Q4 2023 Camtek Ltd Earnings Call
Operator: This meeting is being recorded. Ladies and gentlemen, thank you for standing by.
This meeting is being recorded.
Sure.
Ladies and gentlemen, thank you for standing by.
Kenny Green: I would like to welcome all of you to Camtek's Results Zoom webinar. My name is Kenny Green, and I'm part of the Investor Relations team at Camtek. All participants other than the presenters are currently muted.
I would like to welcome all of you to context result, zoom webinar.
My name is Kenny Green and part of the Investor Relations team at <unk>, All participants Alan that presented a company muted following the formal presentation I'll provide some information and instructions for participating in a live question and answer session.
Kenny Green: Following the formal presentation, I will provide some information and instructions for participating in the live question and answer session. I would like to remind everyone that this conference call is being recorded, and the recording will be available on Camtek's website from tomorrow. You should have already received the press release. If not, please view it on the company's website.
I would like to remind everyone that this conference call is being recorded and the recording will be available on pantex website from tomorrow.
You should have all by now received a press release, if not please view it on the company's website.
Kenny Green: With me on the call today, we have Mr. Rafi Amit, Camtek CEO, Mr. Moshe Idenberg, Camtek CFO, and Mr. Rami Lange, Camtek COO. Rafi will open by providing an overview of Camtek's results and discussing recent market trends. Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe, and Rami will be available to answer your questions
With me on the call today, we have Mr. Rafi, Amit <unk> CEO, Mr. Moshe Eisenberg, <unk>, CFO and Mr. Remi longer can affect C. O L. Roughly will open by providing an overview of <unk> results and discuss recent market trends Moshe will then summarize the financial results of the quarter following that rack.
In Russia, and Rami will be available to answer your questions.
Kenny Green: Before we begin, I'd like to remind everyone that certain information provided on this call is internal company estimates unless otherwise specified. This call may also contain forward-looking information. 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 or statements contained, whether as a result of new information, future results, changes, expectations, or otherwise. Investors are reminded that these forward-looking statements are subject to risks and uncertainties that may cause actual results or events to differ materially from those projected, including as a result of the effects of general economic conditions, risks related to the concentration and significant portion of Camtek's expected business in certain countries, particularly China, from which Camtek expects to generate a significant portion of its revenues for the foreseeable future, but also Taiwan and Korea, including the risks of deviations Please note that the safe harbor statements in today's release also cover the contents of this conference. In addition, during this call, certain non-GAAP financial measures will be discussed. These are used by management to make strategic decisions, forecast future results, and evaluate the company's future performance.
Before we begin I'd like to remind everyone that certain information provided on this call are internal company estimates unless otherwise specified. This call may also contain forward looking information. 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 or statements contained with as a result of new information future results changes expectations or otherwise.
Investors are reminded that these forward looking statements are subject to risks and uncertainties that may cause actual results.
Or events to differ materially from those projected in convenience. The result of the effects of general economic conditions risk related to the concentration of a significant portion of Kansas expected business in certain countries.
In certain countries, particularly China for which <unk> expects to generate a significant portion of its revenues with stable future, but also to one in 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 timely development of new services and products and their adoption by the market increased competition in the industry and price reductions as well as due to other risks identified in the company's filings with the SEC. Please note the safe Harbor statements in todays release also covers the contents of this conference in.
In addition, during this call certain non-GAAP financial measures will be discussed these are used by management to make strategic decisions forecast future results and evaluate the companys future performance management believes that the presentation of non-GAAP financial measures are useful to investors understanding and assessment of the company's ongoing cooperation and prospects for the future.
Kenny Green: Management believes that the presentation of non-GAAP financial measures is useful to investors' understanding and assessment of the company's ongoing cooperation and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures is included in today's earnings release. I'd now like to hand the call over to Rafi Amit, Camtek CEO. Rafi, sorry, but please go ahead.
A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release.
I would now like to hand, the call over to Rafi, Amit counts at sea.
Contact sorry Rafi. Please go ahead.
Rafi Amit: Okay. Thanks, Kenny. Good morning or good afternoon, everyone.
Okay. Thanks Kenny.
Good morning, or good afternoon, everyone.
Rafi Amit: Camtek ended 2023 with a record fourth quarter of $89 million in revenue at the upper end of our guide, bringing our full year revenue to $315 million. Sales in 2023 predictably started modestly after a record year in sales in 2022. Yet, due to increased demand for HPC-related products in the second half of the year, we experienced a significant increase in orders and sales so that Q4 came in 20% higher than the first quarter of 2023. The gross margin in the quarter came in at 49.2%, which is a continued improvement over previous quarters, as we had indicated earlier this year. The operating margin also showed an improvement to 29.2%. 65% of our revenue from products came from advanced interconnect packaging applications, with a substantial portion coming from HBM and chiplet modules. The remaining 35% is divided between compound semiconductors for power devices, CIS, and process control applications.
<unk> ended 2023 was a record fourth quarter of 18 $9 million in revenue.
At the upper end of our guidance.
Bringing our full year revenue to $315 million.
Sales to 'twenty to 'twenty three predictably started modesty after a record year in sales in 2022.
Yes.
<unk> to increase the amount of H B C related product in the second half of the year, we experienced a significant increase in orders and sales. So that Q4 came in 20% higher than the first quarter of 'twenty 'twenty.
Sorry.
The gross margin in the quarter came in at 49.2%, which is a continued improvement over previous quarters as we had indicated earlier this year.
The operating margin also showed an improvement to 29.2%.
65% of our revenue from product came from advanced interconnect packaging applications with a substantial portion coming from H B M and cheap lit modules.
The remaining 35% is divided between compound semiconductors for power devices C. I is in process control applications.
This achievement was from pregnant primarily due to our strong position in tier one customers woman fracture H B M and cheap led devices for AI applications.
Rafi Amit: This achievement was primarily due to our strong position in tier one customers who manufacture HBM and chiplet devices for AI applications. We expect this demand to continue into 2024 and beyond, as it has been reflected in our current orders flow, backlog, and pipeline. We expect 2024 to be a record year even before taking into account the contribution of sales from FRT.
We expect this demand to continue into 'twenty 'twenty four and beyond.
As it has been reflected in our current orders flow backlog and pipeline.
We expect 'twenty 'twenty four to be a record you even before taking into account the contribution of sales from F. R. A T.
Rafi Amit: Our revenue guidance for the first quarter is $93 to $95 million, which represents around 30% growth over Q1 plus. Now, I would like to give an overview of the business environment. As we have mentioned, our main growth engines are the HBM and chiplets modules. These two products are the cornerstones of HPC, and there is a consensus among analysts that they will continue growing at an annual rate of 20 to 30 percent. Camtek is a strong player in this segment. We are present at all Tier 1 customers in a large number of inspection and metrology steps. The HBM and chiplet integration require high-yield and non-good dyes to ramp to high-volume production.
Our revenue guidance for the first quarter is $93 million to $95 million, which represent around 30% growth over Q1 last year.
Now I would like to give an overview of the business environment.
As we have mentioned our main growth engine or the H b M and cheap lids modules.
These two product are the cornerstones of H B C and there is a contenders among analysts.
That they will continue growing in the coming years is an annual rate 20% to 30%.
Karthik use the strong players in this segment.
We are.
Brent present, it to you at all tier one customers in a large number of inspection and metrology steps.
The H P M and cheap lit integration require a yield a known good die.
To ramp to high volume production. This requirement derives the inspection and the metrology needs.
