PHOTRONICS INC 10-Q

Item 1. FINANCIAL STATEMENTS PHOTRONICS, INC. Condensed Consolidated Balance Sheets (in thousands, except per share amounts) (unaudited) February 1, October 31, 2026 2025 ASSETS Current assets: Cash and cash equivalents $ 544,133 $ 492,256 Short-term investments 92,738 95,909 Accounts receivable, net of allowance of $ 1,153 in 2026 and $ 1,166 in 2025 199,490 195,921 Inventories 62,653 61,767 Other current assets 47,235 44,199 Total current assets 946,249 890,052 Property, plant and equipment, net 894,620 854,436 Deferred income taxes 38,255 40,207 Other assets 22,295 19,839 Total assets $ 1,901,419 $ 1,804,534 LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt $ 11 $ 11 Accounts payable 111,651 84,209 Accrued liabilities 94,987 81,653 Total current liabilities 206,649 165,873 Long-term debt 10 13 Other liabilities 44,839 41,341 Total liabilities 251,498 207,227 Commitments and contingencies (Note 11) Equity: Preferred stock, $ 0.01 par value, 2,000 shares authorized, none issued and outstanding - - Common stock, $ 0.01 par value, 150,000 shares authorized, 58,108 shares issued and outstanding as of February 1, 2026, and 57,633 shares issued and outstanding as of October 31, 2025 581 576 Additional paid-in capital 488,806 486,934 Retained earnings 814,323 772,199 Accumulated other comprehensive loss ( 92,320 ) ( 86,120 ) Total Photronics, Inc. shareholders’ equity 1,211,390 1,173,589 Noncontrolling interests 438,531 423,718 Total equity 1,649,921 1,597,307 Total liabilities and equity $ 1,901,419 $ 1,804,534 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents PHOTRONICS, INC. Condensed Consolidated Statements of Income (in thousands, except per share amounts) (unaudited) Three Months Ended February 1, February 2, 2026 2025 Revenue $ 225,066 $ 212,138 Cost of goods sold 146,364 136,603 Gross profit 78,702 75,535 Operating expenses: Selling, general, and administrative 21,311 19,101 Research and development 2,588 4,257 Total operating expenses 23,899 23,358 Other operating income 56 - Operating income 54,859 52,177 Other income (expense): Foreign currency transactions impact, net 12,865 18,443 Interest income and other income, net 6,809 6,585 Interest expense ( 1 ) ( 47 ) Income before income tax provision 74,532 77,158 Income tax provision 14,355 18,901 Net income 60,177 58,257 Net income attributable to noncontrolling interests 17,238 15,406 Net income attributable to Photronics, Inc. shareholders $ 42,939 $ 42,851 Earnings per share attributable to Photronics, Inc. shareholders: Basic $ 0.74 $ 0.69 Diluted $ 0.74 $ 0.68 Weighted-average number of common shares outstanding: Basic 57,794 62,093 Diluted 58,390 62,661 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents PHOTRONICS, INC. Condensed Consolidated Statements of Comprehensive Income (in thousands) (unaudited) Three Months Ended February 1, February 2, 2026 2025 Net income $ 60,177 $ 58,257 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ( 8,667 ) ( 42,917 ) Other 42 70 Net other comprehensive loss ( 8,625 ) ( 42,847 ) Comprehensive income 51,552 15,410 Less: comprehensive income attributable to noncontrolling interests 14,813 6,566 Comprehensive income attributable to Photronics, Inc. shareholders $ 36,739 $ 8,844 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents PHOTRONICS, INC. Condensed Consolidated Statements of Equity (in thousands) (unaudited) Three Months Ended February 1, 2026 Photronics, Inc. Shareholders Accumulated Additional Other Non- Common Stock Paid-in Retained Comprehensive controlling Total Shares Amount Capital Earnings Income (Loss) Interests Equity Balance as of October 31, 2025 57,633 $ 576 $ 486,934 $ 772,199 $ ( 86,120 ) $ 423,718 $ 1,597,307 Net income - - - 42,939 - 17,238 60,177 Other comprehensive loss - - - - ( 6,200 ) ( 2,425 ) ( 8,625 ) Shares issued under equity plans 475 5 ( 979 ) - - - ( 974 ) Share-based compensation expense - - 2,851 - - - 2,851 Other changes in equity - - - ( 815 ) - - ( 815 ) Balance as of February 1, 2026 58,108 $ 581 $ 488,806 $ 814,323 $ ( 92,320 ) $ 438,531 $ 1,649,921 Three Months Ended February 2, 2025 Photronics, Inc. Shareholders Accumulated Additional Other Non- Common Stock Paid-in Retained Comprehensive controlling Total Shares Amount Capital Earnings Income (Loss) Interests Equity Balance as of October 31, 2024 61,949 $ 619 $ 514,757 $ 691,807 $ ( 86,319 ) $ 359,895 $ 1,480,759 Net income - - - 42,851 - 15,406 58,257 Other comprehensive loss - - - - ( 34,006 ) ( 8,841 ) ( 42,847 ) Shares issued under equity plans 549 6 ( 727 ) - - - ( 721 ) Share-based compensation expense - - 3,334 - - - 3,334 Purchase and retirement of common stock through repurchase program ( 195 ) ( 2 ) ( 1,622 ) ( 2,949 ) - - ( 4,573 ) Balance as of February 2, 2025 62,303 $ 623 $ 515,742 $ 731,709 $ ( 120,325 ) $ 366,460 $ 1,494,209 See accompanying notes to condensed consolidated financial statements. 