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Photronics (PLAB) Q4 2018 Earnings Conference Call Transcript

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Photronics (NASDAQ: PLAB)
Q4 2018 Earnings Conference Call
Dec. 12, 2018 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Photronics fourth-quarter fiscal-year 2018 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded, Wednesday, December 12, 2018. I would now like to introduce your host for today's conference, Mr. Troy Dewar, director of investor relations.

Sir, you may begin.

Troy Dewar -- Director of Investor Relations

Thank you, Chanel. Good morning, everyone. Welcome to our review of Photronics 2018 fourth-quarter financial results. Joining me this morning are Dr.

Peter Kirlin, chief executive officer; John Jordan, senior vice president, chief financial officer; and Dr. Christopher Progler, vice president, chief technology officer and strategic planning. The press release we issued earlier this morning, along with the presentation material, which accompanies our remarks, are available on the Investor Relations section of our web page. Comments made by any participants on today's call may include forward-looking statements that include such words as anticipate, believe, estimate, expect, forecast.

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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. At this time, I'll turn the call over to Peter.

Peter Kirlin -- Chief Executive Officer

Thank you, Troy, and good morning, everyone. Earlier today, we posted another strong quarter with record revenue of $144.7 million. This is the sixth consecutive quarter of sequential growth and the fifth consecutive quarter of double-digit year-over-year growth. The fact that we hit a record on the top-line in the face of a semiconductor industry downturn is strong testimony to the effectiveness of our work to reposition the business, take advantage of growth in China or refining our product offering to increase our penetration of captive customers.

As with previous periods, we realized the benefits from the both of these initiatives during the fourth quarter. Revenue shift to China increased 146% year over year and revenue to captives improved 17% over the last year. It was a superb quarter, which reinforces the fact that our strategy is working. In addition to record quarterly revenue, we also achieved a record revenue of $535.3 million for the fiscal year.

Entering 2018, we had the wind at our backs, as the trajectory of the market along with qualifications of wins we had secured indicated that we would have a solid year of growth. Lo tage of the opportunities afforded us by the market as well as creating some new ones to enable us to reach even higher. We have aligned our operation and business with secular market trends, and I believe, we are seeing the benefits of this approach. Despite the revenue growth, margins decreased sequentially.

Some of this was driven by expenses associated with relocating existing tools as well as the expected start-up costs in China. Beyond that, we saw an impact from making mainstream IC product on some of our high-end tools, which produce lower levels of profitability. This was not optimal but necessary given shifts in high-end logic demand. This resulted in operating margin of 12.5% and EPS at $0.18 per share.

With these operating results, we were able to generate sufficient cash to offset CAPEX and share repurchases during the quarter. Our onus to the end the quarter with a great balance sheet and essentially a flat cash balance relative to Q3. John will provide more details in his review, but I'm very pleased with our performance in 2018 and how we are positioned headed into 2019, as we anticipate the completion and ramping of our new China facilities. For 2019, we are cautiously optimistic as we believe that for the first two quarters, we can capitalize on the growth segments of the IC and display for the mass markets to deliver year-over-year growth.

While in the second half of the year, the ramp of our China factories should drive revenues sequentially higher. We control our execution against these opportunities. In contrast, we do not control the geopolitical and related market uncertainties, which are large unknowns. We are consistently monitoring developments in these areas and will respond as needed.

Throughout our 50-year history, we have always made it a priority to keep costs as low as possible, while adjusting our industrial footprint to be aligned with our customers' needs. It's part of our DNA. And I'm confident that as an organization, we will respond effectively to any future challenges. The record revenue level we reached in 2018 was accomplished by delivering on our strategic priority of repositioning the business.

The objective of this strategy is to help us grow while diversifying our revenue stream. As an example, revenue to our largest FPD customer was down 8% for the full year of 2018. Yet total FPD revenue increased 19%. This was due to our increased revenue in China, which more than doubled.

By the way, we began to see increased demand from our largest FPD customer with Q4 revenue up 18% sequentially, reflecting improving demand for high-end AMOLED as well as our position as the technology leader with the most advanced P-800 lithography platform in the industry. Moving to IC. Revenue to captives increased 85% for the full year of 2018 and revenue in China more than doubled. This allowed us to grow total IC revenue 19%, while revenue to our largest customer was only up mid-single digits.

