Q4 2022 Camtek Ltd Earnings Call
Mr. Moshe Eisenberg, <unk>, CFO and Mr. Rami Langa Canpotex CFO .
Rafi will begin by providing an overview of <unk> 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 begin I would like to remind everyone that certain information provided on this call are internal company estimates unless otherwise specified.
This call also may 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 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 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 <unk> expected business in certain countries, particularly China from which comtech expects to generate a significant a significant portion of its revenues.
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 timing developments.
Developments of new services and products and the reduction by the market increased competition in the industry and price reductions as well as due to other risks and uncertainties identified in the company's filings with the SEC.
Please note the safe Harbor statements in todays 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 events and results and evaluate the Companys current performance management believes that the presentation of non-GAAP financial measures are useful to investors understanding and assessment of the Companys ongoing.
Cooperations and prospects for the future a full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release and with that I'd now like to hand, the call over to Rafi, Amit <unk> CEO Rafi. Please go ahead.
Thanks Kenny.
Good morning, or good afternoon, everyone.
<unk> ended another quarter of continued revenue growth.
Fourth quarter revenues were.
Record of $82 million.
11% increase year over year.
Gross margin came in at 49% and operating margin at 27, 8%.
Over 60% of our revenues came from advanced interconnect packaging applications.
Front end and compound semi segments accounted for about 20% for revenue.
The total revenues for $2 22.
It was a record of <unk>.
$321 million, 19% growth year over year.
This is the fifth year in a row with record revenues in the last two years, we more than doubled our revenues and tripled our operating profit.
In 2022, we continue to expand our customer base. We now have over 250 active customers and we have added more than 50, new customers. So we expect them to contribute significantly to future revenue.
The company's diversified exposure to multiple customer secular trend and territories contributed to our success.
We have managed to increase our business in the through generous integration segment, which serve the eye performance computing and in addition, it has partly been qualified for the next generation DRAM products. We expect these two applications to <unk>.
<unk> to contribute significant revenues in 'twenty two 'twenty three.
Compound semi conductor and specifically silicon carbide market continues to grow rapidly and we have been able to win several inspection steps at several different customers.
Last week as reported few weeks ago was a tier one manufacturer for an order totaling of $18 million for multiple machines to be installed in 2023 and 'twenty 'twenty four.
In 2022, we have developed several new products and technologies, which we plan to introduce in 2023, we.
We anticipate it will further increase our market position and expand our capabilities in entering new market segments.
Looking at 2023.
Global economy economy growth is projected projected to slowdown thus affecting wafer fab equipment in general and specifically the memory segment.
Also regarding the new U S restrictions on China semiconductor industry from few months ago.
Have yet to see how it influences the industry.
After three years in which the entire production supply chain was disrupted 'twenty two 'twenty three is.
Expected to be a challenging gear with customers being more cautious and hesitant.
Increasing production capacity before receiving orders from their end user. However, we are also receiving positive signal from several customers regarding expected improvement in the second half of 'twenty two 'twenty three.
We believe that our leadership position into specific segments broad and diversified customer base and long term strategic relationships with customers will enable us to again outperform the wafer fabrication equipment, which is.
As predicted to decline by 20% to 30% in 2023.
Regarding the first quarter.
We estimate the sales to be approximately $71 million to $74 million, which represents a decline of 6% year over year and 12% sequentially at the midpoint.
After doubling sales in the last two years, while focusing on supplying systems on time and providing a good response to customers. We now focus on our company's efficiency.
Also we are carefully monitoring certain balance sheet items, such as inventory levels and accounts receivable.
Adjusting our expenses and headcount to the current demands Michele will address our plan in more detail.
I would like to conclude by stating that the semiconductor is a strategic industry and all leading countries are heavily invested in it.
I would like to hand over to Moshe for more detailed discussion of the financial results Moshe.
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 tables at the end of the press release issued earlier today.
