SHARE-BASED COMPENSATION

6 Months Ended

May 04, 2025

NOTE 9 - SHARE-BASED COMPENSATION

On April 2, 2025, at its annual meeting of shareholders, the shareholders of Photronics, Inc., approved the Company’s 2025 Equity Incentive Compensation Plan (the “2025 Plan”) under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. Shares to be issued under the 2025 Plan may be authorized and unissued shares, issued shares that have been re-acquired by the Company (in the open market or in private transactions), or a combination thereof. The maximum number of shares of common stock that may be issued under the 2025 Plan is five million shares. At the time of approval of the 2025 Plan, the Company’s 2016 Equity Incentive Compensation Plan (which was largely replicated by the 2025 Plan) was due to expire in early 2026, and had a limited quantity of shares remaining available for issuance. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan prohibits further awards from being issued under prior plans. The table below presents information on the Company’s share-based compensation expenses.

	Three Months Ended				Six Months Ended
	May 4,		April 28,		May 4,		April 28,
	2025		2024		2025		2024
Expense reported in:
Cost of goods sold	$	785	$	669	$	1,562	$	1,263
Selling, general, and administrative		2,288		2,987		4,556		4,737
Research and development		302		270		592		499
Total expense incurred	$	3,375	$	3,926	$	6,710	$	6,499

Expense by award type:
Restricted stock awards	$	2,809	$	3,926	$	6,086	$	6,499
Restricted stock units		509		-		509		-
Employee stock purchase plan		57		-		115		-
Total expense incurred	$	3,375	$	3,926	$	6,710	$	6,499

Income tax benefits on share-based compensation	$	406	$	323	$	852	$	421

Restricted Stock Awards

The Company has historically granted restricted stock awards on a periodic basis, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of the Company’s common stock. The table below presents information on the Company’s restricted stock awards.

	Three Months Ended				Six Months Ended
	May 4,		April 28,		May 4,		April 28,
	2025		2024		2025		2024
Number of shares granted in period		237,738		-		583,238		825,050
Weighted-average grant-date fair value of awards (in dollars per share)	$	21.28	$	-	$	23.42	$	29.77
Compensation cost not yet recognized	$	27,028	$	28,695	$	27,028	$	28,695
Weighted-average amortization period for cost not yet recognized (in years)		3.0		3.1		3.0		3.1
Shares outstanding at balance sheet date		1,439,672		1,560,540		1,439,672		1,560,540

Restricted Stock Units

Commencing Q2 FY25, the company began granting restricted stock units, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of the Company’s common stock. The table below presents information on the Company’s restricted stock awards.

	Three Months Ended				Six Months Ended
	May 4,		April 28,		May 4,		April 28,
	2025		2024		2025		2024
Number of units granted in period		52,836		-		52,836		-
Weighted-average grant-date fair value of awards (in dollars per share)	$	22.52	$	-	$	22.52	$	-
Compensation cost not yet recognized	$	681	$	-	$	681	$	-
Weighted-average amortization period for cost not yet recognized (in years)		0.8		-		0.8		-
Restricted stock units outstanding at balance sheet date		33,966		-		33,966		-

Stock Options

Option awards generally vest in one to four years and have a ten-year contractual term. All incentive and non-qualified stock option grants must have an exercise price no less than the market value of the underlying common stock on the date of grant. The grant-date fair values of options are based on closing prices of the Company’s common stock on the dates of grant and are calculated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company’s common stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options are expected to remain outstanding. The risk-free rate of return for the estimated term of an option is based on the U.S. Treasury yield curve in effect at the date of grant. The table below presents information on the Company’s stock options.

	Three Months Ended				Six Months Ended
	May 4,		April 28,		May 4,		April 28,
	2025		2024		2025		2024
Number of options granted in period		-		-		-		-
Cash received from options exercised	$	26	$	119	$	1,298	$	1,055
Compensation cost not yet recognized	$	-	$	-	$	-	$	-
Weighted-average amortization period for cost not yet recognized (in years)		-		-		-		-

Information regarding outstanding and exercisable option awards as of May 4, 2025, is presented below.

Options		Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in years)				Aggregate Intrinsic Value
Outstanding and exercisable at May 4, 2025			148,075			$	10.72				1.80			$	1,259