8 Table of Contents PHOTRONICS, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended February 1, February 2, 2026 2025 Cash flows from operating activities: Net income $ 60,177 $ 58,257 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,802 20,792 Share-based compensation 2,851 3,334 Changes in assets and liabilities: Accounts receivable ( 2,543 ) 7,869 Inventories ( 982 ) ( 2,533 ) Other current assets ( 2,187 ) ( 522 ) Accounts payable, accrued liabilities, and other 20,136 ( 8,731 ) Net cash provided by operating activities 97,254 78,466 Cash flows from investing activities: Purchases of property, plant and equipment ( 47,635 ) ( 35,200 ) Purchases of short-term investments ( 36,611 ) - Proceeds from maturities of short-term investments 41,483 41,482 Government incentives 2,567 620 Other ( 80 ) ( 57 ) Net cash (used in) provided by investing activities ( 40,276 ) 6,845 Cash flows from financing activities: Repayments of debt ( 3 ) ( 15,343 ) Common stock repurchases - ( 4,573 ) Proceeds from share-based arrangements 752 1,433 Net settlements of restricted stock awards - ( 1,995 ) Net cash provided by (used in) financing activities 749 ( 20,478 ) Effects of exchange rate changes on cash, cash equivalents, and restricted cash ( 5,915 ) ( 21,202 ) Net increase in cash, cash equivalents, and restricted cash 51,812 43,631 Cash, cash equivalents, and restricted cash at beginning of period 495,113 601,243 Cash, cash equivalents, and restricted cash at end of period 546,925 644,874 Less: Ending restricted cash 2,792 2,674 Cash and cash equivalents at end of period $ 544,133 $ 642,200 Supplemental disclosure of non-cash information: Accruals for property, plant and equipment purchased not yet paid $ 20,359 $ 10,911 See accompanying notes to condensed consolidated financial statements . 9 Table of Contents PHOTRONICS, INC. Notes to Condensed Consolidated Financial Statements (unaudited) (in thousands, except share amounts and per share data) NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION Description of Business Photronics, Inc. (“Photronics”, “the Company”, “we”, “our”, or “us”) is one of the world’s leading manufacturers of photomasks, which are high-precision photographic quartz or glass plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of ICs and FPDs and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates during the fabrication of ICs, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. The Company currently has eleven manufacturing facilities, located in Taiwan ( 3 ), China ( 2 ), South Korea ( 1 ), the United States (3), and Europe (2). Basis of Presentation The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect amounts reported in them. The Company’s estimates are based on historical experience and on various assumptions that are believed to be reasonable based on the facts and circumstances available at the time they are made. Subsequent actual results may differ from such estimates. The Company reviews these estimates periodically and reflects any effects of revisions in the period in which they are determined. Principles of Consolidation The accompanying unaudited condensed consolidated financial statements (“the financial statements”) have been prepared in accordance with U.S. GAAP for interim financial reporting information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, adjustments, all of which are of a normal recurring nature, considered necessary for a fair presentation have been included. The financial statements include the accounts of Photronics, its wholly owned subsidiaries, and the majority-owned subsidiaries which it controls. All intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10-K for the fiscal year ended October 31, 2025, which provides additional information about the Company’s accounting policies and the methods and assumptions used in the Company’s estimates. The Company’s business is typically impacted during the first quarter of the Company’s fiscal year by the North American, European, and Asian holiday periods, as some customers may change their development and buying activities during this period. