Photronics Inc. (NASDAQ:PLAB) Q4 2019 Earnings Conference Call - Final Transcript

Dec 11, 2019 • 08:30 am ET

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Photronics Inc. (NASDAQ:PLAB) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question comes from the line of Patrick Ho with Stifel. Your line is now open.

Analyst
Brian Chin

Hi, good morning. It's Brian Chin on for Patrick. Thanks so much for taking our questions, and congratulations on the results. Maybe first question here, just, Peter, maybe to go back and just clarify something in addition. So the $100 million capex for fiscal '20, which includes the carryover, does that include that potential acceleration, Peter, you referenced in terms of the phase 2 capacity install on Hefei? Also, would that phase 2 effectively double your output from that facility? And from a timing standpoint, how quickly can you install and ramp that capacity?

Executive
Peter S. Kirlin

Okay. So the $100 million is -- the approximate $100 million is a $33 million carryover. And in addition to that, what we would describe as, maintenance capex. At our current run rate, that number is -- current run rate $625 million, 10% of $625 million is $62.5 million, add $33 million, you get approximately $100 million. So there is no capex for the next wave in Hefei in that number.

The magnitude of the capex will dictate the amount of revenue uplift that we can achieve. So we have not definitively made up our minds exactly how much to invest and when. But our global factories sold out. We have no more capacity. We have -- we're turning business away from multiple customers. We're the market leader in AMOLED displays, so the demand there is tremendous. So there's no doubt, if we invest, we can fill the tools. I think no doubt. So we're talking to customers, we're talking to the local government, and we're trying to arrive at a business plan for the next wave that has the acceptable financial returns that we're looking for. That's not done yet, that's a work in progress. Hopefully, we'll have a lot more to stay about that on the next call, but we're getting close.

Timing of it is more difficult because the long pole in the tent typically can easily run, now, anyways, from -- anywhere from 15 to 18 months, so that's the -- the only challenge we have is the speed at which our suppliers can respond, so -- but everything else is lining up nicely.

Analyst
Brian Chin

Okay. Was that 15 to 18 months, was that a lead time on the tool, just to clarify.

Executive
Peter S. Kirlin

Yes.

Analyst
Brian Chin

Okay, got it. So even if you made the decision in the next quarter, it wouldn't be producing revenue within the fiscal '20 horizon, it could be beyond that?

Executive
Peter S. Kirlin

No, not unless we can pull a miracle, but highly unlikely. Yes.

Analyst
Brian Chin

Got it. And kind of related to that, the China start-up cost, it looked like kind of a 200 basis point lesser headwind in the fiscal 4Q. What are you sort of thinking in terms of fiscal 1Q, January, and -- yes, I guess that would be my next question.

Executive
John P. Jordan

Hi Brian, good morning. It'll be less in