REVENUE

3 Months Ended

Feb. 02, 2025

REVENUE [Abstract]

REVENUE

NOTE 8 - REVENUE

The Company recognizes revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those goods or services. The Company accounts for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable. Substantially all of the Company’s revenue comes from the sales of photomasks. The Company typically contracts with the Company’s customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which the Company invoices as they ship to customers. As the photomasks are manufactured to customer specifications, they have no alternative use to the Company and, as the Company’s contracts generally provide the Company with the right to payment for work completed to date, the Company recognizes revenue as the Company performs, or “over time,” on most of  the Company’s contracts. The Company measures the Company’s performance to date using an input method, which is based on the Company’s estimated costs to complete the various manufacturing phases of a photomask. At the end of a reporting period, there are a number of uncompleted revenue contracts on which the Company has performed; for any such contracts under which the Company is entitled to be compensated for the Company’s costs incurred plus a reasonable profit, the Company recognizes revenue and a corresponding contract asset for such performance. The Company accounts for shipping and handling activities that the Company performs after a customer obtains control of a good as being activities to fulfill the Company’s promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract. The Company reports the Company’s revenue net of any sales or similar taxes the Company collects on behalf of governmental entities.

As stated above, photomasks are manufactured to customer specifications in accordance with their proprietary designs; thus, they are individually unique. Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers; consequently, the Company’s photomasks do not have standard or “list” prices. The transaction prices of the vast majority of the Company’s revenue contracts include only fixed amounts of consideration. In certain instances, such as when the Company offers a customer an early payment discount, an estimate of variable consideration would be included in the transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved.

Contract Assets and Contract Liabilities

The Company recognizes a contract asset when the Company’s performance under a contract precedes the Company’s receipt of consideration from a customer, or before payment is due, and the Company’s receipt of consideration is conditional upon factors other than the passage of time. Contract assets reflect the Company’s transfer of control to customers of photomasks that are in process or completed but not yet shipped to customers. A receivable is recognized when the Company has an unconditional right to payment for the Company’s performance, which generally occurs when the Company ships the photomasks. The Company’s contract assets primarily consist of a significant amount of the Company’s in-process production orders and fully manufactured photomasks which have not yet shipped, for which the Company has an enforceable right to collect consideration (including a reasonable profit) in the event the in-process orders are cancelled by customers. On an individual contract basis, the Company nets contract assets with contract liabilities (deferred revenue) for financial reporting purposes.  The Company’s net credit losses on accounts receivable during the periods ended February 2, 2025 and January 28, 2024 were immaterial. The Company did not impair any contract assets or accounts receivable during the three-month periods ended February 2, 2025, or January 28, 2024.

The following table provides information about the Company’s contract balances at the balance sheet dates.

Classification	February 2, 2025		October 31, 2024
Contract Assets
Other current assets	$	11,819	$	11,532
Contract Liabilities
Accrued liabilities	$	10,887	$	12,375
Other liabilities		7,813		8,910
	$	18,700	$	21,285

The Company did not recognize any revenue from performance obligations satisfied in the previous periods. The following table presents revenue recognized from contract liabilities that existed at the beginning of the reporting periods.

	Three Months Ended
	February 2, 2025		January 28, 2024
Revenue recognized from beginning liability	$	4,369	$	5,507

The Company generally records accounts receivable at their billed amounts. All outstanding past due customer invoices are reviewed for collectability during, and at the end of, every reporting period. To the extent the Company believes a loss on the collection of a customer invoice is probable, the Company would record the loss and credit an allowance for credit losses. In the event that an amount is determined to be uncollectible, the Company charges the allowance for credit losses and derecognizes the related receivable. The Company did not incur any credit losses on the Company’s accounts receivable during the three-month periods ended February 2, 2025, or January 28, 2024.

The Company’s invoice terms generally range from net thirty to ninety days, depending on both the geographic market in which the transaction occurs and the Company’s payment agreements with specific customers. In the event that the Company’s evaluation of a customer’s business prospects, and financial condition indicate that the customer presents a collectability risk, the Company will modify terms of sale, which may require payment in advance of performance. At the time of adoption, the Company elected the practical expedient allowed under ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”) that permits the Company not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when the Company transfers control of goods or services to customers and when the Company is paid is one year or less.

In instances when the Company is paid in advance of the Company’s performance, the Company records a contract liability and, as allowed under the practical expedient in Topic 606, recognizes interest expense only if the period between when the Company receives payment from the customer and the date when the Company expects to be entitled to the payment is greater than one year. Historically, advance payments the Company has received from customers have generally not preceded the completion of the Company’s performance obligations by more than one year.

Disaggregation of Revenue

The following tables present the Company’s revenue for the three-month periods ended February 2, 2025, and January 28, 2024, disaggregated by product type, geographic origin, and timing of recognition.

	Three Months Ended
Revenue by Product Type	February 2, 2025		January 28, 2024
IC
High-end	$	60,105	$	60,875
Mainstream		93,851		96,714
Total IC	$	153,956	$	157,589
FPD
High-end	$	49,679	$	50,616
Mainstream		8,503		8,129
Total FPD	$	58,182	$	58,745
	$	212,138	$	216,334

	Three Months Ended
	February 2, 2025		January 28,    2024
Revenue by Geographic Origin*
Taiwan	$	73,035	$	74,965
China		53,558		58,137
South Korea		40,237		40,335
United States		36,898		32,733
Europe		7,940		9,705
Other		470		459
	$	212,138	$	216,334

* This table disaggregates revenue by the location in which it was earned.

	Three Months Ended
	February 2,		January 28,
Revenue by Timing of Recognition	2025		2024
Over time	$	205,076	$	203,527
At a point in time		7,062		12,807
		212,138		216,334

Contract Costs

The Company pays commissions to third-party sales agents for certain sales they procure on the Company’s behalf. However, the bases of the commissions are the transaction prices of the sales, which are completed in less than one year; thus, no relationship is established with a customer that will result in future business. Therefore, the Company does not recognize any portion of these sales commissions as costs of obtaining a contract, nor does the Company currently foresee other circumstances under which the Company would recognize contract obtainment costs as assets.

Remaining Performance Obligations

As the Company is typically required to fulfill customer orders within a short time period, the Company’s backlog of orders is generally not in excess of one to two weeks for IC photomasks and  two to three weeks for FPD photomasks. However, the demand for some IC photomasks can extend beyond the traditional time period; thus, the backlog, in some individual cases, can extend to as long as two to three months. More recently however, backlogs for most high demand products have returned to historical levels of less than a month. As allowed under ASC 606 – Revenue Contracts with Customers, the Company has elected not to disclose the Company’s remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of one year or less.

Product Warranties

The Company’s photomasks are sold under warranties that generally range from one to twenty-four months. The Company warrants that the Company’s photomasks conform to customer specifications, and the Company will typically repair, replace, or issue a refund for any photomasks that fail to do so. The warranties do not represent separate performance obligations in the Company’s revenue contracts. Historically, customer claims under warranties have been immaterial.