Ladies and gentlemen, thank you for standing by. Welcome to the Photronics Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded, Wednesday, November 29, 2017. I would now like to turn the conference over to Troy Dewar, Director of Investor Relations.

Thank you, Crystal. Good morning, everyone. Welcome to our review of Photronics 2017 fourth quarter financial results. Joining me this morning are Peter Kirlin, Chief Executive Officer; John Jordan, Senior Vice President and Chief Financial Officer; and Christopher Progler, Vice President, Chief Technology Officer and Strategic Planning. The press releases we issued earlier this morning, along with the presentation materials 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 risks, 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. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials. Before turning the call to Peter, I’m pleased to announce that Photronics will hold an Investor Day on May 23, 2018 in New York City. More details will be coming soon and hope to see you all there. At this time, I’ll turn the call over to Peter.

Thank you, Troy, and good morning everyone. We performed well in the fourth quarter with revenue exceed our expectations, growing 8% sequentially and 13% year-over-year. The main driver of this improvement was high-end revenue growth in both IC and FPD. High-end logic was strong and we benefited from solid Asian foundry demand especially at the 28-nanometer node, which is being used by more customers across an increasingly wide array of applications. High-end memory achieved incremental revenue growth for the fourth consecutive quarter as our customers continue to release new products. Overall a very good quarter for high-end IC and it's extremely encouraging to see a significant uptick in both memory and logic within the same quarter. High-end FPD [mask] [ph] revenue also increased during the quarter primarily due to AMOLED sales in China. Overall FPD revenue declined as many of our LCD customers continue to focus on producing current products and maximize profit, resulting in lower mass demand, temporarily shrinking the total available photomasks market. Given the market dynamics we encountered during the quarter, I’m pleased with the revenue growth we achieved and even more pleased as we expanded operating margin to just over 10%, delivering incremental margins in excess of our targets. We’ve historically done a tremendous job of controlling cost and employing our high operating leverage to grow profit more quickly than revenue and this quarter we delivered once again. We also generated cash from operations which is important as we ended the period of high capital investment. CapEx in the fourth quarter was 53 million, our third highest quarterly CapEx ever. If we hit our CapEx projections in 2018, it will be the highest annual CapEx ever. These investments we funded primarily through the cash on our balance sheet. It’s very reassuring to know that strong financial…

Thank you, Peter, and good morning everyone. I have been in Photronics as a CFO for nearly three months. I’ve been visiting and getting familiar with the operations and I’m pleased with the confidence, engagement and enthusiasm of the organization. For those in sales and administration to those in development and production, and the leadership who have brought the business to this level of success. It's an exciting company and a challenging industry with a strategy for organic growth and opportunistic acquisitions, and I look forward to working with the team to deliver shareholder value. I met many of our constituents over the past three months and look forward to meeting you all in the coming months. Fourth quarter operations improved considerably over the previous quarter. Fourth quarter revenue increased 8% sequentially and 13% compared with last year's Q4 resulting in large part from growth in high-end sales. Integrated circuit, IC revenue was $26.1 million, 13% over the third quarter of 2017 and 17% over fourth quarter 2016 revenue. High-end IC revenue of $35.3 million improved 40 million percent over the 23.7 million in Q3 and 44% over Q4 2016 revenue of $24.6 million. As Peter reported, the primary driver of the improvement was high-end logic principally due to growing demand for 28-nanometer from our Asian foundry customers, this production of 28-nanometer chips continues to grow and create photomasks demand. High-end memory has continued to be positive for throughout 2017, we’ve seen four consecutive quarters of growth. We’re well positioned in the market but we anticipate seasonal headwinds in IC during Q1 before returning to sequential growth later in the year. We don’t foresee any deterioration in underlying demand drivers and we expect to at least maintain market share. High-end FPD revenues $17.1 million also improved over both comparable periods…

Thank you. [Operator Instructions] Our first question comes from Tom Diffely from D.A. Davidson. Your line is open.