Rafi Amit: This requirement drives the inspection and metrology needs. In addition to that, these customers invest a lot of R&D resources to add more features and capability to increase the performance of the HPC, and we are frequently asked by our customers to provide new inspection and metrology solutions. As an example, at one of our major customers, we have developed tens of new inspection and metrology steps over the last. We have recently announced receiving significant orders for HPC-related applications for delivery mainly in the first half of 2024. We are now getting initial indications that an additional substantial amount of orders is also expected in the second half. We also continue to receive orders from customers who do not belong to the HPC.
In addition today at these customers invest a lot of R&D resources to add the more feature and capability to increase the performance of the H B C. And we are being frequently asked by our customers to provide new inspection and metrology.
G solutions.
As an example, it's one of our major customers, we have developed tense of new inspection.
In metrology steps over the last year.
We have recently announced receiving significant orders for H B C related application for delivery, mainly in the first half of 'twenty 'twenty four.
We are now getting initial indications that an additional substantial amount of orders are also expected in the second half.
We also continue to receive orders from customers or do not belong to the HBC field.
Rafi Amit: A great number of our OSOT customers continue to increase their production capacity. China is still an important market, but the high demand for HPC will change the distribution of our cells between the different territories. I estimate that the share of our business coming from Korea, Taiwan, and the USA will increase in the coming years. Regarding effort, The official closing was at the end of October 2021.
Great number of our <unk> customers continued to increase their production capacity.
China is still an important market for us, but the high demand for H B C will change the distributions of our sales between the different territories.
<unk> estimates that the share of our business coming from Korea, Taiwan and U S. A will increase in the coming years.
Regarding F R a T.
The official closing was at the end of October 2023 we.
Rafi Amit: We are very pleased with this acquisition, and we are confident that FRT will meet our expectations regarding sales and profit for 2024. We are in the process of post-Berger integration, which we expect to be completed later this year. FRT is well-established in certain metrology applications for HPC and power devices based on silicon carbide, and we are preparing FRT to meet the increasing demand for these markets. We believe FRT has the potential to grow rapidly in the coming years.
We are very pleased with this acquisition, we are confident that FERC will meet our expectation regarding says and profits for 'twenty 'twenty four.
We are in the process of post merger integration, which we expect to be completed later this year.
<unk> T is well established and certain mature rajiv applications for H B C and power devices based on Silicon carbide, and we are preparing F O T to meet the increasing demand for these markets.
We believe F O T has the potential to grow rapidly in the coming years.
Rafi Amit: Regarding our assessment for 2020. In our last meeting, you heard us estimate that 2024 will be a record year in sales. Today we are halfway through the first quarter, and based on our backlog and orders in the pipeline, we feel even stronger. 2024 will indeed be a record year.
Regarding our assessment for 'twenty 'twenty four.
In our last speaking you heard us estimate the 'twenty 'twenty four will be a record year in sales today.
Today, we are halfway through the first quarter and based on our backlog and orders in pipeline, we feel even stronger the 'twenty 'twenty four will indeed be a record year.
Moshe Idenberg: However, it is too early to give an accurate prediction about the expected growth in 2021. And now, Moshe will review the financial results. Moshe?
However, it is too early to give accurate prediction about the expected growth in 'twenty 'twenty four.
And now Moshe will review the financial result Moshe.
Moshe Idenberg: 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 appears in the table at the end of the press release issued earlier today. The FRP transaction and purchase account in treatment are included for the first time in our non-GAAP reconciliation. Revenue for the fourth quarter came in at a record $88.7 million, an increase of 8% compared with the fourth quarter of 2022 and an increase of 10% from the third quarter of 2023. The geographic revenue split for the quarter was as follows. Asia accounted for 82% of our revenues, with the US and Europe the remaining 18%. Gross profit for the quarter was $43.7 million.
Thank you Rafi in my financial summary ahead, I will provide the results on a non-GAAP basis, a reconciliation between the GAAP results and the non-GAAP results appear in the table at the end of the press release issued earlier today.
The FOT transaction and purchase accounting treatment of <unk>.
<unk> for the first time in our non-GAAP reconciliations.
Revenue for the fourth quarter came in at a record $88 7 million globe, an increase of 8% compared with the fourth quarter of 2022 an increase of 10% from the third quarter of 2023.
The geographic revenue split for the quarter was as follows Asia was 82% of our revenues with U S and Europe the remaining 18%.
Gross profit for the quarter were $43 $7 million. The gross margin for the quarter was 49 point to a slight improvement from the third quarter of 2023.
Moshe Idenberg: The gross margin for the quarter was 49.2, a slight improvement from the third quarter of 2023. This gradual improvement is a result of the efforts we have made throughout the year, and we anticipate this trend to continue in the coming quarters. Operating expenses in the quarter were $18.2 million, compared with $17.4 million in the fourth quarter of last year and $17.2 million in the previous quarter. I know that this quarter we included for the first time the two months of FRT-related expenses, which explains the increase from the previous quarter. Operating profit in the quarter was $25.5 million, compared to $22.8 million reported in the fourth quarter of last year and $22.2 million in the third quarter.
Good gradual improvement is a result of the efforts we have made through the year and we anticipate this trend to continue in the coming quarters.
Operating expenses in the quarter were $18 $2 million compared with.
$17 4 million daus in the fourth quarter of last year, and $17 2 million daus in the previous quarter.
I know that this quarter. We included for the first time, the two months of FRC related expenses.
Which explains the increase from the previous quarter.
Operating profit in the quarter was $25 $5 million compared to the $22.8 million reported in the fourth quarter of last year and $22.2 million in the third quarter.
Moshe Idenberg: The increase is mostly due to the increase in revenue and the improvement in gross profit. Operating margin was 28.7% compared to 27.8% and 27.6%, respectively. Financial income for the quarter was $5.7 million, at a similar level to the previous quarter and higher than the $3.8 million reported last year.
The increase is room largely due to the increase in the revenue and the improvement in the gross profit.
Operating margin was 28, 7% compared to 27.8 and 27, 6% respectively.
Financial income for the quarter was $5 $7 million at the similar level to the previous quarter and higher than the $3 8 million Daus reported last year the increase from last year related to significantly higher interest rates on our cash bonds.
Moshe Idenberg: The increase from last year relates to significantly higher interest rates on our cash balance. Net income for the fourth quarter of 2023 was $28.2 million, or $0.57 per diluted share. This is compared to a net income of $24 million, or $0.50 per share, in the fourth quarter of last year. Total diluted number of shares as of the end of Q4 was 49.1 million.
Net income for the fourth quarter of 2023 was $28 2 million Daus, all 57 cents per diluted share. This is compared to a net income of $24 million or 50 cents per share in the fourth quarter of last year.
Total diluted number of shares as of the end of Q4 was 49.1 medium.
Moshe Idenberg: Turning to some high-level balance sheet and cash flow metrics, cash and cash equivalents, including short and long-term deposits and marketable securities, as of December 31, 2023, were $448.6 million. This compared with $517.1 million at the end of the third quarter. The decrease is due to the $100 million cash for the acquisition of FRP, who generated $34.2 million in cash from operations in the quarter on the back of increased revenue and good collection.
Turning to some high level balance sheet, and cash flow metrics cash and cash equivalents, including short and long term deposits and marketable securities as of December 31st 2023 were $448 6 million Daus disc.
This compared with $517 $1 million at the end of the third quarter. The decrease is due to the 100 million dollar cash for the acquisition of FRP with.
We generated $34 2 million daus in cash from operations in the quarter.
On the back of increased revenue and good collection.
