Ladies and gentlemen, thank you for standing by. I would like to welcome all of you to Camtek’s Results Zoom Webinar. My name is Kenny Green and I am part of the Investor Relations team at Camtek. 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 later on in Camtek’s website. 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 line today, we have Mr. Rafi Amit, Camtek’s CEO; Mr. Moshe Eisenberg, Camtek’s CFO; and Mr. Ramy Langer, Camtek’s COO. Rafi, will begin by providing an overview of Camtek’s results and discuss recent market trends, Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe, and Ramy will be available to take your questions. Before we begin, I’d like to remind our listeners 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 that forward-looking information contained, whether as a result of new information, future events, changes and expectations or otherwise. Investors are reminded that actual events or results may differ materially from those projected, including our result of the effects of general economic conditions, the effects of the COVID-19 pandemic on global markets and on the markets in which we operate, including the risk of continued disruption to our and our customers, providers,…

Thanks, Kenny. Good morning for everyone. The last quarter concluded a phenomenal year for Camtek. In Q4, our revenue was $74 million with operating profit of $21 million and 28% operating margin. 2021 was a record year for Camtek in all aspects. Revenue for the whole year was above $270 million over 70% growth compared with 2020, an operating profit of $77 million. Since 2017 revenue has multiplied three times and net profit, seven times. We also achieved a very important goal. We became the main leader in the inspection and metrology for the mid-end segment. We installed our system at all top semiconductor manufacturers. We penetrated the front-end segment, which now accounts for 20% of our sales. We reached an installed base of over 1,500 systems at over 130 active customers. With 2021 behind us, 2022 is shaping up to be another growth year. We started the year with a healthy backlog and received over $40 million of order since the beginning of this year, leading to a very good visibility for the first half of the 2022, with the second half of the year is starting to build up nicely. I expect revenue in the first quarter of 2022 to be between $75 million to $76 million with continued growth in Q2. Last November, we finalized a $200 million convertible notes offering at favorable terms. The main reason for this transaction was to make sure that we have enough cash to support our growth strategy including inorganic growth. In the fourth quarter, about 50% of our sales were for it's vast interconnect packaging, mainly for heterogeneous integration and fan-out. 15% of our revenue were for expecting compound semi-wafers. These wafers are used for power devices and RF devices, which will go into mobile phone and for automotive industry,…

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 table at the end of the press release issued earlier today. Fourth quarter revenue came at a record $74.2 million, an increase of 53% compared with the fourth quarter of 2020 and 5% compared with the previous quarter. This marks the 7th consecutive quarter of growth. The geographic revenue split for the quarter was as follows: Asia 78% and the rest of the world accounted for 22%. This represents a significant increase in the revenue from US and Europe. Gross profit for the quarter was $37.8 million. The gross margin for the quarter was 50.9% versus 48.2% in the fourth quarter of last year and 50.9% in the previous quarter. This is the fourth quarter in a row of gross margin of above 50%, a result of the significant increase in the business volume. I'll remind you that, the gross margin also varies a function of the sales mix typically within the range of 50.5% to 51.5%. We expect higher than usual gross margin in Q1 of 2022, due to favorable mix. Operating expenses in the quarter were $16.8 million this is compared with $14.2 million in the fourth quarter of last year and to the $14.3 million reported in the previous quarter. As we said in the previous call, both R&D and sales expenses increased in Q4, this was a result of a planned investment in R&D and the sales channel mix in the quarter. The effect of this was a slight reduction in the operating margin to 28% from 30.6% in the third quarter. We expect further increase in our OpEx in Q1 in particular due to continued…

Thank you Moshe. We will now open the call for the question-and-answer session. The way you can ask a question is by raising your hand on the platform. So give a moment to review who wants to ask questions. And our first question will be from Tom O'Malley from Barclays. Tom, you can go ahead and talk.

