Tower Semiconductor Ltd.

Thank you, and welcome to Tower Semiconductor Financial Results Conference Call for the first quarter of 2021. Before we begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our forms 20F, F4, F3, and 6K, filed with the Securities and Exchange Commission, as well as filings with the Israeli Securities Authority. They are also available on our website. Tower assumes no obligation to update any such forward-looking statements. Please note that the first quarter of 2021 financial results have been prepared in accordance with U.S. GAAP. The financial tables and data in today's earnings release and in this earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirements as established with the Securities and Exchange Commissions. The financial tables include a full explanation of these measures and the reconciliation of these non-GAAP measures to the GAAP financial measures. Now, I'd like to turn the call to our CEO, Mr. Russell Elwanger. Russell, please go ahead.

Thank you, Nuit. Welcome, everyone. Thank you for joining our call. We entered the year with strong customer demand and increasing forecasts across all our business units and technology platforms. Our revenue for the first quarter of the year was $347 million, exceeding the midpoint of our guidance and representing year-over-year 21% organic growth and 16% total growth. As we stated in the previous quarter call, we expect revenue growth throughout the year and are giving a mid-range guidance for the second quarter of 2021 of $360 million, the highest quarterly revenue in the company's history. This mid-range guidance represents year-over-year organic growth of 26% or 16% total growth. Driven by a significant shift towards 5G-abled handsets with the associated increase in 5G content and our market share gains, the first quarter realized the highest RF-SOI revenue in our history with planned further increases for the second quarter. Our silicon germanium RF infrastructure business continues to grow in the data comm side with very strong demand for a hundred gigabit per second transceivers sold primarily for hyperscale data centers, which itself is a strong growth market. Our silicon germanium telecom driven 10 gigabit and 25 gigabit per second transceivers used in 5G wireless infrastructure build out was strongest during 2020. has slowed some in early 2021 with customer expectations for renewed growth later in 21 into 2022. Total silicon germanium demand is solid with expected year over year growth. Our foundry power IC business is experiencing surging demand with strength in industrial consumer and automotive segments. In addition to benefiting from a very favorable market cycle, we're uniquely positioned to benefit from growth in electric vehicles with well-established customer base in battery management. Additional new technologies have been developed, such as the integrated, very high voltage capacitor, galvanic isolation process announced this past quarter, enabling isolated gate drivers for silicon carbide and gallium nitride automotive power stages, among others. Our power discrete business is rebounding, with forecasted growth over the coming quarters expected to fully utilize the dedicated discrete capacity of our manufacturing facilities. Our image sensor business is realizing significant growth throughout the year, driven by both market growth and market share growth in industrial sensors, with full recovery of the medical dental markets and incremental new business in 300 millimeter large sensor medical. We expect record yearly revenues in imaging. First quarter 2021 utilization levels were as follows. Migdal-Hemek Israel Fab 1, our section factory, was at 70% utilization. As of today, we see an increased level of utilization to 80%. Fab 2 was at 80%, presently at 85%. Newport Beach, California Fab 3 was at 75% utilization as we continue to adjust for increased silicon germanium mix. Our San Antonio factory Fab 9 was at about 70% utilization. Looking at our TPS GoFabs in Japan, utilization for the 8-inch foundry business was at about 70% rate, being non-photo bottleneck limited, which is being addressed in the capacity expansion plan we announced this past quarter. Our 12-inch foundry business was at about 90% rate, similar level to the previous quarter, but with number of layers being increased following the 2020 capacity expansion. To summarize, with a strong first quarter as a base, we are thrilled with the business and operational capabilities, enabling a second quarter mid-range guidance to be a company record revenue. Our comprehensive foundry platforms are replete with advanced analog technology differentiation, which is the source of our customer partnerships with the analog industry leaders. We're excited with the prospect of continued leadership expansion throughout the year. With that, I'd like to turn the call over to our CFO, Oren Shirazi. Oren, please.

Hello, everyone. We released our first quarter 2021 results today, demonstrating a remarkable 16% year-over-year revenue increase, resulting in 98% operating profit increase and 66% net profit increase. and provided a mid-range revenue guidance of $360 million for the second quarter of 2021, which is an all-time record revenue for the company. In addition, to address our customers' demand exceeding our capacity and to increase our revenue in the mid- and long-term, we executed our previously announced capacity expansion plan for our 8-inch and 12-inch fabs and issued $150 million per purchase orders for manufacturing equipment and facilities which should result in capacity increase commencing the second half of this year, targeting full qualification during the first quarter next year. I will now move to our first quarter P&L highlights and then discuss our balance sheet and cash flow financial statements. Revenue for the first quarter of 2021 was $347 million, $47 million higher year-over-year, reflecting 16% year-over-year revenue increase. Looking at our organic revenue, which is defined as total revenue excluding revenue from Novotron Japan, previously Panasonic Semiconductor, and revenue from Maxim in our San Antonio Fed, revenue in the first quarter of 2021 reflects 21% year-over-year increase. Gross and operating profits for the first quarter of 2021 were $70 million and $32 million, respectively. This gross profit is $17 million higher or 33% higher year-over-year. And this operating profit is $16 million higher or 98% higher year-over-year. Net profit for the first quarter of 2021 was $28 million or $0.26 basic and diluted earnings per share. This net profit is $11 million higher or 66% higher year-over-year. Looking at the balance sheet, we demonstrated again a strong and stable financial position. A few points to note. Short-term and long-term debt in the balance sheet decreased from $390 million as of December 31, 2020, to $343 million as of March 31, 2021, mostly due to $29 million debt repayment made during this quarter, primarily comprised of scheduled principal repayment on account of Bond Series G. In relation to our debt and corporate rating, in May 2021, Standard & Poor Mahalot, an Israeli rating company that is fully owned by S&P Global Rating, completed its annual rating review for the company and affirmed a corporate credit rating and Bond Series G credit rating of AA-, including a stable horizon. Shareholders' equity reached a record of $1.48 billion. Different revenue and customers' advances balance under current liabilities and long-term liabilities in the balance sheet have increased by $10.8 million and $8.5 million, respectively, reflecting enhanced receipts from customers that ask to receive more capacity to address their exceeding demands. Current asset ratio, defined as current assets divided by short-term liabilities, is strong at a value of 4x. Our cap table consists of 108 million outstanding ordinary shares and an additional 2 million ESOP-related shares, resulting in a fully diluted share count of 110 million. And a last note on our cash flow report. In the first quarter of 2021, cash flow generated from operations was $87 million. Investments in fixed assets, mainly for manufacturing equipment, was $49 million net. And we repaid $29 million of our debt during the first quarter of 2021. And now, I wish to turn the call back to the operator.