SHARE-BASED COMPENSATION

9 Months Ended

Aug. 02, 2026

NOTE 9 - SHARE-BASED COMPENSATION

On April 2, 2025, at its annual meeting of shareholders, the shareholders of Photronics, Inc., approved the Company’s 2025 Equity Incentive Compensation Plan (the “2025 Plan”) under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. The maximum number of shares of common stock that may be issued under the 2025 Plan is five million shares. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics or its subsidiaries. In the event of a change in control (as defined in the 2025 Plan), the vesting of awards may be accelerated. The 2025 Plan prohibits further awards from being issued under prior plans. The table below presents information on the Company’s share-based compensation expenses.


	Three Months Ended				Nine Months Ended
	August 2, 2026		August 3, 2025		August 2, 2026			August 3, 2025
	August 2, 2026		August 3, 2025		August 2, 2026			August 3, 2025
Expense reported in:
Cost of goods sold	$	977	$	816	$	2,801		$	2,378
Selling, general, and administrative		2,729		2,174		7,869			6,729
Research and development		155		304		(233	)		896
Total expense incurred	$	3,861	$	3,294	$	10,437		$	10,003

Expense by award type:
Restricted stock awards	$	2,275	$	2,943	$	6,516		$	9,029
Restricted stock units		1,547		294		3,806			803
Employee stock purchase plan		39		57		115			171
Total expense incurred	$	3,861	$	3,294	$	10,437		$	10,003

Income tax benefits on share-based compensation	$	787	$	461	$	2,149		$	1,313

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

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


	Three Months Ended				Nine Months Ended
	August 2, 2026		August 3, 2025		August 2, 2026		August 3, 2025
Number of shares granted in period		-		-		-		583,238
Weighted-average grant-date fair value of awards (in dollars per share)	$	-	$	-	$	-	$	23.42
Compensation cost not yet recognized	$	13,256	$	24,414	$	13,256	$	24,414
Weighted-average amortization period for cost not yet recognized (in years)		2.0		2.8		2.0		2.8
Restricted shares outstanding at balance sheet date		800,761		1,421,897		800,761		1,421,897

Restricted Stock Units

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


	Three Months Ended				Nine Months Ended
		August 2, 2026		August 3, 2025		August 2, 2026		August 3, 2025
Number of units granted in period		10,021		109,830		599,622		162,666
Weighted-average grant-date fair value of awards (in dollars per share)	$	28.94	$	18.21	$	33.91	$	19.61
Compensation cost not yet recognized	$	15,940	$	2,387	$	15,940	$	2,387
Weighted-average amortization period for cost not yet recognized (in years)		3.3		3.3		3.3		3.3
Restricted stock units outstanding at balance sheet date		650,171		132,474		650,171		132,474

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	$	9	$	400	$	1,001	$	1,698
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	18,250	$	9.56	1.55	$	378