UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 2026
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 0-15451
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
| | | |
| (Address of principal executive offices) | | (Zip Code) |
| Registrant's telephone number, including area code | | ( |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | Accelerated Filer | Non-Accelerated Filer | Smaller Reporting Company | Emerging Growth Company |
| ☒ | ☐ | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The registrant had 58,997,167 shares of common stock outstanding as of September 3, 2026.
PHOTRONICS, INC.
QUARTERLY REPORT ON FORM 10-Q
August 2, 2026
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PART I.
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FINANCIAL INFORMATION
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Item 1.
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5 | |
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| 6 | ||
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Item 2.
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25 | |
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Item 3.
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33 | |
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Item 4.
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34 | |
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PART II.
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OTHER INFORMATION
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Item 1.
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35 | |
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Item 1A.
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35 | |
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Item 2.
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35
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Item 3.
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35
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Item 4.
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35 | |
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Item 5.
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35 | |
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Item 6.
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36 | |
Definitions of certain terms and acronyms that may appear in this report are provided below.
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AI
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Artificial Intelligence
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| AMOLED | Active-matrix organic light-emitting diode. A display technology used in mobile, wearable, information technology, automotive, and virtual reality products |
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Application-specific IC
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An integrated circuit customized for a particular use, rather than intended for general-purpose use
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ASC
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Accounting Standards Codification
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ASP
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Average Selling Price
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ASU
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Accounting Standards Update
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CNY
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Chinese Yuan
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DNP
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Dai Nippon Printing Co., Ltd.
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EUV
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A wafer lithography technology using the industry standard extreme ultraviolet (EUV) wavelength. EUV photomasks function by selectively reflecting or blocking light, in contrast to conventional photomasks which function by selectively transmitting or blocking light
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Exchange Act
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The Securities Exchange Act of 1934 (as amended)
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FASB
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Financial Accounting Standards Board
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Form 10-K
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Annual Report on Form 10-K
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Form 10-Q
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Quarterly Report on Form 10-Q
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FPD
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Flat-panel displays, or “displays”
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FY
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Fiscal Year
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Generation
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In reference to flat panel displays, it refers to the size range of the underlying substrate to which a photomask is applied. Higher generation (or “G”) numbers represent larger substrates
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High-end (photomasks)
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For IC, photomasks that are 28nm or smaller; for FPD, AMOLED, G10.5+, and LTPS photomasks
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IC
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Integrated circuits, or semiconductors
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LTPS
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Low-Temperature Poly Silicon, a polycrystalline silicon synthesized at relatively low temperatures; polycrystalline silicon in thin-film transistors (TFTs) are used in liquid-crystal display (LCD) flat panels and to drive organic light-emitting diode (OLED) displays
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Mainstream (photomasks)
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For IC, photomasks that service IC nodes greater than 28nm; for FPD, G8 and smaller photomasks
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Optical proximity correction
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A photolithography enhancement technique applied to compensate for the limitations of light to maintain the edge placement integrity of an original design, imaged onto a silicon wafer, for further processing to an etched pattern
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PDMCX
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Xiamen American Japan Photronics Mask Co., Ltd., a joint venture of Photronics and DNP
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ROU assets
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Right-of-use assets
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SEC
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Securities and Exchange Commission
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U.S. GAAP
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Accounting principles generally accepted in the United States of America
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VIE
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Variable Interest Entity
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Wafer
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A wafer, or silicon wafer, is a thin slice of semiconductor material that, in the fabrication of microelectronics, serves as the substrate for microelectronic devices built in and upon the wafer
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This Form 10-Q contains forward-looking statements, as defined by the SEC. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by us, or on our behalf. Forward-looking statements are statements other than statements of historical fact, including, without limitation, those statements that include such words as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “predicts”, and similar expressions, and, without limitation, may address our future plans, objectives, goals, strategies, events, or performance, as well as underlying assumptions and other statements that are other than statements of historical facts. On occasion, in other documents filed with the SEC, press releases, conferences, or by other means, we may discuss, publish, disseminate, or otherwise make available, forward-looking statements, including statements contained within Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.
Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Our expectations, beliefs, and projections are expressed in good faith and are believed by us to have a reasonable basis, including, without limitation, management’s examination of historical operating trends, information contained in our records, and information we have obtained from other parties. However, we can offer no assurance that our expectations, beliefs, or projections will be realized, accomplished, or achieved.
Forward-looking statements within this Form 10-Q speak only as of the date of its filing, and we undertake no obligation to update any such statements to reflect changes in events or circumstances that may subsequently occur. Users of this Form 10-Q are cautioned that various factors may cause actual results to differ materially from those contained in any forward-looking statements found within this Form 10-Q and that they should not place undue reliance on any forward-looking statement. In addition, all forward-looking statements, whether written or oral and whether made by us or on our behalf, are expressly qualified by the risk factors provided in Part I, Item 1A “Risk Factors” contained in Form 10-K for the year ended October 31, 2025, filed with the SEC on December 17, 2025, as well as any additional risk factors we may provide in Part II, Item 1A in this Quarterly Report on Form 10-Q.
PART I.
FINANCIAL INFORMATION
PHOTRONICS, INC.
(in thousands, except per share amounts)
(unaudited)
| August 2, 2026 |
October 31, 2025 |
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | $ | ||||||
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Short-term investments
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Accounts receivable, net[1]
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Inventories
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Other current assets
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Total current assets
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Property, plant and equipment, net
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Deferred income taxes
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Other assets
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Total assets
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$ | $ | ||||||
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LIABILITIES AND EQUITY
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Current liabilities:
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Current portion of long-term debt
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$ | $ | ||||||
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Accounts payable
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Accrued liabilities
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Total current liabilities
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Long-term debt
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Other liabilities
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Total liabilities
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Commitments and contingencies (Note 12)
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Equity:
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||||||||
| Preferred stock, $ |
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| Common stock, $ |
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Additional paid-in capital
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Retained earnings
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Accumulated other comprehensive loss
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( |
) | ( |
) | ||||
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Total Photronics, Inc. shareholders' equity
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||||||||
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Noncontrolling interests
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||||||||
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Total equity
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||||||||
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Total liabilities and equity
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$ | $ | ||||||
[1]
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands, except per share amounts)
(unaudited)
|
| Three Months Ended | Nine Months Ended |
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| August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 |
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Revenue[1]
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$ | $ | $ | $ | ||||||||||||
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Cost of goods
sold
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Gross profit
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Operating
expenses:
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Selling,
general, and administrative
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Research and
development
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Total operating
expenses
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Other operating
income, net
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Operating
income
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Other income
(expense):
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Foreign
currency transactions impact, net
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( |
) | ( |
) | ||||||||||||
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Interest income
and other income, net
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Interest
expense
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( |
) | ( |
) | ( |
) | ||||||||||
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Income before
income tax provision
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Income tax
provision
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Net income
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Net income
attributable to noncontrolling interests
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Net income
attributable to Photronics, Inc. shareholders
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$ | $ | $ | $ | ||||||||||||
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Earnings per
share attributable to Photronics, Inc. shareholders:
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Basic
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$ | $ | $ | $ | ||||||||||||
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Diluted
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$ | $ | $ | $ | ||||||||||||
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Weighted-average
number of common shares outstanding:
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Basic
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Diluted
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[1]
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3,
2025 |
|||||||||||||
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Net income
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$ | $ | $ | $ | ||||||||||||
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Other comprehensive income (loss), net of tax:
|
||||||||||||||||
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Foreign currency translation adjustments
|
( |
) | ||||||||||||||
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Other
|
( |
) | ( |
) | ||||||||||||
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Net other comprehensive income (loss)
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( |
) | ||||||||||||||
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Comprehensive income
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||||||||||||||||
