SHARE-BASED COMPENSATION

6 Months Ended

May 03, 2026

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. The maximum number of shares of common stock that may be issued under the 2025 Plan is five million shares. 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 2025 Plan), the vesting of awards may be accelerated. The 2025 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 3,		May 4,		May 3,			May 4,
	2026		2025		2026			2025
Expense reported in:
Cost of goods sold	$	894	$	785	$	1,825		$	1,562
Selling, general, and administrative		2,657		2,288		5,140			4,556
Research and development		174		302		(389	)		592
Total expense incurred	$	3,725	$	3,375	$	6,576		$	6,710

Expense by award type:
Restricted stock awards	$	2,197	$	2,809	$	4,240		$	6,086
Restricted stock units		1,490		509		2,259			509
Employee stock purchase plan		38		57		77			115
Total expense incurred	$	3,725	$	3,375	$	6,576		$	6,710

Income tax benefits on share-based compensation	$	780	$	406	$	1,362		$	852

The research and development credit for the six months ended May 3, 2026, was primarily attributable to the forfeiture of previously granted time-vesting restricted stock awards, following the departure of an executive.

Restricted Stock Awards

The Company periodically grants restricted stock awards, the restrictions on which typically lapse over a service period of one to four years. The fair values of the awards are determined on the date of grant, based on the closing stock 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 3,		May 4,		May 3,		May 4,
	2026		2025		2026		2025
Number of shares granted in period		-		237,738		-		583,238
Weighted-average grant-date fair value of awards (in dollars per share)	$	-	$	21.28	$	-	$	23.42
Compensation cost not yet recognized	$	15,225	$	27,028	$	15,225	$	27,028
Weighted-average amortization period for cost not yet recognized (in years)		2.2		3.0		2.2		3.0
Restricted shares outstanding at balance sheet date		809,986		1,439,672		809,986		1,439,672

Restricted Stock Units

Commencing 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 unit awards.

	Three Months Ended				Six Months Ended
	May 3,		May 4,		May 3,		May 4,
	2026		2025		2026		2025
Number of units granted in period		80,529		52,836		589,601		52,836
Weighted-average grant-date fair value of awards (in dollars per share)	$	41.09	$	22.52	$	33.99	$	22.52
Compensation cost not yet recognized	$	16,992	$	681	$	16,992	$	681
Weighted-average amortization period for cost not yet recognized (in years)		3.6		0.8		3.6		0.8
Restricted stock units outstanding at balance sheet date		676,982		33,966		676,982		33,966

Stock Options

Stock 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 granted 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 3,		May 4,		May 3,		May 4,
	2026		2025		2026		2025
Number of options granted in period		-		-		-		-
Cash received from options exercised	$	359	$	26	$	992	$	1,298
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 3, 2026, is presented below.

Weighted

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

Options

Price

Life (in years)

Value

Outstanding and exercisable at May 3, 2026

19,250

9.51

1.79

783