Fourth quarter revenues came at a record $82 $2 million, an increase of 11% compared with the fourth quarter of 2021 and slightly more than the previous quarter revenues for the whole year were a record of $321 million or 19% increase year over year.
Sure.
The geographic revenue split for the quarter was as follows Asia, 80% in USA and Europe accounted for 28%.
Gross margin for the quarter was $40 2 million of the gross margin for the quarter was 49% versus $50 nine in the fourth quarter of last year and the same as in the previous quarter in line with our previous guidance range.
We continue to experience inflationary pressure on raw material and labor, which our keynotes.
Fully passed on to customers. However, we are taking steps to mitigate this impact by improving our efficiencies.
And the cost is.
As a result improve our gross margin over the mid to long term.
Operating expenses in the quarter were $17 $4 million. This is compared with $16 8 million in the fourth quarter of last year and $17 million reported in the previous quarter.
Operating profit in the quarter.
Was $22 $8 million compared to $23 $2 million in Q3, and $29 million reported in the fourth quarter of last year.
Operating margin was 28% similar to the previous quarter end to the fourth quarter of last year.
Financial income for the quarter were $3 $8 million compared with $2 million in Q3.
$200000 last year the.
The majority of the increase related to significantly higher interest rates on our deposits on an increased cash balance we expect the financial income to continue to increase throughout 2023.
The interest rates remain high.
Net income for the fourth quarter of 2022 was $24 million or <unk> 50 per diluted share. This is compared to a net income of $19 7 million.
Or <unk> 40.
Per share in the fourth quarter of last year.
So take diluted diluted number of shares as of the end of Q4 was $48 3 million daus.
Turning to some high level balance sheet and crystal metrics.
So total cash, including cash equivalents short and long term deposits as of December 31, 2022.
$479 million.
During the fourth quarter, we had a strong positive cash flow and we generated $19 $9 million in cash from operations and altogether for the year, we have generated $67 million.
Accounts receivable increased to $80 million in the quarter, primarily due to the timing of revenue and collection within the quarter.
Daves outstanding for Q4 were 90 days since the beginning of the year, we experienced strong collections and we expect the account receivable balance to come down by the end of Q1.
Inventory level was $70 $9 million and it went down by $3 $9 million over the quarter.
In the last few years, we increased the inventory in order to support the growth, especially in light of the supply chain issues.
The reduction this quarter is in line with our target to optimize the inventory level, given the new business environment.
Moving to the guidance in Q1, we expect revenue in the range of $71 million to $74 million.
Our gross margin is affected by the business volume and the increase in the bill of material, resulting from the supply chain issues inflation and labor costs.
We therefore expect gross margin to be around 48% in Q1.
Our focus in the last few years was on meeting the phenomenal growth.
In order to improve the gross margin. This year, we plan to focus on cost reduction through engineering and design optimization and supply chain initiatives. These steps take time, and we anticipate that there will assist us in gradually improving our margin over the coming quarters.
We.
Turning to invest in R&D to meet our customer roadmaps and be well positioned for growth.
However, we are adjusting all other operating expenses to the current revenue level.
In order to move us closer to our target operating model when growth returns to our markets.
The current strengths of the U S dollar versus the Israeli shekel is helping our current operating expense level as well.
I would like to highlight the contribution of our cash reserve on our results.
We have close to half a billion dollars in cash that enjoys the increasing interest rates and.
And puts us in an excellent position to grow Inorganically and we are actively looking at opportunities.
With that lovely Rami and myself will be happy to take your questions.
Kenny.
Thank you Michelle.
At this time, we will begin the question and answer session. If you have a question. Please raise your hand <unk> platform, our <unk> and <unk> on mute operate she can ask your question.
As we have a lot of people on the call. We will take a few moments now to Paul for your questions.
Okay.
Our first question will be from Blayne Curtis from Barclays. Please go ahead.
Okay.
Hey, this is Tom O'malley, not sure what happened with the <unk> in there but.
I just wanted to understand in the December quarter.