Moshe Idenberg: The inventory level increased to $94.9 million. The increase over the previous quarter is in part to support the anticipated sales growth in the coming quarters as well as the addition of FRT inventory. Accounts receivable decreased to 87.3 million dollars in the quarter despite the increase in revenue and the addition of FRT. This was done primarily as a result of strong collection in the quarter.
Inventory levels increased with $94 9 million dollar of the increase over the previous quarter as a bump.
To support the anticipated sales growth in the coming quarters as well as the addition of FRP inventory.
Accounts receivable decreased to 87 medium $87 3 million daus in the quarter.
Despite the increase in revenue and the addition of FRP.
This was done primarily as a result of strong collection in the quarter our days sales outstanding DSO decreased to 90 days.
Kenny Green: Our daily sales outstanding, DSO, decreased to 90 days. As Rafi said before, we expect revenue of between 93 and 95 million dollars in the first quarter and that we look forward to a year of growth in 2024. And with that, Raffi, Rami, and I will be open to take your questions. Okay. Thank you, Moshe.
As Rusty said before we expect revenue of between 93 and $95 million in the first quarter and that we look forward to a year of growth in granite wasteful.
And we let raffi allow me and I will be open to take your questions. James. Thank you Ms. Chefs will now start the question and answer session. If you have a question you can raise your hands using visa and platform.
Kenny Green: We'll now start the question and answer session. If you have a question, you can raise your hand using the Zoom platform, and we will hold for questions. Our first question will be from Charles Shee of Needham. Charles, you can go ahead and talk.
And we will tell for questions.
Okay.
Our first question will be from Charles She of Needham Charles You can go ahead and talk.
Charles Shee: Thanks, Kenny. I have a three-part question on orders and the order flow. So I think last time when you reported earnings, that was in mid-November, you talked about starting from the third quarter of 2023, you got probably 240 systems in your order. Now you said the entire second half point three, the order number is close to 300 systems. So, the first part of this question, right, can you give a little bit more color on what the incremental 60 is? Where are they from?
Thanks Kenny.
I have a three part question.
Orders are the order flow.
So I think our last line. When you report earnings that was in mid November you talked about starting from the third quarter quantity three you've got Rob.
Probably 240 systems being ordered.
Now you said the entire second half 'twenty three to order.
Number is close to 300 assistance.
So the first part of this question Ranga can you give a little bit more color on.
What's that incremental 60, where are they from and what kind of applications or the <unk>.
Charles Shee: And what kind of applications? The second part of this multipart question really is, what's the general trend of the order intake in January and February? I understand there's a lunar new year in between, but any color would be great.
Second part of this a multipart question.
Really is what's the general trend after ordering tagging Janet in January and February on our standards of lunar new year and between about that but any color will be great by the third thing I think got you said on the prepaid.
Charles Shee: But the third thing I think you said in your prepared remarks, you talk about initial indications of new orders in second half 24. I want to ask you to clarify, do you mean taking in new orders, or do you expect to take in new orders in second half 24? Or do you expect that you will take those orders in the coming months, but then you will deliver them in the second half of 2014. So, hi Charles. This is Juan.
Prepared remarks, you talk about initial indications.
New orders.
In second half 'twenty four want to ask you to clarify do you mean and taking in new or you expect to taking new orders in second half 'twenty or do you expect that.
To take those orders in coming months bad Bad and you deliver in second half one four thank you.
Okay.
So hi, Charles this is Juan so so first of all yes. The order flow continues linearly. There's nothing you know a outstanding on the on the flow itself, but I think most of the orders that came lately and the addition came more from the ulcer 12. So it was less from the H B.
Rami Lange: So first of all, yes, all the flow continues linearly. There's nothing, you know, outstanding on the flow itself. But I think most of the orders that came lately, the addition came more from the offset world, so it was less from the HBM, and regarding the beginning of the year, definitely, we're starting to see orders, you know, new Chinese New Year, definitely. It's two weeks where Asia is more or less closed, but the discussions, the pipeline, is coming up, and we don't see any change in the activity. I think we had a long discussion about the second half.
Regarding the beginning of the year. So definitely we're starting to see orders you know new Chinese new year definitely you know, we'd say each seed stool still weeks, where Asia is small it's close but the discussions the pipelines coming up and we don't see any changing the activities.
I think we had long discussions about the second half and I think was the question was specifically about the HVA and so yes, and we discussed it would be I think Rafi mentioned it in the prepared notes, we're seeing orders and we are talking I think we are expecting orders in the.
Rami Lange: And I think the question was specifically about the HBM. So, yes, and we discussed it. I think Rafi mentioned it in the prepared notes. We're seeing orders, and we're talking. I think we're expecting orders in the coming weeks for deliveries already in the second half of this year. So definitely, we see a very positive trend, and the backlog is building up for the second half. And we are in discussions with customers, including HBM customers, for shipments of machines in the second half of the year. Thanks Rami, that's a great color.
In the coming weeks coal deliveries already in the second half of this year. So definitely a wary, we see a very positive trend and the backlog is building up for the second half and we are in discussions with customers.
Including H B M customers for shipments of machines in the second half of the year.
Thanks, Rami, that's that's great color practice and glad to see or you are expecting more orders to come.
Moshe Idenberg: Glad to see you're expecting more orders to come over from HBM customers for delivery in the second half. Maybe I want to ask Moshe a question about some of the new items in your non-gap reconciliation. Looks like you wrote off some of the FRT inventory after the close last year. So can you provide some more details of why you chose to write off some of the inventory now? Because I would guess it's less likely you actually think of seeing some inventory you're not going to sell. But what's the rationale behind the write off?
Opened that up.
So from HCM customers or maybe for delivery in the second half.
Maybe I want to ask a multiyear question on some of the new items in your non-GAAP reconciliation. It looks like you wrote off some of the F. R. T. AR inventory after the closed last year. So can you provide some more details of why are you choose to write offs.
The inventory now because.
So I would guess, it's less likely you are you actually seeing some inventory a knock like yourself, but that was the rationale behind the right half of May.
Moshe Idenberg: Maybe a related question. Any update on the FRT outlook for this year? Because at the time of the close of the acquisition, you talked about maybe 30 million ish revenue expected from FRT in 2024. Is that number maintained or remains the same? Any upside on that number?
Maybe unrelated question.
Any update on the FRP outlook for this year cause side the time up there.
The acquisition of close of the acquisition you talked about maybe $30 million ish revenue I expect around F. RT 20th one boy that is that number maintained us remains the same.
Any outside around that number ex.
Moshe Idenberg: Okay, I'll address both questions, and Rami and Rafi will add if they want. So regarding FRT, you know, we said it in the press release, we are very pleased with the acquisition. No change in terms of our expectations from FRT as it relates to 2024 revenue and profitability. We are in the midst of post-merger integration efforts, trying to put together the business already. Some of it is already done, and some is in the process. We plan, by the end of the day, to have FRT to be an integral part of Camtek, such that we are not going to report FRP results separately.
Yes.
Okay.
I'll address both questions and up even when and if they want so regarding FRP on it no.
We said it also in the press release, we are very pleased with the acquisition no change.
In terms of our expectation from FRP.
Relates to 2020 for revenue and profitability.
We are in the midst of a post merger integration efforts trying to put together the business are already some of it is already done and some is in process.
We plan by the end of the day to have any any thought it to be an integral part of of Comtech sorry.
Such that we are not going to report separately the F. A key results.
Moshe Idenberg: Some of the products will also become part of our product offering, so this will also have a positive impact on our revenue as well as on their revenue. So that's FRP.
