EX-99.1 2 ex99_1.htm EXHIBIT 99.1

Exhibit 99.1
Photronics, Inc.Global Leader in the Merchant Photomask Industry Analyst and Investor DayMay 23, 2018

Troy Dewar, Director, IR Welcome Peter Kirlin, CEO Overview & Strategy Chris Progler, CTO Technology Development High-End Growth Drivers HK Park, GM, China & Taiwan FPD High-End FPD Frank Lee, GM, Asia IC High-End IC Logic Pete Broadbent, VP, US & Europe High-End IC Memory John Jordan, CFO Financial Model & Outlook Q&A Lunch Agenda 2

Safe Harbor Statement 3 This presentation and some of our comments may contain projections or other forward-looking statements regarding future events, our future financial performance, and/or the future performance of the industry. These statements are predictions, and contain risks and uncertainties. Actual events or results may differ materially from those presented. These statements include words like “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “may”, “should”, “plan”, “project” or the negative thereto. We cannot guarantee the accuracy of any forecasts or estimates, and we are not obligated to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see the documents we file from time to time with the Securities and Exchange Commission, specifically our most recent Form 10K and Form 10Q.Non-GAAP Financial MeasuresThis presentation and some of our comments may reference non-GAAP financial measures. These non-GAAP financial measures exclude certain income or expense items, and are consistent with another way management internally analyzes our results of operations. Non-GAAP information should be considered to be a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Please see the “Reconciliation of GAAP to Non-GAAP Financial Information” in this presentation.

Peter Kirlin, CEOOverview & Strategy 4

Q2 Reprise / Repositioning the company Sustainable growth strategyConclusion What You Will Hear Today 5

Revenue grew to $131M; up 21% Y/Y and 6% Q/QHigh-end IC biggest growth factor (+83% Y/Y)China revenue doubled Y/Y; up 18% Q/QGross and operating margins expanded on higher revenue and operating leverageNet income attributable to Photronics, Inc. shareholders of $10.7M ($0.15/share)Cash balance of $321M; capex increased to $33M as we invest in growthChina investments on trackConstruction to be completed later this yearProduction to begin first half of 2019 Q2 2018 Summary 6 Investing in long-term, profitable growth to increase shareholder value

Three large customer challengesMicron produced more memory masks in-houseSamsung Display shifts from LCD to AMOLED and brings highest-end masks in-houseMajor IC customer loses 28nm logic market shareWe’ve overcome challenges by winning business at other customersNew business from foundries that are primarily captiveNew IC and FPD business in China Repositioning the Company 7

Global leader in merchant photomask industryDelivering growth by leveraging core competences: Operational Excellence, Low Cost Producer, Technology Leadership, Customer IntimacyInvesting aggressively to exploit secular growth opportunitiesChina industry expansion – Made in China 2025Technology inflection from LCD to AMOLEDExplosion of G10.5+ panel capacityTargeting $630M / $0.80 in revenue / EPS by 2020Strategic investments bring top-line growthOperating leverage creates margin expansionAdditional upside from potential M&A A Compelling Investment Thesis 8

Largest merchant photomask manufacturerUnmatched global footprintInvesting to exploit market disruptions with reciprocal customer commitments Strong balance sheet to fund growth Photronics at a Glance 9

Photomasks are Critical to Electronic Manufacturing 10 ComponentDesign End User Manufacturing Process Photomask

Phases of Photronics Revenue Growth 11 Phase I: 1969 – 1986Technology StartupOrganic GrowthMostly USPre-IPO Phase II: 1986 – 2002 M&A GrowthMerchant ConsolidationGlobal Expansion Phase III: 2003 – 2017Enter High-End MarketForm Strategic PartnershipsInvest in High-End CapabilityEstablish FPD PresenceImprove Balance Sheet Phase IV: 2018 and Beyond Leverage 1st Mover Advantage in ChinaExtend Technology LeadershipIncrease Market ShareStrategic Capital Allocation

Cost controlSupply chain optimization Low Cost Producer Flexible deliveryHigh yields Operational Excellence Trusted partnerWafer yield enhancement Customer Intimacy Process know-howAdvanced PoR Technology Leader Core Competencies Underpin Sustainable Growth 12

Exploiting/Creating Disruptions Drives Revenue Growth 13 G7.5 Display Substrate High-End IC Memory High-End IC Logic G10.5+ Display SubstrateAMOLED Mobile“Made in China 2025” The Right Technology … in the Right Place … at the Right Time Micron JV DNP JV UMC Partner B Partner C