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Less: comprehensive income attributable to noncontrolling interests
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||||||||||||||||
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Comprehensive income attributable to Photronics, Inc. shareholders
|
$ | $ | $ | $ | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands)
(unaudited)
| Three Months Ended August 2, 2026 | ||||||||||||||||||||||||||||
| Photronics, Inc. Shareholders | ||||||||||||||||||||||||||||
|
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Non- controlling Interests |
Total Equity |
||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||
|
Balance as of May 3, 2026
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
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Net income
|
- | |||||||||||||||||||||||||||
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Other comprehensive income (loss)
|
- | ( |
) | |||||||||||||||||||||||||
|
Shares issued under equity plans
|
- | ( |
) | ( |
) | |||||||||||||||||||||||
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Share-based compensation expense
|
- | |||||||||||||||||||||||||||
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Balance as of August 2, 2026
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
| Three Months Ended August 3, 2025 | ||||||||||||||||||||||||||||
| Photronics, Inc. Shareholders | ||||||||||||||||||||||||||||
|
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Non- controlling Interests |
Total
Equity |
||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||
|
Balance as of May 4, 2025
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
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Net income
|
- | |||||||||||||||||||||||||||
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Other comprehensive income
|
- | |||||||||||||||||||||||||||
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Shares issued under equity plans
|
||||||||||||||||||||||||||||
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Share-based compensation expense
|
- | |||||||||||||||||||||||||||
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Purchase and retirement of common stock through repurchase program
|
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
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Balance as of August 3, 2025
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
| Nine Months Ended August 2, 2026 | ||||||||||||||||||||||||||||
| Photronics, Inc. Shareholders | ||||||||||||||||||||||||||||
|
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Non- controlling Interests |
Total Equity |
||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||
|
Balance as of October 31, 2025
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
|
Net income
|
- | |||||||||||||||||||||||||||
|
Other comprehensive income (loss)
|
- | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
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Shares issued under equity plans
|
( |
) | ( |
) | ||||||||||||||||||||||||
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Share-based compensation expense
|
- | |||||||||||||||||||||||||||
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Other changes in equity
|
- | ( |
) | ( |
) | |||||||||||||||||||||||
|
Balance as of August 2, 2026
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
| Nine Months Ended August 3, 2025 | ||||||||||||||||||||||||||||
| Photronics, Inc. Shareholders | ||||||||||||||||||||||||||||
|
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Non- controlling Interests |
Total Equity |
||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||
|
Balance as of October 31, 2024
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
|
Net income
|
- | |||||||||||||||||||||||||||
|
Other comprehensive income
|
- | |||||||||||||||||||||||||||
|
Shares issued under equity plans
|
( |
) | ( |
) | ||||||||||||||||||||||||
|
Share-based compensation expense
|
- | |||||||||||||||||||||||||||
|
Purchase and retirement of common stock through repurchase program
|
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
Balance as of August 3, 2025
|
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands)
(unaudited)
| Nine Months Ended | ||||||||
|
August 2, 2026 |
August 3, 2025 |
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$ | $ | ||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
||||||||
|
Share-based compensation
|
||||||||
|
Changes in assets and liabilities:
|
||||||||
|
Accounts receivable
|
||||||||
|
Inventories
|
( |
) | ( |
) | ||||
|
Other current assets
|
( |
) | ||||||
|
Accounts payable, accrued liabilities, and other
|
( |
) | ( |
) | ||||
|
Net cash provided by operating activities
|
||||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property, plant and equipment
|
( |
) | ( |
) | ||||
|
Purchases of short-term investments
|
( |
) | ( |
) | ||||
|
Proceeds from maturities of short-term investments
|
||||||||
|
Proceeds from sales of short-term investments
|
||||||||
|
Government incentives
|
||||||||
|
Other
|
( |
) | ( |
) | ||||
|
Net cash used in investing activities
|
( |
) | ( |
) | ||||
|
Cash flows from financing activities:
|
||||||||
|
Repayments of debt
|
( |
) | ( |
) | ||||
|
Common stock repurchases
|
( |
) | ||||||
|
Proceeds from share-based arrangements
|
||||||||
|
Net settlements of restricted stock awards
|
( |
) | ( |
) | ||||
|
Net cash used in financing activities
|
( |
) | ( |
) | ||||
|
Effects of exchange rate changes on cash, cash equivalents, and restricted cash
|
( |
) | ||||||
|
Net change in cash, cash equivalents, and restricted cash
|
( |
) | ||||||
|
Cash, cash equivalents, and restricted cash at beginning of period
|
||||||||
|
Cash, cash equivalents, and restricted cash at end of period
|
||||||||
|
Less: Ending restricted cash
|
||||||||
|
Cash and cash equivalents at end of period
|
$ | $ | ||||||
|
Supplemental disclosure of non-cash information:
|
||||||||
|
Accruals for property, plant and equipment purchased not yet paid
|
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(unaudited)
(in thousands, except share amounts and per share data)
NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
Photronics, Inc. (“Photronics”, “the Company”, “we”, “our”, or “us”) is one of the world's leading manufacturers of photomasks, which are high-precision photographic quartz or glass plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of ICs and FPDs and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates during the fabrication of ICs, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. The Company currently has eleven manufacturing facilities, located in Taiwan (3 2 1 ), the United States (3), and Europe (2).
Basis of Presentation
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect amounts reported in them. The Company’s estimates are based on historical experience and on various assumptions that are believed to be reasonable based on the facts and circumstances available at the time they are made. Subsequent actual results may differ from such estimates. The Company reviews these estimates periodically and reflects any effects of revisions in the period in which they are determined.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements (“the financial statements”) have been prepared in accordance with U.S. GAAP for interim financial reporting information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, adjustments, all of which are of a normal recurring nature, considered necessary for a fair presentation have been included. The financial statements include the accounts of Photronics, its wholly owned subsidiaries, and the majority-owned subsidiaries which it controls. All intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10-K for the fiscal year ended October 31, 2025, which provides additional information about the Company’s accounting policies and the methods and assumptions used in the Company’s estimates.
The Company’s business is typically impacted during the first quarter of the Company’s fiscal year by the North American, European, and Asian holiday periods, as some customers may change their development and buying activities during this period. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2026.
Recent Accounting Pronouncements
In December 2025, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2025-11, “Interim Reporting (Topic 270): Narrow Scope Improvements”, which improves the navigability of the required interim disclosures and clarifies when that guidance is applicable. The guidance in this ASU will be effective for Photronics for interim reporting periods in its first quarter of fiscal year 2028 Form 10-Q. The amendments can be applied either (1) prospectively or (2) retrospectively to any or all prior periods presented in the financial statements. The Company does not expect adoption of this ASU to have a material effect on the Company’s consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities”. This update establishes authoritative guidance on the accounting for government grants received by business entities. The guidance in this ASU will be effective for Photronics in its fiscal year 2030 Form 10-K, with early application of the amendments allowed. The standard may be applied using a modified prospective, modified retrospective or full retrospective transition approach. The Company is currently evaluating the timing and impact of this ASU on the Company’s consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”) and in January 2025, the FASB issued ASU No. 2025-01, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which clarified the effective date of ASU 2024-03. ASU 2024-03 will require the Company to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, as well as qualitatively describe remaining amounts included in those captions. The guidance in this ASU will be effective for Photronics in its fiscal year 2028 Form 10-K, with early application of the amendments allowed. The Company is currently evaluating the impact the adoption of this ASU may have on the Company’s consolidated financial statements and related disclosures.
In
December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):
Improvements to Income Tax Disclosures”, to enhance the transparency and
decision usefulness of income tax disclosures. The amendments in this ASU
related to the rate reconciliation and income taxes paid disclosures to improve
the transparency of income tax disclosures by requiring (1) consistent
categories and greater disaggregation of information in the rate reconciliation
and (2) income taxes paid disaggregated by jurisdiction. The guidance in this
ASU will be effective for the Company beginning with its fiscal year 2026 Form
10-K and the adoption is expected to expand the disclosures in the Company's
notes to the consolidated financial statements.
NOTE 2 – CASH, CASH EQUIVALENTS AND INVESTMENTS
The Company invests excess cash primarily in bank time deposits and money market funds. The Company’s classification of investments is as follows:
|
- Maturing within three months or less from the date of purchase
|
Cash and cash equivalents
|
|
- Maturing, as of the date of purchase, more than three months, but with remaining maturities of less than one year, from the balance sheet date
|
Short-term investments
|
|
- Maturing one year or more from the balance sheet date
|
Long-term marketable investments
|
The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows:
Level 1- These are investments where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access.
Level 2- These are investments where values are based on quoted market prices that are not active or model derived valuations in which all significant inputs are observable in active markets.
Level 3- These are investments where values are derived from techniques in which one or more significant inputs are unobservable.
The following are cash, cash equivalents and investments measured at fair value on a recurring basis using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):
| August 2, 2026 | October 31, 2025 | |||||||||||||||||||||||
|
Cash and cash equivalents |
Short-term investments |
Total Fair Value |
Cash and cash equivalents |
Short-term investments |
Total Fair Value | |||||||||||||||||||
|
Cash
|
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
Level 1
|
||||||||||||||||||||||||
|
U.S. Government Securities
|
||||||||||||||||||||||||
|
Money market funds
|
||||||||||||||||||||||||
|
Level 2
|
||||||||||||||||||||||||
|
Commercial paper
|
||||||||||||||||||||||||
|
Time deposits
|
||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
|
Restricted Cash (1)
|
||||||||||||||||||||||||
|
Cash, cash equivalents, and restricted cash
|
$ | $ | ||||||||||||||||||||||
(1)
Based upon the Company's intent and ability to hold its time deposits to maturity (which maturities range up to twelve months at purchase), such securities have been classified as held-to-maturity and are carried at amortized cost, which approximates market value. The Company’s U.S. Government Securities, Commercial paper and Money market funds are classified as available-for-sale. Available-for-sale investments are reported at fair value, with unrealized gains or losses (net of tax) reported in Accumulated other comprehensive income (loss). In the event of a sale of these securities, the Company would determine the cost of the investment sold at the specific individual security level and would include any gain or loss in Interest income and other income, net, where the Company also reports periodic interest earned and the amortization (accretion) of discounts (premiums) related to these investments. As of August 2, 2026, and October 31, 2025, the unrealized gains or losses related to short-term investments were immaterial.
NOTE 3 – ACCOUNTS RECEIVABLE, NET
The components of Accounts Receivable, net at the balance sheet dates are presented below.
|
August 2, 2026 |
October 31, 2025 | |||||||
|
Accounts receivable
|
$ | $ | ||||||
|
Unbilled receivables
|
||||||||
|
Allowance for credit losses
|
( | ) | ( | ) | ||||
| $ | $ | |||||||
Accounts
receivable, net included amounts due from a related party of $39.7 million and
$38.3 million as of August 2, 2026, and October 31, 2025, respectively.
NOTE 4 - INVENTORIES
The
components of Inventories at the balance sheet dates are presented
below.
|
August 2, 2026 |
October 31, 2025 | |||||||
|
Raw materials
|
$ | $ | ||||||
|
Work in process
|
||||||||
|
Finished goods
|
||||||||
| $ | $ | |||||||
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET
Presented
below are the components of Property, plant and equipment, net at the
balance sheet dates.
|
August 2, 2026 |
October 31, 2025 | |||||||
|
Land
|
$ | $ | ||||||
|
Buildings and improvements
|
||||||||
|
Machinery and equipment
|
||||||||
|
Leasehold improvements
|
||||||||
|
Furniture, fixtures, and office equipment
|
||||||||
|
Construction in progress
|
||||||||
|
Accumulated depreciation and amortization
|
( | ) | ( | ) | ||||
| $ | $ | |||||||
Information on ROU assets resulting from finance leases, at the balance sheet dates, is presented below. Please refer to Note 7 for further information.
|
August 2, 2026 |
October 31, 2025 | |||||||
|
Machinery and equipment
|
$ | $ | ||||||
|
Accumulated amortization
|
( | ) | ( | ) | ||||
| $ | $ | |||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 | |||||||||||||
|
Depreciation Expense
|
$ | $ | $ | $ | ||||||||||||
NOTE 6 - PDMCX JOINT VENTURE
In
January 2018, Photronics, Inc., through its wholly-owned Photronics Singapore
PTE. LTD. subsidiary (hereinafter, within this Note “we”, “Photronics”, “us”,
or “our”), and DNP, through its wholly owned subsidiary DNP Asia Pacific PTE,
Ltd., entered into a joint venture under which DNP obtained a 49.99 % interest
in the Company’s IC business in Xiamen, China. The joint venture, which the
Company refers to as “PDMCX”, was established to develop and manufacture
photomasks for semiconductors. The Company entered into this joint venture to
enable the Company to compete more effectively for the merchant photomask
business in China, and to benefit from the additional resources and investment
that DNP provides to enable the Company to offer advanced-process technology to
the Company’s customers.
