Troy Dewar - Director, Investor Relations Peter Kirlin - Chief Executive Officer Sean Smith - Senior Vice President and Chief Financial Officer Chris Progler - Vice President, Chief Technology Officer and Strategic Planning.

Edwin Mok - Needham & Company William Stein - SunTrust Tom Diffely - D.A. Davidson Patrick Ho - Stifel.

Good day, ladies and gentlemen and thank you for standing by. Welcome to the Photronics Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded, Tuesday, December 6, 2016. I would now like to introduce our host for today’s conference, Mr. Troy Dewar, Director of Investor Relations. Sir, you may begin..

Thank you, Kaylee. Good morning, everyone. Welcome to our review of Photronics 2016 fourth quarter financial results. Joining me this morning are Dr. Peter Kirlin, Chief Executive Officer; Sean T. Smith, Senior Vice President and Chief Financial Officer; and Dr. Chris Progler, Vice President, Chief Technology Officer and Strategic Planning.

The press releases issued this morning, along with the presentation materials, which accompanies our remarks, are available on the Investor Relations section of our webpage. Comments made by the 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 statements information.

Finally during the course of a discussion, we’ll 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 will turn the call over to Peter..

winning new high-end business; expanding market share in mainstream; and extending our presence geographically. There are several drivers in 2017, which will help us advance in meeting these objectives. The flat panel display industry is in an inflection point as technology for the most advanced mobile devices transitions from LCD to OLED.

New technology offers improved visual quality and lower power consumption, two important characteristics for consumers. While estimates vary OLED penetration in the smartphone displays today is approximately 20%. By 2020, this penetration is expected to more than double to between 40% and 50%.

The biggest driver of this shift is expected to be the adoption of AMOLED by Apple beginning in 2017. We are investing in additional capacity to prepare for this increase in demand and look to ramp production at the end of our second quarter. Our expectation is that by the end of 2017, the new tools we install will be running near full capacity.

Beyond 2017, we believe OLED penetration to not only smartphones, but also other existing and new display applications will continue to be a source of growth for us. Turning to memory IC, it is encouraging to see price improvements for both DRAM and NAND, the producers of leading edge memory who are already reporting better sales.

A healthier price environment has triggered many of the specialty memory companies to ramp up design activity as they transitioned to 2X DRAM technology. It will take some time for these designs to make it to the manufacturing floor and drive demand for new masks, but we do expect to see this demand beginning in our second quarter.

Additionally, the leading edge memory producers are expected to continue moving to new nodes and to introduce new memory architectures. This should also provide us opportunities that are likely weighted towards the second half of the year. High-end IC logic has to be more volatile than any of our other high-end markets.

The typical pattern is that a customer installs new capacity, that capacity is filled at a speed dictated by yields and this drives new mass demand. Then orders pause until additional capacity is installed. This last quarter was one of those pauses between capacity availability for new designs.

Over the cycle the trend is up until the rate as we have seen over the last few years high quarter-to-quarter variability is the way that smart segment behaves. Looking forward, we see growth occurring in the traditional areas of Taiwan and Korea with more and more tilt towards China. Speaking of China, our investment there is moving forward.

We anticipate breaking ground in February and capital outlays in 2017 will be primarily directed at the facility and clean-room. The majority of the spending for the first wave of equipment is planned for 2018. A second wave of equipment spending is anticipated in the 2020 timeframe.

Our plan provides the flexibility to delay or accelerate orders based upon market conditions. We are also continuing to evaluate the possibility of increasing the percentage of redeployed tools, which will reduce overall cash outflows for the project.

We see China as the next phase of growth for our business and are managing our corporate wide capital investments accordingly. Therefore, we do not expect our capital spending to deviate from historical norms as a percentage of revenue moving forward. Overall view of the China market has not changed since we announced the facility last quarter.

We remain excited about the opportunity and we are coming for our company, our customers and our shareholders. In November, we announced a relatively small acquisition of manufacturing assets, intellectual property from internet graphics.

While the financial impact is not expected to be material to our 2017 results, there are several reasons we like this transaction. First, it provides us with the toolset with the cost structure needed to profitably manufacture large area IC masks.

These are primarily 1x lithography products, similar to our display masks, but through the IC packaging market at a lower price point. Second, we have obtained intellectual property for both advanced packaging and 3D microstructure arrays. Together, these capabilities provide us with an entry into the advanced packaging space.