Solve some are up some of the products. We also become a part of our product offering.
So this will have a positive impact also on our revenue as well as on their revenue.
So that's a 40 and specifically what you see in the write off is a small amount of inventory that we find that in a week would work out together between us and an FRP to put together, a new product offering and in some part of this.
Moshe Idenberg: And specifically, what you see in the write-off is a small amount of inventory that we found that we could work out together between us and FRP to put together a new product offering. And some part of this, the end result of the product, resulted in some inventory write-off. It's a small amount of $900,000.
The end result of the product resulted in some inventory write off it's a small amount of 900000 doors.
So, but we're not.
Moshe Idenberg: But we are not shutting off any FRP-related products. Thank you. Thanks, Charles. Our next question is going to be from Brian Chin, Bob Stiefel. Brian. You may go ahead, and I'll be there. Can you hear me okay?
Shutting off any FRP related product lines.
Thank you.
Thanks Jos.
Our next question is gonna be from Brian Chin of Stifel Brian.
You May go ahead and ask.
Okay.
Either and you hear me okay.
Brian Edward Chin: Yes, we've done very well. Great. Thanks for letting us ask a few questions. I think previously, Rafi, you noted that HBM and heterogeneous integration could comprise 30% or maybe 30% plus of revenue in 2024. And maybe that would also account for a predominant amount of the growth incrementally year to year.
Yes, we lay out pretty well.
Great. Thanks for letting us ask a few questions.
I think previously Rafi at Cepheid noted that H B M and heterogeneous integration could comprise 30% or maybe 30% plus of revenue in 2024, and maybe that would also account for.
Predominant amount of the growth incrementally year to year.
Rafi Amit: Do you still see those to be sort of the, the, uh, the right expectations for this year, or do you see now with expectations for improved order fill for the second half, could those percentages be higher this year? I think in general, I believe that, Since we have a very strong position in our customer, and assuming our customer meets the, you know, the expectation of the analysts regarding the growth rate and the demand, probably we will, Our growth will be very similar to these demands in terms of the heterogeneous integration, HBM, and chiplet field. But, you know, we still have a certain other type of product that is not expected to grow at this level of 20 to 30 percent. So it's going to be, you know, eventually an aggregate of all this. And at this point, we cannot be very accurate with the number.
Do you still see those to be sort of the the the right expectations for this year or.
Do you see now with what's expectations for improved order fill for second half could that.
Percentages are b.
Be higher this year.
I think in general I believe that since we have very strong position in our customers.
And assuming our customer meet the you know the expectation of the analysts regarding the growth rate.
And the demand probably we will.
Our growth would be very similar to these demands in term of the it reduce integration H B a M geopolitically field.
But you know, we still have or certain other type of products that are not expected to grow in this level of 20% to 30%. So it's going to be you know eventually an aggregate got through this and it looks like at this point, we cannot be very accurate with the number. So this is why.
Rami Lange: So this is why I believe that we have to wait a few more months to be sure or to be more accurate about the growth rate. Let me add one thing, and I think I just want to add further to what Rafi said and based on your question. So we said in previous calls and meetings that HBM and triplet, what we call the high performance computing section of our business, will be at least 30% of our business in 2024. I believe that this is the case. It may be even slightly higher, but in the range of these numbers, this is how we see this business in 2024. Mm hmm.
I believe that we have to wait few more.
More months to be sure to be more accurate to boat.
The growth rate.
Okay, Yeah, no fair enough.
Ryan Let me add one thing and I think it just want a further towards Rafi said and based on your question. So we said in previous calls and meetings that the D. H B M and cheap late what we call. The high performance computing section of our business will be at least 30% of our business in 'twenty.
24, I believe that this is the case it may be even slightly higher but in the range of these numbers Desi is going this is how we see this business for 24.
Mhm Okay.
Rami Lange: Okay. And I sort of heard about how China historically has been a good exposure for the company. Ahead of the 20th, could you maybe quantify what percent of sales China could represent or did represent in calendar 23? And even if you think other areas of your business are going to outstrip the growth rate that you might see in China and some of the traditional wafer-level packaging. Are you starting to see a more significant contribution from HBM or chiplet activity in China? Is that in any way sort of embedded in your thinking for 2024?
And Oh.
I sort of heard about.
China Historically has been you know a good.
For the company.
Ahead of the 20th could you maybe quantify what percent of sales China could represent our did represent and counter 'twenty three.
And even if you think on other areas of your business at all.
We're going to outstrip the growth rate that you might see out of China, and some of the traditional wafer level packaging.
Are you starting to see a more significant contribution from H Bammer chip load activity in China is that in any way sort of embedded in your thinking for 2020 for now. So so first of all the we'll get out with D. H damage chip with business. It's definitely the it's not a Chinese business and when you talk about.
Rami Lange: No, so first of all, you know, the HBM and chiplet business is definitely not a Chinese business. And when you talk about it, it's related to the HBM manufacturers and, primarily, to Intel. These are the five players in this arena.
It is related to the HBA manufactures and primarily TSMC. Intel. These are the five players in this arena. So when you can talk about this basis. This is definitely a business out of China, whether there will be similar things in China. It's it's easy to it's early to talk about it when we.
Rami Lange: So when you talk about this business, this is definitely a business outside of China. Whether there will be similar things in China is easy to say, but it's early to talk about. When we talk about business in China, I think the main growth driver there is the OCEP capacity that is being built there. And I would say that we, to give you a number, are in the mid 40% range for 2025. Okay, guys.
Talk about the business in China, each I think the main growth driver. There is the OLED capacity that is being built there and I would say that we a to give you a number I E. It's in the mid 40% a range for.
For a 2023.
Okay got it I appreciate that yeah, I think there was some talk of maybe a China DRAM players starting to maybe add some.
Brian Edward Chin: I appreciate that. Yeah, I think there's some talk of maybe a Chinese DRAM player starting to maybe add some, pursue some advanced capacity, but that's helpful. And then the last question, maybe from Moshe.
Proceeds in advance capacity, but that's helpful. And then the last question.
Maybe for Moshe.
Moshe Idenberg: Where do you expect gross margins to be in Q1? And is the company on track for gross margins to still cross back above 50%, maybe by mid-year? And is there any particular revenue level that's needed to achieve this?
Where do you expect gross margins to be in Q1 and as the company on track for gross margins to still cross back above 50%, maybe by mid year and is there any particular revenue level that's needed to achieve this or is that more reflective of normalizing material and product costs and maybe next as well.
Moshe Idenberg: Or is that more reflective of normalizing material and product costs and maybe next as well? So, as we said in previous calls, and I will repeat it, you know, we have made tremendous efforts this year to improve the gross margin. And we said, you know, at the beginning of the year, the year 2023, I mean, that we expected gradual improvement. And indeed, in the last several quarters, we have gradually improved our gross margin. We are now at 49.2.
Right. So as we said in previous calls and I will repeat it we have made tremendous efforts this year to improve the gross margin and we said in our in the beginning of the year here 2023 I mean.
That we expect gradual improvement and indeed in the last several quarters, we have improved gradually the gross margin.
We're now at $49 two and we definitely expect this number to continue to improve in Q1 and beyond and we believe that.
Moshe Idenberg: And we definitely expect this number to continue to improve in Q1 and beyond. And we believe that throughout 2024, we will achieve the 50% target for gross margin. Okay, great. Thank you. Thanks Brian. The next question will be from Tom O'Malley from Barclays. Tom, you may go ahead and ask.
Throughout 'twenty 'twenty, four we will achieve the 50% target.
For gross margin.
Yeah.
