Semiconductor photomask manufacturer Photronics (NASDAQ:PLAB) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, but sales fell by 1.9% year on year to $212.1 million. On the other hand, next quarter’s revenue guidance of $212 million was less impressive, coming in 5.8% below analysts’ estimates. Its non-GAAP profit of $0.52 per share was 10.6% above analysts’ consensus estimates.
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Photronics (PLAB) Q4 CY2024 Highlights:
- Revenue: $212.1 million vs analyst estimates of $210 million (1.9% year-on-year decline, 1% beat)
- Adjusted EPS: $0.52 vs analyst estimates of $0.47 (10.6% beat)
- Adjusted EBITDA: $76.3 million vs analyst estimates of $72.7 million (36% margin, 5% beat)
- Revenue Guidance for Q1 CY2025 is $212 million at the midpoint, below analyst estimates of $225 million
- Adjusted EPS guidance for Q1 CY2025 is $0.47 at the midpoint, below analyst estimates of $0.52
- Operating Margin: 24.6%, down from 26.6% in the same quarter last year
- Free Cash Flow was $43.27 million, up from -$1.81 million in the same quarter last year
- Inventory Days Outstanding: 38, up from 37 in the previous quarter
- Market Capitalization: $1.31 billion
“We achieved top-line results in line with our expectations and reflective of seasonal demand patterns,” said Frank Lee, chief executive officer.
Company Overview
Sporting a global footprint of facilities, Photronics (NASDAQ:PLAB) is a manufacturer of photomasks, templates used to transfer patterns onto semiconductor wafers.
Semiconductor Manufacturing
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Photronics’s 8.1% annualized revenue growth over the last five years was decent. Its growth was slightly above the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Photronics’s recent history shows its demand slowed as its revenue was flat over the last two years. 
This quarter, Photronics’s revenue fell by 1.9% year on year to $212.1 million but beat Wall Street’s estimates by 1%. Despite the beat, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 2.3% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 8.4% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and indicates its newer products and services will fuel better top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Photronics’s DIO came in at 38, which is in line with its five-year average. These numbers show that despite the recent increase, there’s no indication of an unusual inventory buildup.
Key Takeaways from Photronics’s Q4 Results
We were impressed that Dycom handily beat analysts’ revenue, EBITDA, and EPS expectations this quarter. On the other hand, its revenue and EBITDA guidance for next quarter fell short of Wall Street’s estimates. The market seems to be forgiving this guidance miss, and the stock traded up 5% to $180 immediately after reporting.
So should you invest in Photronics right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
