Ladies and gentlemen, thank you for standing by and welcome to Photronics' Third Quarter Fiscal Year 2021 Earnings Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. As a reminder, this conference is being recorded Wednesday, August 25th, 2021. I would now like to turn the conference over to Troy Dewar, Vice President of Investor Relations. Thank you, Sarah. Good morning, everyone. Welcome to our review of Photronics' 2021 third quarter financial results. Joining me this morning are Peter Kirlin, our Chief Executive Officer, John Jordan, our Chief Financial Officer, and Chris Progler, our Chief Technology Officer. The press release 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 participants on today's call may include forward-looking statements that include such words as "anticipate," "believe," "estimate," "expect," "forecast," "in our view." 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. At this time, I will turn the call over to Peter. Thank you, Troy. Good morning, everyone. We achieved record revenue in the third quarter as robust design environment led to growing photomask demand across our markets. This marked the second consecutive quarter of record revenue. As you will hear formally from John in a few minutes, we expect another record quarter in Q4. The overall outlook for the semiconductor and display industries, including every company within these sectors, continues to improve. Among other things, these indicators point to a boost in capital equipment spending by chip and panel makers that will require photomasks once installed. All signs point to a prolonged period of market strength. This is truly a very positive period for the industry, for photomask demand, and for Photronics. Gross margin improved in the quarter as the benefit from an increase in revenue on fixed cost absorption was aided by price increases for certain mainstream IC nodes. Operating margin also improved, with additional upside due to a one-time gain on the sale of a fixed asset. These results place us within range of our long-term target model, well ahead of the three-year horizon. A growing top line and expanding profit margins are critical elements of our strategy and validate that we are on the right path. Cash flow generated from operations was strong this quarter. We bought new tools and continued our share repurchase activity, while at the same time increasing our cash balance. The significance of this cannot be overstated. We've invested, and we continue to invest in organic growth for our business. These investments are targeted along with our customers' technology roadmaps, supported by long-term purchase agreements that provide assurance that newly installed tools will ramp quickly. This reduces the headwind to gross margins that can arise from underutilized tools and improves ROIC. The strong balance sheet we have built and maintained positions us to sustain this investment approach. Since 2017, annual revenue has grown 40%. Through the peak quarter, revenue was up 58%. We are on track to achieve our fourth consecutive year of record revenue, growing at a compound annual rate of 10% per year since repositioning the business in 2017. Over that same time period, high-end IC revenue nearly doubled, and high-end FPD revenue increased fivefold. This did not happen by accident. It is the anticipated result of a clear, deliberate strategy to invest in areas that would generate the highest growth, while also enabling improved return on capital. From a market perspective, our investment focus has been clear. Geographic expansion into China for both IC and FPD, and technology inflection in FPD, particularly the transition to AMOLED in mobile displays. In addition to these macro trends, there are some drivers that are applicable to the photomask sector. Expedited use of EUV by captives for high-end IC, and industry photomask capacity being sold out in mainstream IC. We also cannot ignore growing nationalism that is spurring capacity buildup in multiple regions, including the U.S. and Europe. All these factors support our belief that we are in a prolonged period of growth in photomask demand. A key element of our investment strategy is to align our operations with the fastest-growing sectors in the markets we serve. In FPD, this has included both mobile displays and ultra-large screen TVs. We have already seen the positive impact of past investments in these growth catalysts on our financial results. To maintain this performance, we continue to focus on high-value and high-growth segments of the market. This includes AMOLED for mobile, which is expanding beyond smartphones into large form factors such as tablets and laptops. AMOLED also enables diverse applications including virtual reality headsets, automotive displays, and even foldable smartphones. In addition to mobile displays, the emergence of premium TVs such as WOLED and QD-OLED drives innovation and requires more complex photomasks. Developing technologies such as micro LED and mini LED will also drive mask demand as they move to high volume production. Industry observers are expecting an increase in installation of display equipment in the next few years. If this happens, then what naturally follows is a period of demand growth for photomasks in order for the new tools to be used