Okay, great. Thank you.
Okay. Thanks, Brian next question will be from Tom O'malley from Barclays. Tom You May go ahead and ask.
Tom O'malley: Hey guys, thanks for taking my question. I just had another one on the order side. If I do some napkin math here from what you reported in Q3 and Q4, it looks like the run rate of those orders has slowed slightly, and you're saying the mix is a little bit away from the HBM side.
Hey, guys. Thanks for taking my question I just had another one on the order side, if I do some napkin math year from what you reported in Q3 and Q4 it looks like the run rate of those orders has slowed slightly and you're saying the mixes a little bit away from the HBM side could you. It's nice that you guys give clarity, but could you could you just give me a little more color there do you guys.
Tom O'malley: It's nice that you guys give clarity, but could you just give me a little more color there? Do you see order rates slowing, or is that just a function of when you're announcing these results? Thank you. So, first of all, Tom, it's a question of decisions from our customers when they make the decision, at least the main customers, so they make a decision that they need the capacity. So in many cases, the order is a little bit ahead of time.
The order rates slowing.
Or is that just a function of when you are announcing.
These results. Thank you.
So first of all tell them you know it's a.
It's a question of decisions from our customers when they make the decision to take the main customers. So they make a decision that they need the capacity. So in many cases the older original get ahead of time and there was no doubt a.
Rafi Amit: And there was no doubt a surge in orders about two or three months ago. But still, there is a good, healthy flow of orders, and we usually announce only when it's a very big order.
Surging the orders.
About two or three months ago, but still there is a growing healthy.
Flow of orders.
And we usually announce only lead to very big over there, but definitely in the flow and the indications and the pipeline a show a very healthy business as we have discussed in the pre <unk> in our <unk> in the discussion with the refugee escape.
Rafi Amit: But definitely, the flow and the indications in the pipeline show a very healthy business, as we discussed in the discussion that Rafi just gave, helpful. And then, as a follow-up, you mentioned that the mix of business with the new orders is a little bit lower on the HVM side. Could you just give us a status update or a health check on what you're shipping to your customers and where you think they are in terms of capacity? Are you still sort of hand to mouth where, you know, customers are trying to take everything they can get? Or are you starting to get some signals from your customers? Like, "hey, we're getting a little bit closer to what we need right now?" Any kind of color on those communications on the HVM side would be super helpful.
Helpful. And then and then as a follow up you mentioned the mix of business with the new orders is a little bit lower on the HCM side could you just give us a.
Status update or a health check on what you're shipping into your customers and where you think they are in terms of capacity are you are you still sort of hand to mouth, where customers are trying to take everything they can get or are you starting to get some signals from your customers like hey, we're getting a little bit closer to what we need right now.
Any kind of color on those communications on the HCM side would be super helpful. Thank you. Okay. So so so first of all I think mentioned I don't want to make any indication that our customers are telling us that they have enough capacity. This is not the case I think what I did say and this is important that the less orders came from were more on the old site size.
Rami Lange: Thank you. Okay, so first of all, I didn't mention, I don't want to make any indication that our customers are telling us that they have enough capacity. This is not the case.
Rami Lange: I think what I did say, and this is important, that the last orders came from were more on the OSOT side of the business, other businesses rather than the HVM. And the reason for that, and it's important to mention it. Yes, the HVM and the chiplet is going to be 30% of our business or even a little bit more next year. There is another healthy 70% aside from this business that we're getting orders and there are many customers. And these businesses are very important. Regarding the HVM.
The business other businesses, rather than the HB and the reason for that and it's important to mention it yes, the HBM and the triplet is going to be 30% of our business or even a little bit more next year. There is another healthy 70% aside from this business. It we're getting all their isn't going to many customers.
And these businesses are very important regarding the H B M. I think this was discussed in details in previous calls we received a lot of owners, yes, and we are getting now clear indications of discussions from customers that we are going to get additional orders for shipment in the second half of 'twenty.
Rami Lange: I think this was discussed in detail in previous calls; we received a lot of orders. Yes. And we're now getting clear indications and discussions from customers that we are going to get additional orders for shipment in the second half of 24. So, on previous calls, we discussed the fact that most of the orders came in the first half. So today we can give an update that this is not only the case that there is going to be a continuation of orders and installations in the second half of 24. Gotcha. Thank you very much.
So you can preview scores we discussed the fact that most of the oldest game for the first time first task. So today, we can give an update that this is not only the case that there is going to be a continuation of orders and installations in the second half of 'twenty four.
Gotcha. Thank you very much.
Craig Ellis: Thanks, Tom. Our next question is going to be from Craig Ellis of B Reilly. Craig, you may go ahead and ask.
Thanks, Tom.
Our next question is going to be from Craig Ellis with B Riley Frank you May go ahead enough.
Craig Ellis: Yeah, thanks for taking the question. I wanted to follow up on some of the earlier commentary regarding orders and what you're seeing. So just to clarify, it sounds like what you're saying is, as you look at the customer mix, and the customer mix you'd expect from the recent trends toward more OSAT and non-HPC, it's back to HPC-related OEMs in the back half of the year. And as you look at what's coming in the back half of the year, then the duration we're talking about really covers technology transitions with HBM to HBM Can you talk about the potential benefit you may be getting from just volume versus any benefit that might be coming from these tech transitions? Thank you. All right, great. So, you know, let's go step by step and just make sure that we all understand.
Yeah. Thanks for taking the question I wanted to follow up on some of the earlier commentary regarding orders and and what you're saying so just.
Just to clarify it sounds like what you're saying is as you look at customer mix and the.
Our customer mix should expect from the recent trends or Morro sat in non H P. C. It's back to <unk>.
H P C related Oems in the back half of the year and as you look at what's coming in the back half of the year.
Hum.
The duration, we're talking about really covers.
Technology transitions with H B M. Two.
H B M. Three E from H B M and maybe even by the end of the year activity with H B M. Four can you talk about the potential benefit you may be getting from just volume versus any benefit that might be coming from these tech transitions.
Yes.
Alright, great.
Let's go step by step and just make clear that we all understand so I think we have talked in previous calls we had quite a few orders coming in.
Rami Lange: So, as we have discussed on previous calls, we had quite a few orders coming in for the HVM and the triplets for the first half of the year. What we're saying now, there was a concern whether there was an overflow, whether there was too much capacity. What the update is, and talking with customers, we understand today that there are going to be additional orders for shipments of HVM and triplets in the second half of the year as well. So from that point of view, we are on track to do at least 30% of our business will come from what we call high performance computing, which comprises triplets and HVMs. And from that point of view, I think the color of those orders is how we understand them.
For the <unk> for the first half of the year, what we're saying now there was a concern whether this there is an overflow there is too much capacity what the update is in talking with customers. We understand today theyre going to be additional orders for shipments of HBM and chip, let's see the second half of the year.
So from that point of view, we are on track to do at least 30% of our business will come from what we call. The high performance computing, which comprises of the cheap listened HBM and from that point of view I think the color of those orders we understand them. So this side of the business is.
Rami Lange: So this side of the business is healthy. What we've seen is that from the OSOTs and the other applications that we have, there is continued addition of capacity, and the rest of the 70% from the orders we have on hand and what we see in the pipeline, we are very confident that this part of the business will be fulfilled as well. And that's really helpful, Rami.
Is healthy.
And what we've seen is that from the offsets in the other applications that we have.
There is continuing owns a addition of capacity and the rest of the 70% from the orders we have on hand, and what we see on the pipeline. We are very confident that this part of the business will be fulfilled this way.
