Camtek Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to Camtech's second quarter 2020 results conference call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Camtech's investor relations team at gkinvestorandpublicrelations at Thank you and good day to all of you.

I would like to welcome all of you to Comtech's second quarter 2020 results conference call and I would also like to thank Comtech's management for hosting this call. With us on the line today are Mr. Rafi Amit, Comtech CEO, Mr. Moshe Eisenberg, Comtech CFO, and Mr. Ramy Langer, Comtech COO. Rafi will provide the overview of Comtech's results and discuss market trends in the second quarter of 2020 and Moshe will then summarize the financial results of the quarter. We will then open the call to take your questions. Before we begin, I'd like to remind our listeners that certain information provided on this call are internal company estimates, unless otherwise specified. This call also may contain forward-looking statements. These statements are only predictions and may change as time passes. Statements on this call are made as of today, and the company undertakes no obligation to update any of the forward-looking statements contained, whether as a result of new information, future events, changes in expectations, or otherwise. Investors are reminded that these forward-looking statements are subject to risks and uncertainties that may cause actual events or results to differ materially from those projected, including as a result of the effect of general economic conditions The effect of the COVID-19 crisis on the global markets and on the market in which we operate, including the risk of a continued disruption to our and our customers' providers, business partners' and contractors' business as a result of the outbreak and the effect of the COVID-19 pandemic. Risk relating to the concentration of a significant portion of expected business in certain countries, particularly China, from which we expect to generate significant portion of our revenues for the second half of 2020, but also Taiwan and Korea, including the risk of deviations from our expectations regarding timing and size of orders from customers in these countries. Changing industry and market trends, reduced demand for services and products, the timely development of the new services and products and their adoption by the market, increased competition in the industry and price reduction, as well as due to other risks identified in the company's filing with the SEC. Please note that the safe harbor statement in today's press release also covers the content of this conference call. In addition, during this call, certain non-GAAP financial measures will be discussed. These are used by management to make strategic decisions, focus future results, and evaluate the company's current performance. Management believes that the presentation of non-GAAP financial measures is useful to investor understanding and assessment of the company's ongoing cooperation and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures is included in today's earnings release. And now I'd like to hand over the call to Rafi, Country CEO. Rafi, go ahead please.

Hi everyone. The second quarter represents continued demand for our system primarily from Asia. Total sales in the second quarter were $37 million, a record quarterly level. Gross margin was 46.1 and operating margin was over 17%, marking a significant improvement in profitability compared with the first quarter. We expect continued improvement in profitability in the third quarter as well. The ongoing demand from our customers for various applications point to a strong third quarter with encouraging backlog going into the fourth quarter. Our revenue guidance for the third quarter is $38 to $39 million, with persistent improvement in the profitability. This indicates strong performance in the second half of the year. We have significantly increased our market Our market share in 2D inspection mainly because our system performance and competitiveness have been dramatically improved in all 2D applications. A key element in our strategy is having in place local professional teams that can independently install and support machines in all our territories and enabling us to continue growing our business even during the COVID-19 pandemic. We have also established a remote training and support infrastructure allowing us to remotely operate systems, upgrade machines with recently developed features, and train local teams on a regular basis. We invest considerable development effort in providing appropriate technological solutions to our IDM Tier 1 customers who developed innovative packaging technologies in the field of heterogeneous integration. We have received a few initial orders and we believe we will soon receive multiple machines orders for production. We expect this segment to become meaningful to our business. Let me give you some highlights of the second quarter. Taiwan and China continue to be the largest territories in the quarter. USA and Europe are starting to pick up. We have received multiple machine orders for over 30 systems from 4 Tier 1 OSATs for 2D applications, mainly for advanced packaging. Some of these machines will be installed in the second half of the year. The two Golden Eagle inspection systems for 600x600 mm panels that were installed at two Tier 1 customers in Q2 are running fan-out panels in production. We expect to deliver additional systems later this year. Our customers believe that fan-out packaging on panels will continue to grow as this is the cost-effective solution. Soon we will start planning our budget and work plan for year 2021. One of the most significant challenges facing management during COVID-19 is to assess what will be the scope of business activity in 2021. We base our strategy of achieving continuous growth on several drivers and trends. The first is the increase in demand for semiconductor devices. The main drivers in our market are advanced packaging, memory, CMC sensor, and RF filter for 5G smartphones. 5G is pushing demand for high-end smartphone cells. Compared to previous generations, these 5G phones include more silicon, more advanced packaging, and larger number of RF chips in each phone. As a result, we are experiencing demand for 5G-related applications. Regarding memory, new memory hubs are under construction in Korea and China, and we expect investment in capital equipment for memory packaging to increase in 2021. The second driver is the adoption of new packaging technologies by our customers. In general, we see considerable efforts in Tier 1 IDM and OSATs to adopt new packaging technologies and execute them to production. Adoption of new technologies require extensive use of inspection and metrology systems. For example, logic CPU and graphics CPU shift to heterogeneous integration packaging. Continued transition of DRAM from wire bonding to 3D IC advanced packaging. Or power devices shift to advanced packaging, specifically FENAU. The third is penetrating to new segments in the front-end. We have already penetrated to the front-end market in the past two years, and we continue to discover more segments that our system can provide suitable solutions for. To summarize, 2020 is shaping up to be another solid growth year for Camtec. But it is important to stress that we are still seeing the coronavirus pandemic effect, which increases risks and uncertainties. Coptic is a dynamic and flexible company that can adapt to any development in the market and to take advantage of the rapid changes in our industry.