We already have growing business in China$39M YTD 2018 (15% of total revenue)Growing strong since 2015 (IC +31% CAGR; FPD +62% CAGR)13% of Q2 2018 LTM revenue (8% of IC; 33% of FPD)Manufacturing presence in China should accelerate growthCustomer contracts will help quickly ramp facilitiesInvestment incentives reduce risk and improve returnsIC JV enables us to compete more effectively Successfully Developing China Business 14 +45% CAGR

IC FPD Location Xiamen Hefei Investment Amount $160M $160M Cleanroom Size ~2,500 m2 ~4,500 m2 Ownership Structure Majority-owned (50.01%) JV Wholly-owned Technology High-end, mainstream, logic, memory Up to G10.5+, AMOLED Production Start First half of 2019 First half of 2019 Spring 2019 Incremental Revenue $150M (total for both operations) Investing in China Operations 15 PLAB well positioned for these investmentsGlobal merchant market and technology leaderStrong footprint in AsiaBalance sheet to support investment Customer commitments totaling ~$300M over next three yearsEnables Hefei facility to operate profitablyEnables Xiamen facility to achieve breakeven

Repositioning the companyImproving high-end revenue China investmentsFPD technology inflections Strategic photomask partnershipsAdjacent market M&A Driving Sustainable, Profitable Growth 16 Short term (6-12 months) Medium term (12-36 months) Long term (36+ months)

Tau Labs, Inc.1986 Gould/AMIMask Shop1987 Master Images Inc.1987 Motorola AustinMask Shop1987 NCR Mask Shop1988 National SemiMask Shop1990 Rexotech, Inc.1990 Perkin-Elmer1990 Philips NijmegenMask Shop1990 Hyundai InfineonAMD/AMTC IBM Europe Hewlett – Packard DuPont NanoMask Inc.1988 SGS-ThomsonMask Shop1989 TektronixMask Shop1991 Philips HamburgMask Shop1993 AT&T Mask Shop1995 Photronics Micro Mask1969 Hoya Oki Mask Shop Sony Sharp Mitsubishi Global Foundries/JV(AMTC) Toppan 1969// 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Derived from Semiconductor Equipment and Materials International (SEMI) Toshiba DNP Fabserve(NEC) Hitachi Fujitsu Photronic LabsIncorporated1969 Motorola PhoenixMask Shop1997 HoyaMicro Mask Inc.1994 GEC PlesseyMask Shop1990 MicrophaseLab’s, Inc.1991 CSEM Litomask Inc.1993 Masken Zentrumfur Mikrostruk Turferung1997 Cirrus Logic1999 Conextant2001 MP Mask/JV withMicron2006 - 2016 PKL2001 PSMC2000 Align-Rite2001 Drexler’sMicrofab1989 Micro FabSystems1988 Martin MarrietaMask Shop1991 Analog DevicesMask Shop1991 RaytheonMask Shop1993 ToppanPrintronics1993 Global Consolidation of Photomask Industry 2018 17 PDMC JV2014 DNP PhotomaskTech Taiwan PDMCX JV2018

Photomask industrySignificant market shareAdvanced technologyValuable manufacturing assetsAdjacent marketsRevenue diversificationSynergies to business modelFinancial benchmarksMeets ROIC hurdlesAccretive to earnings and cash flow M&A Criteria 18

World Class Management TeamSignificant Industry Experience 19 Name Title Years withPhotronics Yearsin Industry Experience Peter Kirlin, Ph.D. CEO 10 33 Chris Progler, Ph.D. VP, CTO, and Strategic Planning 18 30 HK Park GM, China and Taiwan, FPD 13 23 Frank Lee, Ph.D. GM, Asia IC 12 38 Peter Broadbent VP, US & Europe 5 5 John Jordan SVP, CFO 1 5

Global leader in merchant photomask industryDelivering high-end growth by leveraging core competences: Operational Excellence, Low Cost Producer, Technology Leadership, Customer IntimacyInvesting aggressively to exploit secular growth opportunitiesChina industry expansion – Made in China 2025Technology inflection from LCD to AMOLEDExplosion of G10.5+ panel capacityTargeting $630M / $0.80 in revenue / EPS by 2020Strategic investments bring top-line growthOperating leverage creates margin expansionAdditional upside from potential M&A A Compelling Investment Thesis 20