Under
the joint venture agreement, should either Photronics’ or DNP’s ownership
interest fall below 20.0 % for a period of more than six consecutive months ,
such party (an “exiting party”) has the option to sell to the other party, and
the other party has the option to purchase from such exiting party, the exiting
party’s remaining ownership interest. In either case, the sales of ownership
interests would be at the exiting party’s ownership percentage of the joint
venture’s net book value, with closing to take place within three business days
of obtaining required approvals and clearance.
The following table presents the net income
the Company recorded from the operations of PDMCX during the reporting periods.
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 | |||||||||||||
|
Net income from PDMCX
|
$ | $ | $ | $ | ||||||||||||
As required by the guidance in ASC Topic 810 - “Consolidation”, the Company evaluated the Company’s involvement in PDMCX for the purpose of determining whether the Company should consolidate its results in the Company’s financial statements. The initial step of the Company’s evaluation was to determine whether PDMCX was a VIE. Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, the Company determined that it is a VIE. Having made this determination, the Company then assessed whether the Company was the primary beneficiary of the VIE and concluded that the Company was the primary beneficiary during the current and prior years reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. The Company’s conclusion was based on the fact that the Company held a controlling financial interest in PDMCX (which resulted from the Company’s having the power to direct the activities that most significantly impacted its economic performance) and had both the obligation to absorb losses and the right to receive benefits that could potentially be significant to PDMCX. The Company’s conclusion that the Company had the power to direct the activities that most significantly affected the economic performance of PDMCX during the current and prior year periods were based on the Company’s right to appoint the majority of its Board of Directors, which has, among others, the powers to manage the business (through its rights to appoint and evaluate PDMCX’s management), incur indebtedness, enter into agreements and commitments, and acquire and dispose of PDMCX’s assets. In addition, as a result of the 50.01 % variable interest the Company held during the current and prior year periods, the Company had the obligation to absorb losses, and the right to receive benefits, which could potentially be significant to PDMCX.
The following table presents the carrying amounts of PDMCX assets and liabilities included in the Company’s condensed consolidated balance sheets. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX); therefore, the Company’s maximum exposure to loss from PDMCX is the Company’s interest in the carrying amount of the net assets of the joint venture.
| August 2, 2026 | October 31, 2025 | |||||||||||||||
|
Classification
|
Carrying Amount |
Photronics Interest |
Carrying Amount |
Photronics Interest | ||||||||||||
|
Current assets
|
$ | $ | $ | $ | ||||||||||||
|
Noncurrent assets
|
||||||||||||||||
|
Total assets
|
||||||||||||||||
|
Current liabilities
|
||||||||||||||||
|
Noncurrent liabilities
|
||||||||||||||||
|
Total liabilities
|
||||||||||||||||
|
Net assets
|
$ | $ | $ | $ | ||||||||||||
NOTE 7 - DEBT
The
balance of long-term debt and its current portion was comprised of the
following finance leases as described below:
| August 2, 2026 | October 31, 2025 | |||||||
| Principal due: | ||||||||
| Next 12 months | $ | $ | ||||||
| Months 13 – 24 | $ | $ | ||||||
| Months 25 – 36 | ||||||||
| Months 37 – 48 | ||||||||
| Months 49 – 60 | ||||||||
| Long-term debt | ||||||||
| Total debt | $ | $ | ||||||
| Interest rate at balance sheet date | N/A | N/A | ||||||
| Basis spread on interest rates | N/A | N/A | ||||||
| Interest rate reset | N/A | N/A | ||||||
| Maturity date | N/A | N/A | ||||||
| Periodic payment amount | | | ||||||
| Periodic payment frequency | | | ||||||
| Finance lease ROU assets (carrying amount) | $ | (1) | $ | (1) | ||||
(1)
Finance Lease
During the second quarter of fiscal year 2026, the Company received a tool component associated with the purchase of an FPD lithography tool. Under the arrangement, the Company may either return or purchase the tool component from the vendor after a 12 -month period. The Company has determined that the arrangement contains an embedded finance lease under ASC 842, as it contains an identified asset, has the right to direct the use of the asset and obtains substantially all the economic benefits from its use.
NOTE 8 - REVENUE
The Company recognizes revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those goods or services. The Company accounts for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable. Substantially all of the Company’s revenue comes from the sales of photomasks. The Company typically contracts with its customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which the Company invoices as they ship to customers. As the photomasks are manufactured to customer specifications, they have no alternative use to the Company and, as the Company’s contracts generally provide it with the right to payment for work completed to date, the Company recognizes revenue as it performs, or “over time,” on most of its contracts. The Company measures its performance to date using an input method, which is based on the Company’s estimated costs to complete the various manufacturing phases of a photomask. At the end of a reporting period, there are a number of uncompleted revenue contracts on which the Company has performed; for any such contracts under which the Company is entitled to be compensated for its costs incurred plus a reasonable profit, the Company recognizes revenue and a corresponding contract asset for such performance. The Company accounts for shipping and handling activities that it performs after a customer obtains control of a good as being activities to fulfill the Company’s promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract. The Company reports its revenue net of any sales or similar taxes the Company collects on behalf of governmental entities.
As stated above, photomasks are manufactured to customer specifications in accordance with their proprietary designs; thus, they are individually unique. Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers; consequently, the Company’s photomasks do not have standard or “list” prices. The transaction prices of the vast majority of the Company’s revenue contracts include only fixed amounts of consideration. In certain instances, such as when the Company offers a customer an early payment discount, an estimate of variable consideration would be included in the transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved.
Contract Assets, Contract Liabilities, and Accounts Receivable
The
Company recognizes a contract asset when its performance under a contract
precedes the Company’s receipt of consideration from a customer, or before
payment is due, and the right to receive consideration is conditional upon
factors other than the passage of time. Contract assets reflect the Company’s
transfer of control to customers of photomasks that are in process or completed
but not yet shipped to customers. A receivable is recognized when the Company
has an unconditional right to payment, which generally occurs upon the shipment
of the photomasks. The Company’s contract assets primarily consist of
in-process production orders and fully manufactured photomasks which have not
yet shipped, for which the Company has an enforceable right to consideration
(including a reasonable profit) in the event the in-process orders are
cancelled by customers. On an individual contract basis, the Company nets
contract assets with contract liabilities for financial reporting purposes. The
Company did not
The
following table provides information about the Company’s contract balances at
the balance sheet dates.
|
August 2, 2026 |
October 31, 2025 | |||||||
|
Classification
|
||||||||
|
Contract Assets
|
||||||||
|
Other current assets
|
$ | $ | ||||||
|
Contract Liabilities
|
||||||||
|
Accrued liabilities
|
$ | $ | ||||||
|
Other liabilities
|
||||||||
| $ | $ | |||||||
The Company did not
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 | |||||||||||||
|
Revenue recognized from beginning liability
|
$ | $ | $ | $ | ||||||||||||
The Company generally records accounts receivable at their billed
amounts. All outstanding past due customer invoices are reviewed for
collectability during, and at the end of, every reporting period. To the extent
the Company believes a loss on the collection of a customer invoice is
probable, the Company would record the loss and credit an allowance for credit
losses. In the event that an amount is determined to be uncollectible, the
Company charges the allowance for credit losses and derecognizes the related
receivable. The amount of credit losses recorded for the three months and nine
months ended August 2, 2026 and August 3, 2025 were not
The Company’s invoice terms generally range from net thirty to ninety days , depending on both the geographic market in which the transaction occurs and the Company’s payment agreements with specific customers. In the event that the Company’s evaluation of a customer’s business prospects, and financial conditions indicate that the customer presents a collectability risk, the Company will modify terms of sale, which may require payment in advance of performance. At the time of adoption, the Company elected the practical expedient allowed under ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”) that permits the Company not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when the Company transfers control of goods or services to customers and when the Company is paid is one year or less.
In instances when the Company is paid in advance of the Company’s performance, the Company records a contract liability and, as allowed under the practical expedient in Topic 606, recognizes interest expense only if the period between when the Company receives payment from the customer and the date when the Company expects to be entitled to the payment is greater than one year. Historically, advance payments the Company has received from customers have generally not preceded the completion of the Company’s performance obligations by more than one year.
Disaggregation of Revenue
The following tables present the Company’s
revenue for the three months and nine months ended August 2, 2026, and August
3, 2025, disaggregated by product type, geographic origin, and timing of
recognition.