Hey, guys. Thanks for taking my question. Congrats on the nice results. The order patterns look good to start the year here. I just wanted to ask a question on the broader year. You've seen a lot of equipment guys report already and talk about a WFE growth rate that's above 20% for the calendar year 2022? Can you talk about why advanced packaging would be a greater or lesser growth rate than that for the year? And when you look at what's may be limiting you not getting to that greater than 20% growth rate is it supply, or are you guys just being kind of conservative to start the year here?

Okay. Rafi is talking. First of all, we have to distinguish between the front-end equipment and the back-end and the mid-end. There are some always delay between them. If most of the front-end company they announce about order and growing about 20%. I would say that if we take just specific investment we can considering having for us the result about a year later okay? There are always delay between the front-end and the mid-end this in general. Now the advanced packaging in other mid-end application, sometimes do not behave like the front-end. This is from our experience being here that we saw that the front-end was almost – we didn't see any increase. We made an excellent increase. So it is not so easy to find correlation between these two. But in general, I totally agree that the positive trend in the semiconductor sooner or later will come to our field and we will enjoy it. When exactly will be the timing we don't know yet. In general, in the mid-end the delivery time is shortage than the front-end. Our customers can place orders six weeks, eight weeks, 10 weeks, that's good enough for them. I think in the front-end the delivery time is much stronger and it's a matter of infrastructure or building new fabs and expansion. So they know more about the whole year claim, okay? This is just to give you an idea about it.

That's very helpful. I appreciate that. I just have one more. Moshe, you talked about the if-converted method, you saw shares tick up by about half of the amount of the convert that you described. Is a good way to think about the March quarter having the other half come in so close to 48 million shares. And when you just take the midpoint of your guidance which is op margin in the 13.6% range, which is where you guys were in the December quarter, it looks like when you do the math there you have EPS declining slightly. Is that the right way to think about the quarter-over-quarter because of the change do you see some EPS headwind?

First of all with respect to the number of shares you are correct. The applicable number of shares for Q – end of Q1 will be approximately 48 million shares. We will see – I said that we will see same margin for the operating margin. That means that on a higher level of revenues we will see an improvement in the absolute dollar value. And I expect therefore that the EPS to be pretty much the same as this quarter.

Thanks, Moshe. Thanks, guys. Appreciate it.

The next question will be from Brian Chin of Stifel. Brian, you may go ahead talk.

Great. Can you hear me okay?

Yes, we hear you very well.

Yes.

All right. Perfect. Congratulations on the good results and thanks for us ask a few questions. And maybe just a couple here. To start with the magnitude of growth you're anticipating in the June quarter. I know you gave more of a directional indication. But again, the order intake and backlog does support good business trends, magnitude-wise are we talking maybe ballpark 10% sequential growth? And I ask because I don't think seasonality is a strong factor for the business per se but the past few years Camtek has exhibited very strong sequential growth in prior June quarters?

Regarding, the – our estimate about the growth rate, again it's not so simple as I said before because we know very well the first half, we don't have enough information for the second half. But in general, I don't see that we are going to lose any competitive position. I don't think we are going to lose any orders. And it doesn't matter when our customer in the mid-end plan to place order and some of them maybe surprise us and give it later. Some of them will do it in shorter delivery time. So this is why we cannot give enough I would say a good forecast for the whole year. We can see very good the first half. By the way a year ago the maximum we can see the quarter ahead. Now we can see two quarter ahead is excellent. But that's it we cannot see more than that. But in general I think the positive environment definitely can work for us but we will know later about it, not now.

Okay. Fair enough. And maybe this is a little bit related but clearly beginning to see good order intake from the heterogeneous integration applications. If you had to put a finger on it when do you think the spending has a real chance to begin to accelerate? Do you think second half this year first half next? And also for Camtek what do you think the customer breadth should look like, or will it be a little bit more concentrated?

Ramy, do you want to share about it?

