In a statement from Photronics, Inc. (NASDAQ:PLAB) the company has declared that their board of directors have given authorization for commencement of a stock buyback program of the common stock that is valued at around $25 million. Photronics has equally released their financial results for 2018 where they recorded a 20% year over year revenue increase in the fourth quarter as well as a 6% overall increase in revenue for the whole of 2018. The revenue increase tends to be steady when compared to the third quarter for July in which there was a 22% year over year rise and a 4% revenue increase.
Shares redemption
According to the statement from the board, the repurchase is expected to be an open trading exercise that shall be taking place periodically relative of the market condition or in line with the redemption design that is stipulated under the 10b5-1 SEC regulation. The CEO, Peter Kirlin, said that the move to launch the buyback program is a result of Photronics’ confidence in the market and their capability of generating robust revenue and also maintaining a solid balance sheet.
However, there is no obligation by the company to repurchase a given amount or number of the common shares and program is subject to review as it can be withdrawn or deferred at any given time.
Photronics new plant in China
The move of launching a repurchase exercise is in line with their plans of completing the construction of their China plant with expectations of beginning to upgrade in the first half of the 2019 fiscal year. Also, Peter indicates that they expect to complete the construction of their buildings in Hefei and Xiamen by the end of the month which shall be chartered by installations as well as commissioning of the manufacturing gears.
The CEO added that although they are a series of changes that are expected at Photronics, they are nonetheless not changing the near-term commercial position. This is so because they intend to work in line with previous targets since they are well positioned in the market to remain steady fast in attracting customers through their equity value.
Source: StockCharts.com
The stock was down 2.18% to close at $9.88 in yesterday’s trading session on a volume of 632.8K shares. The stock has been trading in a range-bound area since past few couple of months. The range is between $9.10 and $10.10. The 200-day moving average is $9, while the 50-day moving average is $9.64.
2018 Financial results
Photronics released their fourth-quarter results at the end of October which indicated that there was an improvement of around 20% that was reflected in the $144.7 million in revenue compared to last year. The integrated circuit revenue was up to almost $110 million indicating a 15% improvement whereas the Flat Panel Display revenue stood at a record $33.8 million translating to 36% compared to 2017.
A statement from the CEO indicates that Photronics posted positive revenue in the fourth quarter for both integrated circuit revenue and flat panel display revenue because cover demand remained robust throughout the year. Similarly, Peter Kirlin indicted that the company continued to benefit because of their successful shift in business strategies. Strong demand in China and Korea, as well as the growth of high-end AMOLED, were critical regarding FPD revenue. However, integrated circuit revenue grew because of a sequential increase of high-end memory as well as the shrinkage in high-end logic that led to consumers softening their end market demand.
Although the revenues were high, the margins slightly decreased because of the start-up costs for the expansion into China, and tool transfer outlays as well as changes in product assortment. However, these are expected to be temporary setbacks as margins are projected to improve since the China plant has been completed and the Integrated Circuit revenues continue to grow. Even though there were low margins in the 2018 fiscal year, Photronics was able to generate steady cash flow from their setups and also postpone CapEx costs to the first quarter of 2019 thus managing to maintain cash stability.