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 question and answer 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. If not, please view it on the company's website. With me today on the call, we have Mr. Rathi Amit, Camtech CEO, Mr. Moshe Eisenberg, Camtech CFO, and Mr. Rami Langa, Camtech's 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 statements contained, whether as a result of new information, future events, changes, 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. Risks related to the concentration of a significant portion of Cantech's expected business in certain countries, particularly China, from which Cantech expects to generate a significant portion of its revenues for the foreseeable future, but also Taiwan and Korea, including risks of deviations from our expectations regarding timing and the 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 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 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 GAAP to non-GAAP, non-GAAP to GAAP financial measures,

are included in today's earnings release and i'd now like to hand the call over to rafi amit camtech ceo rafi please go ahead okay thanks kenny good morning or good afternoon to everyone camtech closed second quarter with revenue of 73.8 million dollars Gross margin came in at 48%, which is an improvement over Q1, and we expect further improvement in the coming quarters. Operating margin was 25%. Approximately 60% of our revenues came from advanced interconnect packaging applications. The remaining 40% is divided between compound semiconductor for power device, CIS, and process control applications. I would like to clarify that under the term advanced interconnect packaging, we include chip-led modules, HPM, heterogeneous integration, WLP. Our revenue guidance for Q3 is $77 to $79 million, with expected continued growth in the fourth quarter exceeding $300 million in 2023. This year started with a lot of uncertainty, but as we progress into the second half, it is shaping up to be stronger than originally expected. The positive trend in the industry and the flow of orders that we are witnessing now elevate our confidence that 2024 will be an important milestone in reaching a $500 million company. There has been consensus in the semiconductor industry that the effective way to significantly increase computing power more than more is through new packaging technologies such as heterogeneous integration, HI in short, including chiplet modules and high-bandwidth memory, HBM in short. We have mentioned that we are involved in the development of this technology with the leading manufacturers. In the last year, we have already shipped systems to the HI segment, but the growth seem to be starting to accelerate now. It is quite clear that growth in demand for data server and HI applications increases the need for high performance computer or HPC in short, based on HI technologies. We have recently announced receiving orders for 42 systems. A significant portion of the systems is for chiplet modules and HBM for HI, and we expect to receive more orders of the same kind. The technological roadmap of the HI is aggressive in aiming to reach five to 10 times higher density than today technology, which in itself is very challenging. H.I. technology requires uncompromising inspection and metrology in many stages of the process to achieve a high yield. Manufacturers will not move to high volume production without maintaining high yield. We've invested considerable effort in R&D to comply with the technological roadmaps of the HI technology, and we are confident that we will be ready to meet the customer's requirements on time. This state-of-the-art technology is a great opportunity for Camtech to grow significantly in larger market with fewer competitors. As I have mentioned earlier, AI applications depend on HPC, which is based on chiplet modules and HBM technologies. The production process requires many steps of inspection and metrology. CAPTEC is a key equipment supplier to the players in these market segments. exposing us to significant technology trends and business momentum in this area. We are very encouraged to see that as we predicted in the beginning of the year, the second half of 2023 is shaping up to be better than the first half. This is fueled by major investment around AI. Furthermore, in the last few days, we have received an additional multiple systems order from a Tier 1 HBA manufacturer for a total of 10 systems. And we expect to receive more orders. We are also seeing customers starting to place orders with longer lead time, which contributes to our visibility into 2024. We expect the chiplet modules and HBM will account for over 30% of our business in 2024. Another growth engine for ComTech is the electrification of cars using power devices based on silicon carbide, which is also expected to grow over 20% K-Gear in the next few years. To summarize, We are very positive about 2024, which is expected to be a record year for ComTech and an important milestone in reaching our next goal of a $500 million company. And now, Moshe will review the financial result. 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. Second quarter revenues were $73.8 million, marking an upturn from the lower revenue reported in the first quarter of 2023. The geographic revenue split for the quarter was as follows. Asia, 83%, and US and Europe accounted for 17%. Gross profit for the quarter was $35.4 million. The gross margin for the quarter was 48%, an improvement over the 47.3% last quarter. As mentioned before, we have been taking measures to improve the gross margins. we are now seeing the initial impact and we expect to see continued gradual improvement in the coming quarters. Operating expenses in the quarter were $17.1 million, an increase from the $16.7 million reported in the second quarter of last year and a similar level to the previous quarter. The increase is in the R&D level as we continue to invest in future programs. Operating profit in the quarter was $18.3 million compared to the $17.4 million reported in the previous quarter. Operating margin was 24.8% compared to 24% in the previous quarter. Financial income for the quarter was $5.8 million compared with $5.1 million in Q1 and $200,000 last year. The majority of the increase relates to the significantly higher interest rates on an increased cash balance. Net income for the second quarter of 2023 was $21.9 million or $0.45 per diluted share. This is compared to a net income of $22.1 million or $0.46 per share in the second quarter of last year and $20.4 million or 42 cents per share in the previous quarter. Total diluted number of shares as of the end of Q2 was 48.6 million. Turn into some high level balance sheet and cash flow metrics. So cash and cash equivalents, including short and long term deposits as of June 30th, 2023, were 506.3 million dollars. This is compared with $492.7 million at the end of the first quarter. We generated $15.6 million in cash from operations in the quarter. Inventory level went down by $2.7 million over the quarter. In the last few quarters, we adjusted the inventory to the reduced business volumes. We are now at the point that we will start to increase the inventory level again to support the business growth. Accounts receivables were $79 million up from $66.3 million in the previous quarter due to the timing of collection. As for guidance, as Rafi said before, with the current business momentum, we expect revenues of $77 to $79 million in the third quarter. with continued growth into the fourth quarter and in 2024. And with that, Rafi, Rami, and I will be open to take your questions.