And that's really helpful. Rami does that 70% include any benefit from the smartphone market. The team has done a phenomenal job positioning for H P. C. But there was a time when the smartphone market was a much bigger percentage of sales and shipment.
Craig Ellis: Does that 70% include any benefit from the smartphone market? The team has done a phenomenal job positioning HPC, but there was a time when the smartphone market was a much bigger percentage of sales and shipments than it is today? And there have been signs that the Android market is starting to come back and that leading APU manufacturers like MediaTek are doing some interesting things with AI-related capability, which could be more inspection intensive. So what are you seeing out of that end market? And is it one of the things that has you excited about record calendar 24 organic record? Graham, So most of this business will come more from the side of the OSA business. That's where we will see.
Then it is today and there have been signs that.
The Android market is starting to come back and that leading Apu manufacturers like Mediatek are doing some interesting things with AI related capability, which could be more inspection intensive. So what are you seeing out of that end market and.
Is that one of the things that has you excited about record calendar 'twenty poor organic recognize.
Yes.
So most of this business will come more from the side of the Olson business, that's where we will see and definitely we are seeing additional capacity coming into the <unk>.
Rami Lange: And definitely, we are seeing additional capacity coming into the OSA, and it's hard for us to know here who are the end customers and what exactly the application is, but the overall growth in capacity in the OSOT world is positive. It's pretty strong, and that's the reason that I mentioned that the last orders came actually from the OSOT and not just the HBM and chiplets business. That was the reason for my remark.
And it's hard for us to know here, who is the end customers and what is exactly the application, but the overall growth in capacity on the O set World is is is positive spread is stronger and that's the reason that I mentioned the last orders came actually from the old such a nutshell.
D H beam and cheap goods business that was the reason for my remark.
Rami Lange: Got it. That's very helpful. And then lastly, Moshe, just digging into some of the other financial dynamics as we look near term and through 2024. Can you just talk about operating expense expectations for calendar 1Q, which will include a full quarter of FRT, and how should we think about the arc of things from there as we go through the year as you're investing in new product programs and as you're supporting increasingly diverse growth. Thank you.
Got it that's very helpful.
And then lastly, mashai just digging into some of the other.
Financial dynamics as we look nearer term and through 2020 can you just talk about.
Operating expense expectations for calendar, one Q <unk>, which will include a full quarter of F. R T and and how should we think about the art kept things from there as we go through the year as you're investing in new product programs and as you're supporting.
<unk>.
Increasingly diverse growth. Thank you.
Moshe Idenberg: Okay, so in terms of operating expenses dynamics, first of all, R&D. We definitely continue to invest heavily in R&D, and this will grow pretty much in line with revenue growth next year. In terms of sales and marketing activities, we are working on and trying to go more and more direct, in order to improve the cost structure. And the result of it was performed nicely in Q4 when we were able to show slightly below operating expenses than our model. In terms of 2024, this dynamic will continue. Indeed, Q1 will include the full consolidation of the FRT expenses.
Okay. So.
In terms of operating expenses dynamics first of all R&D, we definitely continue to invest heavily in R&D.
And we did this will grow pretty much in line with the revenue growth next year.
In terms of sales.
Sales and marketing activity, we are looking at trying to go more and more and more direct in order to improve the cost structure of band.
This is the result of it in our was performed nicely in Q4, when we were able to show a slightly below operating expenses than our model.
In terms of our 2020 for this dynamic will continue indeed Q1 will include the full consolidation.
<unk> of the <unk> expenses.
Moshe Idenberg: So obviously, the level of expenses will go up slightly, pretty much proportionally to the business. And G&A, finally, is one of the areas that we are trying to keep as modest as we can and trying to keep this entity lean and mean. So you won't see a major increase in G&A. So overall, we expect an improvement in operating expenses in 2024 versus 2023 for the whole year. Okay.
So the obviously the level of expenses will go up slightly.
Pretty much proportionally to.
To the business.
And G&A finally is one of the areas that we're trying to keep.
It's modest as we can and try to keep this entity lean and mean.
So you don't you won't see it.
A major increase in the G&A so overall.
We expect an improvement in the operating expenses in 2020 full investment 2023.
In the whole year.
Duxin Yang: Thanks, team. Thank you. Our next question is going to be from Duxin Yang of Bank of America. Duxin, you may go ahead and ask your question. Hi, thank you for taking our question. I'm on behalf of CIVAG.
Got it thanks team.
Thank you.
Our next question is going to be from Dr. <unk> Yang of Bank of America vaccine you May go ahead and ask your questions.
Hi, Thanks for taking our question.
On behalf of tobacco.
Rafi Amit: I just have a question on the competitive landscape; you have all these orders coming in this year, you said 30% HPC, and 70% OSET. What are your market share expectations this year in wafer level packaging against your main competitor? And is there a difference between HPM chiplet versus OSET?
I just have a question on the competitive landscape and you'll have all of these orders coming in this year, you said, 30% H P. C. 70% offsets what are your market share expectations are this year and wafer level packaging. That's your main competitor and is there a difference in H P M chip lab versus outside.
Okay.
Rafi Amit: I would say, first of all, you know, we need to look at it in basically two areas, on the a 3d metrology. That's an area that we're very done, and our technology is the industry standard and I would say that the most of the the major players in the market across the market not just the the HPC world are using our equipment. Regarding the 2D inspection, that's an area that we have very, very competitive technologies. I think our market share is in the range, it is similar to our main competitor. Here, there is a vast variety of applications, so therefore the market share is a little bit harder to judge. But I can say that we are very, very competitive and we have a significant market share. It's very hard to put here a number, but it's definitely in the 20-30% range and even a little bit higher. Do you have an expectation of shared growth potentially this year? Shergold, and Dawkins.
I would say.
First of all.
You know, we need to look at it and make it into two areas.
On the a three D metrology, that's an area that we're very done.
And our technology is the industry standard and I would say that the <unk>.
Most of the major players in the market across the market not just the HBC world.
We're using our equipment.
Regarding the two the inspection.
That's an area that we have very very competitive.
Technologies.
I think our market share.
Using the range. It is similar to our main competitor here. There is a vast variety of application. So therefore, the market share is a little bit harder to judge, but I can say that we are very very competitive and we have a significant market share. It's very hard to put here in number but it's a H <unk>.
<unk> seen definitely too late in the 20% to 30% range and even a little bit higher.
Yeah.
That's correct.
Do you have any expectation of share growth potentially this year.
Okay.
Share growth and market share.
Rami Lange: Well, of course, you know, we go into the year expecting to increase our share, but this is a little bit more, more, I would say, complicated. And I think Rafi discussed it in the prepared notes. The way that this market works, and especially the HPC world and the advanced packaging in general, this market is changing all the time and here we're developing new steps all the time so it's not just looking backwards can we take a step from a customer or from a competitor at a certain customer this is less case this is less of the taking here what we are trying to do is get as many of the steps of the new steps and we have very, I would say, intimate relationship with all the Tier 1 players and our long-term customers.
Aim.
Well of course say you know.
We go into the year expecting to increase our share but this is a little bit more again, Laurie I would say complicated and I think rafi discussed baked in there in the prepared notes.
The way that this market works and especially the HBC world in the advanced packaging in general.
This market is changing all the time and here we are developing new steps all the time. So it's not just looking backwards can we take the step from a customer or from a competitor where at a certain customer. This is less case. This is less of the take away here, what we are trying to do.
<unk> is get as many of the steps of the new steps.
