Camtek Ltd.

Ladies and gentlemen, thank you for standing by. I would like to welcome all of you to Camtech's results Zoom webinar. My name is Kenny Green and I'm part of the investor relations team at Camtech. All participants 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 would like to remind everyone that this conference call is being recorded and the recording will be available later on from Camtech's website. You should have all now received the company's press release. If not, please view it on the company's website. With me on the line today, we have Mr. Rafi Amit, Camtex CEO, Mr. Moshe Eisenberg, Camtex CFO, and Mr. Rami Langa, Camtex COO. Rafi will begin 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'd like to remind our listeners that certain information provided on this call are internal company estimates unless otherwise specified. This call may also 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 that forward-looking statements contained, whether as a result of new information, future events, changes in expectations or otherwise. Investors are reminded that actual events or results may differ materially from those projected, including a result of the effects of general economic conditions, the effects of the COVID-19 pandemic on global markets and on the markets in which we operate, including the risk of continued disruption to our and our customers, providers, business partners and contractors business. risks related to the concentration of a significant portion of cantex expected business in certain countries particularly china from which we expect to generate a significant portion of our revenues for the coming quarters as well as taiwan and korea including the risks of deviations from expectations regarding timing and size of orders from those customers in those countries changing industry market trends reduce demand for our products the timely development of our new products and their adoption by the market increased competition in the industry, price reductions, as well as due to other risks identified in the company's filings with the SEC. Please note that the safe harbour statement in today's press release also covers the contents of this conference call. In addition, during this call, certain non-GAAP financial measures will be discussed. These are used by Chemtech to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes that the presentation of non-GAAP financial measures are useful to investors' understanding and assessment of the company's ongoing core operations and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release. I would now like to hand over to Rathi, Camtech CEO. Rathi, please go ahead. Thank you, Kenny. Good morning for everyone.

The last quarter concluded a phenomenal year for Camtech. In Q4, our revenue was $74 million, with operating profit of $21 million and 28% operating margin. 2021 was a record year for CapTech in all aspects. Revenue for the whole year was about $270 million, over 70% growth compared with 2020 and operating profit of $77 million. Since 2017, revenue has multiplied three times and net profit seven times. We also achieved very important goals. We became the main leader in the inspection and metrology for the mid-end segment. We installed our system at all top semiconductors manufacturers. We penetrated the front end segment, which now accounts for 20% of our sales. we reached an installed base of over 1,500 systems at over 130 active customers. With 2021 behind us, 2022 is shaping up to be another growth year. We started the year with a healthy backlog and received over $40 million of order since the beginning of this year. leading to a very good visibility for the first half of 2022, with the second half of the year starting to build up nicely. I expect revenue in the first quarter of 2022 to be between $75 to $76 million, with continued growth in Q2. Last November, we finalized a $200 million convertible notes offering at favorable terms. The main reason for this transaction was to make sure that we have enough cash to support our growth strategy, including inorganic growth. In the fourth quarter, about 50% of our sales were for advanced interconnect packaging mainly for heterogeneous integration and fan-out. 15% of our revenue were for inspecting compound semi-wafers. These wafer are used for power devices and RF devices, which will go into mobile phone and for automotive industry, especially for electric cars. About 20% of our sales were for front-end applications which continue to grow and has become a significant part of our business. In Q4, sales to Europe and U.S. accounted for about 22% of total sales, and I expect these territories to continue to generate significant revenue in the coming years. China continues to be our largest territory this quarter. We have managed to ramp the business by 70% in 2021 and our operations were able to keep up with the pace. We invested in our infrastructure and our facility is ready to support continued strong growth. We are investing substantial efforts to overcome the shortage and long lead times in the supply chain. So far, we have done this successfully. This is the major focus of the company and will continue to be so. We are increasing our R&D investment and we expect to launch several innovative products in 2022. 2021 was an exceptional year for the semiconductor industry as there was a great demand for semiconductor components, but a lack of fab production capacity. At the same time, the COVID-19 epidemic continued to disrupt daily life. Obtaining parts and materials due to the shortage in supply chain was also a challenging issue. Despite all that, Comtech has managed to increase its revenue by 70% compared to 2020. As for 2022, I am extremely encouraged with the strong start for 2022. The shortage in supply chain will continue to be a challenge and risk. However, we are doing all efforts to properly manage the shortage in supply chain and make 2022 another growth year. Regarding the 20 million order for two tier one IDM that we announced earlier this week, these systems provide inspection and metrology solutions to the most challenging applications in the field of advanced interconnect packaging. On this occasion, I would like to thank those customers who trust us and choose us as their main provider for the most challenging applications. and to all our dedicated employees and management for all the hard work, which was crucial in delivering such an amazing performance in 2021. I would like to hand over to Moshe for a more detailed discussion of the financial results. Moshe.