Give a breakout by end market from a percentage perspective of what contributed to the revenue could you just break it down between advanced packaging I know you said greater than 60, but any more granularity would be great compound semi front end front end Cmos image sensing and then other just any granularity there would be really helpful. Thank you.
Yes.
It's still a good quarter.
Hi, Blaine so this quality.
So stone Tom Thanks, Tom sorry.
This is ronnie so if we look at the fourth quarter.
In our advanced packaging.
Jim to close to 67%.
This is the mix of the old areas overall, if we look at the yearly basis, it's about 60% our.
Our compound and front end business. They were together just above 20% and then there were a few other Cmos image sensors. This year is a little bit lower than other years and this is for the reason of the sales of mobile phones. So it ended up about six.
And then there were a few small items.
Okay helpful.
6% plus for the full year, you are saying are 6% for the December quarter for camber quarter. In overall this year was around 6% to Cmos image sensors as we anticipated.
<unk> was lower than usual our usual 10%.
For this segment, Okay, and then and then you guys are making some comments about the full year Youre, saying, you think you'll do better than broad based wip, but youre also saying hey, the second half is going to be stronger than the first half could you just help identify which end markets are going to be weaker in the March and June quarter.
And how should we think about what June should look like off of March given the fact that it sounds like June is the bottom for you guys and how extreme should outlook. Thank you.
So so first of all we didn't say that Germany is going to be anything about June I'll talk in a minute about what we are seeing beyond Q1, but let's talk about <unk>.
So the segments are going to be similar next year I am expecting a nice then look at our backlog and the pipeline advanced packaging is going to be very strong next year coming from village, Virginia integration and lot of the move for drams too high bandwidth memories.
This is also going to contribute significant revenues silicon carbide is going to be strong and the overall other markets are going to be okay. So from the segmentation point of view, we don't see anything different keep in mind that we.
260 customers that helps us a lot in balancing the business and we've acquired 50, new customers. This year did I am expecting that some of them will buy additional equipment in 2023.
So this will give us a balanced pace.
A forecast, but looking at Q2.
And beyond the entire year of 2020, three we have a solid backlog and a solid pipeline.
Now you have to remember that we are working in a very dynamic environment things are changing.
We did not get any major cancellations.
There is more hesitancy than before.
So therefore, it is too early to give a forecast for Q2 or even talk about the rest of the year.
But as we said in our prepared remarks, we expect to outperform our market segments.
Thank you.
Thanks, John .
Our next question will be from Charles shaved from Needham.
Charles Please go ahead.
Hi can you hear me.
Yes, yes.
Yes, thank you very much.
Sure.
Ask a bit about the gross margin.
Things like.
You are facing some inflationary cost pressure and taking action to address those and you actually got to down.
Our first quarter gross margin bias merge.
My question is I think historically, it's not just the volume.
<unk>.
And also the copper cost input that influences our margin I think our product mix, sometimes play a bigger role I know you didn't really talk about product mix into 'twenty story that you stay a favorable unfavorable mix that could be.
I mean, a positive or negative to our gross margin for the full year in 2000, sorry.
You have good backlog I think you'd have some visibility into the mix.
Okay.
Hi, Josh.
So I would say the following yes, you are right in our product mix has a lot to do with the gross margin as well, but we.
We decided to focus this time on the cost structure, because we see some pressure on gross margins from the cost elements, we see some increase in the bill of material.
Both from components.
Labor cost.
Altogether, we see some pressure so yes.
Mixing or may have a positive impact I think that the 48% that we gave as a guidance.
Good play is the bottom and.
And we can we may see over the year some improvement coming.
Also from the initiatives that we are already taking.
And as I said it will it may take time, but we expect to see some impact.
Impacts already in the second half of the year.
And also from the product mix that might be more favorable than we currently seeing.
Thank you.
Maybe the second question I really want to go back to that.
The question asked by by Tom earlier.
On a full here what do you think about that.