Chris Progler, CTOTechnology Development 21

China’s IC and display aspirations and investmentsDiversification in mid to high-end IC applications – the 4th Industrial RevolutionNew lithography intensive display form factors and enhancementsIncreased focus on process of record and integrated solutionsComplexity, cost and scale drive consolidation and partnershipsNew innovations in manufacturing Trends Guiding our Technology Portfolio 22

IC: (Data, IoT, AI)Introduce EUV productionInnovate to extend previous nodesFPD: (AMOLED, G10.5+, VR)Accelerate IC type mask techLarger substrate, finer dimensionAP: (Fan Out, Panel)Introduce FPD type mask techSubstrate and resolution roadmap Photronics Patterning Leadership 23 Tech Adoption in Lithographic Applications Adoption (%) 100%50%0% Pattern Correction Phases →

Type 2017 2018 2019 2020 Logic 10nm 7nm 5nm (EUV) DRAM 1x 1y 1z + new architectures 3D-NAND Gen 2 Gen 3 Gen 4 + new architectures LVIP to Mass Production Optical Mask Scaling on Existing Equipment EUV Device Masks Entered 14nm logic, 20nm DRAM, 3D-NAND production (2014)First with advanced EBM 9000 writing tool (2016)First qualified for 1x DRAM (2016) and 1y DRAM (2017)First to deliver yielding 7nm class logic EUV masks (2017) Single Expose Metal 24 IC: Investing in Technology Opportunities

25 Type 2017 2018 2019 2020 TV UHD(4K)QD LCD UHD(8K)QD OLED Mobile(OLED) QHD(6xx ppi) UHD1(8xx ppi) UHD2(12xx ppi) Mask Size 8.5G 10.5G LVIP to Mass Production Entered FPD phase shift mask technology for AMOLED (2013)Delivered Quad HD masks for OLED (2014)Qualified slit type (2010) and half-tone type (2016) efficiency solutionsFirst to market P-800 (2018) and P-80 (2015) writing systemsPlan first to G10.5 in China Phase Shift Mask Contact Hole Resolution P80 P800 FPD: Widening Tech Lead HT layer Slit bar Multi-Dose Mask

26 Type 2018 2019 2020 WLP/Panel Fan Out Mask resolution and registrationApplication specific lithography extensions9” and 14” to panel size Heterogeneous Integration Sampling custom mask solutions for AP litho challengesPreparing resolution enhancement infrastructure (mask, software, design)Evolve capability and lead as lithography importance grows Depth of Focus Solutions 40%20%Baseline Co-designing new AP mask technologyto increase substrate warp tolerance AP: Establishing New Products and PoR

Partnering with Our Customers for Success 27 ThePLABPoR * Process of record 7 high-end PoR* relationships across IC and FPDCritical for ROI on capability investmentsCustom design tools to strengthen connectionsDelivering measurable end product yield enhancementsStriving for virtual captive modelCustomized, flexible, interlocked, fast IBM Nov 2017 Strong Portfolio of Joint Development Projects →

Mask 1 Mask 2 Successful mask for high yield on complex device has many factorsProcess Capability – right specs, pattern quality, no critical defectMask to Substrate (wafer, panel) Know-How – simulate, characterize, improveReproducibility – matching, transfer, ramp and volume experienceProtection – IP, systems, mask lifetime management Why PoR Partners Trust a Photronics Built Mask Probe Yield Result Using 2 Full Spec Masks Ours Theirs 28

Mask 1 Mask 2 Powerful know-how for inter-mask matchingSite to site transfers for expanding productionCaptive process signatures for backupWithin site ramp, reproducibility and yieldHybrid inter-site process supportRecent success stories25nm DRAM, 3D-NAND, 14nm logic: US to Taiwan22nm to 7nm logic: captive mask and module matchingFPD enhancement module: Korea to Taiwan Technology Matching and Moving: A Competitive Strength nanoFab to PDMC OPC Reproducibility FPD: Korea => Taiwan, ChinaIC: US => Taiwan, Taiwan => China 29

Technology as a Tool to Support Business Growth 30 High-End34% Mainstream66% High-End66% Mainstream34% Growth Investment Cycle

Tech and innovation keys to ROIC, even as Moore’s Law slowsProven leadership roadmap across all key lithographic applicationsIC extensions, FPD rising complexity, AP stage settingPartnerships and PoR bring differentiated technology to productsResults, trust, know-how and consistencyDelivering integrated solutions and measurable user yield impactTechnology portability as a competitive advantageMatching in and transferring technologyVerified and cost effective multi-site solutions Technology Summary 31