Yeah. [indiscernible] So no doubt that when we look at the advanced packaging as a segment it is continuing to grow. And out in the advanced packaging there are two main segments that are growing much faster and this is the heterogeneous integration and the fan-out. As far the heterogeneous integration this is something that already started in magnitude in 2021. And definitely we are seeing this trend growing much faster in 2022 and beyond. No doubt the applications are there it's primarily the high-performance computing and when you look at the breadth of applications from the cloud applications and all the AI that is popping up in all the -- in many, many applications definitely this segment is going to grow. One good example is the high band memory you can see that growing very fast. So we are seeing the heterogeneous integration really growing in two ways, one you see it on the general heterogeneous integration and then you see the high bandwidth memory also accelerating. We are definitely seeing a lot of DRAM activities this year. And I think we mentioned it in previous calls we will start to ship to the DRAM world which is very much related to this segment already in the first quarter of this year. So that's definitely a positive news in the overall advanced packaging environment.

Okay. Great. That's very helpful. And maybe just to sneak one last one in. You referenced some new products this year. Can you maybe just -- and talk about how large your existing SAM [ph] is? And how much of these new products could potentially increase your SAM? And also whether you expect a meaningful contribution throughout this year?

Rami, you continue with that?

We look at our SAM, we estimate today at about $800 million and those products will definitely increase it. And I believe once we will launch them we'll definitely go beyond the $1 billion mark.

Okay. Great. Thank you so much.

Okay. Thanks for that, Brian. Our next question will be from Jamie Zakalik of Bank of America. Jamie, you may go ahead also.

Hi. Can you hear me, okay?

Yes.

Yes

Okay, great. Thanks for letting me ask the question. So some of your semi-cap peers highlighted supply issues in late December that impacted Q1, some of them even up to 10% impacts. Does your March quarter guide assume any sort of impact from supply constraints? And if not, what is Camtek doing differently from peers to mitigate these supply issues?

Okay. I think, in general, we organized our purchasing inventory maybe more than a year ago, when we just start at the beginning of this problem. And we increase our inventory. All the raw-mat item were ordered one time. And I think we have a very good operations system that’s doing day-by-day. I couldn't say that that we don't have issue and challenge in some time. We have to find replacement for some components. But, in general, I think, you -- by the way, you can see in the result that our inventory going up. And one of the main reasons that some need a raw-mat item, we have to place an order even a year ahead. In the past, we didn't place orders so long. So I think we did it on time. And we do it day by day. And up to now, we believe we managed it successfully. Hopefully, we continue doing it in 2022 as well.

That's helpful. For my follow up, you mentioned higher gross margins in Q1 on a favorable mix. Which applications are most accretive to margins? And do you expect those markets to be faster growth markets throughout 2022? So maybe these higher margins could sustain throughout the year?

Moshe, do you want to answer for that?

Yes. It's not necessarily -- first of all, advanced packaging, we have a nice gross margin on advanced packaging, but that -- it's not different from previous quarters. It's more like a specific product mix or deal mix that we have in the first quarter that favor -- or resulting in a favorable gross margin.

And did you quantify, is it still within your long term range, or is it potentially above that?

Our gross margin -- typical gross margin varies between 50.5 to 51.5, as I've mentioned in my prepared remarks. This quarter, we expect it to be higher. And, overall, we are making efforts and we are increasing -- we're making other activities within the operations to make it more productive and to improve the gross margin. To what extent this will have an impact this year, it's too early. The visibility that we have for Q1 shows -- indicates a higher gross margin.

That's helpful. And I'll squeeze one more in here and then I'll jump back in the queue. But I wanted to ask some follow ups about the $20 million design win. Can you give any color on timing? Was anything recognized in Q4? Is it all going to be recognized in 2022? And then also, geographically, do these wins help expand your exposure to the U.S. and Europe markets?