for manufacturing. Most of these investments are occurring in China, Korea, and Taiwan. It is no coincidence that these are the very same regions of our FPD manufacturing plants, allowing us to invest in localities that are most closely aligned with our customers' operations. This year, we added three new FPD tools to our global operations. All three tools are now installed. Two of the three contributing meaningfully to revenue during our third quarter, and all three are running at capacity in our fourth quarter, ahead of plan. The investment in these tools is supported by four long-term purchase agreements that add incremental annual revenue in excess of $40 million. This is a great example of our investment strategy in action. We secured the business through long-term contracts, installed the tools, and ramped into full production ahead of schedule, and are now seeing the financial benefit as we generate revenue and profit from newly commissioned tools. In IC, a driver of innovation demand has been node migrations. This happens not only at the bleeding edge, but also for mainstream technologies as customers move to smaller nodes to take advantage of lower cost and better performance. The latter has created a shortage of supply in the mainstream market that is giving us pricing power in this segment for the first time in my 35 years in the business. Regarding the former, as the leading chip makers, most of them have captive mask operations, use EUV to a greater extent in their IC fabs. A larger percentage of their mask capacity is being dedicated to EUV production. This means they need to outsource more non-EUV masks to merchant suppliers. We have pointed to this trend over the last few years, and we expect that it will accelerate as the leading logic and memory manufacturers move toward advanced nodes with progressively more EUV lithography steps. In December of last year, we communicated to you our long-term outlook and strategy, providing a three-year target model. Our performance during 2021, plus our outlook for the rest of the year, demonstrates that we are on track to meet or possibly exceed these targets. Semiconductor and display markets are strong. Our revenue is growing. Margins are expanding. We are generating cash. The balance sheet is solid, and we are aligned with several growth vectors to position us for future success. I really like where we are as well as the direction we are going. We'd like to thank all our employees for your superb effort to generate yet another record quarter for Photronics. At this time, I will turn the call over to John. Thank you, Peter. Good morning, everyone. Third quarter results benefited from strong demand trends, leading technology, broad customer exposure, and tremendous market presence to deliver record revenue of $171 million in the third quarter, which was 7% over the record set in Q2 and up 8% year-over-year, extending the positive trajectory we established earlier in the year and we believe will continue into the fourth quarter. We also completed our strategic capacity expansion in FPD ahead of schedule, enabling us to more quickly enjoy the larger production output. IC revenue improved 5% quarter-over-quarter and 8% year-over-year to a record of nearly $118 million. High-end revenue benefited from strong logic demand, especially in Taiwan and China. Mainstream also continued to grow on strong demand and better pricing as we realized the full benefit of the pricing environment on some mainstream IC nodes throughout Asia. Revenues to China overall were a record 10% better than last quarter and 46% over the same quarter last year. IC revenue into China represented 29% of total IC revenue. We are encouraged by the macro trends driving robust design activity across the semiconductor industry. Additionally, the outlook for wafer fab equipment continues improving, which means more tools in operation that will need photomasks to produce chips. All of this contributes to our optimism that current trends will continue into 2022 and potentially beyond. FPD revenue of nearly $53 million was also a record, 11% better than the second quarter and 7% improvement over the third quarter of last year. Growth in AMOLED displays used in mobile applications was the largest contributing factor. Sequentially, G10.5 plus demand improved as our customers are bringing on new capacity and introducing new designs for ultra-large screen TVs. Mainstream FPD also grew as our new tools expanded our output. FPD revenue into China was 53% of total FPD revenue in the quarter, up 9% sequentially and 2% year-over-year. Similar to IC, we expect current demand trends to continue in FPD, fueling continued growth from a full quarter of that new capacity. Mobile demand should continue to be the growth factor as more smartphones, tablets, and laptops adopt high-value AMOLED technology. Elsewhere, there are signs that the LCD pricing move higher over the last several quarters is ending, meaning the LCD boom is nearing an end. That would be supportive of new design releases as panel makers move to offer improved features and performance to maintain market share and revenue levels. Overall, we're very optimistic on the demand outlook for display photomasks. Margins improved in the quarter with the flow-down from operating