Camtek Ltd.

Gentlemen, thank you for standing by. I would like to welcome all of you to Camtech's first quarter 2021 results Zoom webinar. My name is Kenny Green and I'm part of the investor relations team at Camtech. All other than the presenters are currently muted. Following the formal presentation, I will provide some instructions for participating in the live Q&A session. I'd like to remind everyone that this conference call is being recorded and the recording will be available on Camtech's website from tomorrow. You should have all received by now the company's press release, and if not, you can review it on the company's website. With me today on the call, we have Mr. Rafi Amit, Camtex CEO, Mr. Moshe Eisenberg, Camtex CFO, and Mr. Rami Langa, Camtex COO. Rafi will open by providing an overview of Camtex results and discuss recent market trends. Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe and Rami will be available to take your questions. Before we begin, I would like to remind everyone that certain information provided on this call are internal company estimates unless otherwise specified. 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 obligations to update any of the forward-looking information 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 effects of general economic conditions, the effect of the COVID-19 crisis on the global markets and on the markets 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 effects of the pandemic. Risk related to the concentration of a significant portion of Camtex's expected business in certain countries, particularly China, from which we expect to generate significant portions of our revenue for the foreseeable future, but also Taiwan and Korea, including the risks of deviations from expectations regarding timing, size of orders from customers in these countries, Changing industry and market trends, reduced demand for services and products, the timely development of new services and products and their adoption by the market, increased competition in the industry and price reductions, and as well as due to risks and uncertainties identifying the company's filings with the SEC. Please note that the safe harbor statement in today's press release also covers the contents of this conference call. Furthermore, during this call, certain non-GAAP financial measures will be discussed. These are used by management to make strategic decisions, forecast future results, and evaluate the company's future performance. We believe that the presentation of non-GAAP financial measures are useful to investors' understanding and assessment of the company's ongoing corporations and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release. And with that, I'd now like to hand over the call to Rafi Amit, Camtech CEO. Rafi, please go ahead.

Thanks, Kenny. Good morning and thank you for joining our call today. I demand in our markets excellent performance of our systems and the strong position that ComTech has gained in the market allow us to continue demonstrating record financial performance quarter after quarter. We ended the first quarter of 2021 with $57.4 million revenue, 51% gross margin, and 27% operating margin. The impressive profitability is a result of a rapid increase in sales and favorable product mix. Before I review the first quarter, I would like to give a brief overview of the market's environment. We are experiencing demand from all territories and especially from Asia. We expect to continue showing an increase in sales in the next two quarters. Our revenue guidance for the second quarter is $63 million to $65 million. There are several market trends driving the demands for semiconductor components and for our systems. The demand for products such as laptops and tablets that had been stabilized before COVID-19 has increased due to working from home. Working from home has also led to heavy investment in data center, cloud, and communications infrastructures. The massive amount of data that is sent and stored in the cloud is driving demand for advanced memory, AI devices, and high-performance computing technologies. 5G cellular communications has been adopted by the market earlier than expected, resulting in high demand for electronic components. 5G cellular phones contain more RF devices, cameras, and advanced packaging compared with the previous generations, thus requiring more inspection and metrology of all components. The automotive industry is also undergoing major changes with the shifting to electric cars and advanced driver assistance systems technologies, resulting in demand for extensive electronic components. These components must meet zero defect policy requiring 100% inspection of all components in cars. We see adoption of high-end advanced packaging in new devices as the industry is driving smaller geometric and using heterogeneous integration to deliver products with higher performance and lower power consumption. We are a major player in this space and we expect to expand our business as the industry is implementing new applications with IN advanced packaging. Regarding Q1 highlights, 88% of our sales came from Asia, with China being the largest territory. 50% of our installed system are for advanced packaging applications. which is expected to continue growing in the coming quarters. Other applications in which we pay a major role are compound semi, MEMS, CIS, RF, and macro defect inspection in the front end. During the quarter, we delivered multiple systems order to several tier one customers, as well as single system order to over 20 customers. We continue to execute well under the COVID-19 circumstances. Most of our employees in Israel are vaccinated and return to work from office, which will no doubt improve our overall efficiency. To summarize, high demands for semiconductor components have been leading to an increasing demand for inspection systems. ComTech can provide its customers with reliable, high-performance systems tailored to their special requirements. ComTech is strongly positioned in the market, and as things stand today, we expect 2021 to be an exceptional record year in sales, growth, and profitability. I would like to hand over to Moshe for a more detailed financial discussion of the financial results. Moshe?

Thank you, Rafi. In my financial summary ahead, I will provide the results on a non-GAAP basis. The reconciliation between the GAAP results and the non-GAAP results appear in the tables at the end of the press release issued earlier today. First quarter revenues came at the record $57.4 million, an increase of 90% compared with the first quarter of 2020 and 18% compared with the previous quarter. Assuming the mid range of our Q2 guidance, we expect the revenue in the first half of 2021 to be 80% higher than the same period last year. Gross profit for the quarter was $29.1 million. The gross margin for the quarter was 50.7% versus 45.2% in the first quarter of last year and 48.2% last quarter. The improvement in the gross margin was due to the significant growth in revenues as well as more profitable product and sales mix this quarter. Operating expenses in the quarter were $13.5 million. This is compared with $10 million in the first quarter of last year and to the $14.2 million reported in the previous quarter. The decrease from the previous quarter is mostly due to a more favorable sales channel mix. Operating profit in the quarter was $15.6 million. compared to the $3.7 million reported in the first quarter of last year. Operating margin was 27.2% compared to 12.2% in the first quarter of last year and 18.9% last quarter. The rapid growth in revenue, while we are still in the process of adjusting our expense structure to support this increased business volume, contributed to the high operating margin. Yet, I expect that our operating profitability will be ahead of our model. Net income for the first quarter of 2021 was $14.6 million or $0.33 per diluted share. This is compared to a net income of $3.6 million or $0.09 per share in the first quarter of last year. Total diluted number of shares as of the end of Q1 was 44.5 million shares. Turning to some high-level balance sheet and cash flow metrics, inventory level went up by $5 million to support the continuing growth expected in the coming quarters. Account receivables went up by $13.5 million due to the increased sales and timing of collections. We generated $2.7 million in cash from operations in the quarter. This quarter's cash flow was affected by the above-mentioned working capital requirements. Net cash and cash equivalents and short-term deposits as of March 31st, 2021, were $169.9 million. And together with the $10 million that we have in long-term deposits, the total cash and deposits amounted to $180 million. This compared with $177.8 million at the end of 2020. With the current business momentum, we expect revenues of 63 to $65 million in the second quarter. And with that, Rafi, Rami and myself will be open to take your questions. Kenny.