Well, first of all, this win relates only to 2022. And so from that point of view, that's nothing to do with 2021. No doubt this is -- as we mentioned this is the higher-end applications of advanced packaging. So, no doubt these orders are very important. Obviously, we are very careful to speak with about customers' names and regions, but these are two leading IDMs and they're really in the very top of the list.

Got it. Thanks, guys.

Thanks, Jamie. Our next question is going to be from Charles Shi of Needham. Charles, you may go ahead.

Hi. Thank you for taking my question, Rafi, Moshe, Rami. Maybe the first question, so a follow-up on the $20 million order, you announced earlier. You said it's targeting the most challenging applications coming from two of the Tier 1 IDMs. I know you probably are not going to name the customers, but can you give us a sense whether the IDMs are in the leading logic or memory or auto industrial or like your traditional market like a CMOS image sensor, but some end market color will be great? Thank you.

Charles, we are very careful about names of customers. What I can say is what I said in the previous, it really is for the very top names on the list. I can say that it's not related to memory.

So maybe the second question. I look at your order announcements history. It seems like every year at the beginning you have a good visibility into the first half, maybe by the end of March early April you start to make new announcements on orders and that could contribute to like Q3 of the year? My question is, based on what you see in terms of the ordering? Are you expecting a similar pace of -- in terms of how your order book is filling up, especially for Q3 this year? And I have a follow-up after this.

Ramy?

Well, I'll tell you Charles, it's very hard to compare it, because the mix is different and it's very hard to look at the year before and compare it to this year. I think as we said, the order, flow of the orders and when we see the applications and we see the market trends, definitely it's a very healthy first half and we are starting to see a very nice buildup of applications, customers inputs and also backlog into the second quarter -- and into the second half of 2022. It's a little bit too early to give the whole picture of 2022 and this is very typical to the kind of business that we are in. The customers -- our customers, their forecast is a little bit, I would say, shorter or the visibility they provide us is shorter than if you compare it to the WFE, but no doubt it's building up to be a growth year.

Okay. Got it. So a quick follow-up to that still kind of related to the second half. I know for most of the years in the past you've kind of have a steady kind of linear growth throughout the year. I mean, maybe with a couple of exceptions like in 2019. So I wonder what's your thinking so far, because last night I think ASC they talked about a relatively linear continued growth for their business. I don't know whether that's a good indicator for your business or not? But are you kind of extracting the similar seasonality pattern or revenue profile throughout the rest of 2022. If that's going to be a little different say maybe second half going up or going down what will decide -- what are the leading indicators you are looking at?

So, first of all, you know Charles what's differs Camtek from this market is the fact that we have 130 customers. And we got a quite a few different segments that grow at different pace and this is why it's sort of hard to say. I think that in our prepared notes we said that we definitely see a growth into the second quarter and we are behind it. Above that things are building up positively. It's very, very hard for us to give more accurate projection in this stage. But definitely, it's a very good start for the year.

Thank you, Ramy. That's all from me. Thank you.

Thanks Charles. Next we'll go to Gus Richard of Northland. Gus, please go ahead. Gus, you need to unmute.

My bad. Sorry. Thanks for letting me ask a question. In advanced packaging, can you give me a sense of how much is high bandwidth memory? How much is heterogeneous and how much is fan-out just a relative mix?

How much is it from a mix. I'm trying to think of the numbers. I would say -- and first of all, it's I want to try and look from a -- not just a quarter. When you look in the quarter it's a little bit misleading. But if I look at the entire year, so no doubt first of all there is the broad applications in the advanced packaging of all the different customers. And this would probably -- this is still a big portion. If I'm looking at the -- it's a significant percent the heterogeneous integration in the overall business. The fan-out is also very significant the high band memory is a little smaller in magnitude and then comes a lot of different in smaller applications.

Okay. Got it. Got it. And that's just in terms of advanced packaging, correct?

Absolutely. We are talking just about the 50% of our business that is advanced packaging.

Got it. And then if -- could you do the same slit foundry OSAT IDM? In terms of advanced packaging just to give us a sense of where the revenue in that bucket is coming from?

