Q1 2024 Camtek Ltd Earnings Call
Ladies and gentlemen.
Yeah.
Yeah.
Ladies and gentlemen.
Sure.
Yes.
Yes.
<unk>.
Sorry about the slot in a second.
Kenny Green: Ladies and gentlemen, thank you for standing by and I would like to welcome all of you to Canpotex results Zoom Webinar. My name is Kenny Green Unempowered at the Investor Relations team at <unk>.
Kenny Green: All participants other than the present as a colony muted following the formal presentation I'll provide some instructions of its abating in the live question and answer session.
Kenny Green: I would like to remind everyone that this conference call is being recorded and the recording will be available on <unk> website from tomorrow.
Kenny Green: You should have all received by now the Companys press release, if not please view it on the company's website with me on the call today, we have Mr. Rafi, Amit Amtech CEO, Mr. Moshe Eisenberg, <unk>, CFO and Mr. Rami longer context, CFO Raffi will open by providing an overview of context results and discuss.
Kenny Green: Recent market trends Marcia will then summarize the financial results of the quarter, calling that Rafi Moshe and Rami will be available to answer your questions.
Kenny Green: Before we begin I would like to remind everyone that certain information provided on this call are internal company estimates unless other words otherwise specified. This call may also contain forward looking statements. These statements are only predictions and may change as time passes.
Kenny Green: Statements on this call are made as of today and the company undertakes no obligation to update any of the forward looking statements contained whether result of new information future events changes in expectations or otherwise.
Kenny Green: Vessels are reminded that these forward looking statements are subject to risks and uncertainties that may cause actual events or resolved that materially from those projected including as a result, all b bench or general economic conditions.
Kenny Green: Risk related to the concern concentration of significant portion of Capex expected business in certain countries, it's equally China for which <unk> expects to generate a significant portion of its revenues for the 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.
Kenny Green: Countries.
Kenny Green: Changing industry and market trends.
Kenny Green: 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 and price reductions as well as due to other risks identified in the company's filings with the SEC.
Kenny Green: Please note the safe Harbor statements in today's press release also covers the contents of this conference call.
Kenny Green: In addition, during this call certain non-GAAP financial measures will be discussed these are used by management to make strategic decisions forecast future yourselves and evaluate the company's performance management believes that the presentation of non-GAAP financial measures are useful to investors understanding and assessment of the company's ongoing core operations and.
Kenny Green: Prospects for the future.
Kenny Green: Full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release.
Kenny Green: And now I'd like to hand, the call over to Rafi <unk> CEO Rafi. Please go ahead.
Moshe Eisenberg: Okay. Thanks Kenny.
Moshe Eisenberg: Good morning, or good afternoon, everyone.
Moshe Eisenberg: Comtech ended Q1, 'twenty 'twenty four with a record quarterly revenue of $97 million.
Moshe Eisenberg: Exceeding the guidance of $93 million to $95 million provided last quarter.
Moshe Eisenberg: It is interesting to look at the distribution of sales this quarter.
Moshe Eisenberg: 80% of our revenue came from advanced interconnect packaging applications, which are divided to 40% from H B M segment, 20% from cheap Blitz, and 20% from other advanced packaging applications.
Moshe Eisenberg: The remaining 20 per same hour divided between compound semiconductor for power devices C. I S and process control applications.
Moshe Eisenberg: The gross margin came hide.
Moshe Eisenberg: In this quarter at 50.
Moshe Eisenberg: 56%.
Moshe Eisenberg: This achievement result, mainly from the high percentage of systems sold to the advanced packaging interconnect segment.
Moshe Eisenberg: The operating margin also show an improvement to about 30%.
Moshe Eisenberg: Based on our current order flow backlog and pipeline, we expect the high demand for H B M and chip lids to continue into the next quarters.
Moshe Eisenberg: This is reflected in our revenue guidance for the second quarter, which is about 100 to one of the $2 million.
Moshe Eisenberg: Today, I would like to focus on the high demand for AI related products.
Moshe Eisenberg: Rather than quoting from articles and industry surveys I would like to share with you. The information we have gathered from our current business regarding the effects of AI on our markets.
Moshe Eisenberg: AI technology, and especially generative AI requires extremely powerful computing capability and it is based on H B C. Architecture of reached the two main components are H P M and triplets.
Moshe Eisenberg: Saves Comtech is the leading provider for inspection and metrology of H B M and since we are present it all tier one customers in large number of inspection.