We ended the year with shipments to China running at 22% of total revenue, a level we achieved during both Q3 and Q4. This helped us attain record total revenue, and is one of the reasons we are optimistic regarding our China investments. Clearly, we've already established a strong presence in the region. The market is growing and our share should only increase as we begin manufacturing in the country.

On that note, I'm pleased to announce that our work in China to build, equip and ramp our two new facilities is moving along very well. Construction of the clean rooms and related critical systems is essentially completed, and we are in the process of moving-in our tools. More importantly, we remain on track to begin customer qualifications in the spring with production slated to commence as we exit Q2. I am very proud of the tremendous amount the work the global team has done to bring us to this point with the finish line now coming into view.

The market for photomasks in China is continuing to strengthen. For example, power producers there are introducing innovative technologies and pushing forward with larger screens and higher resolution. Recently, Royole, a Chinese panel producer and customer, introduced a commercial-ready, foldable display for a mobile phone that can open up to the size of a tablet. This is the first of we believe to be many foldable devices that will be brought to market in the coming years.

In large-format TV, the primary market driver is increasing average screen size. Secondarily, 8K displays continue to gain market share. This business is supported by the transition to G10.5+ panel production, and the second G10.5+ panel fab is currently ramping in China with three more fabs under construction. Our new facility in Hefei is designed to capitalize on this trend.

While on China, we'd like to offer my perspective to the recent trade issues. Every day, a new piece of significant news seems to appear that more often than not demonstrates that the tension between governments remains high and the ultimate outcome of trade discussions is uncertain. There have been many surprises so far and there are most certainly more to come. Short term, these actions can go either way as far as our business is concerned.

Having said that, thus far, the direct impact to Photronics has been minimal and not material to our results. In the long run, I believe this tension will motivate more, not less semiconductor content to be manufactured in China. And without a doubt more chips and displays equates to more demand for photomasks, especially for China-domiciled manufacturers. On a related topic, the U.S.

District Court of Northern California filed an indictment against Fujian Jinhua Integrated Circuit Co., UMC and three former UMC executives alleging theft of trade secrets from Micron. This is an ongoing legal process and the ultimate outcome is not yet known. However, I can say that we have not seen a material impact as a result of these actions. We continue to monitor various situations and will provide updates as needed.

In conclusion, I'm extremely pleased with our performance in 2018. We grew revenue and earnings. Our business accelerated dramatically in China. We increased our market penetration at captives and advanced our technology leadership in AMOLED.

Our balance sheet is strong, and we are set to begin production in China at two new state-of-the-art facilities within the next few months. 2018 was a great year for Photronics, and I believe that 2019 can be even better. Before turning the call over to John, I would like to thank all of the Photronics employees for your outstanding achievements to drive record business performance in 2018. John?

John Jordan -- Senior Vice President

Thank you, Peter. Good morning, everyone. Record revenue of $144.7 million in the fourth quarter reflects the successful repositioning of our business by developing business with China customers and increasing our market share with captives. Demand for photomask remained robust across most of our markets, and we posted revenue growth in both IC and FPD.

Before reviewing the results for the quarter, I want to discuss a change that impacts the comparison of fourth-quarter results with previous periods. Beginning in 2018, we moved the fiscal year-end to October 31. Going forward, the first three quarters will continue to end on the last Sunday in the quarter. Fourth quarter will end on October 31 every year.

For this quarter's comparisons, the importance of this change is that Q4 2018 is three days longer than the two previous comparable quarters. Revenue overall increased 6% sequentially and 20% over the same quarter in fiscal 2017 to $144.7 million. IC revenue improved 15% year over year and 3% sequentially, driven by strength in overall logic demand in Asia and by strong demand for high-end memory, generally. High-end logic demand was somewhat softer as demand for products using these advanced chips was tepid.

But that softness was more than offset mainstream activity. Revenue growth for products shipped into China was once again a big factor in our performance, increasing threefold over last year and representing 17% of total IC revenue. Revenue to captive customers was up year over year after a very strong year last year and down only slightly quarter-over-quarter, related primarily to the softness in high-end logic. Looking ahead, we believe high-end logic demand will recover, but timing of that recovery is obviously uncertain.