Well, this is a little bit harder for me just to give you this number from the top of my head. But definitely the IDMs is an important portion. Then comes the OSATs that are very important because there are many of them and they covers a lot of applications. Some of them are not high-end application in advanced packaging but still the quantities are very large. And then obviously, it comes the foundries and here it depends, it differs. So it would be very hard at this stage to give you here an accurate number or an accurate indication.

Got it. That's super helpful. Thanks. And then I'm just curious in your front-end applications, is that currently dominated by discretes or compound? Can you give any color on what sorts of front-end customers you have?

Well, the portion that we do is more related to the -- what we call the back-end of the line of the front-end. So here you would see a variety of applications from trailing hedges to leading edges. It will be both, it's not just one of them. It would be many applications. And this is as we said, it's about 20% of our business this is best portion. And then comes the -- what we call the compound semi that we separated and we look at it as a separate business and this is about 15%. And this is definitely growing. A lot of it obviously is related to automotive, silicon carbide, but there are applications they are like LIDAR, face recognition which are more slightly different materials, but still in the same market segment.

And then in the 10-K, do you disclose year-end backlog? And then if you do can you give us a little preview of what that might be?

No, actually we do not provide in our 20-F which is the equivalent of 10-K for US companies or foreign issuers. We do not provide any backlog information. So we typically, we do not provide it also in our conference calls.

Okay. Fair enough. Thanks so much.

Thank you.

Thank you. Gus.

Thanks, Gus. We'll now go back to Jamie Zakalik of Bank of America for a follow-on question. Jamie, you may unmute.

Thanks. Thanks for letting me ask a follow-up. I had a question on OpEx. It looks like it's starting the year pretty high based on my calculations maybe in the $18 million range. How should we think about OpEx throughout the year? Is this the quarterly rate we should be thinking about? Is there -- are you guys going to potentially grow it sequentially each quarter? Basically, how should we think about it throughout the year?

Well, without referring specifically to the number. I think what we plan on OpEx is pretty flat quarters. We do not plan to increase much above and beyond the increase that you already see in Q4 and Q1. So it will be pretty flattish OpEx level throughout the year.

Okay. And my last one would be -- when you're looking at the year from the visibility you have now, if you had to rank order your applications on which could grow fastest and which might be slightly less fast growth this year. How would you rank the applications across advanced packaging, compound semis, front end et cetera?

So, let's go back no doubt, front end is 50% of our business it's a very robust growth in a couple of segments there that are going to grow very fast. And definitely we are going to enjoy it. So, there's specifically we talked about the heterogeneous integration, we talked about the fanout. And we talked about the DRAM transition to high bandwidth memory, definitely these are three strong trends that are going to go -- are going to be very dominant in 2022 and I believe also in 2023. So, definitely, this segment is very strong, it will grow. And we're very confident about it. I think we've grown very fast in the front end. We -- this is 20% of our business. We see continued growth there, we have a nice backlog for the first and second quarter for this segment. And similarly, the compound semi, which is about 15%. So, those three segments are definitely very strong. And then there are the other that we didn't talk about a like the CMOS image sensors, an area that we dominate, that is around the double-digits of our business, this business is definitely going to be there. And I'm expecting that it will be in similar range in this year as well. And if you take 130 customers who were very confident that this is going to be a very -- it's going to be a good growth year.

Okay, thank you guys. Congrats on the results.

Thank you.

Thanks Jamie. Our next question is from the [indiscernible]. You may go ahead and ask after you unmute yourself.

Hello. I just wanted to understand that if the margin of the research and the selling supposed to be still, I see that it's kind of lower than the other area and I wanted to ask test about the future if you see this continue?

You came across unclear. If you can, please repeat the question?

Rafi, did you hear me? Hear me?

We hear you.

I hear you, but I couldn’t understand your question?

