Revenue 550.7 535.3 483.5 450.7 2016 2017 2018 2019 gic @ FPD
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