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. Following the formal presentation, I will provide some instructions for participating in the live question and answer 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 have all received 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's COO. Rafi will begin by providing an overview of Camtech's 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. 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 those forward-looking statements 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 actual events or 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 Camtech's expected business in certain countries, particularly China, from which Camtech expects to generate a significant portion of its revenues for the foreseeable future, but also Taiwan and Korea, including the risks 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 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 and uncertainties identified in the company's findings with the SEC. Please note that the safe harbour statements 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 management to make strategic decisions, forecast future events and 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 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 the call over to Rafi Amir, Camtech CEO. Rafi, please go ahead.

Thanks, Kenny. Good morning or good afternoon, everyone. Camtech ended another quarter of continued revenue growth. Fourth quarter revenues were a record of $82 billion, an 11% increase year over year. Gross margin came in at 49% and operating margin at 27.8%. Over 60% of our revenues came from advanced interconnect packaging applications. Front-end and compound semi-segments accounted for about 20% of our revenues. The total revenues for 2022 was a record of $321 million, 19% growth year over year. This is the fifth year in a row with record revenues. In the last two years, we more than doubled our revenues and tripled our operating profit. In 2022, we continue to expand our customer base. We now have over 250 active customers and we have added more than 50 new customers. So we expect them to contribute significantly to future revenues. The company diversified exposure to multiple customer, secular trend and territories contributed to our success. We have managed to increase our business in the Trojan integration segment, which serve the high performance computing. And in addition, it has partly been qualified for the next generation DRAM products. We expect these two applications to continue to contribute significant revenues in 2023. Compound semiconductor and specifically silicon carbide market continues to grow rapidly, and we have been able to win several inspection steps at several different customers. Last Twin, as reported a few weeks ago, was a Tier 1 manufacturer for an order totaling of $18 million for multiple machines to be installed in 2023 and 2024. In 2022, we have developed several new products and technologies which we plan to introduce in 2023. we anticipate it will further increase our market position and expand our capabilities in entering new market segments. Looking at 2023, global economy growth is projected to slow down, thus affecting wafer fab equipment in general and specifically the memory segment. Also, regarding the new U.S. restrictions on China's semiconductor industry from a few months ago, we have yet to see how it influences the industry. After three years in which the entire production supply chain was disrupted, 2023 is probably expected to be a challenging year with customers being more cautious and hesitant in increasing production capacity before receiving orders from their end user. However, we are also receiving positive signal from several customers regarding expected improvement in the second half of 2023. We believe that our leading position in the specific segments, broad and diversified customers base and long term strategic relationships with customers will enable us to again outperform the wafer fabrication equipment, which is predicted to decline by 20 to 30% in 2023. Regarding the first quarter, We estimate the sales to be approximately $71 to $74 million, which represents a decline of 6% year over year and 12% sequentially at the midpoint. After doubling sales in the last two years, while focusing on supplying systems on time and providing a good response to customers, we now focus on a company's efficiency. Also, we are carefully monitoring certain balance sheet items, such as inventory levels and account receivables. We are adjusting our expenses and ad count to the current demand. Moshe will address our plan in more details. I would like to conclude by stating that the semiconductor is a strategic industry and all leading countries are heavily invested in it. I would like to hand over to Moshe for more detailed discussion of the financial results. Moshe?

Thank you, Afi. 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. Fourth quarter revenues came at a record $82.2 million, an increase of 11% compared with the fourth quarter of 2021 and slightly more than the previous quarter. Revenues for the whole year were a record of $321 million, 19% increase year over year. The geographic revenue split for the quarter was as follows. Asia, 80%, and USA and Europe accounted for 20%. Gross margin for the quarter was $40.2 million. The gross margin for the quarter was 49% versus 50.9% in the fourth quarter of last year, and the same as in the previous quarter, in line with our previous guidance range. We continue to experience inflationary pressure on raw material and labor, which cannot fully pass on to customers. However, we are taking steps to mitigate this impact by improving our efficiencies and cost as a result, improve our gross margin over the mid to long term. Operating expenses in the quarter were $17.4 million. This is compared with $16.8 million in the fourth quarter of last year and $17 million reported in the previous quarter. Operating profit in the quarter was $22.8 million compared to $23.2 million in Q3. and $20.9 million reported in the fourth quarter of last year. Operating margin was 28%, similar to the previous quarter and to the fourth quarter of last year. Financial income for the quarter was $3.8 million, compared with $2 million in Q3 and $200,000 last year. The majority of the increase relates to significantly higher interest rates on our deposits on an increased cash balance. We expect the financial income to continue to increase throughout 2023 as the interest rates remain high. Net income for the fourth quarter of 2022 was 24 million dollars or 50 cents per diluted share. This is compared to a net income of 19.7 million dollars or 40 cents per share in the fourth quarter of last year. Total diluted number of shares as of the end of Q4 was $48.3 million. Turning to some high-level balance sheet and cash flow metrics. So total cash, including cash equivalent short and long-term deposits as of December 31st, 2022, was $479 million. During the fourth quarter, we had a strong positive cash flow and we generated $19.9 million in cash from operations. And altogether for the year, we have generated $57 million. Accounts receivable increased to $80 million in the quarter, primarily due to the timing of revenue and collection within the quarter. Days outstanding for Q4 were 90 days. Since the beginning of the year, we experienced strong collection and we expect the account receivable balance to come down by the end of Q1. Inventory level was $70.9 million and it went down by $3.9 million over the quarter. In the last few years, we increased the inventory in order to support the growth, especially in light of the supply chain issues. The reduction this quarter is in line with our target to optimize the inventory level given the new business environment. Moving to the guidance. In Q1, we expect revenue in the range of 71 to $74 million. Our gross margin is affected by the business volume and the increase in the bill of material resulting from the supply chain issues, inflation and labor costs. We therefore expect gross margin to be around 48% in Q1. Our focus in the last few years was on meeting the phenomenal growth. In order to improve the gross margin this year, we plan to focus on cost reduction through engineering and design optimizations and supply chain initiatives. These steps take time and we anticipate that they will assist us in gradually improving our margin over the coming quarters. We continue to invest in R&D to meet our customer roadmaps and be well positioned for growth. However, we are adjusting all other operating expenses to the current revenue level in order to move us closer to our target operating model when growth returns to our markets. The current strengths of the US dollar versus the Israeli shekel is helping our current operating expenses level as well. I would like to highlight the contribution of our cash reserve on our results. We have close to half a billion dollars in cash that enjoys the increasing interest rates and puts us in an excellent position to grow inorganically, and we are actively looking at opportunities. With that, Rafi, Rami, and myself will be happy to take your questions. Kenny?