An area that is in the early stages of what we believe to be a secular growth phase over the next several years.

As Moore’s Law slows, advanced packaging technology such as TSMC’s wafer level standout packaging, were enabling device makers to shrink the size and/or power consumption at the system level, which is a clear differentiator for mobile products such as mobile phones like tablets.

And as advanced packaging develops, we believe 1x lithography complexity will advance which plays directly into our core capability.

As you can see the prospects in front of us during the next 12 to 24 months providing ample growth opportunities, while I would like to see a more positive demand environment now, I like our position in the market and the growth opportunities ahead. There is a lot of work on you to get there, but I remain confident we are on the right path.

With that, I would now turn the call over to Sean to provide more detail on our Q4 performance and outlook..

Thanks Peter and good morning everyone. Sales during the fourth quarter dropped 13% sequentially and 24% year-over-year. As Peter mentioned, weakness was seen across all of our markets primarily the high end for both IC and FPD.

Sales of IC photomasks fell 10% to $82 million sequentially mostly at the high end as customers reduced their demand for new mask. High end IC photomask decreased approximately $7 million sequentially. We do not believe we lost any market share during the quarter, but rather our sales were a function of customer timing regarding new product release.

Demand for FPD photomasks was down $6 million sequentially as our largest customer, have taken production offline is transitioning from LCD to OLED. In the long-term, this transition is very positive for us, but does first in the near-term demand.

We are still on schedule to monetize our new FPD tools in the latter half of fiscal 2017, which would enable us to grow our sales as the industry ramps up of new OLED displays for mobile devices. Breaking up sales by region, 73% were from Asia and 27% were from U.S. and Europe.

Gross margin for the quarter was 19.1%, down 640 basis points as a results of the reduced revenue and increased equipment expense principally depreciation. SG&A expenses for Q4 were down $970,000 sequentially, primarily related to reduced compensation expenses.

We have spoken in the past about our operating leverage in our model that helps us when sales are rising and also pressures our margins when sales decline. We were able to reduce operating expense 12% compared with the fourth quarter of last year, limiting the decline in operating profit.

Despite lower sales, we still were able to achieve 4.9% operating margin for the quarter. EBIT was $29 million for the fourth quarter and $150 million for the year. Income tax expense includes a non-recurring benefit of $1.8 million or $0.03 per share related to the recognition of certain tax benefits in Taiwan.

This moves our net income to $5.3 million or $0.08 per share with the tax benefit. Taking a look at our balance sheet, our year end balance sheet shows cash balance of $314 million with net cash totaling $247 million, an improvement of $173 million from last year. Cash CapEx for the quarter was $5 million, bringing the year end total of $15 million.

For 2017, we anticipate spending approximately $100 million in cash CapEx including the balance of our FPD investment and China IC investment. We are working to increase the amount of redeployed tools used in China as Peter alluded to, which will have the effect of reducing cash outflows for new tool purchases.

Into our initial China investment plan, we have stress tested our balance sheet throughout the investment period in assuming local borrow in China to take advantage of interest subsidies. We believe net cash will stay above $150 million throughout the next few years.

Before providing first quarter guidance, I just want to remind everyone that our visibility is always limited as our backlog is typically one week to two weeks. Also, demand for some of our products is inherently lumpy and difficult to predict.

Finally, as our high end business has grown and ASPs for these masses are higher, a relatively few number of high end orders can have a significant impact on our sales for the quarter. Given these caveats, we expect our first quarter sales to be between $104 million and $112 million.

We also anticipate seasonal trends in mainstream as both Christmas and Chinese New Year fall within our first quarter of 2017. 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 $0.06 per diluted share.

I also want to announce the change in our policy regarding the announcement of preliminary results. In the past, we have issued preliminary results if they were above or below our guidance. Going forward, we no longer intend to issue any preliminary announcement either positive or negative.

It’s fair to say that 2016 results were lower than we anticipated 12 months ago. However, we don’t believe anything structurally has changed in our operations and we have tremendous balance sheet which should allow us to manage through lower demand environment while also investing in future growth.

We are on the right path and remain optimistic in the long-term market drivers. Thank you for your interest. I will now turn the call over to our operator for your questions..