First, question on the income statement. I guess I missed it, what was -- what drove the big increase in the non-controlling interest this quarter? Typically, it comes from the joint venture in Taiwan, but just curious if there's more to it?

Yes, that’s exactly it, Tom. Joint venture did really well. Revenue increased in the order of $10 million over prior quarter and drove great profitabilities. So that minority interest share was over $5 million.

Okay. And your guidance for the first fiscal quarter, do you have similar levels coming out of Taiwan then?

Actually PDMC probably won’t be quite as strong in the first quarter as it was in fourth quarter.

Okay. And then the question on the new tools, the P-800, just curious what extra capabilities does that give you versus what you have today? And you mentioned that you’ll be the first in the marketplace to have one. So, just wondering, what the other leading edge manufacturers are using today?

Yes. Presently, the most advanced tool in the market is P80. And right now, the PVs are manufacturing photomasks that are creating displays with resolutions of maximum maybe 800 PPI. The P-800 along with internal development programs we have going on should easily allow AMOLED displays with resolutions to 1,200 PPI and more. So, as our growing customer base is very enthusiastic about gaining market share from each other, we intend to equip them with the photomask that makes that battle possible.

Okay, great. And then I guess similar with the P10, as of today there is no other merchant players out there with that capability?

Not in China, there is only really -- the really only one merchant with that capability and they sit in Japan. And today, there is really only two customers globally for those displays, but by the time they were in production the customer base will have expanded by one or two more players. And just to give you a point of reference, right now, a single mass set for G10.5+ exceeds $10 million, one mask set. So, there is a lot of revenue potential in that market segment.

Okay, doesn’t do much for smoothing out your business though.

No, that thought - obviously that concept is not lost on us, but there is nothing that we manufacture today that has double digit million price tags hung on it.

Okay. Is there any way to quantify what’s the impact on the COGS will be from these new tools going in? And what the timing of that is?

What I would say is we’ve decided to have an investor day to give a much clearer picture to anyone who is interested, what the investment and the opportunity looks like in China. So, what I’d suggest is that you put that on your calendar and you’ll hear more about that then probably even you want to hear if you come visit with us in May.

Okay, that sounds good. And one final question, you talked about the significant contractual demand for these new projects. Although, you have ability to serve those out of your other facilities until these facilities up and running, the new Chinese facilities are up and running?

A majority of the contractual commitments overwhelming majority are for G10.5+; what I can tell you is the contractual commitments we have guarantee profitable operations for multiple years after we start production.

Thank you. Our next question comes from Edwin Mok from Needham & Company. Your line is open.

So, first question on the quarter and I will look -- you mentioned high-end IC was stronger than expected that drove upside. Curious how much of that was driven by 28-nanometer versus [kind of more linear] [ph] 20 or below? And how much was baked in 1Q guidance? And I think beyond that, can you give some color on that?

About 60% of it was driven by 28, so a little more than half was driven by 28-nanometer logic. The remainder was driven by memory and you know smaller geometry on logic business. As far as you know Q1 goes, we always have seasonal softness in our IC business in our first quarter that kind of [Indiscernible]. So that’s baked into the guidance. Also what we’ve seen, you’ve heard us discuss it time and time again, our 28-nanometer business has never quarter-to-quarter been smooth. It has always had the profile of the saw blade. So, we’re hopeful that doesn’t happen in the current quarter, but if you look back over the last at least 12 that’s the way it's been. So that’s how we feel we have to guide.

Okay, great. That’s actually helpful color. And the second question I have on the China, two investments China. If I remember correctly I think previously when you guys first announced your IC JV, I think you were targeting this production in the second half ’18, and now you said early ’19. I just want to make sure I understand if that was a pushed out or is it just due to the, call it, arrangement or the JV that delayed that? That’s the first part of the question. And then the second thing, the $250 million of CapEx. It’s a little bigger than what I was modeling, I was just wondering if that was an increase from where you were before, and if so, what drove the increase?