Segment mix is going to be I think you asked that.
It's quite similar but I also heard you say the.
Best packaging.
Which includes memory DRAM seems to be doing.
Being well this year and that should we kind of expect that that advanced packaging as a percentage mix may be growing a bit this year.
With obvious you said that they are okay, but.
I don't hear that theyre going to be.
I don't hear like it the conviction from you that they are going to be as great as the advanced packaging segments for you.
We oriented I talked about the segmentation <unk> didn't talk about the focus that was the second part where I said, what we can we can we're not in.
Position today to do any forecast.
<unk> and <unk> beyond the first quarter that we have already stated regarding the mix.
Whether the advanced packaging will be a little bit more than 60%, it's still too early to say, but it's definitely we see in the backlog and the pipeline that is going to play a major part of our business continue to be a major part of our business.
And it will be I would say at least 60% whether it will be significantly more as the fourth quarter I still don't know.
Okay. Thank you and may be last one really wanted to ask you about the geographical mix of what Youre seeing today based on order book.
Asia Pacific are assessed U S Europe .
Do you see that mix kind of changing into 'twenty three.
Asia Pacific May be growing a little bit faster in 'twenty, three relative to Europe , USA Europe or do you see the other way around thank you.
I don't think there is going at this stage at least what we see on the current numbers and our plans I think that the Asia, 80% versus U S and Europe , 20% I think at this stage, we expect these to see.
Thank you very much.
Thank you Charles Thanks, Charles Our next question will be from Gus Richard from Northland Scuffs. Please go ahead.
Yes, thanks for taking the question.
I was just wondering if you could talk about sort.
Sort of where your slotting tools at this point how much is that lead time compressed and just any general thoughts around that.
In.
The main issue and I think we spoke about it also in the last call.
What we see today that customers are very hesitant in tuning.
The pipeline into REIT deals or even scheduling.
The ship in time and the reason for that they are waiting to see the data and customers are giving their business and as a result, we've seen our lead times go down from about I would say four to six months coming down to something like three to four months in just.
I'll give you. This these are the rough numbers.
So definitely this is the reason it from our point of view, it's very hard to make to forecast.
And the first quarter.
Got it and then you mentioned in your prepared comments about some new products and I was just wondering if you could give a little more color in terms.
<unk>.
<unk>.
Expansion of market opportunity or.
Any color on the types of applications youre going to be addressing.
Okay.
This is.
And in general Tightens, I will be very careful about it because some of this information is obviously very confidential.
But I would I would say that there are two areas, where we are developing products first of all is to increase over time, we've been increasingly gradually and they are areas that we've identified that has we have good opportunities and we have the technologies to enter and diesel era.
<unk> that we developed products and will introduce Nick.
In parallel we are working with our customers on their Roadmaps and this requires development on our side to meet those Roadmaps. This is very important for us to maintain our market position and increase the business with our existing customers. So this would be the two types of development.
We will be introducing in 'twenty three.
Okay.
And sort of any color on.
Front end advanced packaging is it.
Yes, just any any sort of so it will it will it will be in the.
Advanced packaging it will be in the front end it will be for silicon carbide, and I would say even certain applications even in the Cmos image and so this is really across our entire portfolio and applications, we will be showing improvements in new capabilities in our product.
Okay.
Okay. Thanks, so much.
Yogesh. Thanks, Gus our next question will be from Brian Chin of Stifel. Brian . Please go ahead.
Yes, Brian can you hear us.
Brian I think you're muted.
Alright, sorry about that yes that better yes, we can hear you great. Yeah. Good afternoon, sorry about that thanks for letting us ask a few questions.
Yes, I appreciate the color on the lead times and it does so replacement order now maybe you get a delivery.
May June so you maybe have a little bit.
Visibility and backlog going into <unk>, but do you think based on that first half revenue is generally stabilizing around first quarter levels. That's my first question.
Right.
Well.
You know Brian .
I talked about it before.
It's.