And we have very I would say intimate relationship with all the tier one players and our long term customers and here. What we are doing a lot of airports and we are very successful in that and Rafi mentioned at the certain tier one customer we were able to develop tenths a few steps and obviously the ones that.
Rami Lange: And here what we are doing, a lot of effort, and we are very successful in that. And Rafi mentioned that for a certain Tier 1 customer, we were able to develop tens of new steps, and obviously, the ones that we developed together with the customer are ones that we will win and will take from our competitors. So I think that we are winning a lot of steps, and this will be one of the main reasons for increasing business in 24 and beyond. Thank you so much. Thanks, Texans.
We developed together with the customer on ones that we will win and we will take from our competitors. So I think that we are winning a lot of steps and this will be one of the main reasons for increasing the business in 'twenty four and beyond.
Got it thank you so much.
Thanks, Doug.
Gus Richards: Our next question is going to be from Gus Richards of Northland. Gus, you may go ahead and ask your question. Yes, thank you for letting me ask a couple questions. Just to follow on, you did mention tens of new inspections. And I was wondering, you know, how much TAM expansion you have, or you could give us some color on, you know, is this for backside power? Is it for, you know, what sort of end applications, not specific, but just in general?
Our next question is going to be from gas with jobs of Northland gas you May go ahead and ask your questions.
Yes. Thank you for a lean mass couple questions. Just a follow on you did mentioned tens of new inspections and I was wondering.
If you had a sense of you know.
How much Tam expansion, you got where you could give us some color on is.
Is this for backside power or is it for you know what what sort of end applications not specific but just in general.
Gus Richards: Well, you know, we have to be very careful because we cannot, you know, disclose information from customers. I can say that those steps are in the advanced packaging world. Is it a camera opportunity? Is it, you know, tens of machines, you know, single digit? No, no, no.
You know we have to be very careful because we cannot disclose sales information from customers I can say that those steps are in the advanced packaging world.
Uh-huh Tam opportunity is it.
Tens of machines.
No no no. It's a here at these customer and any other places youre talking about tens of machines to potential is very large and this is why we're so focused on winning new steps.
Rami Lange: It's here at this customer and in other places. You are talking about tens of machines. The potential is very large. And this is why we're so focused on winning this tech. Got it. That's super helpful.
Got it that's super helpful and then Jim.
Rami Lange: And then Just in terms of, you know, your supply, your ability to supply your customers supply constraints, you know, and slotting, can you give us a little bit of color on, you know, If orders continue to accelerate, you know, sort of what sort of sequential growth can you, can you deliver, you know, are there any, you know, inventory constraints, people constraints in terms of ramping up revenue as we go through the year and into next? So, you know, we discussed this on previous calls, but, I think, a couple of years ago, we increased our capacity from clean room space and our, I would say, operational capabilities to around, I would say, at least five hundred million dollars in revenue.
In terms of.
Gil your supply of your ability to supply your customers supply constraints.
And slotting can you give us a little bit of color on you know.
If orders continue accelerate.
Sort of what sort of sequential growth can you can you deliver are there any.
Inventory constraints people constraints in terms of of ramping the revenue as we go through through the year and into next.
So you know we I think we discussed in previous calls, but and we've mentioned it already I think a couple of years ago, we increased our capacity from clean room space and our I would say operational capabilities.
It capabilities to <unk>.
Round I would say at least $500 million revenues. So from the longer I would say the longest lead time, which is the building itself and the and the basic Cleveland space that we have enough.
Rami Lange: So from the longer lead times, I would say the longest lead time, which is the building itself and the basic clean room space, we have enough capacity. Now, what we have done, we have also increased our inventory in order to meet the potential growth. And I think if you go back to 2020, during the year when we grew by 70%, we were able to work very closely. We have excellent relationships with our subcontractors.
Enough capacity now what we have done we also increased our inventory in order to meet the potential growth and I think if you go back to 2020 during the year. When we grew up 70% we were able to work very closely we have excellent relationship.
With our subsequent track tools they have enough capacity to grow if we need to grow certainly beyond our expectations. So we have all the capabilities to grow and we're very confident that we will be able to supply all the requirements that are out there.
Rami Lange: They have enough capacity to grow. If we need to grow, suddenly beyond our expectations, we have all the capabilities to grow, and we are very confident that we will be able to supply all the requirements that are out there. Got it. Super helpful.
Got it Super helpful. Thank you so much thank.
Gus Richards: Thank you so much. Thank you, Gus. Thank you, Gus.
Thank you Gus Thanks, Gus our next question is going to be from Alon lost of May tough Dush alone. You May go ahead and ask your questions.
Alon Last: Our next question is going to be from Alon Last of Maytas Dash. Alon, you may go ahead and ask your question. Hi, thanks for taking my questions. Going back to the orders, could you please provide some details about what the implications of those 300 machines are? What kind of revenue projection is due only to the current orders? What can we expect in the first and second quarter?
Hi, Thanks for taking my question going back to that in the rns.
Could you. Please provide some details about what are the implications of dogs.
Meaning what.
Kind of a revenue projection alright.
Due to only two.
The current targets.
We expect.
In the first and second quarters.
Rafi Amit: Okay. Hi Alon. The order that we received in the second half of 300 machines partially was delivered, you know, within the second half, but most of them, I would say, close to 70 percent, will be delivered in 2024, mainly in the first half of the year. Our ASP for machines is around $1 million, so that's the magnitude of the orders. And again, this is a general number, but our ASP is $1 million, so we are talking orders of the magnitude of $300 million. A big portion of these orders will already be delivered within our guidance of 93 to 95 million dollars in the first quarter.
Okay.
And the orders that we've received in the second half of 300 machines.
Partially were delivered in all in the <unk> within.
Ingrid the second half, but most of them I would say close to 70% will be delivered in 'twenty 'twenty four mainly in the first half of the year.
Our ASP for the image for machines is around $1 million. So that's the magnitude of the orders.
And again this is a general number but you know our <unk> is 1 million. So we are talking orders of magnitude of $300 million.
And <unk>.
Sorry.
Big portion of these orders will be delivered already within our.
The guidance of the <unk>.
$93 million to $95 million.
In the first quarter.
Moshe Idenberg: OK, and another question, if I look at the operating expenses, it doesn't seem that form factor contributed a lot to the expenses. So could you please provide some performance details about what was the contribution of form factor to the OPEX and also revenues during this quarter? So we can get into the level of details between Camtek and FRT, but obviously, they did contribute their share to the operating expenses in the form of two months only.
Okay, and another question and if I look at that.
And then operate dance Panther it doesn't seem that.
Contributed a lot of that spend from so could you. Please provide some.
Former details about what what's the contribution of that form factor to that to the Opex also revenues during this quarter.
So we can.
Getting to the level of detail between Comtech and FRP, but they obviously they did contribute their share to the operating expenses in the form of two months only.
Moshe Idenberg: Next quarter, the contribution to the expenses will be a little bit higher. Also, as I said, it's harder to provide an exact number because, as I said, we are going more and more direct in terms of sales distribution. So the level of sales and marketing expenses that are part of the operating expenses is coming down.
Next quarter on that day, the contribution to the expenses will be in a bit higher.
Also as I said, you know it's harder to.
To provide an exact number because as I said we are.
Going more and more direct in terms of sales distribution, so the level of sales and marketing expenses.
Part of the operating expenses level.
Coming down.
Moshe Idenberg: But in general, what it's important to say is that we plan to integrate FRT fully into our business, our sales people. When I say our, there will be a combined sales team that will sell both the Camtek legendary products as well as the FRT new products. And the technical support team will support both product lines. So everything will be integrated within 2024.