leverage. Gross margin improved to 26.6%, supported by better pricing in mainstream IC and better product mix, particularly in FPD. Operating margin was 16.7%, including a $3.5 million gain on the sale of a lithography tool. We're very pleased with the progress resulting from our focus on margin expansion. Below the line, income tax provision increased due to increased earnings and the gain I mentioned earlier. Net income to non-controlling interest increased with the strong performance of our joint ventures in China and Taiwan, and other income increased due to unrealized gain on foreign exchange. Earnings per diluted share, including about $0.06 a share from the gain on sale of a tool, was $0.28, based on 61.5 million diluted shares outstanding. Cash and equivalents increased to $283 million. With $118 million in debt, net cash is $165 million. Operating cash flow in the quarter was $55 million. Year to date, we've generated $113 million operating cash flow. Capital expenditures of $19 million in the quarter brings our year-to-date total for CapEx to $87 million, net of nearly $6 million in subsidies received. We're still forecasting CapEx of about $120 million for the year. For next year, we're not yet prepared to provide specific guidance on CapEx. We do expect it to be lower than this year, focused primarily on IC in the mainstream business. We spent $12.5 million repurchasing close to another million shares of our stock during the quarter, bringing the total year to date to 3 million shares for $36 million. Cumulatively, $53 million spent of the $100 million authorization currently active. We believe there's significant value in PLAB. We intend to continue buying shares under this authorization. Before I provide fourth quarter guidance, I'll remind you that our visibility is always limited, as our backlog is typically only one to three weeks, and demand for some of our products is inherently uneven and difficult to predict. Additionally, the ASPs for high-end mask sets are high, and as this segment of the business grows, a relatively low number of high-end orders can have a significant impact on our quarterly revenue and earnings. Government actions to address health concerns or trade policy may also impact on our results. Given those caveats, we expect fourth quarter revenue to be in the range of $171 million-$179 million. As we've discussed throughout our commentary, end market demand factors are favorable, and we expect them to stay that way at least through the fourth quarter. We expect further benefit from our recent capacity expansion. Based on those revenue expectations and our current operating model, we estimate earnings per share for the fourth quarter to be in the range of $0.21-$0.29 per diluted share. In summary, third quarter results were a continuation of the trajectory begun earlier in the year and ahead of the outlook we provided at the beginning of 2021. The catalysts energizing that trajectory are constructing a market environment for photomasks that we anticipate will last for the next several quarters and potentially longer. We have invested to align our operations with these market trends and will continue to strategically invest to grow revenues, expand margins, optimize cash flow, and improve our return on capital. I will now turn the call over to the operator for your questions. Thank you. As a reminder, to ask a question, you will need to press star, then one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tom Diffely with D.A. Davidson. Your line is now open. Okay, thank you. Good morning. First, I was wondering if you had seen any supply chain issues or COVID-related impacts of your quarter, or if it means embedded in your outlook. We continue to operate everywhere around the world. Right. With COVID, we, I think, have been aggressive at managing our supply chain. We do have, like our customers, some challenges with the tool suppliers in particular, and their ability to service tools. That obviously showed up or was in the quarter, and it's baked into our guidance moving forward. Overall quality of support has deteriorated somewhat. We historically have done a lot of our own self-maintenance. This internal capability that we have developed for years to drive cost out of our business, I think has paid great benefits during COVID, and we expect business to continue more or less uninterrupted as it has. Okay. No, that's great to hear. Peter, obviously you guys, it sounds like you're very encouraged by the flat panel display market and all the drivers going forward. It seems as though on a near-term basis, you're somewhat capacity limited, ramping revenues with new tools coming online. I was just curious, you talked about not really expanding investments with capital spending next year on the flat panel side, the focus will be on IC. Just kind of curious how you reconcile the fact that that's a fast-growing market, and you seem to be not investing as heavily into it going forward. Yeah. If you look at that market, Tom, our IC business as we, I think, elaborated, the high end is strong, the mainstream is sold out. The FPD business is not that. It's not the case. We are sold out because of our technology position, but to the best of our ability to discern it, none of our competitors are. We're operating in a market