Photronics Inc. (NASDAQ:PLAB) Q2 2018 Earnings Conference Call - Preliminary Transcript

May 22, 2018 • 08:30 am ET

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Photronics Inc. (NASDAQ:PLAB) Q2 2018 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen and welcome to the Photronics Q2 Fiscal Year 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded Tuesday, May 22, 2018.

I would now like to turn the conference over to Troy Dewar, Director of Investor Relations. You may begin, sir.

Executive
Troy Dewar

Thank you, Kevin. Good morning, everyone. Welcome to our review of Photronics' 2018 second-quarter financial results. Joining me this morning are Dr. Peter Kirlin, Chief Executive Officer; John Jordan, Senior Vice President and Chief Financial Officer; and Dr. Christopher Progler, Vice President and Chief Technology Officer and Strategic Planning.

The press release we issued earlier this morning, along with the presentation material, which accompanies our remarks, are available on the Investor Relations section of our webpage.

Comments made by any participant on today's call may include forward-looking statements that include such words as anticipate, believe, estimate, expect, forecast. These forward-looking statements are based upon a number of risk, uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied and we assume no obligation to update any forward-looking information.

During the course of our discussion, we will refer to certain non-GAAP financial metrics. These numbers are useful for analysts, investors and management to evaluate our ongoing performance. Reconciliation of these metrics to GAAP financial results is provided in our presentation materials.

At this time, I will turn the call over to Peter.

Executive
Peter Kirlin

Thank you, Troy and good morning, everyone. We delivered strong performance in the second quarter, achieving 6% sequential revenue growth and 21% growth compared with the second quarter of 2017. Revenue for Q2 of $130.8 million is the highest we have achieved since the record-setting fourth quarter of 2015. This marks the fourth consecutive quarter of sequential revenue growth and the third consecutive quarter of double-digit year-over-year growth.

One year ago, our business troughed as several challenges reduced demand from some of our largest customers. Since then, we have worked hard to regain our momentum, primarily by repositioning our business, including a targeted effort to accelerate our China bookings and an initiative to increase our revenues from customers with captive mask operations.

I'm happy to report that these two initiatives are paying off as evidenced by our current business levels. Based upon our Q2 results, we are currently operating at an annual run rate of $523 million, essentially even with our record-setting 2015 revenue of $524 million. This is a remarkable turnaround from last year and I am extremely proud of the fine work done across our organization to achieve it.

Margins improved as well; operating income increased 30% sequentially and is nearly three times greater than last year. From a profitability perspective, this was the highest quarter in nearly two years, demonstrating yet again the high operating leverage in our business model, which has been preserved