[Operator Instructions] Our first question comes from the line of Stephen Chin with UBS. Your line is open..

Good morning guys. Thank you for taking my question. This is [indiscernible] for Stephen.

You said you got a little extra earnings power from reducing OpEx by say of coming in essentially flat quarter-over-quarter, I am wondering given your sort of bigger thoughts cost structure, if there is any more kind of levers going forward if sales down, recover or stay flat?.

Stephen, there is always levers that we pull. We have the long history of being a low cost producer and globally we have both a large number of cost reduction programs running constantly. So we are going to continue to drive the expenses out of the business. We do that in good times and bad times.

When times get bad, it gets a higher degree of focus because the lowering level in our factories diminishes. So, there is more time for people to spend looking for cost reduction than production. So, it accelerates during times of slow demand, but it never stops..

Got it. Thank you..

Thank you. And our next question comes from the line of Edwin Mok with Needham & Company. Your line is open..

Hi. Thanks for taking my questions.

First, I guess just to clarify on the guidance relative to the midpoint is kind of flattish, maybe potentially up a little bit, but your commentary regarded just that everything is kind of stable, just curious what would drive your business to go through the high end at the current range?.

I think for example, if you look at the various segments of our business, foundry memory has basically is entering the third quarter of redesign for 2X DRAM technology. We have not planned for pool in of any tape-outs from that market segment into the quarter. Should anyone of them hit, if one or two orders would push us to the top end of the range.

So that’s one thing that could pop the quarter. Another thing that could pop the quarter is I have more recovery in the FPD market headed into the beginning of the calendar year next year. And it’s actually – what would be needed to do that is actually a softening of the overall demand for our customers.

Right now the second tier customers, particularly for 42 inch and smaller displays are really running almost flat out basically back to the capacity left behind by Samsung as they are closing down their G7 factory.

Any one of those or a number of those customers get more aggressive at developing new products, we could easily see an uplift in the FPD space. So when I look at the business I guess, to me those are the two areas I would be most likely to be better than we might anticipate now..

Okay, that’s helpful. Actually, maybe talk on this first quarter, I think few things I want to ask first on the IC side, you mentioned on your prepared remarks that you see heavier design or you are anticipating heavier design activity in the memory area going to fiscal second quarter.

Just curious are you talking about those foundry memory customers or are you talking about something specific on NAND or DRAM? Any kind of color you can provide on that commentary?.

Yes. We expect to see an uplift in foundry memory before we expect to see demand materialize for a major node transition. So, that is more a second half of calendar year FY ‘17 event given the current visibility that we have. But as you know that’s a moving target.

The foundry memory on the other hand is approaching the goal line with a number of customers. So, that’s not heavily weighted to any single customer. It’s a significant number of smaller companies that are all retooling for the next node..

Okay, that’s helpful. And then on the FPD side, I have two questions. First is, as you mentioned, your large customer – your largest customer is converting line from LCD, OLED.

Based on what they are planning on converting, do you have a way to kind of think about what could be your revenue opportunity once those conversions are done from that customer?.

Chris?.

Based on the capacity that they are putting in, is there a way to think about covering opportunities on the capacity that they are putting in?.

So, your question Edwin is regarding when the new display technology is being mass production?.

Yes. So, once they move in – once this customer converts to – from LCD to OLED, right. Just curious anyway we can kind of think about consider number of pieces of OLED display mass of glass that you kind of tend to push through the factory, right.

How much mass opportunity do you think you can capture from this customer? It might not be – it might not all happen in one quarter, but at least kind of in aggregate, what kind of aggregate opportunities will you expect?.

I mean, my feeling is it’s going to be pretty gradual through 2017. The big driver volume for this display retooling, I think everybody knows what it is. And if you look at the supply chain for OLED displays, you see a lot of inventory building. So, there is clearly production plans going online. I think it’s going to be kind of gradual through 2017.

I think the second quarter of calendar year 2017 would probably be the strongest indicator in start of this mass production on multiple sorts of AMOLED display formats for some of these new applications. But all the signs are there and we look at the inventory for components that need to be put into these displays.

So, to be more specific than that, it’s really difficult to say..

Okay, that’s fair. And then lastly, so we have heard the actual capacity for large size LCDs getting a little tighter now, because partially because of this conversion and partially because of all the push towards OLED.

