SHARE-BASED COMPENSATION

9 Months Ended

Aug. 03, 2025

NOTE 9 - SHARE-BASED COMPENSATION

On April 2, 2025, at its annual meeting of shareholders, the shareholders of Photronics, Inc., approved the Company’s 2025 Equity Incentive Compensation Plan (the “2025 Plan”) under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. The maximum number of shares of common stock that may be issued under the 2025 Plan is five million shares. At the time of approval of the 2025 Plan, the Company’s 2016 Equity Incentive Compensation Plan (which was largely replicated by the 2025 Plan) was due to expire in early 2026 and had a limited quantity of shares remaining available for issuance. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics or its subsidiaries. In the event of a change in control (as defined in the 2025 Plan), the vesting of awards may be accelerated. The 2025 Plan prohibits further awards from being issued under prior plans. The table below presents information on the Company’s share-based compensation expenses.

	Three Months Ended				Nine Months Ended
	August 3,		July 28,		August 3,		July 28,
	2025		2024		2025		2024
Expense reported in:
Cost of goods sold	$	816	$	683	$	2,378	$	1,946
Selling, general, and administrative		2,174		2,388		6,729		7,126
Research and development		304		271		896		769
Total expense incurred	$	3,294	$	3,342	$	10,003	$	9,841

Expense by award type:
Restricted stock awards	$	2,943	$	3,342	$	9,029	$	9,841
Restricted stock units		294		-		803		-
Employee stock purchase plan		57		-		171		-
Total expense incurred	$	3,294	$	3,342	$	10,003	$	9,841

Income tax benefits on share-based compensation	$	461	$	323	$	1,313	$	745

Restricted Stock Awards

The Company has historically granted restricted stock awards on a periodic basis, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of the Company’s common stock. The table below presents information on the Company’s restricted stock awards.

	Three Months Ended				Nine Months Ended
	August 3,		July 28,		August 3,		July 28,
	2025		2024		2025		2024
Number of shares granted in period		-		-		583,238		825,050
Weighted-average grant-date fair value of awards (in dollars per share)	$	-	$	-	$	23.42	$	29.77
Compensation cost not yet recognized	$	24,414	$	25,750	$	24,414	$	25,750
Weighted-average amortization period for cost not yet recognized (in years)		2.8		2.9		2.8		2.9
Shares outstanding at balance sheet date		1,421,897		1,513,827		1,421,897		1,513,827

Restricted Stock Units

Commencing Q2 FY25, the Company began granting restricted stock units, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of the Company’s common stock. The table below presents information on the Company’s restricted stock unit awards.

	Three Months Ended				Nine Months Ended
	August 3,		July 28,		August 3,		July 28,
	2025		2024		2025		2024
Number of units granted in period		109,830		-		162,666		-
Weighted-average grant-date fair value of awards (in dollars per share)	$	18.21	$	-	$	19.61	$	-
Compensation cost not yet recognized	$	2,387	$	-	$	2,387	$	-
Weighted-average amortization period for cost not yet recognized (in years)		3.3		-		3.3		-
Restricted stock units outstanding at balance sheet date		132,474		-		132,474		-

Stock Options

Option awards generally vest in one to four years and have a ten-year contractual term. All incentive and non-qualified stock option grants must have an exercise price no less than the market value of the underlying common stock on the date of grant. The grant-date fair values of options are based on closing prices of the Company’s common stock on the dates of grant and are calculated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company’s common stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options are expected to remain outstanding. The risk-free rate of return for the estimated term of an option is based on the U.S. Treasury yield curve in effect at the date of grant. The table below presents information on the Company’s stock options.

	Three Months Ended				Nine Months Ended
	August 3,		July 28,		August 3,		July 28,
	2025		2024		2025		2024
Number of options granted in period		-		-		-		-
Cash received from options exercised	$	400	$	20	$	1,698	$	1,074
Compensation cost not yet recognized	$	-	$	-	$	-	$	-
Weighted-average amortization period for cost not yet recognized (in years)		-		-		-		-

Information regarding outstanding and exercisable option awards as of August 3, 2025, is presented below.

Weighted

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

Options

Price

Life (in years)

Value

Outstanding and exercisable at August 3, 2025

115,075

10.31

1.88

1,091