The current status, even when we look at our backlog and pipeline that they are solid.
We are very hesitant in giving you.
More color on the second quarter, because things are changing.
As I said before we did not have any major cancellations. So we feel we are positive about the business, but still it's very hard at this stage to put a very clear number.
Okay fair enough.
You just run.
Q1 revenues flat across the year.
And Youre, obviously, a little bit more optimistic about second half, but that would that would obviously get maybe downtown for the air something a lot better than maybe what the kind of the benchmark might be in.
In terms of industry spend this year.
Maybe a couple of other questions.
I know with China, I know you don't aggregate, China exposure as a whole and so not asking you to do that but.
Can you provide some sense of how you think holistically your revenue in China could trend this year.
Relative to last year and also generally also generally what makes you more optimistic maybe that the distribution of this revenue improves later in there.
So first of all we did not as you said, we don't give any <unk>.
<unk> in Asia, but all in all.
Yeah.
China is coming out of the Corona virus, it's going to open.
We'll see how things work there in a couple of months, but when we look in China we are.
The business there is stable.
Colombia stable pipeline is stable, we don't see any major change.
I think our our customer there.
Continuing to.
Two older machines, the industry's growing their new customers. There. So I don't see any change. However, there are some I would say some things that we will need to wait and see how the whole thing in China is playing out I think <unk> talked in here in his prepared remarks.
How the U S restrictions would work there there are a lot of unknowns, but I think from our point of view, we do not see a major change there and raffi, maybe you want to comment further.
I say that.
If during the Q1.
The proportion between China Asia and in the other territory are about the same as last year.
And we have two technical Federation, the China was under a very tough time and very heavy slowdown.
So as far as I know the government now want to make a very quick recovery. So definitely it can make.
Action could definitely improved the business in China, but as I said, it's too early to say with to wait.
Maybe one or two months and then we can feel more comfortable what is going on.
Okay.
That's helpful.
Very last question silicone.
Silicon carbide has come up I mentioned, a few times on the call.
Within maybe that 20% of revenue, which Q4 and maybe similar last year, but what's the significance.
Second year of your Silicon carbide power device.
Revenue.
And kind of it with new products existing products.
Is that a business of its smaller size right now it looks like it could even grow this year kind of geographically.
Where are you stronger and where are you targeting if you think just not by customer, but Europe U S Japan China.
Any color there would be helpful.
So first of all the silicon carbide the compound semi in general H.
It's a global business and it's in all territories, and obviously I'm hesitant I don't want to disclose any names of customers, we're serving I would say.
Most of the major players in this area.
Think we talked about the $18 million.
The order, which we received.
<unk>.
A few weeks ago and Thats definitely from from a number it's a significant number.
What I can talk about this this is just one customer.
With specific steps, we are doing additional steps at this customer of this specific customer that there is even more potential in that specific opportunity and lags. These customer there are several other customers that can order machine. So so silicon carbide is growing very fast.
We have a good position in all I would say or most of the major tier one customers that are out there and definitely it's a business with them expecting to grow we're going to grow.
Both as the business grows but we are also finding more and more steps within the process that we're going to address.
Okay great.
I would like to add that in our silicon carbide actually is mainly for the electric cars.
And you know everyone knows what's going on this is one of the of the segment because it is the CAGR is over I think 20.
20%.
Definitely this drive the silicon carbide very aggressively.
And this is why we feel very comfortable with it.
Thank you Rafi I appreciate it.
Thank you Brian our next question will be from Craig Ellis from B Riley Craig you May go ahead.
And please on mute yourself.
Can you hear me guys, yes, we can yes, I wonder Paul So congratulations on the fifth year of growth really a great track record.
I wanted to follow up on that.
The industry outperformance issue and I totally understand that the nature of things makes it hard to really provide concrete color.
Around the businesses dynamics beyond the current order.
So I'll try it this way.
We look at the potential to outperform industry that are can you give us some range.
Potential outperformance you think is possible.
