Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to Camteks first quarter 2020 herself conference call. All participants are presently in the listen only mode. Following managements focus intuition instructions will be given for the question I mean after such as a reminder, this conference is being recorded you should have Rcs I know the company's press release.
If you will not received it please contact skeptics Investor Relations team at you can't Investor and public relations.
164668 to be 559 or few it in the news section of the company's website Www Dot Camtek Dot com I would now like to handover the call to Mr. I felt you can investor Relations Mr. health would you like to begin.
Yeah. Thank you and good day to all of you like to work or have you to comfort first quarter 2000, and Tornier results conference call an old locals, hoping for income tax management for hosting this call.
We don't go onto the roughly I mean, it's come through Axiall.
I remember a complex beautiful, Mr only longer that come to exceed Oh.
Coffee were provided the although you've come to get resolved and discuss market trends in the first quarter 2020.
Social done some arbitrage results of the quarter.
Then open the call to Turkey Your question.
Oh, the do you know likes to remind on that so to information provided on the school arent all companies.
Unless otherwise specified.
You School also may contain forward looking statement, you say to the only predictions.
Change as time passes.
They can do score or merger as of today. The company undertakes no obligation to update or any of the forward looking statements contained.
As a result useful measure future events sure interesting expectation or otherwise.
Sorry minded actual events or results MARD doesn't look year from those projected.
Joining as a result, so exchange it industry market trends reduced demand for services and for the time, you development of new services and products and a reduction better markets.
Which competition and industry and price reduction is what did you do other risks identified in the company's fighting would you actually see.
Please note at the Safe Harbor statements in today's press release also covers the content of these conference calls.
In addition junior scores so it's a non-GAAP financial measures will be discussed.
Hi used by management to make strategic decisions focus future results and evaluate the company's current performance.
That's run believes that it doesn't change of lung gets that much in measures used for two investor understanding and assessment of the company's ongoing Corporation I'm supposed to look for a future.
For the reconciliation among gifts give some action measures is included in todays earning money.
Oh no that's another close to Lucky I mean, some tax yield Ofi go ahead. Please.
Good morning, Thank you.
Yes.
First quarter 2020 ships amounted to approximately.
Sure.
No.
The company regional guys.
For the quarter Oh.
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So it's important to.
No.
The installation of fuel machines goals.
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Okay.
Based on all doing.
With them.
He is towards the second so.
As we expect our second quarter revenue will be surface six.
Yes.
Despite the Goro situation the company.
It seems strong business.
The demand for our customers for verification going to school <unk>.
Third quarter.
We are well.
Excuse me.
I would like.
So we used a range for mentioned.
Score, resulting in a little small.
This call 2012.
Oh strategy used to extend our installed base, which is why didn't you then the big.
And and design performed.
We also received.
Three d. misfortune.
And.
This process on becoming a leading supplier.
Section this way.
For the first off of 2020, we ever so you all do from some other cost.
Most people.
Fiction machine.
They sequence equalization.
No.
Which resulted in lower gross margin.
The first quarter.
As expected.
Yeah.
No logical 45% due to this broader piece and the laws.
Customer with older machines.
We'll take a nation also live more complex applications and.
[laughter] Burgess machine.
Mobile capabilities into higher.
The second quarter over resident guys is.
Seeks to certainty.
We scored <unk> roles and.
With that we see Q3.
Well, we've already seen change you train with orders for the third quarter four machines with more is above.
Okay.
The first six months.
Let me give you some of that highlight.
Yes.
Sorry, one in China.
I'll just stories.
Since the beginning of this year, we have received all due to poor approximately 50 machines for.
We'll see medicines oral medication.
Machines installation will be completed by the end officer water.
We have received all due for multiple machines strong if you want our with customers mainly for Fiveg applications.
We delever. The first book did you give inspection machine for 620 600 million Mr. Fungicides. These machine is of course, you want coastal do for food helped applications, we expect to Delever the second machine towards you've heard costume jewelry.