Thank you, Rafi. In my financial summary ahead, I will provide the results on a longer basis. The reconciliation between the gap results and the non-gap results appear in the table at the end of the press release issued earlier today. Fourth quarter revenue came at a record $74.2 million, an increase of 53% compared with the fourth quarter of 2020 and 5% compared with the previous quarter. This marks the seventh consecutive quarter of growth. The geographic revenue split for the quarter was as follows. Asia, 78%, and the rest of the world accounted for 22%. This represents a significant increase in the revenue from US and Europe. Gross profit for the quarter was $37.8 million. The gross margin for the quarter was 50.9% versus 48.2% in the fourth quarter of last year. and 50.9% in the previous quarter. This is the fourth quarter in a row of gross margin of above 50%, a result of the significant increase in the business volume. I remind you that the gross margin also varies as a function of the sales mix, typically within the range of 50.5% to 51.5%. We expect higher than usual gross margin in Q1 of 2022 due to favorable mix. Operating expenses in the quarter were $16.8 million. This is compared with $14.2 million in the fourth quarter of last year and to the $14.3 million reported in the previous quarter. As we said in the previous call, both R&D and sales expenses increased in Q4. This was a result of a planned investment in R&D and the sales channel mix in the quarter. The effect of this was a slight reduction in the operating margin to 28% from 30.6% in the third quarter. We expect further increase in our OPEX in Q1, in particular due to continued expansion in R&D and sales. Yet, with the higher gross margin, I expect operating margin to be similar to the current level. Net income for the fourth quarter of 2021 was 19.7 million dollars or 43 cents per diluted share. This is compared to a net income of 8.8 million dollars or 21 cents per share in the fourth quarter of last year. Total diluted number of shares as of the end of the fourth quarter was 46.3 million. As a result of the successful completion of the convertible notes offering, we need to include the potential shares of 3.3 million shares in the number of the diluted share. As the transaction took place in mid-November, the effect in the fourth quarter is partial. In the first quarter of 2022, there will be further increase. In the company gap results, we recorded a one-time tax expense of $5.3 million with respect to historical exempt income. I would like to provide some more details on this. The company elected to take advantage of the temporary rule, which is applicable to 2022 only, and pay a reduced tax rate on its exempt earnings to allow the company to distribute dividends from these earnings in the future with no additional corporate tax liability. Turning to some high-level balance sheet and cash flow metrics, we generated $21.5 million in cash from operations in the quarter. Following the convertible note transaction in November, total cash and cash equivalents and short-term deposits together with the $32 million cash that we have in the long-term deposits is $430 million. Inventory level was $63.9 million and it went up by $2.1 million over the quarter. This is to support the current demand for our products and to ensure the availability of key components. We monitor the supply chain concerns on an ongoing basis. At this point, we do not foresee any impact on our projected revenues. And finally, guidance. We expect revenues of 75 to 76 million dollars in the first quarter and continued growth in Q2. And with that, Rafi, Rami and myself will be open to take your questions. Kenny?