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 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 on the call today, we have Mr. Rathi Amit, Camtex CEO, Mr. Moshe Eisenberg, Camtex CFO, and Mr. Rami Lango, Camtex COO. Rathi 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 answer 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 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 the forward-looking statements contained whether results of new information, future events, changes, and expectations are otherwise. Investors are reminded that these forward-looking statements are subject to risks and uncertainties that may cause actual events or results different materially from those projected, including as a result of the effects of general economic conditions. Risk related to the concentration of 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 identified in the company's filings with the SEC. Please note 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 results, and evaluate the company's 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 prospect for the future. A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release. And now I'd like to hand the call over to Rafi, Camtex CEO. Rafi, please go ahead.

Okay, thanks, Kenny. Good morning or good afternoon, everyone. ComTech ended Q1 2024 with a record quarterly revenue of $97 million, exceeding the guidance of $93 to $95 million provided last quarter. It is interesting to look at the distribution of sales this quarter. 80% of our revenue came from advanced interconnect packaging applications, which are divided to 40% from HPM segment, 20% from chiplets and 20% from other advanced packaging applications. The remaining 20% are divided between compound semiconductor for power devices, CIS and process control applications. The gross margin came high in this quarter at 50.6%. This achievement results mainly from the high percentage of systems sold to the advanced packaging interconnect segment. The operating margin also shows an improvement to about 30%. Based on our current order flow, backlog and pipeline, we expect the high demand for HBM and chiplets to continue into the next quarters. This is reflected in our revenue guidance for the second quarter, which is about $100 to $102 million. Today, I would like to focus on the high demand for AI-related products. Rather than quoting from articles and industry surveys, I would like to share with you the information we have gathered from our current business regarding the effects of AI on our markets. AI technology, and especially generative AI, requires extremely powerful computing capability, and it is based on HPC architecture, of which the two main components are HPM and chiplets. Since Camtech is the leading provider for inspection and metrology of HBM, and since we are present at all tier one customer in large number of inspection and metrology steps, the rate of requirement of incoming orders from HBM manufacturers is an important indication of the expected growth rate of HBM and HPC. The sharp increase in demand for HBM can be understood when comparing the revenue from our tools for HBM inspection and metrology in the first quarter of 2024 to historical rates. Until the first quarter of last year, HBM accounted for a single digit percentage of our revenue. Starting from the second half Last year, we experienced significant growth in HBM sales, and they accounted for approximately 20%. This quarter, the revenue for HBM applications was 40% of our total revenue, and we expect this level to continue in Q2 as well. We believe that this is a very strong indicator to the extent of production capacity built by the industry for this component, which are essential for high-performance computing. As we mentioned in our last call, the Q4, the consensus among the analysts is that HBM and chiplet will continue growing in the coming years, at an annual rate of 20 to 30%. And therefore, we believe that this segment will continue to be a significant part of ourselves in the coming years. The advantage of being a major player in Tier 1 HBM and chiplets manufacturers is that we are constantly challenged by the most advanced technological requirements, enhancing our capabilities and knowledge in inspection and metrology. We have developed new solutions to meet our Tier 1 customers' roadmaps. I use the term solutions because it is a combination of new platform, new and advanced optical assemblies, special feature and AI-based algorithms. To sum it up, the field of AI is changing the industry and Camtech is well positioned to benefit from these strengths. which will give us more confidence in our ability to continue growing beyond 2024 and reach our next goal of annual sales of more than $500 million. And now Moshe will review the financial result. Moshe?

Thanks, Rafi. In my financial summary ahead, I will provide the results on a non-gay basis. The reconciliation between the GAAP results and the non-GAAP results appears in the table at the end of the press release issued earlier today. The purchase accounting treatment from the FRT transaction is also included in our non-GAAP reconciliation. In addition, please note that the FRT results are included only starting from November 1, 2023. Going now to the revenues. First quarter revenues came in at a record $97 million, an increase of 34% compared with the first quarter of 2023, and an increase of 9% from the fourth quarter of 2023. The geographic revenue split for the quarter was as follows. Asia, 86%. China was a relatively lower part of the mix because a good portion of our revenue this quarter came from HBM and chiplets. US and Europe together are 14%. Gross profit for the quarter was $49.1 million. The gross margin for the quarter was 50.6%, up from 47.3% in Q1 of last year and 49.2% last quarter. The improvement is a result of a more favorable product mix, as well as the initiatives we implemented to improve the cost structure over the last few quarters. We anticipate to maintain these levels in the coming quarters. Operating expenses in the quarter were $20.1 million compared to $16.9 million in the first quarter of last year and $18.2 million in the previous quarter. The increase is mostly due to a planned expansion to support the continued growth. Operating profit in the quarter was $29 million compared to the $17.4 million reported in the first quarter of last year and $25.5 million in the previous quarter. The increase is mostly due to the increase in the revenue and the improvement in the gross profit. Operating margin was 29.9% compared to 24% and 28.7% respectively. Financial income for the quarter was $5.6 million at the similar level to the previous quarter and higher than the $5.1 million reported last year. The increase from last year was due to higher interest rate on our cash balance. Net income for the first quarter of 2024 was $31.3 million or 64 cents per diluted share. This is compared to a net income of $20.4 million or 42 cents per share in the first quarter of last year. Total diluted number of shares as of the end of the first quarter was 49.3 million. Turning to some high-level balance sheet and cash flow metrics, Cash and cash equivalents, including short and long-term deposits and marketable securities, as of March 31, 2024, were $467 million. This compared with $449 million at the end of the fourth quarter. We generated $20 million in cash from operations in the quarter on the back of increased revenue and good collections. I know that during April, the company paid $60 million as a dividend to the shareholders. The inventory level increased by approximately $7 million to $102.1 million. The increase over the previous quarter is to support the anticipated sales growth in the coming quarters. Account receivables decreased to $86.4 million in the quarter despite the increase in revenue. primarily as a result of a strong collection in the quarter. Our days' sales outstanding decreased to 81 days, down from 90 days. Guidance. As Rafi said before, we expect revenue of between $100 million to $102 million in the second quarter, with continued sequential growth throughout 2024. And with that, Rafi, Rami, and I will be open to take your questions. Kenny?