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'll 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 on Camtech's website from tomorrow. You should all receive by now the company's press release. If not, please view it on the company's website. With me today on the call, we have Mr. Rafi Amit, Camtech CEO, Mr. Moshe Eisenberg, Camtech CFO, and Mr. Rami Langa, Camtech 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'd like to remind everyone 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 information contained, whether as a result of new information, future events, changes and expectations or otherwise. Investors are reminded that these forward-looking statements are subject to risks and uncertainties that may cause factual results. to differ materially from those projected, including as a result of the effects of general economic conditions. Risk related to the concentration of a significant portion of Camtec's expected business in certain countries, particularly China, from which Camtec expects to generate a significant portion of its revenues in the foreseeable future, but also Taiwan and Korea, including risk 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, as well as due to other risks identified in the company's findings 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 course, 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 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. And with that, I'd now like to hand the call over to Rathi, Camtech's CEO. Rathi, please go ahead. Okay, thanks, Kenny.

Good morning or good afternoon. Camtech ended another quarter of continued growth. Second quarter revenues were 79.6 million. Growth margin was 51% and 30% operating margin. We have diversified customer base. This quarter, we sold to over 40 different customers. Advanced interconnect packaging accounted for more than 50% of our revenue and continue to be our largest segment with heterogeneous integration accounting for 20% of this segment. We continue to expand our customer base and sold systems to 10 new customers in the first half of this year. Specifically, we are cementing our position in the front end and compound semi segments and shipping systems to existing and new customers. These two segments accounted for 23% of our revenues. CIS was about 10% of our business. This quarter, we see the same trend of transferring our position in the US and Europe due to major industry investments taking place there. US and Europe accounted for 21% of our sales versus 12% in Q2 of last year. In these days of economic uncertainty, I assume that our investors are interested in hearing what are we estimate for the coming quarters and how we view the semiconductor market. We are experiencing a challenging period. On one hand, there are concern of a slowdown in the semiconductor industry. And on the other hand, we see continued demand for our systems. The macroeconomic environment is not positive. High inflation, rising interest rate, high fuel prices, sharp rising prices of basic products, all of which lead to a decline in GDP and may lead to a slowdown in the semiconductor industry. There are several reasons for the ongoing demand for our systems. the main driver of our market is the transition to more digital products that heavily use semiconductor devices, such as computing and data storage, automotive in general, and the transition to electric cars, wireless communication, advancing to 5G, higher use of internet, and more. I believe there is a consensus among all analysts that all the above will continue to grow. The way ferro manufacture today and in the coming years are much more complex due to new technologies adopted by the industry. Leading countries realizing that the semiconductor industry has become a strategic industry and are heavily investing in building new fabs. And China, China's policy of replacing import of strategic end products and semiconductor devices for domestic productions means a continued expansion of a production capacity of a semiconductor industry, not necessarily related to a global economic situation. To summarize, these two opposing forces make long-term forecasting much more difficult than in the normal times. Anyway, at this stage, we do not identify a slowdown in the demand for our systems. The production utilization in the industry is high, and flow of the incoming order is also high, and the backlog is healthy. Moreover, we believe that the field of inspection and the segment in which we operate will be less affected in the event of slowdown. Our systems are used by customers for inspection and metrology of 100% of patterned wafer. The more the geometry density increases, the higher optical magnification needs to be used. As a result, our customers order more systems. Hence, during a downturn, whereby the number of wafer may decrease, pattern density still increases, and therefore the demand for our system is likely to be less impacted. Regarding our forecast for the second half, With our strong backlog, we see continued growth into the second half of the year and our forecast for the third quarter revenue is expected to be between 81 to $83 million. Let me give you some color on what we see in the second half of this year. The product means is expected to be similar with advanced interconnect packaging reaching more than 55% of our annual revenues. The US and Europe will continue to grow as a percentage of revenue. At this point, we don't see any potential disruption to our supply chain. As I have said, we do not see any signs of declining demand for our systems. Moreover, we believe that our market will continue to grow in the long term, even though there may be a few bumps along the way. However, regarding a possible slowdown in our industry, we are managing our headcount and balance sheet items. We are keeping a very watchful eye on overall expenses and the business situation of our customers. We also believe that the market condition, especially in the capital market, may generate M&A opportunities. We are actively looking for opportunities and ready to use our well-capitalized balance sheet in order to execute M&A transaction that will enhance our long-term growth potential. That ends my summary. I would like to end over to Moshe for more detailed discussion of the financial results. Moshe?

Thanks, Rafi. My financial summary ahead will provide the results on a non-GAAP basis. The reconciliation between GAAP results and non-GAAP results appears in the tables at the end of the press release issued earlier today. Second quarter revenues came at a record level of $79.6 million, an increase of 18% compared to the second quarter of 2021. The geographic revenue split for the quarter was as follows. Asia accounted for 79% and the rest of the world, 21%. Gross profit for the quarter was $40.5 million. The gross margin for the quarter was 50.9% versus 52.1% in the second quarter of last year. This is within the range of our gross margin of our model. And as in previous quarters, the deviations has to do mainly with the product mix and does not represent a trend. Operating expenses in the quarter were $16.7 million, similar to the level in the second quarter of last year, and lower than the $18 million reported in the previous quarter. The decrease from the previous quarter is mostly due to sales channel mix. Operating profit in the quarter increases to $23.8 million, compared to the $18.5 million reported in the second quarter of last year. Operating margin was 29.9% compared to 27.4%. Net income for the second quarter of 2022 was $22.2 million or $0.46 per diluted share. This is compared to a net income of $17.1 million or $0.38 per share in the second quarter of last year. Total diluted number of shares as of the end of Q2 was 48.1 million. Turning to some high-level balance sheet and cash flow metrics. Cash and cash equivalents, including short and long-term deposits, as of June 30, 2022, were $438 million. This compared with $428.3 million at the end of the first quarter. We generated... $13 million in cash from operations in the quarter. Inventory level went up by $5.9 million over the quarter. This is a result of a strategic decision to support the current demand for our products and to ensure against potential availability issues in key components. Account receivables were around the same level as in the previous quarter and represent approximately 80 days. As Rafi said before, we expect revenue of 81 to 83 million dollars in the third quarter. And with that, Rafi, Rami and myself will be open to take your questions. Kenny?