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2026. Recent Accounting Pronouncements In December 2025, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2025-11, “Interim Reporting (Topic 270): Narrow Scope Improvements”, which improves the navigability of the required interim disclosures and clarifies when that guidance is applicable. The guidance in this ASU will be effective for Photronics for interim reporting periods in its fiscal year 2028 Form 10Q. The amendments can be applied either (1) prospectively or (2) retrospectively to any or all prior periods presented in the financial statements. The Company does not expect adoption of this ASU to have a material effect on the Company’s consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU No. 2025-10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities”. This update establishes authoritative guidance on the accounting for government grants received by business entities. The guidance in this ASU will be effective for Photronics in its fiscal year 2030 Form 10-K, with early application of the amendments allowed. The standard may be applied using a modified prospective, modified retrospective or full retrospective transition approach. The Company is currently evaluating the timing and impact of this ASU on the Company’s consolidated financial statements and related disclosures. 10 Table of Contents In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. ASU 2024-03 will require the Company to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, as well as qualitatively describe remaining amounts included in those captions. The guidance in this ASU will be effective for Photronics in its fiscal year 2028 Form 10-K, with early application of the amendments allowed. The Company is currently evaluating the impact the adoption of this ASU may have on the Company’s consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU related to the rate reconciliation and income taxes paid disclosures to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The guidance in this ASU will be effective for Photronics in its fiscal year 2026 Form 10-K, with early application of the amendments allowed. The Company is currently evaluating the effect of this ASU adoption on its disclosures. NOTE 2 – ACCOUNTS RECEIVABLE, NET The components of Accounts Receivable, net at the balance sheet dates are presented below. February 1, October 31, 2026 2025 Accounts Receivable $ 172,569 $ 166,511 Unbilled Receivables 28,074 30,576 Allowance for Credit Losses ( 1,153 ) ( 1,166 ) $ 199,490 $ 195,921 NOTE 3 – CASH, CASH EQUIVALENTS AND INVESTMENTS The Company invests excess cash primarily in bank time deposits and money market funds. The Company’s classification of investments is as follows: - Maturing within three months or less from the date of purchase Cash and cash equivalents - Maturing, as of the date of purchase, more than three months, but with remaining maturities of less than one year, from the balance sheet date Short-term investments - Maturing one year or more from the balance sheet date Long-term marketable investments The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1- These are investments where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access. Level 2- These are investments where values are based on quoted market prices that are not active or model derived valuations in which all significant inputs are observable in active markets. Level 3- These are investments where values are derived from techniques in which one or more significant inputs are unobservable. 11 Table of Contents The following are cash, cash equivalents and investments measured at fair value on a recurring basis using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant unobservable inputs (Level 3): February 1, 2026 October 31, 2025 Cash and cash equivalents Short-term investments Total Fair Value Cash and cash equivalents Short-term investments Total Fair Value Cash $ 237,349 $ - $ 237,349 $ 222,166 $ - $ 222,166 Level 1 U.S. Government Securities - 19,127 19,127 3,789 25,157 28,946 Money market funds 29,340 - 29,340 11,159 - 11,159 Level 2 Commercial paper 42,452 5,985 48,437 30,747 2,259 33,006 Time deposits 234,992 67,626 302,618 224,395 68,493 292,888 $ 544,133 $ 92,738 $ 636,871 $ 492,256 $ 95,909 $ 588,165 Restricted Cash (1) 2,792 2,857 Cash, cash equivalents, and restricted cash $ 546,925 $ 495,113 (1) Restricted cash is included in other assets and primarily relates to customs requirements and land lease agreements. Based upon the Company’s intent and ability to hold its time deposits to maturity (which maturities range up to twelve months at purchase), such securities have been classified as held-to-maturity and are carried at amortized cost, which approximates market value. The Company’s U.S. Government Securities, Commercial paper and Money market funds are classified as available-for-sale. Available-for-sale investments are reported at fair value, with unrealized gains or losses (net of tax) reported in Accumulated other comprehensive income (loss) . In the event of a sale of these securities, the Company would determine the cost of the investment sold at the specific individual security level and would include