FPD revenues were a record $33.7 million in the quarter, up 36% over last year and 16% over last quarter. AMOLED for mobile displays was the biggest driver, up 73% from last year. We've talked before about the trade-offs between AMOLED and LTPS in the mobile format. With the AMOLED trend strengthening during the past two quarters, it's apparent that more and more panel producers are moving toward this technology.

That being said, we still see solid demand for LTPS and expect it to continue to be a contributor in the near term. Masks for large-format LCD panels rose slightly in the quarter. We expect to see more meaningful growth in this sector later this year when we begin to produce G10.5+ masks in China. Full-year revenue of $535.3 million was 19% higher than fiscal year 2017 revenue.

IC revenue increased 19% from $350.3 million in fiscal 2017 to $416.1 million in fiscal 2018. And FPD also increased 19% from $100.4 million in fiscal '17 to $119.2 million in fiscal year 2018. As Peter mentioned, gross margin was down from Q3 for a few reasons. First, the cost of moving tools during the quarter as we adjusted our manufacturing footprint to match customer demand.

Second, there was a lower margin mix of product produced on some high-end tools. Finally, we had a shift in product mix with an unfavorable impact on margins. We believe these factors are temporary and expect margins to expand when the high-end IC business recovers. In the operating expense area, R&D cost for qualification activity for several high-end products, together with increased compensation expense and, as anticipated, China start-up activity increased operating expenses from $15.2 million, 11.1% of revenue, in Q3 to $17.4 million, 12% of revenue, in Q4.

Operating expense in China accounted for 30% of the increase in operating expenses in the quarter. Full year operating expense of $65.9 million in fiscal 2018 or 12.3% of revenue increased from $59.4 million but compared favorably to the 13.2% of revenue in fiscal year 2017. Operating expenses in the China operations for the year accounted for 39% of the increase in operating expenses. Operating margin decreased from 15% in Q3 to 12.5% in Q4, but was much better than the 10.3% margin in Q4 2017.

Full-year operating margin of 12.3% was manifestly better than the 7.1% operating margin in fiscal-year 2017. Below the operating line, other income improved on foreign exchange gain and the sale of an asset. Tax expense was higher in Q4, due in large part to a onetime tax benefit in Q3 of $2 million. Full-year effective tax rate was 10.7% due to net benefits of the tax reform act, tax holiday in certain locations and other credits and onetime adjustments.

Net income attributable to Photronics shareholders was $12.5 million in the quarter or $0.18 per diluted share, similar to the $13 million and $0.18 reported last quarter, but significantly higher than the $5.4 million net income and $0.08 per share reported for the same quarter last year. Full-year net income before minority interest was $61.2 million. Minority interest was $19.2 million and net income to Photronics shareholders was $42.1 million for the year, representing diluted earnings per share of $0.59 compared to $13.1 million and $0.19 per share in fiscal 2017. The strong operating results drove excellent operating cash flow of approximately $44 million for the quarter and nearly $131 million for the year, a 35% increase over fiscal 2017.

We continued the share repurchase initiative during the quarter and returned an additional $16 million to shareholders through that program. Full-year share repurchases were $23 million, removing 2.6 million shares from the outstanding share count. As of year end, there was approximately $22 million remaining under the current repurchase authorization. We made CAPEX investments in the quarter of $39 million, $96 million for the year.

Our China projects have progressed really well, as Peter mentioned, but many project payments were rescheduled into first quarter 2019, so CAPEX was significantly less than anticipated. The CAPEX investments for fiscal 2019, primarily to complete the China initiatives, will be approximately $210 million, $170 million of which will occur in the first quarter. To date this quarter, $70 million of that $170 million has already been paid. As a result of the strong cash flow and the reduced CAPEX expenditures, cash increased from $308 million at year-end 2017 to $329 million at October 31, 2018.

The balance of long-term debt of $57.5 million at October 31, 2018, is the convertible debt issued due April 1, 2019. Post close, we announced the new working capital loan agreement of $25 million and a new $50 million fixed asset loan agreement for our JV in China. These will be drawn from time to time for general financing needs, payment of import taxes or VAT or for payment to suppliers for tools. While we have sufficient cash to fund the China initiatives, the local loan agreements provide greater flexibility in managing cash flows and allow us to take advantage of local incentives on interest expenses.