And if you can't quantify that could you rank. The factors that you think are most significant in leading to an outperformance margin.
Okay.
Let me try.
We talked about the segmentation, so I think that the advanced packaging segment.
We will be.
I would say solid this year.
So this is a segment that is 60% of our business in the fourth quarter was 67%.
These things and this is a segment that we'll maintain.
I would say good performance and when I talk about this segment, including the DRAM move to high bandwidth memory potentially dairies with DDR five.
Definitely.
60% of our business I think each of these I can say in good shape.
Then the risks I think silicon carbide is an area that should also.
And perform win as Rafi said this is going into electric cars and this is a segment that's going to continue to grow because there is a transition from the two electric cars, we see everywhere.
And that comes I would say the risk.
I think where we are with.
There is an uncertainty.
In the capacity.
Some of our customers customers that are very hesitant about expanding their capacity.
That's the area, where it's very hard to give a number to quantify.
So we feel comfortable about it will outperform the performance of the market.
But to give you an exact number it gets difficult.
Now one thing that definitely I think it's a plus is our exposure and strength in China definitely is roughly said.
There are some loans, but definitely this is <unk>.
Area, it's going to continue and expand the industry. There is no choice, we see that the number of live customers application, where currency I'm expecting that this will be a plus for us in 2003.
After you want to add something Tom it's fine.
<unk>.
Now the situation.
Well I mean that was really helpful. Thank you.
Moshe ill flip one over to you. So it sounds like within operating expense. There's there are some different dynamics going on on the R&D line. The company's committed to all the things that are going to generate those new products that you've talked about so it sounds like spending there is at least stable, but potentially up but on <unk>.
Other parts of operating expense Youre looking for efficiency. So how does that net out in the first quarter into the year does that net to a fairly flat opex would they go down in absolute dollars through the year help us with the contour of that line.
So, yes youre right.
We will continue to invest in R&D and as a matter of fact, we will see some increase in R&D over the year.
So that means that other areas will have to compensate for that.
Sales and marketing and G&A and here we are.
I'm going to tackle.
Sales channels improvements, we're going to look into travel.
Basically we will be doing.
Like any company that is looking to improve profitability, we will be much more cautious with respect to all kinds of expenses.
We will monitor it more carefully note that we have not done it in the past, but obviously when you when you are in.
More challenging business situation, we will do it even more so.
So net net we will see some reduction in operating expenses.
From the Q4 numbers.
Not by much but we will see some some reduction so if we ended Q4 with 17 going forward, we would see some reduction in Q1 in the level of operating expenses.
That's really helpful. And then Raphael ask your questions. So the company has done a fantastic job growing its customer base.
And the 225% or excuse me the 50% to 75% addition last year is pretty remarkable.
If you look at 2023.
Much further room is there to expand the customer base in that how significant can that be relative to what was a really big year end 2022.
First of all regarding customer base.
Even even from time to time and will be a surprise.
So discovery discover new customer.
Many of them by the way in China, as a new customer.
You don't know about them, nobody know and all of the southern to get more and more customers. So definitely China is one of the major your territory that we could see new customers.
And when we talk about new customers some time.
It is the same customer but different segment in this specific customer.
For example, if we penetrated two.
Tier one customer to a specific application and then found that we can give them better solution in other application in other department. So all of a sudden you have more than one customer like sub customers. So so we see that.
We there are enough room.
For us to develop our ability to many other segments and especially when you talk about op Youll see front end application there are more and more play that from time to time.
We see that we have the tool we have the ability and the.
In order to go out there and this is why we feel very comfortable that the.
The 250 customer definitely are helping us in reducing our risk when there are some slow down effect.
And with.
We definitely continue doing all our efforts to continue expanding.
The customer the installed base of customers.
So plenty of room for share and share of wallet expansion. As you look ahead. That's helpful. Thanks, Rafi Moshe I'll flip it back to you as my final question. So very significant increase in interest income in the quarter would you expect that kind of increase again in the first quarter.