any gain or loss in Interest income and other income, net , where the Company also reports periodic interest earned and the amortization (accretion) of discounts (premiums) related to these investments. For the periods ended February 1, 2026, and October 31, 2025, the unrealized gains or losses related to short-term investments were immaterial. NOTE 4 - INVENTORIES The components of Inventories at the balance sheet dates are presented below. February 1, October 31, 2026 2025 Raw materials $ 60,768 $ 60,150 Work in process 1,880 1,616 Finished goods 5 1 $ 62,653 $ 61,767 12 Table of Contents NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET Presented below are the components of Property, plant and equipment, net at the balance sheet dates. February 1, October 31, 2026 2025 Land $ 12,309 $ 12,245 Buildings and improvements 198,547 192,860 Machinery and equipment 2,120,747 2,109,456 Leasehold improvements 20,063 20,474 Furniture, fixtures, and office equipment 19,456 19,394 Construction in progress 167,882 134,880 2,539,004 2,489,309 Accumulated depreciation and amortization ( 1,644,384 ) ( 1,634,873 ) $ 894,620 $ 854,436 Information on ROU assets resulting from finance leases, at the balance sheet dates, is presented below. During the first half of 2025, the Company exercised its early buy-out option for a high-end lithography tool and a high-end inspection tool. February 1, October 31, 2026 2025 Machinery and equipment $ 54 $ 54 Accumulated amortization ( 54 ) ( 53 ) $ - $ 1 The following table presents depreciation expense (including the amortization of ROU assets), related to property, plant and equipment incurred during the reporting periods. Three Months Ended February 1, February 2, 2026 2025 Depreciation Expense $ 19,716 $ 20,702 NOTE 6 - PDMCX JOINT VENTURE In January 2018, Photronics, Inc., through its wholly-owned Photronics Singapore PTE. LTD. subsidiary (hereinafter, within this Note “we”, “Photronics”, “us”, or “our”), and DNP, through its wholly owned subsidiary DNP Asia Pacific PTE, Ltd., entered into a joint venture under which DNP obtained a 49.99 % interest in the Company’s IC business in Xiamen, China. The joint venture, which the Company refers to as “PDMCX”, was established to develop and manufacture photomasks for semiconductors. The Company entered into this joint venture to enable the Company to compete more effectively for the merchant photomask business in China, and to benefit from the additional resources and investment that DNP provides to enable the Company to offer advanced-process technology to the Company’s customers. Under the joint venture agreement, should either Photronics’ or DNP’s ownership interest fall below 20.0 % for a period of more than six consecutive months , such party (an “exiting party”) has the option to sell to the other party, and the other party has the option to purchase from such exiting party, the exiting party’s remaining ownership interest. In either case, the sales of ownership interests would be at the exiting party’s ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance. 13 Table of Contents The following table presents the net income the Company recorded from the operations of PDMCX during the reporting periods. Three Months Ended February 1, February 2, 2026 2025 Net income from PDMCX $ 5,113 $ 3,368 As required by the guidance in ASC Topic 810 - “Consolidation”, the Company evaluated the Company’s involvement in PDMCX for the purpose of determining whether the Company should consolidate its results in the Company’s financial statements. The initial step of the Company’s evaluation was to determine whether PDMCX was a VIE. Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, the Company determined that it is a VIE. Having made this determination, the Company then assessed whether the Company was the primary beneficiary of the VIE and concluded that the Company was the primary beneficiary during the current and prior years reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. The Company’s conclusion was based on the fact that the Company held a controlling financial interest in PDMCX (which resulted from the Company’s having the power to direct the activities that most significantly impacted its economic performance) and had both the obligation to absorb losses and the right to receive benefits that could potentially be significant to PDMCX. The Company’s conclusion that the Company had the power to direct the activities that most significantly affected the economic performance of PDMCX during the current and prior year periods were based on the Company’s right to appoint the majority of its Board of Directors, which has, among others, the powers to manage the business (through its rights to appoint and evaluate PDMCX’s management), incur indebtedness, enter into agreements and commitments, and acquire and dispose of PDMCX’s assets. In addition, as a result of the 50.01 % variable interest the Company held during the current and prior year periods, the Company had the obligation to absorb losses, and the right to receive benefits, which could potentially be significant to PDMCX. The following table presents the carrying amounts of PDMCX assets and liabilities included in the Company’s condensed consolidated balance sheets. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX); therefore, the Company’s maximum exposure to loss from PDMCX is the Company’s interest in the carrying amount of the net assets of the joint venture. February 1, October 31, 2026 2025 Classification Carrying Photronics Carrying Photronics Amount Interest Amount Interest Current assets $ 208,288 $ 104,165 $ 180,289 $ 90,163 Noncurrent assets 172,757 86,396 166,756 83,395 Total assets 381,045 190,561 347,045 173,558 Current liabilities 39,355 19,681 23,193 11,599 Noncurrent liabilities 3,034 1,517 2,970 1,485 Total liabilities 42,389 21,198 26,163 13,084 Net assets $ 338,656 $ 169,363 $ 320,882 $ 160,474 14 Table of Contents NOTE 7 – REVENUE The Company recognizes revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those goods or services. The Company accounts for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable. Substantially all of the Company’s revenue comes from the sales of photomasks. The Company typically contracts with its customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which the Company invoices as they ship to customers. As the photomasks are manufactured to customer specifications, they have no alternative use to the Company and, as the Company’s contracts generally provide it with the right to payment for work completed to date, the Company recognizes revenue as it performs, or “over time,” on most of its contracts. The Company measures its performance to date using an input method, which is based on the Company’s estimated costs to complete the various manufacturing phases of a photomask. At the end of a reporting period, there are a number of uncompleted revenue contracts on which the Company has performed; for any such contracts under which the Company is entitled to be compensated for its costs incurred plus a reasonable profit, the Company recognizes revenue and a corresponding contract asset for such performance. The Company accounts for shipping and handling activities that it performs after a customer obtains control of a good as being activities to fulfill the Company’s promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract. The Company reports its revenue net of any sales or similar taxes the Company collects on behalf of governmental entities. 15 Table of Contents As stated above, photomasks are manufactured to customer specifications in accordance with their proprietary designs; thus, they are individually unique. Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers; consequently, the Company’s photomasks do not have standard or “list” prices. The transaction prices of the vast majority of the Company’s revenue contracts include only fixed amounts of consideration. In certain instances, such as when the Company offers a customer an early payment discount, an estimate of variable consideration would be included in the transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved. Contract Assets, Contract Liabilities, and Accounts Receivable The Company recognizes a contract asset when its performance under a contract precedes the Company’s receipt of consideration from a customer, or before payment is due, and the right to receive consideration is conditional upon factors other than the passage of time. Contract assets reflect the Company’s transfer of control to customers of photomasks that are in process or completed but not yet shipped to customers. A receivable is recognized when the Company has an unconditional right to payment, which generally occurs upon the shipment of the photomasks. The Company’s contract assets primarily consist of in-process production orders and fully manufactured photomasks which have not yet shipped, for which the Company has an enforceable right to consideration (including a reasonable profit) in the event the in-process orders are cancelled by customers. On an individual contract basis, the Company nets contract assets with contract liabilities for financial reporting purposes. The Company did not identify impairment indicators for any outstanding contract assets during the three month periods ended February 1, 2026, or February 2, 2025. The following table provides information about the Company’s contract balances at the balance sheet dates. February 