HK Park, GM, China and Taiwan, FPDHigh-End FPD 32

Aligning with market driversMobile transition to AMOLEDLarger TV screensHigher resolutionExtending technology leadershipLeading portfolio of advanced mask writersLeveraging IC know-how for FPD process developmentGrowing presence in China33% of revenue Q2 2018 LTMShould accelerate with Hefei production FPD Recent Performance 33

Align global footprint with dominant geographic panel technologiesMost advanced AMOLED technology in KoreaLarge format (G10.5+) LCD TV in ChinaEstablished mainstream producers in TaiwanSuccessfully establish China operating presenceHefei manufacturing facilityG10.5+ masks for large screen TVIntegrate into global network to optimize customer serviceExtend technology leadershipHigher resolution AMOLED displaysTechnology transfer from IC to FPDGrow to be global, merchant market share leader Strategic Priorities 34

Mobile devices moving from LCD to AMOLEDSuperior visual characteristicsLower power consumptionEnables flexible formatPreferred for VR/AR devicesIncreases mask complexityMore mask layers per setTighter specs on each layerQualifying P-800 in Korea1st to qualify this advanced mask writerProduces highest resolution AMOLED masksCompetitive advantage vs. all merchants and captives Leveraging Technology Leadership for Mobile Display AMOLED Adoption 35 Source: Internal Estimates AMOLED remains preferred technology for mobile applications

65” 65” 65” 65” 65” 65” 65” 65” 95% G10.5+  Improved Glass Efficiency for Ultra-Large Screen TV 36 2940 mm x 3370 mm 2200 mm x 2500 mm 1950 mm x 2250 mm 1500 mm x 1850 mm 75” 75” 75” 75” 75” 75” 94% 65” 65” 65” 64% 75” 75” 73% 65” 65” 88%

China represents fastest growing display region64 fabs in production, under construction or being plannedLargest display producer (Korea 2nd)Photomask opportunities in China are attractiveWide range of display technology, including AMOLED & G10.5+No merchant photomask producer with high-end experienceNo G10.5+ photomask producer “Made in China 2025” Driving Growth in FPD Market 37 +17% CAGR Source: Internal Estimates G10.5+ CAGR +62%

34 Existing China Display Fabs 38 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png LCD (25)AMOLED (9)G10.5+ (N/A) Photronics LocationsFPD KoreaFPD Taiwan We are qualified at all existing fabs.

30 New China Display Fabs in Production by 2022 39 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png LCD (7)AMOLED (15)G10.5+ (8) Photronics LocationsFPD KoreaFPD HefeiFPD Taiwan

New Hefei Facility 40 Construction complete by end of fiscal year 2018.Tool move in during fiscal Q119.

New Hefei Facility FAB Office Building Front Door FacilityBuilding 41

Become G10.5+ market share leaderExtend AMOLED technology leadershipEstablish China market share leadershipIntegrated global manufacturing facilities with outstanding customer service How We Win 42

Key Success FactorsHefei rampG10.5+ launchWill be our largest FPD facilityAMOLED mobile display technology inflectionDiversify customer concentrationFPD revenue expected to double over next 3 years FPD Outlook 43 2017-2020 CAGR: 29%

Repositioned the businessChina investment on trackInvesting to exploit industry trendsBusiness expected to double over next 3 years FPD Summary 44

Frank Lee, GM, Asia ICHigh-End IC Logic 45

Repositioning the businessStrong demand from Asia logic foundriesKorea IC revenue up 24% YTDRevenue to Taiwan foundries up 58% YTDExpanding penetration at captive manufacturersIncreasingly seen as trusted technology partnerHigh-end capacity and capabilityClose proximity to customer High-End IC Logic Recent Performance 46

Two JV’s serving AsiaTaiwan JV, PDMC, formed in 2014China JV, PDMCX, formed in 2018Combines technology, know-how and customer relationships of two leading merchant mask producersReduces risk of Xiamen investmentFacility should ramp more quickly due to complimentary sales organizationsAllows us to compete more effectivelyPhotronics owns 50.01% of both JVsPhotronics management teamConsolidate financial results Successful Partnership with DNP 47

Large group of customers, suppliers, partners, and local officials in attendanceJV seen as technology partner for advanced IC manufacturingChina producers eager to have local source of high-end photomasks Shanghai Technology Forum 48

Leverage JV’s in Taiwan and China to win market shareMaintain and extend market leadership in TaiwanBuild China market share into leadership positionDraw on combined technology, experience, and customer relationshipsIncrease business globally with large foundries and IDMsPrevent formation of additional captive manufacturing in ChinaSuccessfully ramp China manufacturing facility Strategic Priorities 49