Before I provide first-quarter guidance, I will reiterate the reminder that our visibility is always limited as our backlog is typically only one to two 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 revenue and earnings for the quarter. Given those caveats, we expect first-quarter revenue to be in the range of $120 million to $130 million.

The first quarter is typically a seasonally slow quarter for us, and Q1 2019 will be a net of six days shorter than Q4 2018. When we assess each end market, we believe our FPD operations will remain at capacity, with mixed expectations in the high-end IC as memory should be positive, while logic is more uncertain. Based on this revenue expectation and our current operating model, we estimate earnings for the first quarter to be in the range of $0.01 to $0.07 per diluted share. This includes approximately $0.05 per diluted share for China start-up expenses.

2018 was a great year for Photronics. We achieved record revenue and made considerable progress against our strategic growth objectives, including our investment in China. At the beginning of the year, we discussed our acknowledgment of the risks of cyclicality in the China endeavor and the necessity of meeting our operating projections to ensure that we could fund our growth initiatives. We delivered on the operating challenge and fortified our liquidity position.

The risk associated with the China effort has been substantially reduced, and we are cautiously optimistic to be just ramping into initial production in China late in the first half of fiscal 2019. Our strong balance sheet and improving competitiveness in all our markets augurs well for continued growth and success. We are looking forward to a challenging year in fiscal 2019 that will continue the progress on our strategic path. I will now turn the call over to the operator for your questions. 

Questions and Answers:

Operator

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

Tom Diffely -- D.A. Davidson -- Analyst

Yes. Good morning. Wanted to dig into the impact that you're seeing from the new costs. When you look at the gross margin impact of the reported quarter, is there some way that you can give us the relative impact of the mix versus the start-up costs?

John Jordan -- Senior Vice President

Tom, we don't really get into the details of each of our operations, other than at the bottom line. We've given the result that we expect on the bottom line. But the effect on margins, a little more detail than we usually discuss.

Tom Diffely -- D.A. Davidson -- Analyst

OK. So the 5% projected impact in the current quarter similar to what it was last quarter?

John Jordan -- Senior Vice President

I'm sorry, repeat that.

Tom Diffely -- D.A. Davidson -- Analyst

The $0.05 impact that you are seeing for the current -- the January quarter, was it at a similar level for the October quarter?

John Jordan -- Senior Vice President

No, the October quarter was in the range of $0.01 to $0.02.

Tom Diffely -- D.A. Davidson -- Analyst

OK. And then just on a broader basis when it comes to margins, when you look at China just ramping up overall and becoming a bigger percentage of the business and growing very strong year over year, has that had an impact on margins?

John Jordan -- Senior Vice President

To the extent that we need to hire people in the production area, those costs don't have revenues associated with them. So there is an impact from those lean costs.

Peter Kirlin -- Chief Executive Officer

No, I think, I'm not sure you answered...

John Jordan -- Senior Vice President

That answered the question?

Peter Kirlin -- Chief Executive Officer

You interpreted his question correctly.

Tom Diffely -- D.A. Davidson -- Analyst

Yes, no. Looking forth...

Peter Kirlin -- Chief Executive Officer

So our variable margin model all year long has remained intact, no variation. What I said in my prepared remarks was, we saw high-end demand drop. So we still saw strong demand in mainstream. So we built 45 and 55-nanometer business on tools that normally build 14 and 28.

When we do that, we have depreciation running through the margin in those products that normally would not be there. So the way -- our mainstream business and our high-end business has the same margin as long as we're building the business on the proper tools. When that's not the case, and we move the mainstream business up, we see margin compression. And that's what we saw in the quarter.

But it's better than the alternative, which is to allow the competition to enjoy that business. And the contribution margin is still positive, but it's significantly less. So that's what happened as far as the mix in the quarter was concerned.

Tom Diffely -- D.A. Davidson -- Analyst

OK. But then maybe looking more broadly, when you look at the Chinese market for both IC and flat panel, do you see enough high-end business there to get back to kind of normal relationships between high-end and mainstream for your business and your normal margin structure?

Peter Kirlin -- Chief Executive Officer

Yes, sure. And most of the -- lion's share of the capacity on IC that's headed into China initially is at the very top to the mainstream node. So it's the right tools for the job at hand. And of course, the FPD tools are targeted, first the G10.5+, which has a revenue associated with it like nothing we have ever seen.