1, October 31, Classification 2026 2025 Contract Assets Other current assets $ 11,644 $ 12,670 Contract Liabilities Accrued liabilities $ 22,380 $ 9,491 Other liabilities 4,509 5,041 $ 26,889 $ 14,532 The Company did not recognize any revenue from performance obligations satisfied in the previous periods. The following table presents revenue recognized from contract liabilities that existed at the beginning of the reporting periods. Three Months Ended February 1, February 2, 2026 2025 Revenue recognized from beginning liability $ 1,157 $ 4,369 The Company generally records accounts receivable at their billed amounts. All outstanding past due customer invoices are reviewed for collectability during, and at the end of, every reporting period. To the extent the Company believes a loss on the collection of a customer invoice is probable, the Company would record the loss and credit an allowance for credit losses. In the event that an amount is determined to be uncollectible, the Company charges the allowance for credit losses and derecognizes the related receivable. The Company did not incur any credit losses on the Company’s accounts receivable during the three month periods ended February 1, 2026, or February 2, 2025. 16 Table of Contents The Company’s invoice terms generally range from net thirty to ninety days , depending on both the geographic market in which the transaction occurs and the Company’s payment agreements with specific customers. In the event that the Company’s evaluation of a customer’s business prospects, and financial conditions indicate that the customer presents a collectability risk, the Company will modify terms of sale, which may require payment in advance of performance. At the time of adoption, the Company elected the practical expedient allowed under ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”) that permits the Company not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when the Company transfers control of goods or services to customers and when the Company is paid is one year or less. In instances when the Company is paid in advance of the Company’s performance, the Company records a contract liability and, as allowed under the practical expedient in Topic 606, recognizes interest expense only if the period between when the Company receives payment from the customer and the date when the Company expects to be entitled to the payment is greater than one year. Historically, advance payments the Company has received from customers have generally not preceded the completion of the Company’s performance obligations by more than one year. Disaggregation of Revenue The following tables present the Company’s revenue for the three month periods ended February 1, 2026, and February 2, 2025 , disaggregated by product type, geographic origin, and timing of recognition. Three Months Ended February 1, February 2, Revenue by Product Type 2026 2025 IC High-end $ 71,282 $ 60,105 Mainstream 94,009 93,851 Total IC $ 165,291 $ 153,956 FPD High-end $ 46,949 $ 49,679 Mainstream 12,826 8,503 Total FPD $ 59,775 $ 58,182 $ 225,066 $ 212,138 Three Months Ended February 1, February 2, Revenue by Geographic Origin* 2026 2025 Taiwan $ 74,319 $ 73,035 China 62,719 53,558 South Korea 41,080 40,237 United States 37,402 36,898 Europe 8,781 7,940 Other 765 470 $ 225,066 $ 212,138 * This table disaggregates revenue by the location in which it was earned. 17 Table of Contents Three Months Ended February 1, February 2, Revenue by Timing of Recognition 2026 2025 Over time $ 218,197 $ 205,076 At a point in time 6,869 7,062 $ 225,066 $ 212,138 Contract Costs The Company pays commissions to third-party sales agents for certain sales they procure on the Company’s behalf. However, the bases of the commissions are the transaction prices of the sales, which are completed in less than one year; thus, no relationship is established with a customer that will result in future business. Therefore, the Company would not recognize any portion of these sales commissions as costs of obtaining a contract, nor does the Company currently foresee other circumstances under which the Company would recognize such assets. Remaining Performance Obligations As the Company is typically required to fulfill customer orders within a short time period, the Company’s backlog of orders is generally not in excess of one to two weeks for IC photomasks and two to three weeks for FPD photomasks. As allowed under ASC 606 – Revenue Contracts with Customers , the Company has elected not to disclose the Company’s remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of one year or less. Product Warranties The Company’s photomasks are sold under warranties that generally range from one to twenty-four months . The Company warrants that the Company’s photomasks conform to customer specifications, and the Company will typically repair, replace, or issue a refund for any photomasks that fail to do so. The warranties do not represent separate performance obligations in the Company’s revenue contracts. Historically, customer claims under warranties have been immaterial. NOTE 8 - 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. 