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 am part of the investor relations team at Camtech. All participants other than the presenters are currently muted. Following the formal presentation, I will 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 have all by now received 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, Camtex CEO, Mr. Moshe Eisenberg, Camtex CFO, and Mr. Rami Langer, Camtex 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 start, I would like to note that certain statements made on this call constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may use terminology such as believes, expects, may, will, should, anticipates, plans, or similar expressions to identify forward-looking statements. Such statements reflect only current beliefs, expectations, and assumptions of CamTech. However, actual results, performance, or achievements of CamTech may differ materially as they are subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, those that are described in CamTech's most recent annual report on Form 20F, and as may be supplemented from time to time in Camtech's other filings with the SEC, including today's earlier filing of the earnings PR, all of which are expressly incorporated herein by reference. Camtech undertakes no obligation to update any such forward-looking statements unless required by law. Camtech's public findings are available on the Securities and Exchange Commission's website at www.sec.gov and may also be obtained from Camtech's website at www.camtech.com. Also, today's call will include certain non-GAAP financial numbers for a reconciliation between GAAP and non-GAAP results. Please see the table included in today's press release, which is also posted on the IR section of Camtech's website. And I would now like to hand the call over to Rafi, 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 $112 million, representing 40% growth compared with Q3 23. The distribution of revenue in this quarter is as follows. Around 50% of our sales were for HPC or high performance computing related products for the third quarter in a row. Approximately 20% for other applications of advanced packaging and the rest were split between other segments. This trend in product misresulted in favorable profitability parameters of 51% gross margin and slightly over 30% operating margin. The main gross driver in the semiconductor market continues to be HPC modules for generative AI for which we are a key equipment provider. The demand in the HPC segment remained healthy and overall we expect the contribution of HPC to our business this year to be around 50%. Our future forecast take into consideration a positive HPC trend. From order we have on hand, In our pipeline and from discussion with customers, we expect demand for our system for HPC-related products to continue into 2025. We also see increased demand for our systems for a wide range of other applications. Based on our current order flow, backlog, and pipeline, our revenue guidance for the fourth quarter is around $115 million, representing about 30% growth year-over-year with sequential growth in Q1 2025. Given the guidance for Q4, we expect 2024 to be a record year for ComTech with revenue around $427 million, representing 35% growth year-over-year. Our expectation is that 2025 will be another year of growth. During Semicon Taiwan in early September, we introduced our fifth generation of the Eagle system, Eagle G5. The new system offers superior wafer throughput coupled with improved optical resolution, meeting both current market demand and the customer's future roadmap. Since the introduction, As we announced last week, we have already received order for over $20 million with delivery starting in Q4 this year. This system is the first in several new products that we have been developing in the recent years and will provide inspection and metrology solutions for the upcoming advanced packaging technologies that are characterized by the fine pitch or micro-bump and hybrid bonding interconnects. In addition to the Eagle G5, which has been officially presented, we also introduced our new and advanced system for the next generation of advanced packaging to several key customers. Some of them have already installed the new system for qualification, while others have placed initial orders for it. This new system will be officially launched in Semicon Korea in the beginning of 2025 and is expected to contribute tens of millions of dollars already within 2025. I would like to add a comment about the confusing estimates regarding the growth forecast of the HPC segment in 2025. Our understanding is that the demand for HPC modules continues to be high. And the reason some see a slowdown is due to a lack of production capacity. The cornerstones of HPC modules are logic and HBM component and the 2.5D substrate that pack all the components into one module. In our caution opinion, the bottleneck is currently due to missing capacity of 2.5D substrates. We estimate that this bottleneck will be released in 2025. The strong order flow and backlog for delivery in 2025 gives us a relatively clear long-term vision. which allows us to organize our operations efficiently to meet the expected demand. And as indicated in previous calls, we are adding new manufacturing capacity in Europe that will start operating in 2025. To sum it up, I am excited about our business and outlook and expect 2025 to be another year of growth. And now, Moshe will review the financial result. Moshe?

Thanks, 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. Revenue for the third quarter came in at a record $112.3 million, an increase of 40% compared with the third quarter of 2023 and a sequential increase of 10% from the second quarter of 2024. The geographic revenue split for the quarter was as follows. Asia was 87%. U.S. and Europe accounted for 13%. Gross profit for the quarter was $57.1 million. The gross margin for the quarter was 50.8%, similar to the second quarter of 2024, and improved from 49% in the third quarter of 2023. This is within our expected range, with the changes from prior periods mainly due to product mix in the quarter and increased revenues from last year. We expect similar levels in the next couple of quarters. Operating expenses in the quarter were $22.9 million, compared to $18.6 million in the third quarter of last year and $21.6 million in the previous quarter. The increase is mostly due to a planned expansion to support growth of operations and the continued investment in the development of new products referred to by Rafi. We expect a similar level of OPEX in Q4 as well. Operating profit in the quarter was $34.2 million compared to the $22.2 million reported in the third quarter of last year and $30.8 million in the previous quarter. The increase is mostly due to the increase in revenue and the improvement in the gross profit from last year. Operating margin was 30.4% compared to 30% and 27.6% respectively. Financial income for the quarter was $6.4 million compared to the $5.7 million reported in the third quarter of last year and $5 million in the previous quarter. The increase is mostly due to the increased cash balances and the positive impact of exchange rate differences. Net income for the third quarter of 2024 was $37 million or 75 cents per diluted share. This is compared to a net income of $25.2 million or 51 cents per share in the third quarter of last year. Total number diluted of shares as of the end of the third quarter was 49.4 million. Turning to the balance sheet and the cash flow metrics, cash and cash equivalents, including short and long-term deposits and marketable securities as of September 30, 2024, were $489 million. This compared with $454 million at the end of the second quarter. We generated $36 million in cash from operations in the quarter, on the back of an increased revenue and profitability and strong collection. Inventory level increased by $7 million to $116 million. The increase over the previous quarter is to support the anticipated sales growth in the coming quarters. Accounts receivables increased slightly from $68.2 million to $70.7 million in the quarter. I'm especially pleased to report that our day's sales outstanding continue to improve, and they now stand at just 57 days, down from over 100 days last year. As Rafi said before, we expect revenue of around $115 million in the fourth quarter, with sequential growth in Q1 of 2025. And with that, Rafi, Rami, and I will be open the call to take your questions.