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
Revenue by Product Type
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 | ||||||||||||
|
IC
|
||||||||||||||||
|
High-end
|
$ | $ | $ | $ | ||||||||||||
|
Mainstream
|
||||||||||||||||
|
Total IC
|
$ | $ | $ | $ | ||||||||||||
|
FPD
|
||||||||||||||||
|
High-end
|
$ | $ | $ | $ | ||||||||||||
|
Mainstream
|
||||||||||||||||
|
Total FPD
|
$ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
Revenue by Geographic Origin*
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 | ||||||||||||
|
Taiwan
|
$ | $ | $ | $ | ||||||||||||
|
China
|
||||||||||||||||
|
South Korea
|
||||||||||||||||
|
United States
|
||||||||||||||||
|
Europe
|
||||||||||||||||
|
Other
|
||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
*
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
Revenue by Timing of Recognition
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 | ||||||||||||
|
Over time
|
$ | $ | $ | $ | ||||||||||||
|
At a point in time
|
||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Related Party
Transactions
Revenue
included $35.8 million and $102.9 million for the three and nine months ended
August 2, 2026, respectively, and $33.7 million and $103.3 million for the
three and nine months ended August 3, 2025, respectively, from a related party.
Contract Costs
The Company pays commissions to third-party sales agents for certain sales they procure on the Company’s behalf. However, the bases of the commissions are the transaction prices of the sales, which are completed in less than one year; thus, no relationship is established with a customer that will result in future business. Therefore, the Company would not recognize any portion of these sales commissions as costs of obtaining a contract, nor does the Company currently foresee other circumstances under which the Company would recognize such assets.
Remaining Performance Obligations
As the Company is typically required to fulfill customer orders within a short time period, the Company’s backlog of orders is generally not in excess of to for IC photomasks and to for FPD photomasks. As allowed under ASC 606 – Revenue from Contracts with Customers, the Company has elected not to disclose the Company’s remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of one year or less.
Product Warranties
The Company’s photomasks are sold under warranties that generally range from one to twenty-four months . The Company warrants that the Company’s photomasks conform to customer specifications, and the Company will typically repair, replace, or issue a refund for any photomasks that fail to do so. The warranties do not represent separate performance obligations in the Company’s revenue contracts. Historically, customer claims under warranties have been immaterial.
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 | Nine Months Ended | |||||||||||||||
|
August 2, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 | |||||||||||||
|
Expense reported in:
|
||||||||||||||||
|
Cost of goods sold
|
$ | $ | $ | $ | ||||||||||||
|
Selling, general, and administrative
|
||||||||||||||||
|
Research and development
|
( | ) | ||||||||||||||
|
Total expense incurred
|
$ | $ | $ | $ | ||||||||||||
|
Expense by award type:
|
||||||||||||||||
|
Restricted stock awards
|
$ | $ | $ | $ | ||||||||||||
|
Restricted stock units
|
||||||||||||||||
|
Employee stock purchase plan
|
||||||||||||||||
|
Total expense incurred
|
$ | $ | $ | $ | ||||||||||||
|
Income tax benefits on share-based compensation
|
$ | $ | $ | $ | ||||||||||||
The
research and development credit for the nine months ended August 2, 2026, was
primarily attributable to the forfeiture of previously granted time-vesting
restricted stock awards, following the departure of an executive.
Restricted Stock Awards
| | Three Months Ended | | Nine Months Ended | |||||||||||||
| August 2, 2026 | August 3, 2025 | August 2, 2026 | August 3, 2025 | |||||||||||||
| Number of shares granted in period | ||||||||||||||||
| Weighted-average grant-date fair value of awards (in dollars per share) | $ | $ | $ | $ | ||||||||||||
| Compensation cost not yet recognized | $ | $ | $ | $ | ||||||||||||
| Weighted-average amortization period for cost not yet recognized (in years) | ||||||||||||||||
| Restricted shares outstanding at balance sheet date | ||||||||||||||||
Restricted Stock Units
| | Three Months Ended | | Nine Months Ended | |||||||||||||
| August 2, 2026 | August 3, 2025 | August 2, 2026 | August 3, 2025 | |||||||||||||
| Number of units granted in period | ||||||||||||||||
| Weighted-average grant-date fair value of awards (in dollars per share) | $ | $ | $ | $ | ||||||||||||
| Compensation cost not yet recognized | $ | $ | $ | $ | ||||||||||||
| Weighted-average amortization period for cost not yet recognized (in years) | ||||||||||||||||
| Restricted stock units outstanding at balance sheet date | ||||||||||||||||
Stock Options
The
Company has granted stock option awards which 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 |
| Nine Months Ended | |||||||||||||
|
August 2,
2026
|
August 3,
2025
|
August 2,
2026
|
August 3,
2025
| |||||||||||||
|
Number
of options granted in period
|
||||||||||||||||
|
Cash
received from options exercised
|
$ | $ | $ | $ | ||||||||||||
|
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 August 2, 2026, is presented below.
| Options | Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (in years) |
Aggregate Intrinsic Value | ||||||||||||
| Outstanding and exercisable at August 2, 2026 | $ | $ |
NOTE 10 - INCOME TAXES
The
Company calculates its provision for income taxes at the end of each interim
reporting period on the basis of an estimated annual effective tax rate
adjusted for tax items that are discrete to each period. The table below sets
forth the primary reasons that the Company’s effective income tax rates
differed from the U.S. statutory tax rates in effect during the periods ended
August 2, 2026, and August 3, 2025.
|
Reporting Period
|
U.S. Statutory
Tax Rates
|
Photronics
Effective Tax
Rates
|
Primary Reasons for
Differences
|
|||
|
Three
months ended August 2, 2026
|
|
|
Tax credits in a non-U.S.
jurisdiction more than offset the impact of higher statutory tax rates and
changes in uncertain tax positions in non-U.S. jurisdictions.
|
|||
|
Three
months ended August 3, 2025
|
|
|
Non-recognition of the tax
benefit of losses that, in certain jurisdictions, have been offset by valuation
allowances, non-U.S. pre-tax income being taxed at higher statutory rates in
the non-U.S. jurisdictions, and changes in uncertain tax positions in non-U.S.
jurisdictions.
|
|||
|
Nine
months ended August 2, 2026
|
|
|
Tax credits in a non-U.S.
jurisdiction more than offset the impact of higher statutory tax rates and
changes in uncertain tax positions in non-U.S. jurisdictions.
|
|||
|
Nine months ended August 3, 2025
|
|
|
Non-recognition of the tax
benefit of losses that, in certain jurisdictions, have been offset by valuation
allowances, non-U.S. pre-tax income being taxed at higher statutory rates in
the non-U.S. jurisdictions, and changes in uncertain tax positions in non-U.S.
jurisdictions.
|
Uncertain Tax Positions
Although
the timing of reversal of uncertain tax positions may be indeterminate at this
time, the Company believes the resolution of these uncertainties in a manner
inconsistent with the Company's expectations could have a material impact on the
results of operations and financial condition. Resolution of these uncertain
tax positions may result from either or both the lapses of statutes of
limitations and tax settlements. The Company is no longer subject to tax
authority examinations in the U.S., major foreign, or state tax jurisdictions
for years prior to fiscal year 2019. The table below presents information on
unrecognized tax benefits as of the balance sheet dates.
|
August 2,
2026
|
October 31,
2025
| |||||||
|
Unrecognized tax benefits
related to uncertain tax positions
|
$ | $ | ||||||
|
Unrecognized tax benefits
that, if recognized, would impact the effective tax rate
|
$ | $ | ||||||
|
Accrued interest and
penalties related to uncertain tax positions
|
$ | $ | ||||||
NOTE 11 - EARNINGS PER SHARE
The calculation of basic and diluted earnings per share is presented below.
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||
|
August 2,
2026
|
August 3,
2025
|
August 2,
2026
|
August 3,
2025
| |||||||||||||
|
Net
income attributable to Photronics, Inc. shareholders
|
$ | $ | $ | $ | ||||||||||||
|
Weighted-average
common shares outstanding (in thousands):
|
||||||||||||||||
|
Basic
|
||||||||||||||||
|
Effect
of dilutive securities:
|
||||||||||||||||
|
Share-based
awards
|
||||||||||||||||
|
Potentially
dilutive common shares
|
||||||||||||||||
|
Weighted-average
common shares - Diluted
|
||||||||||||||||
|
Earnings per share:
|
||||||||||||||||
|
Net
Income attributable to Photronics shareholders - Basic
|
$ | $ | $ | $ | ||||||||||||
|
Net
Income attributable to Photronics shareholders - Diluted
|
$ | $ | $ | $ | ||||||||||||
The table below sets forth the outstanding weighted-average share-based payment awards that were excluded from the calculation of diluted earnings per share because their exercise price exceeded the average market value of the common shares for the period or, under application of the treasury stock method, they were otherwise determined to be antidilutive.
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||
| (in thousands of shares) |
August 2, 2026
|
August 3, 2025
|
August 2, 2026
|
August 3, 2025
| ||||||||||||
|
Share-based payment awards, in shares
|
||||||||||||||||
|
Total potentially dilutive shares excluded
|
||||||||||||||||
NOTE 12 - COMMITMENTS AND CONTINGENCIES
On
July 6, 2026, a purported shareholder filed a class action complaint in the
United States District Court for the District of Connecticut (Cooper v.
Photronics, Inc., et al.: Case No. 3:26-cv-01069) against the Company and
certain of its directors and officers alleging violations of Sections 10(b) and
20(a) of the Exchange Act and Rule 10b-5 promulgated under Section 10(b).
Plaintiff alleges that defendants made materially false and misleading
statements related to the Company’s business to deceive the market in violation
of the Exchange Act. Plaintiff seeks unspecified damages, interest, attorneys’
fees, expert fees and other costs. The Company disputes these allegations and
intends to vigorously defend the action. There are no accrued contingent
liabilities recognized based on our belief that any liabilities, while
reasonably possible, are not probable, and any possible loss or range of losses
in these matters cannot be reasonably estimated at this time given the early
stage of the matter.
The Company is
subject to various other claims that arise in the ordinary course of business.
The Company believes that the potential liability under such other claims,
individually and in the aggregate, will not have a material effect on the
Company’s condensed consolidated financial statements.