18 Table of Contents Three Months Ended February 1, February 2, 2026 2025 Expense reported in: Cost of goods sold $ 931 $ 776 Selling, general, and administrative 2,483 2,268 Research and development ( 563 ) 290 Total expense incurred $ 2,851 $ 3,334 Expense by award type: Restricted stock awards $ 2,043 $ 3,277 Restricted stock units 770 - Employee stock purchase plan 38 57 Total expense incurred $ 2,851 $ 3,334 Income tax benefits of share-based compensation $ 582 $ 446 The research and development credit for the quarter ended February 1, 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 periodically grants 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 February 1, February 2, 2026 2025 Number of shares granted in period - 345,500 Weighted-average grant-date fair value of awards (in dollars per share) $ - $ 23.82 Compensation costs not yet recognized $ 18,078 $ 25,786 Weighted-average amortization period (in years) 2.4 3.0 Shares outstanding at balance sheet date 855,124 1,256,697 Restricted Stock Units Commencing Q2 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 awards 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. 19 Table of Contents Three Months Ended February 1, February 2, 2026 2025 Number of units granted in period 509,072 - Weighted-average grant-date fair value of awards (in dollars per share) $ 33.21 $ - Compensation costs not yet recognized $ 16,486 $ - Weighted-average amortization period (in years) 3.9 - Restricted stock units outstanding at balance sheet date 634,402 - Stock Options Stock option awards 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 February 1, February 2, 2026 2025 Number of options granted in period - - Cash received from options exercised $ 634 $ 1,272 Compensation cost not yet recognized $ - $ - Weighted-average amortization period (in years) - - Information regarding outstanding and exercisable option awards as of February 1, 2026, is presented below. Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding and exercisable at February 1, 2026 56,750 $ 9.54 1.80 $ 1,420 NOTE 9 - INCOME TAXES The Company calculates its provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. The table below sets forth the primary reasons that the Company’s effective income tax rates differed from the U.S. statutory tax rates in effect during the periods ended February 1, 2026, and February 2, 2025. 20 Table of Contents Reporting Period U.S. Statutory Tax Rates Photronics Effective Tax Rates Primary Reasons for Differences Three months ended February 1, 2026 21.0 % 19.3 % Non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and changes in uncertain tax positions in non-U.S. jurisdictions more than offset by the impact of tax credit in a non-U.S. jurisdiction. Three months ended February 2, 2025 21.0 % 24.5 % Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions and the establishment of uncertain tax positions in non-U.S. jurisdictions. Uncertain Tax Positions Although the timing of reversal of uncertain tax positions may be indeterminate at this time, the Company believes the resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial condition. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2019. The table below presents information on unrecognized tax benefits as of the balance sheet dates. February 1, 2026 October 31, 2025 Unrecognized tax benefits related to uncertain tax positions $ 12,638 $ 11,379 Unrecognized tax benefits that, if recognized, would impact the effective tax rate $ 12,638 $ 11,379 Accrued interest and penalties related to uncertain tax positions $ 649 $ 551 Subsequent to the balance sheet date of February 1, 2026, one of the subsidiaries in a foreign jurisdiction received official notice of a FY24 income tax audit, which was settled. The impact is immaterial and will be recorded in Q2 FY26. In addition, another subsidiary in a foreign jurisdiction reached a settlement with the local tax authority for the FY23 and FY24 income tax audits. The impact of the settlement is also immaterial and will be recorded in Q2 FY26. 