where our tools are fully loaded. Others are not. This gives us some degree of conservatism as we look at investments we're willing to make. We continue to talk to customers, and I'll just highlight again, the new tools we just installed, I've never seen in my career here or in my career, period, new tools installed and ramped so quickly. It's obvious why that happened. We had commitments from customers, to make it happen in advance of the tools being installed. We're aspiring to create the same scenario in that market, and in a situation where all the competitors have excess capacity. To the extent we can continue to drive the strategic approach we have used there, we'll get more aggressive. We'll see how it goes. There's a lot of AMOLED photolith capacity coming online, not photolith, but AMOLED display capacity coming online in China this year. Basically, the way we count it anyway, is almost doubling from the beginning of the year to the end of the calendar year. There's a lot of AMOLED mask demand. Samsung's market share is dropping. The Chinese market share is increasing. LG's business is growing, yet their market share is, I think the way we see it anyway, is basically relatively consistent, but because the market is so strong, their business is up. The market looks good, as far as downstream is concerned. We're sold out. It's a way to make money. The conservatism comes because none of our competitors are. Okay, great. No, that's encouraging. Finally, when you look at the mainstream market, in very tight supply right now, are you seeing anybody add capacity, photomask making capacity at the mainstream side, or is it still not economical to buy new tools to service this market? What we see our competitors doing as we are doing, that is trying to add point tools wherever they can, to eke more output out of the mainstream installed base. As you look harder, right, as the market continues to improve, We, as well as our competitors, are finding ways where it makes sense to, again, not add lines, but add tools, that's clearly part of our focus in the upcoming year. The other thing I would say is we've made repeated comments that the mainstream market's oversold in Asia, this trend is now pretty prevalent in Europe, too. Our European business is now oversold. This sets the stage, if it continues, to walk prices up in Europe as we have in Asia. Whether it reaches into the U.S. or not, time will tell. The market in the mainstream is strengthening everywhere. One comment I made, kind of burning the script. Historically, what's driven our business has been node transitions, and historically, those transitions have always been at the bleeding edge. Now we're seeing a significant and growing number of node transitions. This has been going on for a while, but it's now quite clear we're seeing node transitions in the mainstream from 110 - 90, or 90 - 65, or 65 - 55 or 40. These are respins of products or product revisions that historically would not have happened. Because I think of a few things, Moore's Law slowing down, or in fact, really, the economic consequences of Moore's Law stopping at 28, as well as the growth of China and the impacts that are following that, we're seeing a much larger, greater number of node transitions in the mainstream business. That is new growth that was really never there before, not there in any kind of material way. Okay. No, I appreciate the color. Thank you. Thank you. As a reminder, to ask a question, you will need to press star then one on your telephone. Our next question comes from the line of Gus Richard with Northland. Your line is now open. Yes, thanks for taking the questions. First of all, you mentioned that some of the captives are outsourcing as they fill in more EUV in their internal shops. I was wondering if you'd give us a sense of where captive versus merchant has been over the last few years, where it is today, and where you think it might be in a couple of years from now. Yeah. The captive versus merchant is a long story. A very long story. When I look back 35 years when I started in the business, the market was about 15% merchant. If you look back 20 years, it has expanded to be about 65%. What's happened is that, in the IC space anyways, it's pushed back to now where the merchant market is about 35% and holding. It looks, right now, pretty stable. If you look at our business, and you look back to 2017, when outsourcing from EUV really started, our business with captives has about doubled over that period of time, to the point where it's now approaching almost $100 million. We've seen that as a growth vector for us, and we expect that it's going to continue. That's kind of a broad brush. As Moore's Law comes to a halt, when that happens, it's very hard to understand what purpose a captive has. I think in the very long term, we'll see a shift back to buy versus make, but that's not within the horizon of a typical Wall Street investor. Is that going to have a big effect in the next year or two? No. In the 5-10-year horizon, it's hard to see why an IC manufacturer would want to be making its own masks. My opinion, anyways. Actually, your answer leads me to the next question. Because Moore's Law is slowing, more advanced processor companies are moving to heterogeneous integration with trailing-edge