China represents fastest growing semiconductor regionGrowing domestic producersInvestments by multi-nationalsMore investment needed to meet national targets2022 forecast is 17%China government target is 40% by 2020, 70% by 2025Photomask opportunities in China are attractiveWide range of nodes in logic and memoryNo strong domestic merchant mask producer “Made in China 2025” Driving Growth in IC Market 50

23 New China 12” IC Fabs 51 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png Photronics LocationsIC KoreaIC XiamenIC TaiwanIC Boise (not shown) Logic (17)Memory (6) Innotron (M) Nexchip (L) YMTC (M) Samsung (M) AOS (L) Unigroup (L) GF (L) SMIC (L) Intel (M) SMIC (L) Cansemi (L) JHICC (M) USC (L) Silan (L) Sien IC (L) HidM (L) AMS (L) TSMC (L) HH Group (L) Unigroup (M) SMIC (L) SMIC (L) HLIC (L)

New Xiamen IC Facility 52 Construction complete by end of fiscal year 2018.Tool move in during fiscal Q119.

New Xiamen IC Facility 53 FAB Supporting Building Office Building FacilityBuilding

Technology leadership in both logic & memoryDevelop high-end capacity and capabilityObtain PoR for new nodes (28nm, 14nm)Customer relationships that lead to business partnershipsProximity to large customers (fast delivery, comprehensive customer support)Act as virtual captive, providing joint development programs and technology supportCross-site collaboration and integrationGrow market shareWin majority of merchant opportunitiesGrow by serving captive customers How We Win 54

Key Success Factors“Made in China 2025” expansionNode migration (14nm, 10nm, 7nm)Captive business penetrationLeverage JV & partnership to compete more effectivelyWin majority market share of growing foundry demand Cross-site collaboration to serve global customers High-End IC Logic Outlook 55 2017-2020 CAGR: 7%

Repositioned the business to grow high-end market shareChina investment on trackGrowing business globally with logic foundries and IDMsJV’s in China and Taiwan allow us to compete more effectivelyIncreasingly seen as business and technology partner High-End IC Logic Summary 56

Pete Broadbent, VP US & EuropeHigh-End IC Memory 57

Repositioning the customer baseExtremely strong memory demand – revenue to top memory customers up 78% YTD vs. 2017High market share with specialty and emerging memory foundriesBenefitting from Micron technology foundationTrusted technology partnerHigh-end capacity and capabilityTechnology, global engineering support High-End IC Memory Recent Performance 58

We have replaced nearly all of the revenue lost from Micron insourcingStrong diversity of high-end customersCost structure improved during downturn – more profitable at same revenue levelRobust qualification pipeline – PoR development with key memory customers Repositioning Boise 59 Customer Transition % of Boise Revenue

Maintain and grow market leadership in Asia memory (DRAM & 3D-NAND)Provide virtual captive technology, capability and customer serviceIncrease high-end business with foundries (China, U.S.)Integrate global high-end manufacturing locations to better serve customers Strategic Priorities 60

Strong memory growth trendDiversity of technology, applicationsCurrently dominated by large, captive producersMerchant opportunity with emerging memory producers, foundriesMost emerging memory production in Asia (Taiwan and China) Memory Market Dynamics 61 China New Fabs - $70B+ Investments Company $B Memory Site Tsinghua Unigroup 30 DRAM Nanjing Yangtze Memory Technologies (YMTC) 24 3D-NAND Wuhan Innotron 8 DRAM Hefei Fujian Jin Hua IC (JHICC) 8 DRAM Fujian China Existing Fabs Company Memory Site Intel 3D-NAND Dalian Samsung 3D-NAND Xi-An SK Hynix DRAM Wu-Xi JHICC/UMC DRAM Xiamen Nexchip DRAM Hefei YMTC DRAM Wuhan

23 New China 12” IC Fabs 62 Image from https://commons.wikimedia.org/wiki/File:China-equirect.png Photronics LocationsIC KoreaIC XiamenIC TaiwanIC Boise (not shown) Logic (17)Memory (6) Innotron (M) Nexchip (L) YMTC (M) Samsung (M) AOS (L) Unigroup (L) GF (L) SMIC (L) Intel (M) SMIC (L) Cansemi (L) JHICC (M) USC (L) Silan (L) Sien IC (L) HidM (L) AMS (L) TSMC (L) HH Group (L) Unigroup (M) SMIC (L) SMIC (L) HLIC (L)