Moshe Eisenberg: And metrology steps the rate of requirement of incoming orders from H B M. Manufacturers is an important indication of the expected growth rate of H B M and H P C.
Moshe Eisenberg: Yes.
Moshe Eisenberg: The sharp increase in demand for H B M can be understood when comparing the revenue from our tools for H B M inspection and metrology in the first quarter of 'twenty 'twenty four to historical rates.
Moshe Eisenberg: Until the first quarter of last year H B M accounted for a single digit percentage of our revenue.
Moshe Eisenberg: Starting from the second half.
Moshe Eisenberg: Last year, we experienced significant growth in H b M cells and they accounted for approximately 20%.
Moshe Eisenberg: This quarter the revenue for H B M applications was 40% of our total revenue and we expect this level to continue in Q2 as well.
Moshe Eisenberg: We believe that this is a very strong indicator to the extent of production capacity build by the industry for this component, which are essential for eye performance computing.
Moshe Eisenberg: As we mentioned in our last call.
Moshe Eisenberg: The Q4 the consensus among the analyst is that H B M and cheap lids will continue growing in the coming years.
Moshe Eisenberg: At an annual rate of 20% to 30%.
Moshe Eisenberg: And therefore, we believe that this segment will continue to be a significant part of our sales in the coming years.
Moshe Eisenberg: The advantage of being a major player in tier one H b M and cheap lids manufacturers is that we are constantly challenged by the most advanced technological requirements enhancing our capabilities and knowledge in inspection and metrology.
Moshe Eisenberg: We have developed new solutions to meet our tier one customer Rodman.
Moshe Eisenberg: I used the term solution because it is a combination of new platform, new and advanced optical assemblies special feature an AI based algorithms.
Moshe Eisenberg: To sum it up the field of AI is changing the industry income tech is well positioned to benefit from these strengths, which will give us more confidence in our ability to continue growing beyond 'twenty 'twenty four and reach our next goal of annual sales.
Moshe Eisenberg: <unk> of more than $500 million.
Speaker Change: And now <unk> will review the financial results for sure.
Speaker Change: Thanks Rafi in my financial summary ahead, I will provide our results on a non-GAAP basis. The reconciliation between the GAAP results and the non-GAAP results appear in the table at the end of the press release issued earlier today.
Speaker Change: The purchase accounting treatment for for the <unk> transaction is also included in our non-GAAP reconciliation.
Moshe Eisenberg: In addition.
Moshe Eisenberg: Please know that the FRC results are included only starting from November 1st 20 credit for it.
Moshe Eisenberg: Going now to the revenues first quarter revenues came in at a record 97, <unk>, an increase of 34% compared with the first quarter of 2023 and an increase of 9% from the fourth quarter of 'twenty granted three midyear.
Moshe Eisenberg: The geographic revenue split for the quarter was a soils Asia, 86%.
Moshe Eisenberg: China was the relatively lower part of the mix because a good portion of our revenue this quarter came from H B S and shippers.
Moshe Eisenberg: U S and Europe.
Moshe Eisenberg: Together, our 14%.
Moshe Eisenberg: Gross profit for the quarter was 49.1% from $49 1 million or.
Moshe Eisenberg: The gross margin for the quarter was 66% up from 47, 3% in Q1 of last year and 49, 2% last quarter.
Moshe Eisenberg: The improvement is a result of a more favorable product mix as well as the initiatives, we implemented to improve the cost structure over the last few quarters.
Moshe Eisenberg: We anticipate to maintain these levels in the coming quarters.
Moshe Eisenberg: Operating expenses in the quarter were $20 $1 million compared to $16 9 million dwells in the first quarter of last year and $18 2 million Daus in Korea this quarter.
Moshe Eisenberg: The increase is mostly due to a planned expansion to support the continued growth.
Moshe Eisenberg: Operating profit in the quarter was $29 million compared to the 17 point only you'll gola.
Moshe Eisenberg: Reported in the first quarter of last year, and 25.5 million daus in the previous quarter.
Moshe Eisenberg: The increase is mostly due to the increase in the revenue and the improvement in the gross profit.
Moshe Eisenberg: Operating margin was 29, 9% compared to 24% and $28 seven respectively.
Moshe Eisenberg: Financial income for the quarter was $5 6 million door is a similar level to the previous quarter and higher than the 5.1, Neil Doyle reported last year. The increase from last year was due to higher interest rates on cash on our cash balance.