NOTE 13 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT
The following tables set
forth the changes
in the Company’s accumulated other comprehensive income (loss) by component
(net of tax) for the three months and nine
months ended August 2, 2026, and August 3,
2025.
|
| Three Months Ended August 2, 2026 | |||||||||||
|
Foreign Currency
Translation
Adjustments
|
Other
|
Total
| ||||||||||
|
Balance at May 3, 2026
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
|
Other comprehensive income
(loss)
|
||||||||||||
|
Other comprehensive income
(loss) attributable to noncontrolling interests
|
( | ) | ||||||||||
|
Balance at August 2, 2026
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
|
| Three Months Ended August 3, 2025 | |||||||||||
|
Foreign Currency
Translation
Adjustments
|
Other
|
Total
| ||||||||||
|
Balance at May 4, 2025
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
|
Other comprehensive (loss)
income
|
( | ) | ||||||||||
|
Other comprehensive (loss)
income attributable to noncontrolling interests
|
( | ) | ( | ) | ||||||||
|
Balance at August 3, 2025
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
|
| Nine Months Ended August 2, 2026 | |||||||||||
|
Foreign Currency
Translation
Adjustments
|
Other
|
Total
| ||||||||||
|
Balance at October 31, 2025
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
|
Other comprehensive income (loss)
|
( | ) | ( | ) | ||||||||
|
Other comprehensive income
(loss) attributable to noncontrolling interests
|
( | ) | ||||||||||
|
Balance at August 2, 2026
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
|
| Nine Months Ended August 3, 2025 | |||||||||||
|
Foreign Currency
Translation
Adjustments
|
Other
|
Total
| ||||||||||
|
Balance at October 31, 2024
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
|
Other comprehensive (loss) income
|
( | ) | ||||||||||
|
Other comprehensive (loss) income attributable to
noncontrolling interests
|
( | ) | ( | ) | ||||||||
|
Balance at August 3, 2025
|
$ | ( | ) | $ | ( | ) | $ | ( | ) | |||
NOTE 14 – SHARE REPURCHASE PROGRAM
In September 2020, the Company’s Board of
Directors authorized the repurchase of up to $100 million of its common stock,
pursuant to a repurchase plan under Rule 10b-18 of the Exchange Act. The
repurchase authorization by the Board of Directors has no expiration date, does
not obligate the Company to acquire any common stock, and is subject to market
conditions. From September 2020 through October 2022, the Company
repurchased 5.8 million shares at a cost of $68.3 million. In August 2024, the
Board of Directors authorized an increase to the Company’s existing share
repurchase program from the remaining $31.7 million up to $100 million. In June
2025, the Board of Directors authorized an additional $25 million of share
repurchases. In fiscal year 2025, the Company repurchased 5.0 million shares at
a cost of $97.4 million (an average of $19.52 per share). All shares
repurchased under the program have been retired prior to the end of the fiscal
quarter in which they were purchased. During the three months and nine months
ended August 2, 2026, the Company did not 27.6 million remained available under this authorization
for the repurchase of shares.
NOTE 15 - SEGMENT REPORTING
The
Company operates and manages its business as one
The following table presents selected financial information with respect to the Company’s single operating segment for the periods ended August 2, 2026 and August 3, 2025:
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||
|
August 2,
2026 |
August 3,
2025 |
August 2,
2026 |
August 3,
2025 | |||||||||||||
|
Revenue
|
$ | $ | $ | $ | ||||||||||||
|
Cost of goods sold
|
( | ) | ( | ) | ( | ) | ( | ) | ||||||||
|
Gross Profit
|
||||||||||||||||
|
Selling, general and
administrative expense
|
( | ) | ( | ) | ( | ) | ( | ) | ||||||||
|
Research and development
expense
|
( | ) | ( | ) | ( | ) | ( | ) | ||||||||
|
Other operating income
|
||||||||||||||||
|
Operating Income
|
||||||||||||||||
|
Other income (expense), net
|
( | ) | ( | ) | ||||||||||||
|
Income tax provision
|
( | ) | ( | ) | ( | ) | ( | ) | ||||||||
|
Net income attributable to
noncontrolling interests
|
( | ) | ( | ) | ( | ) | ( | ) | ||||||||
|
Net income attributable to
Photronics, Inc. shareholders
|
$ | $ | $ | $ | ||||||||||||
Overview
Management’s
discussion and analysis (“MD&A”) of the Company’s financial condition and
results of operations should be read in conjunction with its condensed
consolidated financial statements and related notes. Various sections of this
MD&A contain forward-looking statements, all of which are presented based
on current expectations, which may be adversely affected by uncertainties and
risk factors (presented throughout this filing and in the Company’s Form 10-K
for fiscal year 2025), that may cause actual results to materially differ from
these expectations. See “Cautionary Statement Regarding Forward-Looking
Statements”.
We
sell substantially all of our photomasks to designers and manufacturers of IC
and FPD electronic devices. Photomask technology is also being applied to the
fabrication of other high-technology products including advanced packaging
modules, micro-optical components for applications such as virtual
reality/augmented reality and silicon photonics, micro-electronic mechanical
systems (MEMS), and diverse nanotechnology applications. Our selling cycle is
tightly interwoven with the development and release of new semiconductor and
display designs and applications, particularly as they relate to the
semiconductor industry's migration to more advanced design nodes and
fabrication processes. The demand for photomasks is primarily correlated with
new product design activity and to a lesser extent scaling up of manufacturing
of end products. Consequently, an increase in semiconductor or display sales
does not always result in a corresponding increase in photomask sales. To the
extent integrated circuit and flat panel display applications rely less on new
design activity, it could result in a reduction in demand for photomasks. In
addition, new design methodologies driving a reduction in complexity of
photomasks could also reduce demand for photomasks ‒ even if the demand for
semiconductors and FPDs increases. More broadly, advances in semiconductor,
display, and photomask design and production methods that shift the burden of
achieving device performance away from lithography could also reduce the demand
for photomasks. While there is no indication today that such diminishing of
long-range photomask demand is occurring or will occur, the microelectronics
industry has been volatile, experiencing periodic downturns and slowdowns in
design activity. These negative trends have been characterized by, among other
things, diminished product demand, excess production capacity, and accelerated
erosion of selling prices with a concomitant effect on revenue and
profitability.
We are typically required to fulfill customer orders within a short period of time, sometimes within twenty-four hours. This results in a minimal level of backlog orders, typically one to two weeks of backlog for IC photomasks and two to three weeks of backlog for FPD photomasks. However, the demand for some IC photomasks can extend longer than the traditional time period; thus, for some products, our backlog can expand to as long as two to three months.
The global semiconductor and FPD industries are driven by end markets which have broad application in the global economy including but not limited to consumer-driven applications, data centers that support AI implementation, electric vehicles and national security. While we cannot predict the timing of the industry's transition to volume production of next-generation technology nodes, or the timing of up and down-cycles with precise accuracy, we believe that such transitions and cycles will continue into the future, beneficially and adversely affecting our business, financial condition, and operating results as they occur. We believe our ability to remain successful in these environments is dependent upon the achievement of our goals of being a service and technology leader and efficient solutions supplier, which we believe should enable us to continually reinvest in our global infrastructure.
We are focused on improving our competitiveness by advancing our technology and reducing costs and, in connection therewith, have invested and plan to continue to invest in manufacturing equipment to serve both the high-end and mainstream photomask markets. As we face challenges that require us to make significant improvements in our competitiveness, we continue to implement programs to streamline, drive efficiency and reduce costs in our infrastructure.
State-of-the-art
production for semiconductor masks is considered to be 4 or 5 nanometer and
smaller including EUV lithography for ICs and Generation 8.6 AMOLED
display-based process technologies for FPDs. However, we define our high-end
product category as 28nm and below for semiconductors and Generation 10.5 plus,
Generation 6 and 8 AMOLED and LTPS for displays. This is consistent with
current merchant mask industry definitions. Moreover, design nodes above 28nm
and FPD processes for standard LCD displays below Generation 10 are considered
mainstream or standard products. At these geometries and various high-end
nodes, we can produce full lines of photomasks, and there is no significant
technology employed by our competitors that is not available to us. We expect
advanced node designs to continue to move to production throughout fiscal 2026,
and we believe we are well positioned to service an increasing volume of this
business as a result of our investments in manufacturing processes and
technology in the regions where our customers are located.
The
photomask industry has been and is expected to continue to be characterized by
technological change and evolving industry standards. In order to remain
competitive, we will be required to continually anticipate, respond to, and
utilize changing technologies. In particular, we believe that, as semiconductor
geometries continue to become smaller and/or more complex, and display designs
become larger or otherwise more advanced, we will be required to manufacture
even more complex products, including photomasks with advanced optical
proximity correction, increase of curvilinear patterning and EUV photomasks.
Additionally, demand for photomasks has been, and could in the future be,
adversely affected by changes in high-performance electronics fabrication
methods that affect the type or quantity of photomasks used, such as changes in
semiconductor demand that favor programmable IC devices and other approaches
that replace application-specific ICs, or the use of certain chip-stacking
methodologies that lessen the emphasis on conventional lithography technology.
Furthermore, increased market acceptance of alternative methods of transferring
circuit designs onto semiconductor wafers could reduce or eliminate the need
for photomasks in the production of semiconductors.
Our
revenues have benefited, and our costs, including depreciation, have been
affected by the increased demand for high-end-technology photomasks that
require more advanced manufacturing capabilities, but generally command higher
ASPs. Our year-to-date capital expenditure payments were $130.4 million and
$120.6 million in the nine months ended August 2, 2026 and the nine months
ended August 3, 2025, respectively. Nonetheless, we intend to continue to make
the required investments to support the technological and production
requirements of our customers that we believe will continue to enable our
growth. This includes investments to replace end-of-life mask-making equipment
with higher-performing systems that better serve our customers. In support of
this effort, we expect capital expenditure payments to be in the range of $255
million to $305 million in fiscal year 2026.