Just curious, does that create additional opportunity for you in the LCD side from the other customer, for example, some of the customers in China or Taiwan and how you guys are going to capture those opportunities?.

We are well diversified across – we are well diversified across the customer base that we are shipping into China from both Taiwan and Korea. So, right now what we would describe is the mainstream LCD market, demand is actually pretty muted, why? Because when Samsung took there, it’s actually two factories they are converting. One was the G7 factory.

The other is the factory that today is used to build IT displays. So, it’s not one, it’s two. But in any event, Samsung taking that capacity offline has created better pricing. So, what our customers in Taiwan and to a lesser degree China have done a reaction to that is run their existing designs to higher volume levels.

That’s actually a negative for us, because when that capacity is full on existing designs, there is no demand for new reticles. It’s better for us when they are trying to gain market share by bringing new products to the market.

Now, as China moves to larger format LCD, that’s great for us, because that means new mass, because it might be the same design, but it’s on the larger size substrate, so there is more of them. And of course, there is additional new products that result from that.

So, it’s all the capacity that is going into China starts coming online, that is going to create an explosion in demand for displays. And I really mean when I use the word explosion, I don’t think it’s overstated. So – but that is not a first quarter event for us..

Great. Actually, that’s very good color. Thanks. That’s all I have..

Thanks, Edwin..

Thank you. Our next question comes from the line of William Stein with SunTrust. Your line is open..

Great. Good morning and thanks for taking my questions. First, I am hoping you can detail a little bit more about the cash outlay with regard to the investment in the new China facility. And I think in the past, you suggested that there could be an additional investment for flat panel in China.

And I am wondering if you can talk about timing and sizing of that?.

Yes, thanks Will. In our guidance for 2017, we mentioned in the prepared remarks it’s going to be about $100 million, including some initial investment as Peter alluded to for the clean room and buildings there and the bulk of the investment would be in 2018. We have not deviated at this point from our initial announcement on China’s investment.

So, the number has not changed. Perhaps if we redeploy tools that could go down and perhaps at the end of Q1 we could give further guidance, but right now we are sticking on the original plan..

And that….

Yes. To further answer your question, as long as the current plan that we have in place, coupled with the demand outlook across the globe, we have more high-end capacity installed today than our competitors combined and you can see where we sit relative to capacity utilization.

So, I look forward over the trajectory of the investment in China does not have presently deviating from where as I said from historical capital investments as a percent of revenue. So, we don’t see the IC investment in China in anyway materially distorting our business model from the CapEx to revenues perspective.

Should we invest in capacity for FPD and China? That is not built into our forecast at the present time. That would be in addition to the investments that are planned. Having said that, I think we mentioned last – during the last call that we had a significant customer commitment in China that will baseload that facility.

If we would likewise step up and make a significant FPD investment, we would be looking for a similar kind of commitment to mitigate the risk of making a substantial investment and that takes time..

Thanks for that clarification.

I just want to make sure I understand the $100 million CapEx spend next year is for the entire business not just for China and the $160 million investment in China is both multi-year and a gross number that includes both new cash outlay and some transition of capital that’s already been deployed? Is that the right way to think?.

Correct, Will. Some of that – in the $100 million some of that is carryover from the FPD investments we made or tools that are coming in that we need to pay for this year and as the initial build out of the China facility, but the $160 million is build out over a period of years, as Peter alluded to..

Okay.

And one other if I can, you mentioned both consolidation and diversification options for future growth, it seems pretty clear you made a very small but diversifying acquisition in the quarter, is that more the sort of sizing and type of investment we should anticipate these, relatively small contributing tuck-ins and maybe more broadly can you characterize the M&A funnel?.

The way we characterize the funnel is broad. There are a number of potential things to do there, but having said that, they may range from small to large. The way we look at that space is with anything we do to be accretive. So when you put a financial hurdle on it, it makes you more a picky acquirer. So it’s beyond that.

I don’t think I can really categorize the things that we are looking at. But it’s very clear there is a lot of consolidation happening across the industry as the customers consolidated – drives consolidation back through the supply chain. So we have a strong balance sheet, positions us well to have those conversations.

But at the same time, we are I think picky and we should be in what we would do..

Great. Thank you..

Thanks..

Thank you. And our next question comes from the line of Tom Diffely with D.A. Davidson. Your line is open..