So it's all new business. So we think the tools we have that we're actively installing hit the sweet spot of both the IC and FPD markets.

Tom Diffely -- D.A. Davidson -- Analyst

OK, great. And it looks like the -- obviously, the high-end flat panel facility in China is very much on track here. You're installing the equipment right now. What is the typical lead time or qualification time that you have with new customers for a new fab like that? Is it a situation where just within a quarter or two, you can have actual production revenue systems going out the door? Does it take longer to qualify?

Peter Kirlin -- Chief Executive Officer

Yes. With FPD, normally, the qualification cycle concludes in a quarter, unlike IC, which could easily take close to a year. So FPD is a much -- all the guidance we have given around the China ramps, they all contemplate the fact that the FPD business is new for us as far as the substrate size is concerned. The customers are not new.

We're doing business with all of them. And the qualification cycles are significantly shortened, right? I would also point out again that, in the FPD arena, we have said that we have significant contractual commitments for the capacity there that will enable us to ramp the profitability quickly. So for us, on the FPD side of business, it's very much -- the business is there. What's gating our ability to realize is our ability to execute on the build plan for the factory, the equipping of the factory with the tools, and then the -- it's the ramp of our line and then finally the qualification of our customers, right? So -- but it's in our hands, right? It's -- we are not looking for business once the line is ramped.

We're looking to ramp the line. Those are very different scenario.

Tom Diffely -- D.A. Davidson -- Analyst

OK, yes, it's a good position to be in. And then finally, what is the projected interest expense or the terms of the new credit line that you have in China? It sounds like you're going to take advantage of some tax benefits there.

John Jordan -- Senior Vice President

Yes. The interest expense will be reimbursed by the incentives that we have there, Tom. So the timing will be different. But net-net, at the end of the period, we'll have zero for interest expense.

Tom Diffely -- D.A. Davidson -- Analyst

Well, OK, great. All right. Well, thanks for your time today.

John Jordan -- Senior Vice President

Thank you, Tom.

Operator

Thank you. And our next question comes from the line of Patrick Ho of Stifel. Your line is now open.

Patrick Ho -- Stifel Financial Corp. -- Analyst

Thank you very much. Maybe as a follow-up to one of Tom's questions about the start-up costs. Peter, you gave good color in terms of the qualification times between display and IC. Is it fair for me to look at that also as when you have to keep up the duplicate cost as you begin to qualify and get tools offline in China? Or do believe that you could take away some of those duplicate costs faster than expected as you start ramping up the Chinese fabs?

Peter Kirlin -- Chief Executive Officer

I'm not sure, Patrick. We -- any of us -- we're all kind of looking at one hell of a puzzle. What you meant by the duplicate cost, can you explain that a little more?

Patrick Ho -- Stifel Financial Corp. -- Analyst

Yes. So just to ensure that you're qualifying and having the necessary capacity, I'm assuming, you're going to be holding costs at your current -- where you're actually qualified and where you are doing production today. And two of the Chinese fabs are up and running at optimum levels, you're going to keep some level of duplicate cost at your current -- at your current facilities until the China fabs ramp up. That's kind of what I'm getting at.

Peter Kirlin -- Chief Executive Officer

All right. So again, with FPD, there really is no duplication -- there is no duplication of cost. Right now, our FPD capacity is fully sold out, right? This quarter, it was fully sold out. And what we said is, next quarter, we expect it to be fully sold out.

At the end of the second quarter, we -- starting -- hope to see beginning of revenue coming out of China. As long as nothing significantly changes between here and there, meaning Q2, we'll continue to be sold out. So the new China capacity will be incremental to a business that has no more. Now early going in China, the major focus, given what our two partner customers are asking us is to get the G10.5 qualified as fast as humanly possible.

As we're doing that, to the extent we have tool capacity, we'll push that capacity to support the AMOLED demand in China and/or the LTPS demand, won't generate the same overall revenue, but it'll still generate incremental margin. So as far as FPD goes, there are no incremental or duplicative costs in the system. As far as IC business is concerned, the duplicate costs, if they are there, would be to, like, not fully loading the global capacity footprint, right? That -- so I guess, you could call those costs duplicative if you want to use a broad definition. So that's the only real inefficiency that I can point to in our system.