Moshe Eisenberg: Net income for the first quarter of 'twenty for any forward $31 3 million Daus, all 64 cents per diluted share. This.
Moshe Eisenberg: This is compared to a net income of $20 4 million daus or 42 cents per share in the first quarter of last year.
Moshe Eisenberg: Total total diluted number of shares as of the end of the first quarter was $49 3 million.
Moshe Eisenberg: Turning to some high level balance sheet, and cash flow metrics cash and cash equivalents, including short and long term deposits and marketable securities.
Moshe Eisenberg: As of March 31, 'twenty 'twenty four were 467 new logos.
Moshe Eisenberg: This compared with $449 million at the end of the fourth quarter.
Moshe Eisenberg: We generated 20 million daus in cash from operations in the quarter on the back of increased revenue and good collection.
Moshe Eisenberg: I know that during April the company paid $60 million as a dividend to the shareholders.
Moshe Eisenberg: The inventory level increased by approximately $7 million to $102 one yield of the.
Moshe Eisenberg: Greece over the previous quarter is to support anticipated sales growth in the coming quarters.
Moshe Eisenberg: Accounts receivables decreased to $86 4 million daus in the quarter. Despite the increasing revenue primarily as a result of our strong collection in the quarter.
Moshe Eisenberg: Our days sales outstanding decreased to 81 days down from 90 days.
Moshe Eisenberg: Guidance is up we said before we expect revenue of between 100 200 into legal grew up in the second quarter with continued sequential growth throughout 'twenty plentiful.
Speaker Change: And with that Rafi, Amit and I will be open to take your questions. Kenny. Thank you Moshe at this time, we will start the question and answer session. If you have a question. Please raise your hands on the Zain platform.
Speaker Change: Knowing that I will introduce you and ask each of them used after which you may ask your question.
Kenny Green: We have a lot of people Nicole we will wait a few moments to poll for your questions.
Kenny Green: Yes.
Kenny Green: Our first question will be from Charles sheet of Needham Charles You May go ahead.
Kenny Green: A.
Charles: Good afternoon. Thanks for taking my question. So Q1 H E M plus chip led 60% of the total revenue. That's that's a very impressive number but I kind of recall that that you guys. What are you expecting.
Charles: These two applications to account for like a 30% plus for the whole year.
Speaker Change: Shall we expect a higher number for the full year now or our and it's kind of like a moving target because it depends on your total revenue, but the one I want to get some sense.
Charles: Is Q1 in terms of our HCM bus chip led as a percentage is at the high point of the year or do you expect that.
Charles: Maybe you can walk here to maintain this level, maybe Q3 Q4 may be a slowdown.
Charles: <unk> as a percentage of all of the bad banks.
Charles: Rami you want to answer to their tenure, so hi, hi, Charles same sorts of definitely yesterday the numbers came higher than we expected when we were thinking about it and talking about it a couple of quarters ago, but definitely the numbers are higher.
Rami: We assume and we said it but the number is going to go this year to be around 50%, it's definitely going to be higher than we expected previously.
Charles: Sure.
Speaker Change: Got it.
Speaker Change: So.
Speaker Change: My asking the H P M and the chip led our revenue you guys are receiving so far and is there any China contribution yet.
Speaker Change: When youre talking here dishes not related to China as a machine alluded in his.
Speaker Change: <unk> prepared notes that's definitely the day five big players will discuss the main producers.
Speaker Change: Got it.
Speaker Change: Then the other question you guys I think this was our first.
Speaker Change: Of those over the longer term.
Speaker Change: Guidance you provided the 20th quantified revenue, surpassing that 500 million in milestone I believe your current capacity the Max potential outdoor capacity is about at that level. So wonder.
Speaker Change: Do you think well also about <unk> capacity expansion.
Speaker Change: Maybe.
Speaker Change: You you're going to do some of that expansion this year.
Speaker Change: Want to get some thoughts to how you think about the supply side of the equation. Thank you. So a char. So let me first of all correct you when we spoke about $500 million, we're talking beyond Pcs in the foreseeable future. This is the next target. This is not related for 2025.
Speaker Change: We are not in a position to say today, what will be the revenues of the entire year 24 indefinitely locked 2025, so ac's regarding day defined Andre will then and those are very clear regarding the capacity and I think we mentioned it in previous call.