Yes. Good morning..

Hi Tom..

I am sorry about that.

Peter, earlier you talked about kind of the near-term softness in the business, are you seeing any pricing pressure at all as a cause as a reaction to that?.

The answer is no, not really. Our large customers, we tend to do have annual agreements that dictate pricing. They also generally bracket market share. So the bulk of the softness happens to be in that segment of our business. So there is not a price pressure and there is not, as Sean said, loss of market share. There is simply loss of TAM.

That’s not true everywhere. But generally speaking, the other pieces of our business, which are highly diversified, the pricing environment is really not remarkably different in any way..

Would you say that there is actually a loss of TAM or is it more just the timing of the TAM, is a little different?.

Well, I think it’s, as you said, I think it’s both because some of the TAM that our customers – in the memory – so in the memory space, it’s just a shift in time, to be explicit. In the logic space, if our customers don’t get the business, the 800-pound gorilla, does.

So it’s not a loss of market share from Photronics to one of its merchant competitors, it’s a loss of market share to a very large captive and it has nothing – we have a very, almost no ability to influence that. But that TAM often – some of it pushes out, but sadly the big chunk of it disappears.

And now on the display side, I think it’s – we already made some comments about that. I think it’s more of a shift in time TAM. When new designs come out they will be there for the taking. But right now it’s more profitable for our customers to run against healthy demand environment, designs that are already in manufacturing.

But if you look for example, the FPD business the main stream is pretty stable, where the hurt was at the high end and we already described what was responsible for that..

Yes, okay.

And you mentioned that on the memory side expected, some of these move to production in the second quarter, have you seen that, are you getting the pilot line work on those projects that could move to production?.

The way that works is we have already gotten the pilot line tape-outs. And we actually got them two quarters or three quarters ago. So what happens is a foundry, a memory foundry, will qualify a new technology. Then they release the design kits to their customers who then go away and do their designs is that new node.

So we already qualified and what we are waiting for is this first wave of 2X foundry DRAM, but what happened is the 3X business that we were enjoying given the precipitous fall in memory pricing simply dried up to nothing. So normally there would be a tail, but there is no tail. There is absolutely zero tail.

And that’s obviously been so in our business..

Okay.

And you feel though the 2X yields right now are sufficient enough for them to move to actual production over the next one quarter to two quarters?.

Yes, without a doubt..

Okay, great.

And Chris, getting back to the question everyone had earlier on the LCD versus OLED, maybe if you can give us an idea of what the relative photomask opportunity is, just moving a line from LCD to OLED, is OLED more capital intensive for photomask?.

I don’t think it’s more capital intensive than the large area LCD masks, because they run on similar kind of high end equipment even though the form factor, the size of the displays were smaller for the AMOLED.

As far as the number of masks in the set, that goes up pretty strongly, maybe more than doubles, the number of masks or lithography steps needed to make an AMOLED display versus an LCD display. So the set content certainly goes up. And I think the ASP for each individual mask also tends to go up in AMOLED because the masks are more complicated.

So I think even to the form factors is smaller, generally it provides a pretty healthy up-tick to the size of the market for FPD masks when it’s adopted and that’s mostly driven by the larger number of layers per set and the more complex masks that need to go into that to making those kind of displays.

As far as quantify how much larger we could imagine the FPD mask opportunity getting by wide scale introduction of AMOLED for new phones and things, I think I wouldn’t really want to do that, but I will say that it’s definitely a healthy upward trend as far as impact of the market overall..

Well, it sounds like you have to install to new tools just to keep up with the current demand?.

I will flip that back to Sean. I don’t think we need to – I mean we have some projects going on with efficiency and we always try to use the tools for the highest ASP products and we do mix shifting and mix balancing to get the best and highest profit products going to the FPD lines.

As far as meeting the capacity needs, I think we will invest as the capacity is required. But certainly our capability is there qualified for these products. We have excellent mask technology. We are working with the big players in these displays. So the technology is certainly there, so we can deploy new equipment quickly as the market needs it..

And I think two quarters ago when we announced that we were making these investments, these tools have long lead times to get in. So we are prepared..

Okay, great. And finally….

We think we have time to market with the capacity additions as closely as we can that making sure that we don’t lose market share..

Okay.