But in general we know that the.
It's important to say is that what we plan to knock the blend that we plan to integrate <unk> fully into our business our salespeople when I say, our there will be a combined sales team. It would say both the context legend.
Legendary products as well as the effort the new products.
Our technical support team will support both our product lines, so everything would be.
Integrated.
Within 'twenty 'twenty four.
Moshe Idenberg: Okay, last question for me. Some companies mentioned that they expect a sudden pullback in orders from China in the second half or during the during 24. What's your projection about Chinese demand? Are we likely to see it stable or decline during the during? We see stable demand coming out of China.
Okay and last question from me.
Applied had mentioned that that they expect a sudden pullback in orders from China in the second half hour. During January 24, what what you're watching a projection about the Chinese demand are we are we likely to see.
It's stable or decline burned during the.
We see stable demand coming out of China.
Rafi Amit: I think the comparison of Camtek with Applied is a little bit misleading because we serve, I would say, first of all, the OSOT world, which is growing very fast in China. Trailing Edge, Fabs, I think these are the main markets. And, of course, there are some smaller applications.
Think the comparison of Comtech was applied is a little bit misleading because we serve I would say first of all the whole set world, which is growing very fast on China.
Trailing edge Fabs.
I think these are the main markets and of course, our smaller applications.
Rafi Amit: But this is not the segment that Applied is serving. And therefore, I think the comparison here is a little bit misleading. Thank you very much. Thank you, Alon. Thank you, Alon. The next question is going to be from Joey Chai of Analog Century Management. Joey, you may go ahead and ask your question. All right, can you guys hear me? Yeah, we can. We hear you. Thank you, yeah, thanks so much for taking my question. So, I have more of a house cleaning question here.
These are not the segment that applied is serving and therefore I think the comparison here is ease a little bit misleading.
Okay. Thank you very much thank you alone.
Thank you next question is gonna be from Joey shy of analog century management. Joey you May go ahead and ask your question.
Hi, Hey, guys hear me, yes, we can hear you think yeah. Yeah. Thank you so much for taking my questions. So.
A more of a house cleaning question here so.
Joey Chai: So, today, management, like, reported, like, 300 orders. But based on, like, my track record, I think since Q3, the company has reported around, like, 240 orders. And on December 18, there were another, like, 25.
So today like management Bank reported 200 orders, but based on my track. So I think since Q3, the company reported a rally to 140 orders and on December 18, there was another 25, so suppose like on public.
Rami Lange: So suppose, like, on public release, there's, like, 265. So I'm just trying to ask, like, is there a discrepancy between, you know, 300 and 265? That I see here is that rounded on the 10th to the 300, or was it rounded on the, you know, the single digit base, like, for example, was running 295 machines, then you guys ran it to 300. It's so far, so it's rounded up in a single layer on the thing understood okay very well. But look, what we discussed on the last call. We mentioned 200 and all the machines, if I And since we got additional orders and we're already counting them until the end of the quarter, we did not mention the older ones.
Really there's a 265 machines. So I'm just trying to ask is the discrepancy between the three hundreds and the 265.
That I see here is that roundup on the 10th to the 300 or was it rounded on the you know the single digit base. For example is running 295 machines than you guys brought it to 300.
So so far so it rounded up in a single day on the same understood. Okay alright.
But look what we have discussed in the last call. We had mentioned 240 machines, if I remember correctly and seeing.
We have got additional orders and we are really counting them until the end of the quarter. We did not mention the olden suits. So by the end of 'twenty. Three we had about 300 or 300 machines. Some of them. Some of those 300, we shipped in the second half.
Rami Lange: So by the end of 23, we had about 300 machines; some of them, some of those 300 we shipped in the second half, and a significant portion of them will be shipped during 2024. And, of course, we are getting additional orders as we speak; it's on a daily basis. In general, we make a special announcement when we receive a large order. That's the time we make a special announcement, and from time to time, we discuss it during our call. Hayman. Did I answer your question, Jones? 100%
A significant portion of it will be shipped during 2024 and of course, we are getting additional orders as we speak it's on a daily basis in general we announce.
Orders when we receive.
And large order that's the time, we make especially announcements and from time to time, we discuss it during our calls.
In.
Did I answer your question, Joe 100 per cent. Thank you so much.
Joey Chai: Thank you so much. You're welcome. Sorry, yeah, I have one more follow-up. So, for the 30% of the revenue in 2024, which is measured commentary is going to be from like HBM and HPC, like, can management kind of comment on what's the split between these two? Because based on the comments, it seems like most of it is from the HBM part going forward. So, Joey, I cannot really make the distinction here, and I don't have them in front of me. But in general, we talk about high-performance computing, which comprises chiplets and HDMs. How about the... So, what would be the split between the chiplets and the HDM?
Sorry, Yeah, I have one more follow up so so for that 30% of the revenue in 'twenty 'twenty four which as mentioned comment is gonna be from like H B M and H P C like.
Can management comment on whats split between these two because based on the comments seems like most of it is from.
The H B M part going forward.
So I E.
So Joey I cannot really make sure the distinction and I don't have them.
And so for me, but in general we talk about the high performance computing, yes comprises off the templates and the H beams, sorry about that so what would be the split between the chip led and the H E. M. I don't have them in <unk> no.
Rami Lange: I don't have them in front of me. Okay. No worries. Let's just bundle them together, because eventually, this is more or less the segment that is really today's growth engine, and eventually, most of these chiplets need the HDMs around them. Understand understood, and another clarification. Sorry, this is the last.
So we just bundle them together because eventually David this is more or less the segment that is.
Is really today the growth engine and eventually most of these chips.
Chip literally days teams around them.
Understood understood and and another clarification, sorry, the last one so yeah.
Joey Chai: Yeah, you guys are saying that you see clear indications, you know, for the orders in the second half of 2024. And I assume you guys have much better visibility also into 2025. Can I assume that's also the case?
You guys, saying seeing clear indication you know for the orders in the second half of 'twenty 'twenty four and I assume you guys are much more better visibility.
Also into 2025 can assume that's also the case no.
Rami Lange: No, that's not the case. Okay. Still, 25 is far enough that we still cannot have visibility.
It's not the case okay.
Still 25 this is.
Far enough that state and we cannot have the visibility we understand the market, we understand the trends, but when you come to a real backlog.
Rami Lange: We understand the market, we understand the trends, but when you come to a real backlog, this is a little bit too much; this is beyond the horizon. Thank you very much. All right, thank you. Thanks, Joey. So that concludes the Q&A session. Before I hand that back over to Rafi for a concluding statement, I'd like to just let everyone know that in the coming hours, the upload and recording of this call will be available on the Investor Relations section of Camtek's website at camtek.com.
This is a little bit too this is beyond the horizon.
Thank you very much.
Alright, thank you.
Thanks, Joey so that ends the Q&A session.
And before I hand up back of its rapid a concluding statements I would like to just let everyone know that in the coming hours the upload and recording of this goal will be available on the Investor Relations of Cantel website at <unk> Dot com.
Kenny Green: I would like to thank everybody for joining this call and, Rafi, please go ahead with your closing statement. Okay, 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. To our investor, I thank you for your long term commitment. I look forward to talking with you again next week. Thank you and goodbye. Goodbye.
I'd like to thank everybody for joining this call and as Rafi. Please go ahead with your closing statements.
Okay I would like to thank you all for your continued interest in our business I want to especially thinks the employees and my management team for the tremendous performances.
To our investors I. Thank you for your long term support I look forward to talking with you again next quarter. Thank you and goodbye.
Good.