The
manufacture of photomasks for use in fabricating ICs, FPDs, and other related
products built using comparable photomask-based process technologies has been,
and continues to be, capital intensive. Our employees and our integrated global
manufacturing network represent a significant portion of our fixed operating
cost base. Should our revenue decrease as a result of a decrease in design
releases from our customers, we may have excess or underutilized production
capacity, which could significantly impact our operating margins, or result in
write-offs from asset impairments.
Results of Operations
All
the following tabular comparisons, unless otherwise indicated, are for the
three months ended August 2, 2026, May 3, 2026 and August 3, 2025 and the nine
months ended August 2, 2026 and August 3, 2025.
The
analysis and tables in this MD&A section may not foot due to rounding.
The
following tables present selected operating information expressed as a
percentage of revenue.
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||||||
|
August 2,
2026
|
May 3,
2026
|
August 3,
2025
|
August 2,
2026
|
August 3,
2025
| ||||||||||||||||
|
Revenue
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
|
Cost of goods sold
|
66.8 | 68.7 | 66.3 | 66.8 | 64.6 | |||||||||||||||
|
Gross profit
|
33.2 | 31.3 | 33.7 | 33.2 | 35.4 | |||||||||||||||
|
Selling, general, and administrative
|
10.4 | 9.9 | 8.8 | 9.9 | 8.8 | |||||||||||||||
|
Research and development
|
1.7 | 1.3 | 2.0 | 1.4 | 2.0 | |||||||||||||||
|
Operating income
|
21.1 | 20.1 | 22.9 | 21.9 | 24.6 | |||||||||||||||
|
Other income (expense), net
|
4.3 | 5.6 | (4.5 | ) | 6.3 | (1.6 | ) | |||||||||||||
|
Income before income tax provision
|
25.4 | 25.7 | 18.4 | 28.1 | 23.0 | |||||||||||||||
|
Income tax provision
|
5.1 | 5.1 | 4.6 | 5.5 | 5.4 | |||||||||||||||
|
Net income
|
20.3 | 20.6 | 13.8 | 22.6 | 17.6 | |||||||||||||||
|
Net income attributable to noncontrolling interests
|
6.9 | 5.6 | 3.0 | 6.8 | 5.8 | |||||||||||||||
|
Net income attributable to Photronics, Inc. shareholders
|
13.4 | % | 15.0 | % | 10.9 | % | 15.9 | % | 11.8 | % | ||||||||||
Revenue
Our quarterly revenues can be affected by the seasonal purchasing practices of our customers. As a result, demand for our products is typically impacted during the first quarter of our fiscal year by the North American, European, and Asian holiday periods, as some of our customers may adjust their buying activities during those periods.
The
following tables present changes in revenue disaggregated by product type and
geographic origin.
Changes in Revenue by Product Type ($ in millions)
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||||||||||||||||||
|
August 2, 2026
|
May 3, 2026
| Percent Change |
August 3, 2025
| Percent Change |
August 2, 2026
|
August 3, 2025
| Percent Change | |||||||||||||||||||||||||
|
IC
|
||||||||||||||||||||||||||||||||
|
High-end *
|
$ | 68.5 | $ | 56.7 | 20.9 | % | $ | 53.6 | 27.7 | % | $ | 196.4 | $ | 173.1 | 13.5 | % | ||||||||||||||||
|
Mainstream
|
86.2 | 90.8 | (5.2 | )% | 94.2 | (8.5 | )% | 271.0 | 284.6 | (4.8 | )% | |||||||||||||||||||||
|
Total IC
|
$ | 154.7 | $ | 147.5 | 4.9 | % | $ | 147.8 | 4.6 | % | $ | 467.5 | $ | 457.7 | 2.1 | % | ||||||||||||||||
|
FPD
|
||||||||||||||||||||||||||||||||
|
High-end *
|
$ | 52.3 | $ | 52.8 | (1.0 | )% | $ | 53.5 | (2.2 | )% | $ | 152.1 | $ | 146.8 | 3.6 | % | ||||||||||||||||
|
Mainstream
|
9.1 | 9.6 | (5.6 | )% | 9.1 | (0.2 | )% | 31.5 | 29.0 | 8.3 | % | |||||||||||||||||||||
|
Total FPD
|
$ | 61.4 | $ | 62.4 | (1.7 | )% | $ | 62.6 | (1.9 | )% | $ | 183.6 | $ | 175.8 | 4.4 | % | ||||||||||||||||
|
Total Revenue
|
$ | 216.0 | $ | 209.9 | 2.9 | % | $ | 210.4 | 2.7 | % | $ | 651.1 | $ | 633.5 | 2.8 | % | ||||||||||||||||
* High-end photomasks typically have higher ASPs than mainstream products.
Changes in Revenue by Geographic Origin ($ in millions) **
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||||||||||||||||||
|
August 2,
2026
|
May 3,
2026
|
Percent
Change |
August 3,
2025
|
Percent
Change |
August 2,
2026
|
August 3,
2025
|
Percent
Change | |||||||||||||||||||||||||
|
Taiwan
|
$ | 68.5 | $ | 65.0 | 5.3 | % | $ | 68.4 | 0.1 | % | $ | 207.9 | $ | 216.5 | (4.0 | )% | ||||||||||||||||
|
China
|
53.0 | 60.6 | (12.5 | )% | 50.6 | 4.7 | % | 176.3 | 162.9 | 8.2 | % | |||||||||||||||||||||
|
South Korea
|
43.3 | 40.0 | 8.1 | % | 43.7 | (1.0 | )% | 124.4 | 121.5 | 2.3 | % | |||||||||||||||||||||
|
United States
|
40.1 | 34.2 | 17.5 | % | 37.8 | 6.3 | % | 111.7 | 105.4 | 6.0 | % | |||||||||||||||||||||
|
Europe
|
10.2 | 9.0 | 12.9 | % | 9.1 | 12.9 | % | 28.0 | 25.2 | 11.5 | % | |||||||||||||||||||||
|
Other
|
0.9 | 1.1 | (14.5 | )% | 0.8 | 9.4 | % | 2.7 | 2.0 | 35.5 | % | |||||||||||||||||||||
| Total Revenue | $ | 216.0 | $ | 209.9 | 2.9 | % | $ | 210.4 | 2.7 | % | $ | 651.1 | $ | 633.5 | 2.8 | % | ||||||||||||||||
** This table disaggregates revenue by the location in which it was earned.
Revenue
in the three months ended August 2, 2026 increased $6.1 million or 2.9%
compared with the three months ended May 3, 2026, mainly due to improved
business conditions in Taiwan along with the U.S. and South Korea, particularly
at the high-end. Revenue increased $5.7 million or 2.7% compared with the three
months ended August 3, 2025, primarily driven by higher demand in our IC
business.
IC
revenue increased by $7.2 million or 4.9% in the three months ended August 2,
2026 compared with the three months ended May 3, 2026, and increased by $6.8
million or 4.6% compared with the three months ended August 3, 2025, as a
result of a recovery from previously delayed semiconductor
design releases and acceleration of node migration trends. IC
revenue increased $9.8 million or 2.1% in the nine months ended August 2, 2026
compared with the nine months ended August 3, 2025, primarily driven by
increased global demand for high-end products.
FPD
revenue decreased $1.1 million or 1.7% in the three months ended
August 2, 2026 compared with the three months ended May 3, 2026,
and decreased $1.2 million or 1.9% compared with the three months
ended August 3, 2025 influenced by the timing of consumer electronic launches in emerging
markets that were impacted by the industry's tight memory conditions. FPD
revenue increased $7.7 million or 4.4% in the nine months ended August 2,
2026 compared with the nine months ended August 3, 2025, mainly due to the
increased demand for both high-end and mainstream products.
Gross Margin ($ in millions)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||||||
|
August 2,
2026 |
May 3,
2026 |
Percent
Change |
August 3,
2025 |
Percent
Change |
August 2,
2026 |
August 3,
2025 |
Percent
Change | |||||||||||||||||||||||||
|
Gross profit
|
$ | 71.7 | $ | 65.8 | 9.0 | % | $ | 70.9 | 1.1 | % | $ | 216.2 | $ | 224.3 | (3.6 | )% | ||||||||||||||||
|
Gross margin
|
33.2 | % | 31.3 | % | 33.7 | % | 33.2 | % | 35.4 | % | ||||||||||||||||||||||
Gross
margin increased to 33.2% in the three months ended August 2, 2026 compared
with 31.3% in the three months ended May 3, 2026, primarily due to a favorable
product mix as well as increased revenue and the associated operating leverage
in our financial model.
Gross
margin decreased to 33.2% in the three months ended August 2, 2026 compared
with 33.7% in the three months ended August 3, 2025, primarily due to higher
manufacturing costs and increased labor and benefits costs.
Gross
margin decreased to 33.2% in the nine months ended August 2, 2026 compared with
35.4% in the nine months ended August 3, 2025, primarily due to higher material
costs, labor and benefits costs and manufacturing costs.
Selling, General and Administrative Expenses
Selling,
general and administrative expenses were $22.5 million in the three months
ended August 2, 2026, an increase of $1.8 million compared with $20.8 million
in the three months ended May 3, 2026, and an increase of $4.1 million compared
with $18.4 million in the three months ended August 3, 2025, primarily due to
higher labor and benefits costs and professional services.
Selling,
general and administrative expenses were $64.6 million in the nine months ended
August 2, 2026, compared with $55.6 million in the nine months ended August 3,
2025. The increase of $9.0 million was primarily due to higher labor and
benefits costs and professional services.
Research and Development Expenses
Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, were $3.7 million in the three months ended August 2, 2026, compared with $2.8 million in the three months ended May 3, 2026 and $4.3 million in the three months ended August 3, 2025. The $0.9 million increase from the three months ended May 3, 2026 was primarily due to increased qualification activities in Asia and the U.S. The $0.6 million decrease from the three months ended August 3, 2025 was primarily due to reduced development activities in the U.S.