The second quarter.
Our customers. This year this phase out spectra energy partners, we continue to grow as this is cost effective approach.
Needless to say this week on two new all the R&D airports together with few one customers to develop new inspection and metrology capabilities.
For the next generation packaging.
Yes.
Regarding the pool, but they need and its impact on the global economy.
Our business so.
We are performing.
We are monitoring the situation closely and doing uptick our flows as things change.
Hi tool that four or five we can hold them behind us and back to normal life.
I would like to specifically thing our employees for their fantastic work and the ability to adopt weekly to this deal is though I.
I would love to is over to more shape for more details peanuts. Your discussion if you're not should result for sure.
Thank you will see my financial summary, I heard I would provide the results are unaudited basis.
A reconciliation between to get results in the non-GAAP results appear on the table at the end of the press release issued earlier today.
It's up you mentioned first quarter 2020 shipments of machines to customer amounted to approximately $33 million in London. The company original guidance for the quarter.
However, first quarter revenues came in 30.2 renewables.
Decreased 11% compared with $34 million reported in the first quarter 2019.
Corona vitals caused delays installations and the company recognizes system revenues only after installation.
It's impacted revenue recognition or multiple for number of missile systems.
Which were delivered but installation was not completed during the first quarter.
The geographic revenue splits for the quarter was as follows Asia, 89% interest on towards 11%.
Gross profit for the quarter was $13.6 million the gross margin for the quarter was 45.2%.
This is 50.6% into first quarter of last year due to the lower revenue and sales mix of fixing the margin as Rafi mentioned already before.
Operating expenses in the quarter were $10 million. This is compared with 9.9, new doors into first quarter last year and to the $10.5 million reported in the previous quarter.
We expect operating expenses in the second quarter to return to Q4, 19 levers and certain R&D projects expenses will be recorded.
Operating profit during the quarter were $3.7 million compared to the $7.3 million reported in the first quarter last year.
Operating margin was 12.2 per cent compared to 21% to 1.5% mainly as a result on the lower gross margin.
Overall, we expect a significant improvement in our operating margin over the coming quarters.
Net income for the first quarter of 2020 were $3.6 million or nine cents per diluted share.
This is compared to a net income of $6.7 million or 18 cents per share in the first quarter last year.
Turning to some highly levered balance sheet in capital metrics.
Inventory Lebron has gone up by approximately $3 million. So I won't be test to do with the ship machines that were not recognized and all included in the inventory.
So used to support the increase in business volume, which we are expecting to coming quarters.
We generated $1.3 million in cash from operations in the quarter.
Accounts receivables increased from $31.4 million to certain $37.1 million.
This is due to timing of payments from customers.
During April we already collected more than $50 million and we expect strong positive cash flow during the second quarter.
Litigation cash equivalents and short term deposits as of March 31st to 12, who can bready increased to $90.6 million compared with 89.5 years ago doors at the end of 2000 thing team.
As Rob you mentioned earlier, we have a record backlog, we do expect revenue was $36 million to $38 million.
Second quarter with continued revenue growth and improved profitability in the third quarter.
And with that.
And my sense would be open to take your questions for a dose.
Thank you ladies and gentlemen, this time will begin the question answer session. If you have a question. Please press star one if you wish to Ken's question. Please press star to if you're using speaker.
They have for pressing your numbers.
Your question, we pulled in the order. They are received please them biodiesel for your question.
The first question some Quinn Bolton with Needham and company. Please go ahead.
Hey, guys nice nice nice results and.
The strong guidance for the second quarter I wanted to start on the.
Profitability of the gross margins you sort of went through the lower margins on basic to the systems that you're shipping in the first half you've talked about gene.
The backlog supporting a higher gross margin ended the third quarter and just wondering if you might be able to give us. Some sense is that on the range of 50 to 100 basis points.
Improvement in into the third quarter.