Yes, the answer to the first question, building a facility - a manufacturing facility in China, there is a very long list of regulatory hurdles that need to be jumped. So, as we have worked through that it’s taken a bit longer for us to clear some of those hurdles. Having said that, you can see that what we learned from our experience, so our FPD operation is likely going to come on-line nearly coincidentally with our IC, we nearly half the time taken us to jump all of the -- all of the regulatory requirements, the second time around. So, yes, it's a little bit longer than we had hoped, but we still believe well timed to the market. And we’ve taken lessons learned and applied them to the FPD project, and it’s sailing along quite nicely.

And then on the total CapEx number?

Your question regarding CapEx, wasn't -- what wasn't in the prior guidance was the P-800, that announced.

I see. I see, okay. That's explained that.

Yes. In our 2017 guidance, our actual CapEx is a little bit soft. So, obviously some of the things we thought for 2017 were pushed out of in that. That's contemplated in that as well.

Okay, great. Last question I have on the margin side, I think Peter you mentioned that, as you ramp the facility obviously that might have some near-term margin headwind that could start to come in the second half of 2018. Anyway you can quantify that, how much impact to us you expect to have on your margins?

We may be able to quantify better getting towards the Investor Day in May, but at this point it’s difficult to forecast.

Okay, great. That’s all I have. Before I go just quickly, if Sean, you're listening, a quick shout out to you. I hope all is well. I was glad to work with you all these years. Thank you.

Thank you. [Operator Instructions] Our next question comes from Patrick Ho from Stifel Nicolas. Your line is open.

Thank you very much. Maybe just a follow-up on the new mask riding tool on the display side that you have mentioned, is that focused primarily on China only? Or are there existing leading edge or high-end display customers that are also going to benefit from the increase in capacity that you have later on in 2018?

That tool is really focused on ensuring that, if any customer globally wherever they reside, wants the best mask with the highest level of revolution, they come to us to buy it. So, it's not specific to anyone geography.

Great, that’s helpful. Maybe moving to the IC side, there is a lot more activity, there is a lot more chatter about next generation 7 nanometer particularly with one of your customers as they try and sign on next -- I guess customers for that node. How do you see the activity as it is right now for potential 7 nanometers max for you in 2018 as a whole? Is that a note that you guys are focused on? Or are you seeing I guess a lot of qualification activity today that will lead to potential revenues in 2018?

Hi, Patrick. Yes, this is Chris. I can try to answer that one. So on the IC side, as Peter mentioned, the bulk of the business uplift was 28-nanometer. We have quite a few late stage calls at 22, 14, some new ones there that are going to complete in ’17 or early ’18. So, we expect those two nodes will be more material in ’18. As far as 7, we are engaged in qualifications there, both for optical and EUV as well. Although, I think to suggest that we would have material revenue at 7-nanometer and 18 is a little premature. Most of it is matching for captives and doing some initial work to get those processes set. I think 18 will be a little early though. On the EUV side, we signed a joint development agreement with IBM recently to look at EUV for 7 and 5 nanometer applications. As you know, they have a pretty strong high performance computing roadmap. They don’t have the captives, so we’re collaborating with them to develop processes, and there should be some revenue connected to that program as well. So, there is work is focus for us, but I don’t think we can say it will be a strong revenue driver in ’18, but 28, 14 and 22 should continue to pick up.

Thank you. And I’m showing no further questions from our phone line, so I will now like turn the conference back over to Peter Kirlin for any closing remarks.

Thank you for joining us this morning. We are having an important year, focused on growing our revenue, improved earnings and cash generation, and investing our long-term strategic growth initiatives. Important that we perform well against these objectives, I’m optimistic about the direction of the Company and what we expect to accomplish over the next several years. I look forward to updating you as we move forward. Happy holidays to all.

Ladies and gentlemen that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line.