And how much how much duration should we expect with these increases and.
And average interest rates across your different.
Cash and investment instruments as we look at 'twenty three.
So.
As you can as we all know interest rates are.
Pretty high these days.
And we are trying to take full advantage of the high interest rates.
We have reported $3 8 million of financial.
Income in the fourth quarter and yes, we expect this number to continue to grow.
Two five ish million dollars on a quarterly basis.
In 2023.
And again this is all assuming that the interest rates remain at the current level.
That's really helpful. Thanks for the insights team.
Thank you Craig.
Is that are any additional questions. Please raise your hands on the platform and we will give a moment to Paul.
Okay.
Yes.
Yes.
Yes.
Okay.
Our next question will be from Alan loss from leader along please go ahead.
Okay.
Alone.
You need one mute yourself.
Yes, Hi can you hear me yes.
And Paul might have not formulated.
From a catch up.
Yes. My question is about the memory was a bit slower in the last couple of years and years and speak about it as a potential for 2023 could you elaborate a bit about whats the.
The prospect there.
Yeah. So so this is an example, where the technology.
After DRAM is changing.
No.
Today, there are more and more applications and this is tied up to the high performance computing and the heterogeneous integration you see the high bandwidth memory. These are memories data are in snacks very fast very efficient from power consumption from bandwidth from every aspect. So.
All the manufacturers are starting to produce them to have been producing them, but they are ramping up.
The quantity is the capacity is growing and obviously our machines are here with us.
To inspect the bumps on the wayfarers and debt to an application that we're very dominant throughout.
In all the major players in this segment and that's an area each not huge but it is big enough mentioned im.
<unk> 23.
<unk> 24.
We expect to enjoy conversing application.
Thank you.
Welcome and thank you Adam.
Next question will be from Shah Cohen.
<unk>. Please go ahead.
Yeah, Hi guidance.
So all of our silicon carbide.
And what's your own market share over there you'll have the dominant player in the silicon carbide inspection and we are also play on gallium nitride on top of Silicon carbide and and.
What we see we see major expansion from across all customers from onshore too.
<unk> diagnostics.
Okay.
And to add capacity once we see that.
Multiple growth of capacity in that area. So if you can speak more about that that would be awesome.
So far.
So some Shanghai.
Cannot speak about customers names, but I think as we said before this is definitely a market. The end market is growing and the use of silicon carbide is also growing and more and more people are adopting silicon carbide in their electric cars. So definitely.
That's an area.
But we will see growth over the next few years and I think Rafi mentioned the cadence here is about 20% plus so.
So yes, we are a dominant player in certain applications not in all of the application.
An area that we are gradually developing capability and expanding.
Our presence.
Two other applications other steps process steps within the silicon carbide.
<unk>.
So that's definitely a very promising market for us it has been growing over the last few years and I think from.
A single digit number.
Two double digit numbers this year and we definitely expect to see more growth in this segment over the next few years.
Okay gallium nitride is that regarding nitrogen.
Yes, yes, gallium nitride is also has some advantages in other applications I think the market they're still at these stages is smaller but definitely it's a market that we play in gallium nitride gallium arsenide.
Many flavors here.
Each of the flavor has different aspects and means in capacity I think it's a little bit more complex.
To try and answer all of this in a few minutes.
Are you on a call and we can talk about it more.
Thank you very much.
Thank you should thank you <unk>.
And I believe that is the end of the question and answer session before I hand over back to Raffi I'd like to let you all know in the coming hours. We uploaded the recording of this conference call to the Investor Relations section of <unk> website at <unk> Dot com.
I'd like to thank everybody for joining this call and <unk>.
To handbags Raffi at closing statement Rafi. Please go ahead.
I would like to thank you all for your continued interest in our business I want to especially thank the employees and my management team for the tremendous performance total investor I think your long term support.
Look forward to talking with you again next quarter.
Thank you and goodbye.