Just just any sense you could give us on.
What's the trend might be into this into the third quarter gross margin.
As you Queens, Yeah, basically as you mentioned.
Our current backlog supports higher.
Gross margin towards the third quarter.
We believe that weekend basically.
I'd go back to the kind of normal level that we reported throughout 2010 they do.
Probably closer to the second half of 2019.
Great. Thank you and then on the Cmos image sensor I believe you said that you've already received orders for 50 systems. This year I think that would imply a pretty strong mix shift in your business towards she is this year wondering you know.
If you see that strength continuing pass the third quarter.
Or does your visibility just just today extend into the third quarter for the Cmos image sensor portion of the business.
Well leads.
Well I Queen this is Ron.
We are seeing today, you know two quarters ahead.
Which is more than we usually see.
It's very hard to de stage with everything that is going around to go and anticipate what will happen in the fourth quarter, we don't see any negative signs at this stage. However, I think this is the most we can see at this stage, we definitely see the just Cmos image to image sensors swung into.
First three quarters of Dcs.
Great and then last question I had was you'd mentioned the.
Panel level packaging inspection system I think you said you.
Shipped one system in the first quarter checked to ship the second system here in that in the second quarter for fan out applications. Just wondering if you can you give us more details.
Are those systems going into a large foundry is going to a more traditional sat customer just just wondering about the adoption of and all of them packaging.
More broadly. Thank you. So so the panda level machines are going to oak sense.
Okay.
As you know you an open mills you know is related to the cost reduction the fan out to applications and it's a very important trend.
We see these train defense, we announced increasing overall and say amount was always on the roadmap of offsets any DDT starting to happen, it's very hard to see today to what extent it will go but definitely people believe you need and believed a decent provide cost of sick.
We will span out applications and as we said we're shipping to a tier one.
So we just shipped with tier one offset in the first quarter and we will shift to another tier one hosts.
On the second quarter and by the way, we see more I would say that muscle most but.
Power devices are properly Mitch very very nice this concept and we see more and more power devices. The doors to this direction fin Oakland partners.
Great. Thank you very much for any additional color.
Next question from Craig Ellis of B. Riley FBR. Please go ahead.
Hey, guys. This is carlin shock for Craig I guess, starting with the gross margin front.
Your seeming to the other people in the semi cap side have noted higher freight cost impacted margins I. Just wanted to know if you guys are seeing any of that and how much of it impact that might have had high in the quarter or the outlook.
So yes indeed.
A freight and shipping expenses went up pretty sharply.
We will see most of the impact actually I think into second quarter, not so much into first quarter as most of the first quarter.
We still nodes.
Suffer much folks from the grown the virus.
E books.
But yes, we will see and we are seeing increasing shipping expenses.
In the next couple of quarters.
Got it and then I guess kind of turning to Opex, obviously ticking up a little bit in the second quarter.
Can you just give us a sense for what the linearity is through the year do you have further R&D kind of projects are in the pipeline that you'll have to increase opex for in maybe the third quarter or the fourth quarter.
So in terms of R&D I don't expect.
In much the increase over what you just mentioned in.
For so it will be pretty linear.
Moving from second quarter, two the rest of the year.
We do do some fluctuation on sales and marketing or could be based on the way we approach.
Saves.
When you sell direct oversee the level of.
Commissions to agents or lower.
We walk through agents.
I'm doing.
You talked on the sales and marketing expenses.
Got it Okay. That's helpful and then I guess last one for me.
Obviously, it sounds like the image sensor business is doing well can you just kinda talk through some of the puts and takes in the quarter any outlook in some of the other end markets just kind of.
Those are playing out.
Any color there would be great.
Thanks.
And.
I think overall.
The our end markets already behaving so far in a very duty into we we anticipated Cmos image sensors as they say they're going to be strong.
The next with this first we Coulters, we don't see any LICA TBD into fourth quarter, but we don't we don't know enough involved.