Research
and development expenses were $9.1 million in the nine months ended August 2,
2026, compared with $12.6 million in the nine months ended August 3, 2025. The
$3.5 million decrease was primarily due to reduced qualification activities in
the U.S.
Other Income (Expense), net ($ in millions)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||
|
August 2, 2026 |
May 3, 2026 |
August 3, 2025 |
August 2, 2026 |
August 3, 2025 |
||||||||||||||||
|
Foreign currency transactions impact, net
|
$ | 4.8 | $ | 7.9 | $ | (14.3 | ) | $ | 25.5 | $ | (26.9 | ) | ||||||||
|
Interest expense
|
(0.0 | ) | (0.0 | ) | (0.0 | ) | (0.0 | ) | (0.1 | ) | ||||||||||
|
Interest income and other income, net
|
4.6 | 3.8 | 4.8 | 15.2 | 16.8 | |||||||||||||||
|
Other income (expense), net
|
$ | 9.4 | $ | 11.7 | $ | (9.4 | ) | $ | 40.7 | $ | (10.2 | ) | ||||||||
Other
Income decreased $2.3 million in the three months ended August 2, 2026
compared with the three months ended May 3, 2026 and increased
$18.8 million compared with the three months ended August 3, 2025,
primarily due to foreign currency transaction gains and losses. These foreign
currency impacts were primarily driven by fluctuations in the New Taiwan dollar
and the South Korean won relative to the U.S. dollar.
Other
Income increased by $51.0 million in the nine
months ended August 2, 2026 compared with the nine months ended August 3, 2025,
primarily due to foreign currency transaction gains and losses driven by
favorable movement in the New Taiwan dollar.
Income Tax Provision ($ in millions)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||||
|
August 2,
2026 |
May 3,
2026 |
August 3,
2025 |
August 2,
2026 |
August 3,
2025 |
||||||||||||||||
|
Income tax provision
|
$ | 11.0 | $ | 10.6 | $ | 9.6 | $ | 35.9 | $ | 34.2 | ||||||||||
|
Effective income tax rate
|
20.0 | % | 19.7 | % | 24.8 | % | 19.6 | % | 23.5 | % | ||||||||||
On
December 15, 2022, the European Union (EU) Member States formally adopted the
EU’s Pillar Two Directive, which generally provides for a minimum effective tax
rate of 15%, as established by the Organization for Economic Co-operation and
Development (OECD) Pillar Two Framework. The EU effective dates were January 1,
2024, and January 1, 2025, for different aspects of the directive. A
significant number of other countries continue to implement similar legislation
with varying effective dates. The Company is currently subject to Pillar Two,
but we estimate that the financial impact is currently immaterial. We will
continuously evaluate the potential impact of the Pillar Two Framework as
future changes in legislation are enacted.
On
July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the
United States. The OBBBA includes significant changes to federal tax law and
other regulatory provisions that may impact the Company. As the legislation
enacted applies to tax years beginning after December 31, 2024, the impacts are
effective starting in our FY26. The Company has evaluated applicable provisions
of the OBBBA for FY26 and has included the estimated impacts within the FY26
provision.
The
effective income tax rate is sensitive to the jurisdictional mix of earnings.
The
effective income tax rate increased in the three months ended August 2, 2026,
compared with the three months ended May 3, 2026, primarily due to changes in
the jurisdictional mix of earnings.
The
effective income tax rate decreased in the three months ended August 2, 2026, compared
with the three months ended August 3, 2025, primarily due to a decrease in
foreign taxes as well as changes in the jurisdictional mix of earnings.
The
effective income tax rate decreased in the nine months ended August 2, 2026
compared with the nine months ended August 3, 2025, primarily due to investment
tax credits in a non-U.S. jurisdiction in FY26.
Net Income Attributable to Noncontrolling Interests
Net
income attributable to noncontrolling interests increased to $15.0 million in
the three months ended August 2, 2026, compared with $11.8 million in the three
months ended May 3, 2026, and increased by $8.7 million in the three months
ended August 2, 2026 from the three months ended August 3, 2025. The increase observed
in both periods is primarily attributable to the net income increase in our
Taiwan-based joint venture.
Net
income attributable to noncontrolling interests was $44.0 million in the nine
months ended August 2, 2026, compared with $37.0 million in the nine months
ended August 3, 2025. The $7 million increase was a result of an increase in
net income at our Taiwan-based joint venture.
Liquidity and Capital Resources
Our
primary sources of liquidity are our cash on hand and cash we generate from
operations. Cash and cash equivalents were $549.5 million and $492.3 million as
of August 2, 2026, and October 31, 2025, respectively. As of August 2, 2026,
total cash and cash equivalents included $509.9 million held by foreign
subsidiaries, including an aggregate of $408.5 million held by our joint
ventures in Taiwan and China (consisting of $330.7 million held by our joint
venture in Taiwan and $77.8 million held by our joint ventures in China). In
addition, we currently have CNY 200 million or $25 million of borrowing
capacity, at our discretion, in China to support local operations. This
facility is subject to annual reviews and extensions with a current expiration
date of August 31, 2027. As of August 2, 2026, PDMCX had no outstanding
borrowings against the facility.
We
consolidate our joint venture entities and control the boards of directors of
such entities. In addition, we possess sufficient voting rights under the
applicable joint venture agreements to approve dividend distributions through
the ordinary governance process. Cash dividend declarations by our joint
ventures do not require supermajority approval and cannot be blocked by
minority shareholders. Accordingly, we believe the governance structure of our
joint venture entities does not restrict our ability to cause distributions to
be made from such entities. Transfers of funds from China are subject to the
procedures and requirements of China’s State Administration of Foreign
Exchange, as well as applicable withholding taxes and other local compliance
requirements. However, we believe that these considerations primarily affect
the timing, administrative process, and net proceeds associated with
distributions rather than our ability to access the underlying cash balances.
We
continually evaluate alternatives for efficiently funding our capital
expenditures and ongoing operations. These reviews may result in our engagement
in a variety of investing and financing transactions including borrowings, the
transfer of cash among subsidiaries, and/or the repatriation of cash to the
U.S. The transfer of funds among subsidiaries could be subject to foreign
withholding taxes; in certain jurisdictions, repatriation of these funds to the
U.S. may subject them to U.S. state income taxes and/or local country
withholding taxes. We believe that our liquidity, including available financing, is
sufficient to meet our requirements through the next twelve months and
thereafter for the foreseeable future. Through the utilization of our existing
liquidity, the cash we generate from operations and short-term investments, we
plan to continue to invest in our business, with investments targeted at
aligning with our customers’ technology road maps. In addition, we stand ready
to invest in mergers, acquisitions, or strategic partnerships, should a
suitable opportunity arise.
We
estimate our capital expenditures for fiscal year 2026 to be in the range of $255
million to $305 million mainly in Asia and the U.S.; these investments will be
targeted towards high-end and mainstream capacity that will increase operating
capability and efficiency, and enable us to support our customers’ near-term
demands. As of August 2, 2026, we had outstanding capital commitments of
approximately $215.3 million and accrued liabilities related to capital
equipment purchases of approximately $48.9 million. Although payment timing
could vary, primarily as a result of the timing of tool delivery, installation
and testing, we currently estimate that we will fund $257.3 million of our
total $264.2 million committed and recognized obligations for capital
expenditures over the next twelve months.
On
August 28, 2024, the Board of Directors authorized an increase to the Company’s
existing share repurchase program from the remaining $31.7 million to $100
million. In June 2025, the Board of Directors authorized an additional $25
million of share repurchases. During the fiscal year ended October 31, 2025,
the Company repurchased 5.0 million shares for $97.4 million. During the three
months and nine months ended August 2, 2026, the Company did not repurchase any
shares. As a result, $27.6 million remained available under this authorization
as of August 2, 2026. Depending on market conditions, we may utilize some or
the entire remaining approved amount to reacquire additional shares.
As
discussed in Note 6 – PDMCX Joint Venture of the Company’s condensed
consolidated financial statements, DNP, the noncontrolling interest in the
Company’s China-based joint venture has, under certain circumstances, the right
to put its interest in the joint venture to Photronics, or to purchase the
Company’s interest in the joint venture. Under all such circumstances, the sale
of DNP’s interest would be at its ownership percentage of the joint venture’s
net book value, with closing to take place within three business days of
obtaining required approvals and clearance. As of the date of issuance of this
report, DNP had not indicated its intention to exercise this right. As of
August 2, 2026, Photronics and DNP each had net investments in this joint
venture of approximately $183.3 million.
Cash Flows ($ in millions)
|
Nine
Months Ended
|
||||||||
|
August 2, 2026
|
August 3, 2025
| |||||||
|
Net cash provided by
operating activities
|
$ | 220.6 | $ | 160.0 | ||||
|
Net cash used in investing
activities
|
$ | (150.7 | ) | $ | (173.6 | ) | ||
|
Net cash used in financing
activities
|
$ | (0.3 | ) | $ | (115.3 | ) | ||
Operating
Activities: Net cash from
operating activities reflects net income adjusted for certain non-cash items,
including depreciation and amortization, share-based compensation, and the
effects of changes in operating assets and liabilities. Net cash provided by
operating activities increased by $60.6 million in the nine months ended August
2, 2026, compared with the nine months ended August 3, 2025, primarily due to
the increased net income and positive changes in working capital.
Investing
Activities: Net cash flows used
in investing activities decreased by $22.9 million in the nine months ended
August 2, 2026, compared with the nine months ended August 3, 2025, primarily
driven by an increase in proceeds from maturities and sales of short-term
investments of $113.7 million, partially offset by an $82.1 million increase in
purchases of short-term investments.