die co-package with leading-edge die, and you're disaggregating designs. It's early days in this transition. Are you guys seeing any benefit from that at this point? Or even what's being done in cell phones? Yeah, Chris, we do have an active packaging business, and Chris, why don't you take that one? Sure. Not packaging, the actual die. Yeah, okay. Yeah. I'll let Chris answer. I'll just let Chris answer the business. Go ahead, Chris. Sure, yeah. Thanks. There's two pieces to that. One is the lithography needed to put together those integrated packages, Gus, as you know. We do see some roadmap emerging on, let's call it, packaging lithography. It's just the beginning of it, we are seeing masks and the litho get a little more complex. There's kind of an early nascent business in that, also we're developing some technology in that area. The question you asked is, are we seeing an impact on more designs due to the way chips are being integrated, I think we are seeing that. ASIC has come back pretty strong as a design tool. It really had been hollowed out significantly, or at least stopped growing due to FPGAs and other things. Due to power, performance, cost reasons, FPGAs and all kinds of gate arrays are losing market share. This is actually the only device family to shrink in 2021, that's projected. You are seeing a pivot back to ASICs, and smaller form factor ASICs that go into these packages definitely is a trend. Even going down to things that users call chiplets, very small purpose-built, relatively inexpensive die, where the value is through the integration of those together into a package. We do see that trend. That kind of leads to a resurgence in design activity across the board, and this is one of the things pushing the mainstream markets forward. For heterogeneous, it's at the beginning phases, but definitely that's a positive trend for design tape outs, and we see the signs of it now. Thank you, Chris. Thank you, Chris. I got distracted at one point, and I misinterpreted your question, but Chris obviously hit it right on its head. When I was a young boy in this business, ASICs dominated. They absolutely dominated. Over the years, over the last 15 years, they faded away, and FPGAs was a significant reason why that trend transpired. It looks like it's back to the future, where, as you, Chris, said we're in the early days of it, but this is really good for overall photomask demand. Got it. That's very helpful. Just in terms of packaging lithography and mature, what nodes are tight in your mature IC lines? Where is lithography and packaging these days, and where is it going over the next couple of years? Yeah. Again, Chris, why don't you take that, and I'll fill in whatever I think is missing. Go ahead, Chris. Sure. We use a relatively broad definition of mainstream today, which is up to but not including 28 nanometer nodes, quite broad. If you wanted to break that down into finer categories, you would have, let's say, mature legacy 90 nanometer, 110 nanometer, maybe, and greater, and then kind of mid-range nodes, 40, 55. There are steps in the mask technology between those that bring different sorts of value. Mainstream for us, at least the way we talk about it in this context, is quite broad. Our high-end, at least today, generally starts from 28 and goes down. As far as packaging lithography, there's kind of two trends that have unfolded in the last, I would say, three to five years. One was the effort to try to do packaging lithography on larger substrates. This is so-called panel or package on panel. We were starting to see that substrate scaling, mid-range masks, nine, 14-inch masks, which are significantly larger than IC-size masks. We still see some of that, but what we're finding, the stronger trend, particularly on the leaders now, is wafer-level packaging, so going back to standard size IC masks, and kind of doing it at wafer-level scale. That trend is much stronger now, especially at the high end of packaging. The types of ground rules you see there, in the very low-end case, 40, 50 micron types of via holes and things like that, down to a few microns at mask level for wiring and that sort of thing. In that context, it would be a relatively mainstream mask technology. There are some unique characteristics of those packaging masks that allow some technology injection into them and some differentiation. It has to do with the substrates. The substrates are very warped. The way you have to control the CDs on the mask, the way the masks are integrated into the lithography is somewhat unique. The dimensions are large, but there are some packaging-specific technologies that need to be developed to serve that market, and we are working on them. Just roughly, how big of the IC business is packaging these days in terms of mask demand of your IC revenue? Yeah. I don't think we would comment, but I would say Maybe Peter or John might, but I would say it's relatively small. We don't break it out, that's one reason to show you it's a relatively small percent of the total. yeah. I don't want to give specific numbers. Yep. Yeah, we don't track it as a separate segment yet, so I really couldn't add much more than to say it's significantly less than 10% of our IC business presently. The one area that- Got it. Oh. That might be- Go