Aim.
Advanced packaging is the second portion entities is healthy and there are many activities do and we're shipping machines to introduce market I think the memory portion of the it's on speaking, it's still not picking up I expect the explosion.
To pick up towards the latter part two of these few or early next year as the DRAM manufacturer start.
Can you to add capacity.
What we're seeing is also an increase email or Rx business, we mentioned due to a rafi mentioned if there any summary, we has a a nice order for multiple machines for one of the tier one players in these markets and DC DC is a gain related to the scene and mark.
I will say five primary fiveg.
And of course, there are only you know ones and twos and other two d. applications that in general complement it to rest will see applications, but overall this remain applications are the ones, which I just highlighted.
Got it alright, thanks, guys.
Thank you.
And next question is from Guts Gus Richard of Northland Securities. Please go ahead.
Yes, thanks for taking the questions can you talk little bit about linearity shipments in the quarter and logistical issues getting things installed on yeah, obviously had.
Some problems and just want to sort of know.
What you guys are doing to address those.
Well if I talk about give me are pretty I think the first quarter dealing the RFP was was Chinese new year. The January and the first three months of the quarter was pretty I would say was pretty low.
Second and third two months of the first quarter where rates.
We're strong both of them and they were seeing more release aim I think overall.
We.
The big linear routine I think most of the month the gross these accruals.
Entire eight quarters into next let's see if I look at the second and third quarter, we're going more or less to sheep similar number of machines with some inquiries spirit to increase into revenues, but overall the number of machines will be similar from month to month dishes very important for us.
As DC allows us to streamline the manufacturing end the installation of the machines in a better way.
Absolutely installations.
We have a dedicated teams our own teams in each of the regions in each of the territories and they would be doing the installations and there is very little the support do require from a from here from our headquarters so from that point of view.
I don't foresee any major issues with the installations, we think that there are a nice they must lights out two different regions will be able to sheeple to machines and we look at the situation today, we don't see any issues course, as we see it disposed situation.
Some of the things, we don't know and we will update you something needs to be updated but it does stage today, we do not foresee any issues and shipments and installation in the next couple of quarters.
Okay, and then just a little bit of a further revenue breakdown.
Lastly, what percentage of revenue is China.
Q1, and in the next couple of quarters and also what some mix. These days between fund then.
Macro defect inspection and back end.
Well you know we don't look at these we looked at it as Frontend, a meat and backing so.
It's very hard for me just away.
So to speak the numbers out of my sleeve here, but I will tell you I think the main business is in the mid to end.
The smaller plus is in the front end.
And I would say the second embodied in the middle East to back and some of the applications with the bank and I would say these on numbers too so definitely the meat and is the most dominant part in our business.
Regarding chime in China.
I'm showing no we don't keep the accurate numbers, but definitely it is significant and I think it is similar to other semiconductor companies Theres a lot of investments in China.
Going on.
I think what makes it seems more deep Asian way us to Corona titles is less.
If you know effecting less at this stage.
Second quarter, a us in Europe.
Very heavily affected by to coordinate titles. So we wouldn't see more business coming out of Asia, No doubt, China is very important and.
Very significant.
Got it okay. Thank you.
Thank you guys.
If there any additional questions. Please press star one if you wish to cancel your question. Please press star to please standby only poll for questions.
There are no further questions at this time before I ask Mr. led me to go ahead with his closing statement I would like to remind participants thatll be please this call will be available Camteks website www camp that.
I will begin in Cairo, Ms., Stephanie would you like me give concluding statement.
Yes, I would like to think two foot thick hole.
For your continued interest in our business again, I would like to think or our employees and my management team folder.
Business performance and we look forward to continuing.
Well, we'll invest or I think Q long term support I look forward to talking with you again go to thank you and goodbye.
Thank you. This concludes the Capex first quarter 2020 results conference call. Thank you for your participation you May go ahead and disconnect.
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Okay.
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