And then finally if Peter, when you look at the comment you made about the explosive growth in China, was that comment directed towards the position of China going to OLED over time or was something else in there I missed?.

It’s really both, right. There is clearly, if you look at China, if you count the number of projects underway where there is already shovels in the ground and there has already been orders placed for equipment, it’s somewhere between 15 lines and 20 lines of capacity going into China over the next – there is not much that’s going to come in.

There is a little bit coming in the first half of next year and it starts to build late in calendar year next year and then into 2018.

By the time all that capacity is online, China will be the second largest – will have the second largest installed base of FPD manufacturing equipment worldwide by the end of 2018, the very thing happens the way it’s planned to and I think you have seen that.

The investors have already seen that in, for example, in applied materials booming FPD sales. They have been to have by 18 months one of the longest lead. One of their tools, I won’t mention which one, but it has a lead time of about 18 months.

It’s the longest lead time item and in FPD factory and you can as I said, anyone can look and see how strong their bookings for FPD are. So today China is the distant number three behind Korea and Taiwan and in Japan, but by the end of 2018, is going to be number two vying for number one position..

Thanks for your time today..

Thanks Tom..

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

Thank you very much.

Two parts, in terms of the memory IC business for you guys, first on the DRAM side, as the industry moves to the 2X node as you mentioned, are there any concerns on your end that given some of the customer issues and the delays on that end as 1x becomes part of their roadmap that that’s somewhat overlaps and that can minimize some of the 2X opportunity that you are seeing?.

Yes. That market Patrick, tends to lag the leading edge by about two technology nodes. It’s a much smaller volume market, it’s as we use the word, either foundry or specialty memory. So I think – I guess there is a possibility that that market can push 1x more rapidly than what we have historically expect out of it.

But right now it doesn’t seem to be on the horizon near-term anyways and actually the pricing environment in memory improving if anything will delay the next node transition in foundry memory..

I can make one other comment. It does look like there is kind of a 2X and 2Y node, if you will, among at least the foundry users. So, I think you will probably see another shrink of the bit sell in the low 20s that they will use for foundry and that’s actually I think a pretty solid node for foundry memory.

And we have a lot of probably historically high number of yields and enhancements projects going on with this kind of foundry memory community. Now that’s way for yield. So I think there is going to be good products in these 2X, 2Y nodes for the foundry memory space. So this should have a pretty good run with those products I think..

Great, that’s helpful.

And maybe going to the NAND flash side, can you broadly discuss your exposure especially with the industry transition to 3D NAND and how you are able to capitalize upon that opportunity, because obviously capacity is being put in place by the leading suppliers and the demand obviously is still very strong out there given these capacity ramps, can you broadly speak of your exposure to that emerging opportunity?.

Well, this is Chris. I can make a couple kind of starting comments. So, we are qualified as you probably know for 3D NAND actually multiple generations of 3D NAND. We are building some of those masks now and we have been in production for quite a bit of time coming out of the Micron joint venture.

So, we are certainly capable to build those masks and we are either working with or qualifying with most of the major manufacturers for 3D NAND.

As far as the difficulty of the masks, what the mask composition looks like, it tends to be a larger number of masking layers, a fewer number of critical layers, I would say, but a larger number of overall masking layer. So, it is a good opportunity for photomask and that we see a pretty good shrink path on 3D NAND also.

By that I mean, 3D NAND, it’s more the number of layers that are stacked and how they provide to the architect and we see companies moving pretty quickly, because the first generations of 3D NAND are not really able to be that profitable. There is issues with them.

So, we think roadmap is going to go pretty quickly and we are working with I think the major suppliers of that, mostly those that are connected to the Micron and Micron Technology, Intel, Intel’s project in China. So, we have exposures to those programs..

Yes. I would likewise say that 3D cross point, the best proxy for that from a mask perspective is 3D NAND. So, there is a high degree of similarity as far as the reticle goes in those two technologies..

Great, thank you very much..

Thanks, Patrick..

Thank you. And I am showing no further questions at this time. I would like to turn the call back to Mr. Kirlin for closing remarks..

Thank you once again for joining us this morning. While 2016 ended with a challenging quarter, we are extremely excited for 2017 with anticipated growth from FPD driven by the AMOLED ramp and the construction of our China factory to serve the rapidly growing IC market there. I look forward to updating you as we progress. Happy holidays to everyone..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day..