Technology leadership in both logic & memoryDevelop high-end capacity and capabilityEstablish PoR for new nodes (DRAM, 3D-NAND)Joint development for next generation nodesCustomer relationships that lead to business partnershipsAct as virtual captive providerCross-site collaboration and integrationGrow market shareWin majority of merchant opportunitiesGrow merchant market by serving captive customers How We Win 63

Stable demand – less cyclicalGood margins and cash flowLow consumer of capitalVery competitive – more like a commodity marketAuto and IoT driving analog growth Mainstream – Steady IC Contributor 64

Key Success Factors“Made in China 2025” expansionNode migration (DRAM, 3D-NAND)Strong market driversMaintain leading market share with specialty foundry producersCross-site collaboration to serve global customersMainstream stability, growth of auto, IoT High-End IC Memory Outlook 65 2017-2020 CAGR: 7%

Repositioned the businessBoise performance back to JV levelsGrowing business with Asia specialty memory foundriesExtending technology leadership, developing partnerships High-End IC Memory Summary 66

John Jordan, CFOFinancial Model & Outlook 67

My observations coming from outsideLean, no-frills well-organized businessTransparent across boundariesDevoid of unnecessary redundanciesAll key players are respected industry experts with years in the industryInsistence on operational excellence and maintaining a death grip on costPassionate respect for customers and relationshipsA passion to win and a passion to improve the value equation for shareholdersFinance observations:Excellent controls environmentAppropriate competence levels in all positionsTone at the top to do the right thingOpportunity to automate and improve processes to achieve best practiceDesire to support the drive to improve ROIC Early Observations 68

Performance Improved During 2nd Quarter 69 *Net income attributable to Photronics, Inc. shareholders +6%Q/Q +21%Y/Y +270 bpsQ/Q +650 bpsY/Y +210 bpsQ/Q +660 bpsY/Y +60%Q/Q +10XY/Y +80%Q/Q +6XY/Y +67%Q/Q +5XY/Y

Performance Improved During 1st Half 70 +17% Y/Y +400 bps Y/Y +420 bps Y/Y +4X Y/Y +4X Y/Y +4X Y/Y *Net income attributable to Photronics, Inc. shareholders

Key Success Factors“Made in China 2025” – new facilitiesFPD technology inflectionsRepositioning the companyNode migration (logic & memory)Growing business with captive producersIC JV’s in China and TaiwanStable mainstream businessCross-site collaboration to serve global customers Positive Growth Outlook 71 2017-2020 CAGR: 12%

Disciplined focus on investments to improve ROICMaintain strong balance sheet through China investment periodFinancial stability through economic downturnFlexibility to invest in other growth opportunities (organic or M&A)Continue to drive cost out to improve customer value proposition and improve shareholder return Strategic Priorities to Improve Shareholder Value 72

Strong operating cash flow generatorPowerful operating leverage: target 50%Positive free cash flow every fiscal year since 2009Solid balance sheet Solid Financial Fundamentals 73

Free Cash Flow Much Stronger Post China Investments 74 *Free cash flow equals operating cash flow less capex

Reducing Risk of China Investment 75

Fund organic growthGeographic expansion into ChinaTechnical investments to maintain leadership positionExplore strategic M&APhotomask industry – IC & FPDAdjacencies to increase revenue diversificationDebt repaymentConverts mature in 2019Incurring local debt in China Clear Capital Deployment Priorities 76 *Net cash defined as cash and cash equivalents less long-term borrowings (including current portion)

Clear path to profitable growthPrudent stewardship of balance sheetFinancial model to grow income faster than revenueFinancial targetsRevenue $630M & EPS $0.80 by 2020Operating margin > 15%Minimum $100M net cashImprove ROIC – no projects accepted below hurdle rate Financial Summary 77

Global leader in merchant photomask industryDelivering high-end growth by leveraging core competences: Operational Excellence, Low Cost Producer, Technology Leadership, Customer IntimacyInvesting aggressively to exploit secular growth opportunitiesChina industry expansion – Made in China 2025Technology inflection from LCD to AMOLEDExplosion of G10.5+ panel capacityTargeting $630M / $0.80 in revenue / EPS by 2020Strategic investments bring top-line growthOperating leverage creates margin expansionAdditional upside from potential M&A A Compelling Investment Thesis 78

Questions? 79

Thank you for your interest! For Additional Information:R. Troy Dewar, CFADirector, Investor Relations203.740.5610tdewar@photronics.com