ahead. ... interesting to lump into packaging, on LCD side or display side, mini LED and micro LED trends, that's driving a different set of, for lack of a better word, packaging or integration type masks that actually have a lot of the characteristics of IC packaging masks. The interconnection circuitry on how those LEDs are wired up and how the micro LEDs will be wired up also drives an interesting set of lithography technologies, and consequently, mask technologies as well. We'll start to see at some point some convergence between some of that technology from a lithography perspective as well, between FPD and IC. Got it. mini micro LED, much like packaging in general, still is an immaterial portion of your business? Yeah, I would say. Yeah, because it's in development mode, but to go back to, and I think Chris made a good transition, to the extent that we have an active rather than the package, than a passive backlight. The mask sets utilize standard LCD technology with a mask set complexity approaching a rigid OLED display mask set. We go mini LED or micro LED, and we have an active backlight. That's good business for a mask maker. You use it as display mask making equipment rather than IC mask making equipment. Got it. Very helpful. Thank you so much. Thank you. We do have a follow-up question coming from the line of Tom Diffely with D.A. Davidson. Your line is now open. Yeah, thank you. I have a quick question for John. When you look at the target model, what do you need to bridge the gap from the $700 million today to the $750 million and the high end of the target model in terms of capital spending or just additional capacity? Yes, Tom, we've talked about what we're going to use for modeling CapEx going forward, and we've assumed that it would be $100 million spend. That's just a rough estimate without specific attribution as to product lines or tools. Beyond this year, as we said in the comments, we don't have our specific budgeting done yet. That's actually going to be done in a few weeks. I think if we just stay with the $100 million estimate for each year, that's as specific as we can get. Okay. If you do that, is there a noticeable difference in depreciation that gets worked into the model, or is there a pretty even split between spending going in and old tools coming out? Yeah, we've got a lot of old tools rolling off as we add the new ones. Our depreciation has stayed right in the range of $90 million. I think a few years ago, 2018 I think it was, when we did our first multi-year model, we were assuming that the depreciation was going to increase to over $100 million. With all the tools rolling off, we're staying right in the $90 million, and I think probably $100 million would be the highest level for depreciation. Great. Okay. Thank you, John. If you're looking at that chart, Tom, you can see that we're approaching on a run rate basis, the $700 million column. Our margins, both gross and operating, we're approaching the mid-level of the chart, the $725 million. The reason for that is, as we described on the last call, we're seeing about a two-margin point bump on both gross and operating margins due to the price increase in the mainstream. It kind of shifts the scale in a very meaningfully positive way. If you look at that chart that we put up at our Analyst Day, you'll see that we're basically shifted one column to the right on the profile of the income statement versus the revenue required to reach it. Okay. Yeah, that's great. When you look at the mix, how big an impact can mix have in any one quarter on, I guess, more on the EPS versus the revenue line? Yeah. Thanks for that question, Tom. It's kind of a funny question because mix can be significant. In FPD this quarter, the mix tended toward higher margin products, and if that continues, then our margin will reflect that benefit. If it goes back to the lower margin products, it has a better effect on revenue, but margin wills. Trying to predict mix, especially in this business where we've always said we have two to three weeks of backlog, is pretty difficult. Obviously, if the mix tends toward the higher margin products, we'll reflect that in the earnings. Right. I would, big picture, Tom, I would go back and say that I think everybody listening, or who's been, you fall under this bucket, close to the company for a long time, knows that we had just gone through a period where we built and ramped two facilities in China, right? To do that, you can't do that without putting a drain on your income statement. If you look at the current quarter, we are approaching EPS of a dollar a share, which has been a very long-term target for the leadership team. We haven't been there as a company since the turn of the 21st century. It's been a long time since anybody here has seen a dollar a share, you can see that it's right in front of us now. The real dramatic growth for Photronics this year isn't the top line, although 10%'s not bad. It's the bottom line. Yeah. Yeah. We are at the dollar share in our run rate right now, before we even exited the calendar year, 35% earnings growth year-over-year. That's dramatic. That is really dramatic, and that has always been, since I've been here for 13 years, the knock on the company. Most of the financial metrics have been strong. What has been most