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 questions 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 by now received the company's press release. And if not, you can view it on the company's website. With me on the call today, we have Mr. Rafi Amit, Camtech CEO, Mr. Moshe Eisenberg, Camtech CFO, and Mr. Rami Langer, Camtech 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, Rathi, 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 conference 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 information or 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 an 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 identified in the company's findings with the SEC. Please note that the safe harbour statements and 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 port operations and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release. And now I would like to hand the call over to Rafi Amit, Camtech CEO. Rafi, please go ahead.

Okay, thanks, Kenny. Good morning or good afternoon, everyone. Camtech ended this quarter with a record quarterly revenue of $102.6 million, representing 40% growth compared with Q2 2023. The distribution of revenue in this quarter is over 50% of our sales were for high-performance computing-related products for the second quarter in a row. approximately 15% for OSATs, mainly for advanced packaging, and the rest were split between silicon carbide, front-end, CMOS image sensor, and other applications. This trend of product mix resulted in increased profitability and I am very pleased with the improvement of achieving a gross margin of 51% and operating margin of about 30%. The demand in the HPC segment is reflected in the PR we issued a few days ago with an announcement about receiving multiple systems order of over $25 million from a global tier one customer to inspect HBM wafers. I am happy to share with you that since we issue the PR, this customer added $6 million, bringing the entire order to over $31 million. The industry trends regarding high-performance computing modules is also reflected in our view of our future revenue. Based on our current orders flow, backlog and pipeline our revenue guidance for the third quarter is 107 to 110 million dollars representing in the midpoint about 35 percent growth year over year we expect continued growth in the fourth quarter as well the main growth driver in the semiconductor market is hpc modules for generative AI for which we are a key equipment provider. Our revenues in this quarter have grown three times since Q2 2023. From order we have on hand, our pipeline, and from discussion with customers, we expect demand for our system for HPC-related products to continue in the second half of 2024 and into 2025. HPC modules include mainly chiplets, HBM, and silicon substrates. The production technologies of HPC modules are developing rapidly, which require our continued development of advanced and cost-effective solutions. For example, one of our new key challenges is measuring and inspecting wafers with an extremely high number of micron-level interconnects at a very fine pitch. The industry is moving from a pitch of tenths of micron to a single digit pitch. Moreover, customers use more inspection steps to maintain high yield and they are evaluating our systems in process steps we have not participated in before. so we can see high potential for expanding our business with our current and new generation systems. Our new generation systems that we completed developing are equipped with state-of-the-art sensor and optics to perform all types of inspection, 3D bumps measurement and metrology. that we believe will address the current and the next generation HPC related products at high volume manufacturing throughputs. We also expect OSATs to implement packaging capabilities for HPC. This trend will allow Fabless and IDM companies to start producing HPC model that will be suitable for AI and additional applications. We expect that our strong position within the OSATs will benefit us with this industry shift as well. Clearly, A major growth in demand for capital semiconductor equipment is generated from the reality where countries with leading economics, such as US, Japan, China and Europe, consider advanced semiconductor components as strategic national assets and therefore expand their design and production capabilities by establishing new manufacturing facility in their respective countries. Concern regarding geopolitical changes only accelerate the decision of those countries to have local infrastructure for the manufacturing of semiconductor components. The strong order flow, some for delivery in 2025, and the high demand for HPC gives us a relatively clear long-term vision. which allows us to organize our operation efficiently to meet the expected demand. To sum it up, the demand for HPC together with industry analyst forecasts for a growing demand for end products such as mobile phone and PC, and the establishment of new facilities in key countries make us believe that we will continue growing in 2025. And now, Moshe will review the financial result. Moshe?

Thanks, Afi. In my financial summary ahead, I will provide the results on a non-GAAP basis. The reconciliation between GAAP results and the non-GAAP results appears in the table at the end of the press release issued earlier today. Revenue for the first quarter came in at a record $102.6 million, an increase of 39% compared with the second quarter of 2023, an increase of 6% from the first quarter of 2024. The geographic revenue split for the quarter was as follows. Asia, 92%. U.S. and Europe accounted for 8%. The higher the normal contribution from Asia relates mainly to the big demand for HBM, which is currently manufactured in Korea and Taiwan. Gross profit for the quarter was $52.4 million. The gross margin for the quarter improved to 51%. up from 50.6% in the first quarter of 2024 and 48% in the second quarter of last year. This is mainly due to a more favorable product mix in the quarter and our ongoing efforts to improve the cost structure of our products. We anticipate that gross margin will remain at a similar level in the coming quarters. Operating expenses in the quarter were $21.6 million compared to $17.1 million in the second quarter of last year and $20.1 million in the previous quarter. The increase is mostly due to planned expansion to support growth of operations. Operating profit in the quarter was $30.8 million compared to $18.3 million reported in the second quarter of last year and $29 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 30% compared to 24.8% and 29.9% respectively. Financial income for the quarter was $5 million, slightly lower than the $5.8 million reported in the second quarter of last year, and $5.6 million in the previous quarter. The decrease is mostly due to the lower cash balance following the $60 million dividend paid in April, slightly offset by the cash generated throughout the quarter. Net income for the second quarter of 2024 was $32.6 million or 66 cents per diluted share. This is compared to a net income of $21.9 million or 45 cents per share in the second quarter of last year. Total diluted number of shares as of the end of the second 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 June 30th, 2024 was $454 million. This compared with $466 million at the end of the first quarter. We generated $49 million in cash from operations in the quarter on the back of increased revenue and a very strong collection. Inventory level increased by $7 million to $109 million. The increase over the previous quarter is to support the anticipated sales growth in the coming quarters. Despite the increase in revenue, account receivables decreased from $86 million to $68.2 million in the quarter as a result of strong collection in the quarter. Our day's sales outstanding improved significantly from 81 to 61 days. Finally, we expect revenue of between $107 to $110 million in the third quarter with continued sequential growth in Q4. And with that, Rafi, Rami and I will be open to take your questions. Thank you, Moshe.