Photronics, Inc. · NASDAQ:PLAB
Photronics — Investor Day (December 2020)
32 slides from Photronics's investor day presentation, Dec 14, 2020
Slide 1: Virtual Analyst and Investor Day
Virtual Analyst and Investor DayDecember 14, 2020 Global Merchant Photomask Leader
Slide 2: Safe Harbor Statement
Safe Harbor Statement 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 uncertainties
Slide 3: Overview & Strategy
Overview & Strategy Peter Kirlin, CEO
Slide 4: Today's objectives
Today’s objectives Present PLAB investment thesisReview progress since 2018 investor dayDescribe next growth phaseDemonstrate alignment with market trendsProvide long-term financial targetsAnswer your questions 12/14/2020 4
Slide 5: A Compelling Investment Thesis
A Compelling Investment Thesis Global leader in merchant photomask industryDelivering growth by leveraging core competenciesGrowing more quickly than the marketTechnology aligned with secular growth trendsChina industry expansion (IC & FPD) – Made in China 2025Display technology inflectionsInvestmen
Slide 6: Leading merchant with unmatched global presence
Leading merchant with unmatched global presence 12/14/2020 6 ICFPDIC & FPD Unmatched Global Footprint11 Strategically Located Manufacturing Facilities Sources: SEMI 2019 Photomask Characterization Study; internal estimates
Slide 7: Phases of Photronics revenue growth
Phases of Photronics revenue growth 12/14/2020 7 Phase I: 1969 – 1986Technology StartupOrganic GrowthMostly USPre-IPO Phase II: 1986 – 2002 M&A GrowthMerchant ConsolidationGlobal Expansion Phase III: 2003 – 2017Enter High-End MarketForm Strategic PartnershipsInvest in High-End CapabilityEstablish FP
Slide 8: Investment focus driving financial results
Investment focus driving financial results 12/14/2020 8 535 551 610 +11% CAGR
Slide 9: Delivering on commitments
Delivering on commitments 2018 Investor Day Commitment Results Growth $630M revenues and $0.80 EPS $610M and $0.52, impacted by COVID lockdowns & trade war Market Position China production to start H119 Hefei delivered; Xiamen plan modified Enter G10.5+ market Market leader Grow market share Deliver
Slide 10: Growing China business
Growing China business We have growing business in China34% of total revenue in 202023% of IC revenue58% of FPD revenueGrowing strong since 2017IC +67% CAGRFPD +71% CAGRLocal manufacturing accelerates growthCustomer contracts fosters sustainable resultsIC JV enables us to compete more effectively 12
Slide 11: FPD nearly doubled over years
FPD nearly doubled over 3 years Targeted high-end investmentsG10.5+AMOLED & LTPS for mobilePartner with largest panel makersRunway left for advance display growthMobile platformsAdvanced TVMini & Micro LED2021 investments aligned with market trends 12/14/2020 11 +24% CAGR
Slide 12: Evolving investment focus
Evolving investment focus 2018 Strategic Targets 2020 Strategic Targets G10.5+ Complete AMOLED inflection point Advanced display technologies: AMOLED for mobile; OLED for TV/IT; emerging Micro and Mini LED China geographic expansion Continues, driven by Made In China 2025 industrial policy and growi
Slide 13: 2021-2023 Targets
2021-2023 Targets Double industry growth rates: 5-7%Expanding gross and operating margins, reaching high twenties and high teens, respectivelyMore than doubling EPS to well in excess of $1 / share 12/14/2020 13
Slide 14: Summary
Summary We have sustained double digit growth in a very challenging environment over the past 3 yearsOur leadership position is expandingMoving forward our investment focus is narrowing to drive accretive growthWith a business model demonstrated to deliver increasing shareholder value 12/14/2020 14
Slide 15: Delivering Technology to the Market
Delivering Technology to the Market Chris Progler, CTO
Slide 16: Photomasks help enable the connected world
Photomasks help enable the connected world Golden age of design and integration as differentiatorsGlobal dynamics enhance mask value: technology, yield, cost, speed, security, trustIncreasing barriers to entryLeadership through partnership: Process of Record, Long-Term Purchase Agreement, Joint Deve
Slide 17: Photomask opportunity transcends lithography design nodes
Photomask opportunity transcends lithography design nodes LegacyCostCapacity Continuity High-EndChip enablementDesign integrationNew fab ramp 12/14/2020 17 Mid-RangeTime to marketDesign flexibilityYield
Slide 18: High-tech photomask demand drivers
High-tech photomask demand drivers ICEUV – mask and litho tech still maturing, consumes heavy writing resourceMask complexity and count needed for advanced designsSoC trends – multi-function customization alongside SoC disaggregationCloud to edge computing migration and design activityFPDMask carryi
Slide 19: Photomask velocity: A key differentiator
Speed of design turns takes center stage across the landscapeAdvanced mask complexity, level count and yieldCapacity constraints at mid and legacy nodesTechnologies that enable our photomask velocityCustomer collaboration tools to streamline process developmentHigh yielding, self-correcting and effi
Slide 20: Technology as a tool to support our business growth
Technology as a tool to support our business growth 12/14/2020 Growth Investment Cycle +12% CAGR 20
Slide 21: How has China's strategy energized served markets for growth?