in the mind of shareholders is earnings, and we're delivering on that now. If you look at our China operations, they're just like one of the gang. The profile of the income statement is no different than the profile of the income statement at a consolidated level. China is signed, sealed, and delivered as far as being a contributing, upstanding member of our geographic factory footprint. We're not happy or satisfied, but on one hand, on the other, China, it's right there now. It's right there with everybody else. Okay. No, it's great to see, and I appreciate your time this morning. Thank you. Our next question comes from the line of Orin Hirschman with AIGH Investment Partners. Your line is now open. Hi. Good morning. Congratulations on the progress. I just wanted to ask, just in terms of the overall industry dynamic, if there is a huge lead time just in terms of getting tools, and obviously there are only really three major guys left that are non-captives, does there come a point where, because of the lack of the ability to add capacity additions here and the dynamics that you describe in the overall industry, where photomasks are becoming a gating factor on designs going into production? If so, how does that affect you? Yeah. Well, right now, customers are experiencing lead times in the mainstream market that they've never seen. It is impacting them, and they're willing, as a result, basically, to pay more. You are correct that the photomask industry, like the semiconductor industry, is served by even a fewer number of key suppliers with limited capacity. The industry's not to the point that you're describing. What it's forced us to do is plan for CapEx with longer cycles. We're putting capital authorizations in front of our boards six months in advance of when we would've done it historically, so that we can continue adding capacity. I don't know what our competition is doing, but we've changed our capital authorization process to look forward farther in time as the lead time of our equipment suppliers has stretched. That's how we're managing it. I can't say how others are. We're also more demanding on the projections for those investments. These investments have to meet our target hurdle rate in order for us to make the decision and to even propose it to the board. In the last couple years, that's made a big difference. I assume part of that is what you described, where the tool is basically sold out before the tool even goes into production, if possible. Well, the way to make sure that happens is to get customers to make commitments to buy capacity before you install it. Historically, we haven't done that, but over the last four or five years, we have. We actually make it more difficult for ourselves to buy capital because we have to do a lot of work in advance of it. The impact on the financial company, I think, shows now clearly for itself. Yeah, it's a good time to be adding capacity in our markets. Having said that, in the IC parts business, at the high end, qualifying new capacity and new nodes takes time. You can install a tool, and it could easily be six or nine months till it's fully utilized, not because the demand isn't present, but because the customers require extensive qualification to ensure that it doesn't affect their wafer yields. This is 1 follow-up question. It's nice that thank God you made it to the a dollar type of run rate, but the model is very sensitive, as you said. Can you see a path how you get to $1.50, $1.82 over time, assuming that the dynamics in the industry stay somewhat similar, and how prominent does price increase factor into that? I'm sorry, your line is not very good, but I think the question you asked was we're beyond a dollar run rate right now, can we sustain it till we actually deliver it? I'll let John answer that. Yeah. The question is can you see going out further? Can you see a path to get to $1.50, $1.80, $2 base, and what would that path be based on besides some capacity additions? Would it also include some minor price increases, etc, if the dynamics stay somewhat similar to what we're seeing today out there? Yeah. In the target model that we presented in December, I think a dollar was the lowest where we expected to get with that $700 million revenue level. Our expectation is to hit a dollar within the next year and exceed it, and the investments that we continue to make are, obviously, we expect them to be additive, accretive to the bottom line. In our next target model, we should have another hurdle beyond a dollar. If you look back at what we presented at $750 million run rate, we had EPS of $1.25-$1.35. Clearly, if revenues go up and we have pricing power, we can do better than that. Okay, great. Thank you. Thank you. Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the call over to Peter Kirlin for closing remarks. Thank you for joining us this morning. We appreciate your time and interest. As we enter the fourth quarter, there's reason to believe this year will be one of the best ever for Photronics. We're on track to achieve record revenue, and our earnings are improving each quarter. The strategy we are following is working. We are optimistic that our best days lie ahead. Look forward to updating you on our progress. Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line.