Financing
Activities: Net cash used in
financing activities decreased by $115.0 million in the nine months ended
August 2, 2026 compared with the nine months ended August 3, 2025. This was
primarily driven by a decrease in common stock repurchases of $97.4 million and
debt repayments of $18.0 million.
The
negative impact of changes in foreign currency exchange rates on cash, cash
equivalents, and restricted cash balances was $12.3 million in the nine months
ended August 2, 2026.
Non-GAAP Financial
Measures
Non-GAAP
Net Income attributable to Photronics, Inc. shareholders and non-GAAP diluted
earnings per share attributable to Photronics, Inc. shareholders are
"non-GAAP financial measures" as such term is defined by Regulation G
of the Securities and Exchange Commission and may differ from similarly named
non-GAAP financial measures used by other companies. The financial tables below
reconcile Photronics, Inc. financial results under U.S. GAAP to our non-GAAP
financial information. We believe these non-GAAP financial measures that
exclude certain items are useful for analysts and investors to evaluate the
Company’s on-going performance because they enable a more meaningful comparison
of historical results of the Company’s core business. These non-GAAP metrics
are not a measure of consolidated operating results under U.S. GAAP and should
not be considered as an alternative to Net income (loss), Net income (loss) per
share, or any other measure of consolidated results under U.S. GAAP. The items
excluded from these non-GAAP metrics but included in the calculation of their
closest U.S. GAAP equivalent, are significant components of the condensed
consolidated statement of income and must be considered in performing a
comprehensive assessment of overall financial performance.
The
following table reconciles U.S. GAAP net income and diluted earnings per share
attributable to Photronics, Inc. shareholders to the non-GAAP net income and
diluted earnings per share attributable to Photronics, Inc. shareholders for
the indicated periods. The columns may not foot due to rounding.
|
| Three Months Ended | |||||||||||
|
August 2,
2026
|
May 3,
2026
|
August 3,
2025
| ||||||||||
|
Reconciliation of U.S. GAAP to non-GAAP net income:
|
||||||||||||
|
U.S. GAAP net income
attributable to Photronics, Inc. shareholders
|
$ | 28,916 | $ | 31,429 | $ | 22,891 | ||||||
|
FX (gain) loss
|
(4,776 | ) | (7,869 | ) | 14,258 | |||||||
|
Estimated tax effects of
FX (gain) loss
|
2,055 | 629 | (3,663 | ) | ||||||||
|
Estimated noncontrolling
interest effects of above
|
3,233 | 739 | (4,130 | ) | ||||||||
|
Non-GAAP net income
attributable to Photronics, Inc. shareholders
|
$ | 29,428 | $ | 24,928 | $ | 29,356 | ||||||
|
Weighted-average number of
common shares outstanding - Diluted
|
58,718 | 58,745 | 58,068 | |||||||||
|
Reconciliation of U.S. GAAP to non-GAAP EPS:
|
||||||||||||
|
U.S. GAAP
diluted earnings per share attributable to Photronics, Inc. shareholders
|
$ | 0.49 | $ | 0.54 | $ | 0.39 | ||||||
|
Effects of the
non-GAAP adjustments above
|
0.01 | (0.12 | ) | 0.12 | ||||||||
|
Non-GAAP
diluted earnings per share attributable to Photronics, Inc. shareholders
|
$ | 0.50 | $ | 0.42 | $ | 0.51 | ||||||
Business Outlook
Our current business outlook and guidance was provided in the
Photronics third quarter fiscal year 2026 earnings press release, earnings
presentation, and financial results conference call, but is not incorporated
herein. These can be accessed in the investor section of our website - www.photronics.com.
Information included on our website is not incorporated in this Form 10-Q.
Our
future results of operations and the other forward-looking statements contained
in this filing and in the Photronics third quarter fiscal year 2026 earnings
press release, and the related financial results conference call and earnings
presentation involve a number of risks and uncertainties, some of which were
discussed in Part I, Item 1A of our 2025 Form 10-K. These factors and a number
of other unforeseeable factors could cause actual results to differ materially
from our expectations.
Critical Accounting Estimates
Please refer to Part II, Item 7 of our 2025 Form 10-K for discussion of our critical accounting estimates. There have been no changes to our critical accounting estimates since the filing of our Form 10-K for the year ended October 31, 2025.
Foreign Currency Exchange Rate Risk
We
conduct business in several major currencies throughout our worldwide
operations, and our financial performance may be affected by fluctuations in
the exchange rates of these currencies. Changes in exchange rates can
positively or negatively affect our reported revenue, operating income, assets,
liabilities, and equity. The functional currencies of our Asian subsidiaries
are the South Korean won, the New Taiwan dollar, the Chinese yuan, and the
Singapore dollar. The functional currencies of our European subsidiaries are
the British pound sterling and the euro. In addition, we engage in transactions
and have exposures to the Japanese yen.
We
attempt to minimize our risk of foreign currency transaction losses by
producing products in the same country in which the products are sold (thereby
generating revenues and incurring expenses in the same currency), and by
managing our working capital. However, in some instances, we sell products in a
currency other than the functional currency of the entity where it was
produced, or purchase products in a currency that differs from the functional
currency of the purchasing entity. We may also enter into derivative contracts
to mitigate our exposure to foreign currency fluctuations when we have a
significant purchase obligation or significant receivable denominated in a
currency that differs from the functional currency of the transacting
subsidiary. We do not enter into derivatives for speculative purposes. There
can be no assurance that this approach will protect us from the need to
recognize significant foreign currency transaction gains and losses, especially
in the event of a significant adverse movement in the value of any foreign
currency in which we conduct business against any of our functional currencies,
including the U.S. dollar.
Our
primary net foreign currency exposures as of August 2, 2026, included the South
Korean won, the Japanese yen, the New Taiwan dollar, the Chinese yuan, the
Singapore dollar, the British pound sterling, and the euro. As of that date, a
10% adverse movement in the value of currencies different from the functional
currencies of our subsidiaries would have resulted in a net unrealized pre-tax
loss of $71.5 million, which represents an increase of $4.7 million from our
exposure as of May 3, 2026. Our most significant exposures at August 2, 2026,
were exposures of the New Taiwan dollar and the South Korean won against the
U.S. dollar. We do not believe that a 10% change in the exchange rates of other
non-U.S. dollar currencies, other than the aforementioned currencies, would
have had a material effect on our August 2, 2026 condensed consolidated
financial statements.
Interest Rate Risk
A
10% adverse or favorable movement in the interest rates on our variable rate
borrowings would not have had a material effect on the Company’s August 2, 2026
condensed consolidated financial statements, as there were no variable rate
borrowings outstanding as of the balance sheet date.
Inflation Risk
Inflationary
factors generally affect us by increasing material, labor and overhead costs,
as well as costs associated with certain risks identified above, which may
adversely affect our results of operations and financial position. We have
historically been able to recover the impacts of inflation through sales price
increases; however, we cannot reasonably estimate our ability to successfully
recover any impact of inflation through price increases in the future. Our
inability to do so could harm our results of operations and financial position.
Evaluation of Disclosure Controls and Procedures
We have established, and currently maintain, disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting during the fiscal quarter ended August 2, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II.
OTHER INFORMATION
Please refer to Note 12 within Part I, Item 1 of this report for information on legal proceedings involving the Company.
Item 1A. RISK FACTORS
There have been no material changes to our risk factors as set forth in “Item 1A. Risk Factors” in our 2025 Form 10-K.
Issuer Purchases of Equity Securities
In
September 2020, the Company’s Board of Directors authorized the repurchase of
up to $100 million of its common stock, pursuant to a repurchase plan under
Rule 10b-18 of the Exchange Act. The repurchase authorization by the Board of
Directors has no expiration date, does not obligate the Company to acquire any
common stock, and is subject to market conditions. From September 2020 through
October 2022, the Company repurchased 5.8 million shares at a cost of $68.3
million. In August 2024, the Board of Directors authorized an increase to the
Company’s existing share repurchase program from the remaining $31.7 million up
to $100 million. In June 2025, the Board of Directors authorized an additional
$25 million of share repurchases. In fiscal year 2025, the Company repurchased
5.0 million shares at a cost of $97.4 million (an average of $19.52 per share).
All shares repurchased under the program have been retired prior to the end of
the fiscal quarter in which they were purchased. During the three months and
nine months ended August 2, 2026, the Company did not repurchase any additional
shares. As of August 2, 2026, $27.6 million remained available under this
authorization for the repurchase of shares.
None.
Not applicable.
Rule 10b5-1 Trading Arrangements
Our directors and officers (as defined in Rule 16a-1 under the Exchange Act) may from time to time enter into plans or other arrangements for the purchase or sale of our shares that are intended to satisfy the affirmative defense conditions of Rule 10b5–1(c) or may represent a non-Rule 10b5-1 trading arrangement under the Exchange Act.
No such plans or arrangements were adopted terminated
| Incorporated by Reference | |||||||
| Exhibit Number | Description | Form | Exhibit | Filing Date |
Filed or Furnished Herewith
|
||
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Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
X | ||||||
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
X | ||||||
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
X | ||||||
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
X | ||||||
|
101.INS
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Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
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101.SCH
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Inline XBRL Taxonomy Extension Schema Document
|
X | |||||
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101.CAL
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
X | |||||
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
X | |||||
|
101.LAB
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Inline XBRL Taxonomy Extension Label Linkbase Document
|
X | |||||
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101.PRE
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Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
X | |||||
|
104
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
X | |||||
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Photronics, Inc.
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
By:
|
/s/ ERIC RIVERA
|
|
|
|
ERIC RIVERA
|
|
|
|
President, Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
|
Date: September 10, 2026
|
By:
|
/s/ RUI (ELIE) ZHANG
|
|
|
|
RUI (ELIE) ZHANG
|
|
|
|
Vice President, Corporate Controller
Chief Accounting Officer
(Principal Accounting Officer)
|
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Date: September 10, 2026