How has China’s strategy energized served markets for growth? Domestic investments add local capacity to win share and support national agendaForeign competition must improve product innovation to sustain advantage and shareIntegrated circuits and displays elevated to center stage in economic and se
Slide 22: "Made in China 2025" driving growth
“Made in China 2025” driving growth 12/14/2020 22 Source: Internal Estimates
Slide 23: Summary
Summary Photomasks are enabling technology for IC and display in the connected worldKey tech inflections driving growthChina investment and global share goals in IC and FPD: LCD to mobile pivot, multi-node IC design activitySweet spot mid-range IC nodes to support pervasive chip implementation. Capa
Slide 24: Financial Model & Outlook
Financial Model & Outlook John Jordan, CFO
Slide 25: 2020 Summary
2020 Summary Several revenue records establishedRevenue of $609.7MFPD revenue of $191.3MChina revenue of $207.5M (IC = $97.1M; FPD = $110.5M)Operating income improved 23% Y/YGenerated $143M in cash from operating activities, invested $71M in capex, and returned $34M in cash to shareholdersChina faci
Slide 26: Illustrative Target Model
Illustrative Target Model 2018 2019 2020 Illustrative Target Model3-Year Horizon Revenue $535 $551 $610 $7005% CAGR $7256% CAGR $7507% CAGR Gross Margin 25% 22% 22% 24-26% 26-28% 27-29% Operating Margin 12% 9% 10% 13-15% 15-17% 17-19% Operating Cash Flow $131 $68 $143 $150-160 $160-170 $175-185 Free
Slide 27: Clear capital deployment priorities
Clear capital deployment priorities Fund organic growthGeographic expansion into ChinaInvestments to maintain technical leadershipCapacity expansion when reciprocated by customer commitmentFinancial discipline to improve ROICExplore strategic M&APhotomask industry – IC & FPDAdjacencies to increase r
Slide 28: Financial discipline improves shareholder value
Financial discipline improves shareholder value Targeted investments drive top-line growth in excess of marketOperating leverage and cost reductions expand marginsTarget operating margins mid- to high-teensTarget incremental margins 50%Strong cash flow generation fortifies balance sheetCapital deplo
Slide 29: Summary
Summary Recent performance on upward trendGrowing more quickly than marketsMargin expansion creates earnings powerStrong cash flow generationStrategic use of cash to fund growth and enhance shareholder returns 12/14/2020 29
Slide 30: A Compelling Investment Thesis
A Compelling Investment Thesis Global leader in merchant photomask industryDelivering growth by leveraging core competenciesGrowing more quickly than the marketTechnology aligned with secular growth trendsChina industry expansion (IC & FPD) – Made in China 2025Display technology inflectionsInvestmen
Slide 31: Questions?
PHOTRONICS Questions? J = gq = < i} <4 & iS} = =
Slide 32: For Additional Information
For Additional Information:R. Troy Dewar, CFAVice President, Investor Relations203.740.5610tdewar@photronics.com Thank you for your interest!