Okay. I just wanted to ask about the margin of the research and development costs and the selling and general administration cost? If -- I show that the margins go lower and I wanted to know if in 2022, it will be -- continue the same margin like it was 2021?

Okay. Actually, we did say in previous calls that we plan to increase R&D and sales and marketing. The company is growing and in order to support the growth, we needed to invest more in R&D and in sales channels. So, what you have seen in fourth quarter, you will continue to see in the first quarter is somewhat an increase in this level of spending. As I said to Jamie, after this, we will see more like a flattish R&D and sales and marketing for the rest of the year.

Okay.

Thank you, [indiscernible]. [Operator Instructions]. Thank you, Udi. If anybody else has a question they would like to ask, please raise your hands. And we'll give a few moments to call to see if there is any additional questions. So we have a question, no we do not, or we do have a question from Alan Lars. Alan you may go ahead and ask.

Hi. Thank you for taking my question. You stocked every quarter also about the introduction of new products that are supposed to be in the coming quarters. Could you please provide some details about it? What kind of products are planned to be introduced? To what areas? And what's the prospect of they're selling in the coming year or two?

Okay. I can maybe you know we talk about new products. Actually it's like -- we call it like ongoing. Almost every order we get there are some special development, some special feature. And many times we develop product and feature while we get the order. So there are many, many other -- many I would say new product that we launch all the time. We don't announce on any or of them. Only when we go to a new platform or something really major system, we usually make announcement, this is in general. So we always said that in 2022 we plan to launch innovation product -- innovative product we mean definitely it will be some new platform, more features on the Eagle and the new platforms. So we have a lot of new, I would say the innovative product will be launched next year. And by time, we will definitely we'll talk about it I will explain what the purpose of this product and what we expect from that product.

I had a follow-up and it's related to the R&D intensity, we have seen in 2021 a quite significant decline in the R&D intensity because of the increase in sales, quite robust increase in sales while R&D was quite flat, which is speaking about the operating leverage. But to what extent this is something which is sustainable or is it a need to go to somehow higher levels of R&D intensity in order to support future growth or future prospects of new innovations?

But let me just give you something about your statement. Definitely R&D the last year should support the sales and most of the R&D efforts were to support the sales. But while we support the sale, many of the support are what we call long-term product, long-term development that we already plan to launch in some time. So I couldn't say that all the efforts just go to support the ongoing without thinking about the long-term. Now developing a new platform usually this is the project that takes a few years, okay? In our world the accuracy, the demand, application, it takes time always to come with totally new product or new platform. So this is what we call we have a dedicated team that's working only on the long-term. But altogether we definitely have a new product. And even while we put a lot of efforts in 2021, we came with the fourth generation of the Eagle. We came to many feature of site inspection, side edge section and back inspection and many different sensors a lot of things that we don't make any announcement for every one of them. But definitely customers are very aware about our capability and what type of product we provided during this year.

Thank you very much.

Just to complete Alan your question -- the answer. As we said, we -- indeed R&D spending last year was somewhat lower than what we wanted, because it took us some time to hire people with a big race after talented engineers. So it took us some time to hire the people that we wanted and to increase the level of expenses, which are absolutely mandatory for our continued growth. And I think that during the fourth quarter and in the first quarter we have managed to improve this. We have added more people to the R&D team and sales and marketing as well. And as a result what you will see in 2022 is a higher level of R&D expenses.

Thank you, Alan.

Thank you.

Okay. Thanks. That would end our Q&A session. Before I hand back to Rafi, I just want to remind everybody that in the coming hours this call the recording will be uploaded to Camtek's Investor Relations website. And with that, I would now like to hand over to Rafi for his closing statements. Rafi, please go ahead.

Okay. I would like to thank all of you for your continued interest in our business. Again, I would like to thank all our employees and my management team for the tremendous performance and we look forward to continuing it. To all investors, I thank your long-term support. I look forward to talking with you again next quarter. Thank you very much and good-bye.