Photronics, Inc. · NASDAQ:PLAB
Photronics — Investor Presentation (June 2020)
31 slides from Photronics's investor presentation, Jun 4, 2020
Slide 1: Photronics, Inc. Investor Presentation Q2 2020
Photronics, Inc.Global Leader in the Merchant Photomask Industry Investor PresentationQ2 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: Response to COVID-19: Four Key Focus Areas
Employee healthHealth monitoringAdoption of best practicesGlobal visitor policyRaw material supplyWeekly meetings to monitor global supply chainConstant contact with suppliersTool maintenanceEngagement with virtual service technicians where feasibleReliance on self-service expertiseCustomer supportO
Slide 4: 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 5: Photronics at a Glance
Photronics at a Glance 5 Unmatched Global Footprint11 Strategically Located Manufacturing Facilities 535 551 597
Slide 6: Photomasks: Essential for Electronics Manufacturing
Photomasks: Essential for Electronics Manufacturing 6 Component Design End User Manufacturing Process Photomask BRINGS DESIGN TOMANUFACTURING FLOOR
Slide 7: 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 7
Slide 8: Repositioned for Growth
ChinaTotal TAM +$800M by 2023Region with strongest growth potentialSupported by new manufacturing facilities since 2019IC CaptiveApproximately ~$2.5B TAMWe are seen as trusted partnerCommitments improve sustainabilityHigh-end revenue growthHigh value and high growthSupports China & captive initiativ
Slide 9: 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 9 Past (2017 – 2018) Recent and Present (2019 –
Slide 10: Developing and Growing China Business
We already have growing business in China32% of total revenue in Q2 2020 LTM21% of IC revenue59% of FPD revenueGrowing strong since 2016IC +76% CAGRFPD +64% CAGRManufacturing presence in China aims to accelerate growthCustomer contracts help ramp facilities more quicklyInvestment incentives reduce r
Slide 11: 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 writer; 2nd P-800 on
Slide 12: 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 12 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 13: 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 14: China Display Fabs in Production by 2022
51 China Display Fabs in Production by 2022 14 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png G10.5+ (5)AMOLED (16)LCD (30) Photronics LocationsFPD KoreaFPD HefeiFPD Taiwan
Slide 15: Driving Growth in IC Market
China represents fastest growing semiconductor regionGrowing domestic producersInvestments by multi-nationalsMore investment needed to meet national production share targets of 40% by 2020, 70% by 2025Photomask opportunities in China are attractiveWide range of nodes in logic and memoryNo strong dom
Slide 16: New China 12" IC Fabs 2018-2022
22 New China 12” IC Fabs 2018-2022 16 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png Photronics LocationsIC KoreaIC XiamenIC TaiwanIC Boise (not shown) Logic (16)Memory (6)
Slide 17: 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 18: Solid Financial Fundamentals
Powerful operating leverage: target 50%Strong operating cash flow generatorDisciplined investment approachSolid balance sheet Solid Financial Fundamentals 18
Slide 19: Building Long-Term Momentum
Key Success FactorsOn pace for 3rd consecutive record annual revenue“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 collaborati
Slide 20: 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 6.2M shares ($61.7M) s
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: Q2 2020 Summary
Revenue was $142.8M, down 11% Q/Q and up 9% Y/YFPD production remained at capacity, with sequential mix shift away from G10.5+ and AMOLED as customers in China pushed out ordersIC revenue impacted by order push out from China customersRevenue of products shipped to China improved 39% Y/Y, but fell 2
Slide 25: Total Revenue IC FPD
Total Revenue 25 IC FPD Total may differ due to rounding
Slide 26: Income Statement Summary
$M (except EPS) Q220 Q120 Q/Q Q219 Y/Y Revenue $ 142.8 $ 159.7 (11%) $ 131.6 9% Gross Profit $ 30.4 $ 34.6 (12%) $ 26.0 17% Gross Margin 21.3% 21.7% (40 bps) 19.8% 150 bps Operating Income $ 12.7 $ 16.3 (22%) $ 9.2 38% Operating Margin 8.9% 10.2% (130 bps) 7.0% 190 bps Other income (expense) ($ 1.0)
Slide 27: IC Photomask Revenue
High-end flat Y/Y; sequential decline primarily due to Chinese order push outsChina revenue +14% Y/YQ/Q down 21% on soft foundry demandRepresents 21% of Q220 IC revenueOutlookDemand trends improvingGovernment restrictions and trade policy developments create uncertainty $M Q220 Q120 Q/Q Q219 Y/Y Hig
Slide 28: IC Photomask Revenue
IC Photomask Revenue 28 Mainstream High-End High-End: 28nm and smaller; total may differ due to rounding
Slide 29: FPD Photomask Revenue
Y/Y growth due to production ramp in Hefei; Q/Q decline due to China order push out (G10.5+ & AMOLED)China revenue -20% Q/Q; +69% Y/YRepresents 57% of Q220 FPD revenueOutlookDemand trends improving for G10.5+ and AMOLEDGovernment restrictions create uncertainty, especially for mobile demandProductio
Slide 30: FPD Photomask Revenue
FPD Photomask Revenue 30 Mainstream High-End High-End: ≥G10.5, AMOLED and LTPS; total may differ due to rounding
Slide 31: Select Financial Data
$M Q220 Q120 Q219 Cash $ 238 $ 218 $ 167 Debt $ 53 $ 54 $ 36 Net Cash* $ 184 $ 164 $ 131 Operating Cash Flow $ 31 $ 31 $ 17 Capital Expenditures $ 16 $ 14 $ 34 Government Incentives for Capital Equipment $ 3 $ 2 $ 1 Share repurchase $ 6 $ 11 - Debt is local China borrowing to finance fixed assetsFY