So yes, we said we had contractual commitments to drive Hefei -- Xiamen to breakeven, but not beyond it. So we will have to ramp in new revenue in order to fully load the global factory. Now in the current quarter, we had expenses related to tool moves, right, of existing tools. And we said before many times now that we're building some of that China business, obviously, in the IC arena in other the places.

So as China ramps, we're moving some of the existing capacity to build it there. So we're not expecting it all to be greenfield. So once you start this dismantling a line in the factory, it doesn't make sense maybe to move all the tools to one location. So you blend those tools across your network to get the most leverage out of them.

So the tool move expenses we saw on the quarter were primarily related to blending those tools out across the existing network, the ones not going to China. So that was a onetime event that will not duplicate itself. So that could also, I guess, be viewed as duplicative costs, but they're now through the P&L and gone. And so that's the best I can do to answer your question.

Patrick Ho -- Stifel Financial Corp. -- Analyst

No, that was helpful, Peter. Thank you. As my follow-up question, the weakness on the high-end logic side, I guess, is not totally surprising given a lot of the uncertainty in the markets today. Could you just give a -- maybe a little more qualitative, was it is at a certain node, whether 14 or 28? Or was it broadly across a couple of nodes on the high-end logic front?

Peter Kirlin -- Chief Executive Officer

No, it's both 14 and 28. And as I said, 45 and 55 really stayed strong. But it was not confined to a single customer. It was generally -- it was a broad weakness that surfaced in the quarter.

And you don't have to use too much imagination to understand where it was coming from in the downstream market. So -- but anyways, there was enough business there that we were able to, more or less, continue to load our tools, just wasn't optimal.

Patrick Ho -- Stifel Financial Corp. -- Analyst

Great. Maybe as my final question, in terms of the relocation of some of the tools to, I guess, meet the appropriate demand. So it -- does that give any indications on your end over the next couple of quarters that the mainstream will continue to be healthy and the high-end logic, I guess, will continue to be a little bit softer than expected? Or, yes, it sounded like it only took about a quarter for you to adjust the toolsets based on demand. How quickly, if high-end logic does turnaround sooner than expected, will you be able to, I guess, reallocate those tools?

Peter Kirlin -- Chief Executive Officer

Yes. We can change -- we're in a position to change the gear on the bike, if -- and consistent with demand, right? And I will say that, I've been here 10 years, and we operated last quarter at the highest level of capacity utilization that I have seen in my 10 years at Photronics because, again, the revenue potential of the more mainstream business is not as great as the high end, yet we still had a record quarter. So we're working hard, generally, not at all our factories, but FPD was sold out. We had several IC factories sold out.

There was still some capacity in the system. But we were running pretty fast, and as I said earlier, fortunately, we haven't slowed the capacity coming online in the second half of the year in both IC and FPD. We would need to do that likely, regardless, even if we weren't ramping factories in China in the second half of the year. But depending on what happens, obviously, with the overall market, that's the wildcard.

Nobody really knows. But there are still segments, obviously, of our business, and John highlighted on the memory market for us right now is very strong. And that, obviously, is a testimony to our specific customers and where there are in their node ramps. And our FPD business, particularly AMOLED segment of it, is strong.

And of course, we have the best technology so that puts our capacity preferentially in demand. Based on our market checks, we don't think any of our competitors in the FPD space are sold out right now. We are the only one because we have the right tools positioned against the right market segment, so...

Patrick Ho -- Stifel Financial Corp. -- Analyst

Great. Thank you very much.

Operator

Thank you. And I'm showing no further questions at this time. I would now like to turn the call over to Mr. Peter Kirlin for closing remarks.

Peter Kirlin -- Chief Executive Officer

OK. Thank you, once again, for joining this morning. 2018 was a great year for Photronics. We've performed well and our market strengthened.

I believe that 2019 can be even better as our Chinese facilities come online and we take the next step in our strategic growth plan. Happy holidays to all.

Operator

[Operator signoff]

Duration: 42 minutes

Call Participants:

Troy Dewar -- Director of Investor Relations

Peter Kirlin -- Chief Executive Officer

John Jordan -- Senior Vice President

Tom Diffely -- D.A. Davidson -- Analyst

Patrick Ho -- Stifel Financial Corp. -- Analyst

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