21 Table of Contents NOTE 10 - EARNINGS PER SHARE The calculation of basic and diluted earnings per share is presented below. Three Months Ended February 1, February 2, 2026 2025 Net income attributable to Photronics, Inc. shareholders $ 42,939 $ 42,851 Weighted-average common shares outstanding (in thousands): Basic 57,794 62,093 Effect of dilutive securities: Share-based payment awards 596 568 Potentially dilutive common shares 596 568 Weighted-average common shares - Diluted 58,390 62,661 Earnings per share : Net Income attributable to Photronics shareholders -Basic $ 0.74 $ 0.69 Net Income attributable to Photronics shareholders - Diluted $ 0.74 $ 0.68 The table below sets forth the outstanding weighted-average share-based payment awards that were excluded from the calculation of diluted earnings per share because their exercise price exceeded the average market value of the common shares for the period or, under application of the treasury stock method, they were otherwise determined to be antidilutive. Three Months Ended February 1, February 2, 2026 2025 Share-based payment awards, in shares 158 488 Total potentially dilutive shares excluded 158 488 NOTE 11 - COMMITMENTS AND CONTINGENCIES The Company is subject to various claims that arise in the ordinary course of business. The Company believes that the potential liability under such claims, individually and in the aggregate, will not have a material effect on the Company’s condensed consolidated financial statements. 22 Table of Contents NOTE 12 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT The following tables set forth the changes in the Company’s accumulated other comprehensive income (loss) by component (net of tax) for the three month periods ended February 1, 2026, and February 2, 2025 . Three Months Ended February 1, 2026 Foreign Currency Translation Adjustments Other Total Balance at October 31, 2025 $ ( 85,513 ) $ ( 607 ) $ ( 86,120 ) Other comprehensive income (loss) ( 8,667 ) 42 ( 8,625 ) Other comprehensive income (loss) attributable to noncontrolling interests 2,451 ( 26 ) 2,425 Balance at February 1, 2026 $ ( 91,729 ) $ ( 591 ) $ ( 92,320 ) Three Months Ended February 2, 2025 Foreign Currency Translation Adjustments Other Total Balance at October 31, 2024 $ ( 85,587 ) $ ( 732 ) $ ( 86,319 ) Other comprehensive income (loss) ( 42,917 ) 70 ( 42,847 ) Other comprehensive income (loss) attributable to noncontrolling interests 8,875 ( 34 ) 8,841 Balance at February 2, 2025 $ ( 119,629 ) $ ( 696 ) $ ( 120,325 ) NOTE 13 – SHARE REPURCHASE PROGRAM In September 2020, the Company’s Board of Directors authorized the repurchase of up to $ 100 million of its common stock, pursuant to a repurchase plan under Rule 10b-18 of the Exchange Act. The repurchase authorization by the Board of Directors has no expiration date, does not obligate the Company to acquire any common stock, and is subject to market conditions. From September 2020 through October 2022, the Company repurchased 5.8 million shares at a cost of $ 68.3 million. In August 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the remaining $ 31.7 million up to $ 100 million. In June 2025, the Board of Directors authorized an additional $ 25 million share repurchase. In fiscal year 2025, the Company repurchased 5.0 million shares at a cost of $ 97.4 million (an average of $ 19.52 per share). All shares repurchased under the program have been retired prior to the end of the fiscal quarter in which they were purchased. During the three month period ended February 1, 2026, the Company did not repurchase any additional shares. As of February 1, 2026, $ 27.6 million remained available under this authorization for the repurchase of shares. NOTE 14 - SEGMENT REPORTING The Company operates and manages its business as one operating and reportable segment based on the organizational structure of the Company and information reviewed by the Company’s Chief Executive Officer, who is also the chief operating decision maker (“CODM”). The CODM allocates capital resources across the Company’s entire asset base to maximize profitability without regard to geography, legal entity, or end market basis and evaluates the performance based on consolidated net income attributable to Photronics, Inc. shareholders . 23 Table of Contents The following table presents selected financial information with respect to the Company’s single operating segment for the periods ended February 1, 2026 and February 2, 2025: Three Months Ended February 1, 2026 February 2, 2025 Revenue $ 225,066 $ 212,138 Cost of goods sold ( 146,364 ) ( 136,603 ) Gross Profit 78,702 75,535 Selling, general and administrative expense ( 21,311 ) ( 19,101 ) Research and development expense ( 2,588 ) ( 4,257 ) Other operating income 56 - Operating Income 54,859 52,177 Other income (expense), net 19,673 24,981 Income tax provision ( 14,355 ) ( 18,901 ) Net income attributable to noncontrolling interests ( 17,238 ) ( 15,406 ) Net income attributable to Photronics, Inc. shareholders $ 42,939 $ 42,851 24 Table of Contents