Speaker Change: <unk> in the last expansion that we have made we have today the ability to manufacture here reduced affinity over $500 million. So from the capacity from our ability to you know to meet the requirements, including the sub suppliers into some.
Speaker Change: Player change, we are ready to reach those numbers, but when we reached him that's a different discussion that we cannot.
Speaker Change: Discuss today.
Speaker Change: Yeah, that's fair.
Speaker Change: Basically it means that at your you won't be supply constrained that before youre demand reaches that level.
Speaker Change: So maybe a last question I think this is probably.
Speaker Change: Uh huh.
Speaker Change: A good number that you guys disclosed that the chip leathers, 20%.
Speaker Change: The total revenue wonder if compared with the last year.
Speaker Change: Is that that is there any also a meaningful upticks on the I'll, let chip, but the revenue as well as you did put a lot of emphasis on HCM side, but really want to have a better understanding about chip. Let alone are you supplying to one or two customers already on the chip design.
Speaker Change: So definitely there is a significant increase on the cheaper side as well and we are supplying to the two major players here. So from that point of view, we are covering the entire market.
Speaker Change: Definitely there is an increase the numbers were significantly lower when you go a year ago.
Speaker Change: Thanks, so much.
Speaker Change: Thanks Jos.
Speaker Change: Our next question will be from Brian Chin of Stifel. Brian You May go ahead and ask.
Brian Edward Chin: Hi, there can you hear me okay.
Brian Edward Chin: Yeah.
Brian Edward Chin: Great.
Brian Edward Chin: Good afternoon, and thanks for letting us ask a few questions.
Brian Edward Chin: I guess firstly do you believe there is an increasing portion of your shipments. This year will be 412 high HBM die stacking and does your revenue opportunity increase in a linear fashion when you move from AI or the industry moves made Hyatt 12 high HBM stacks.
Speaker Change: Hey, Andrew.
Andrew: So it was sort of in general Brian <unk>.
Andrew: It should mean, an increase but any more either side, it's going to be the ratio.
Andrew: Alfredo H beds per treatment.
Andrew: So you know going through a stack of 12, staying with boots later lesser each be in surround the cheap lids. So I'm not sure you know what eventually the total numbers of drams that will be scanned solar when you need to look at our business. We scan wafers. So we don't study to in the sense of a what.
Andrew: One day after the other so really hear the question will be the number of drams that are going to be used.
Andrew: For the <unk> and this is going to really dictate what is going to be the growth factor from our point of view.
Speaker Change: Got it.
Speaker Change: Is that okay, you understood the point, Brian Yeah, Yeah, Yeah, I think I think I did that that's helpful.
Speaker Change: And that for me.
Speaker Change: From a lead time perspective, how are you managing I E.
Speaker Change: Do you have the ability of shell footprint to be able to help the eventual 500 million and term revenue target, but in terms of the fast progression of this ramp how are you managing from a lead time perspective.
Speaker Change: And are you at this stage basically booking into <unk>.
Speaker Change: So so first of all let's talk about the lead times so from the lead times.
Speaker Change: I think our customers have given us enough lead time in order to run.
Speaker Change: Today, I would say daily.
Speaker Change: The lead time is three to six months so from that point of view, we have the lifetime to run the business and get good inventories really is to be able to meet the demand.
Speaker Change: Okay got it.
Speaker Change: In addition, our remarks for the lead time.
Speaker Change: You know usually the this what we call high performance computing H B M. In Chile. It is done by the you know the biggest player in the industry and they are well organized and they can place order for let's say, even a year ahead.
Speaker Change: When we talk of other segment, usually the like all subtle other their lead time is much shorter in general so it's depending on the mix product and then we can see.
Speaker Change: Also the related to the lead times oil.
Speaker Change: Okay.
Speaker Change: Maybe one last question for promotion.
Speaker Change: I guess, how do we think about gross margin progression as revenue exceeded $400 million.
Speaker Change: Annualized rate over the over the course of this year, but what are sort of the key considerations around product customer mix or maybe cost.
Speaker Change:
Speaker Change: So obviously, our gross margin has to do with few factors. The first one is the product mix in D. C. As you know, we don't really know if others can come forward with a different mix.
Speaker Change: And the second element is more like the cost structure and.
Speaker Change: So what we did in the last several quarters is we definitely improve the cost structure of our of our Cogs level.
Speaker Change: In terms of fixed expenses and also divided very expensive and we definitely improve it.
Speaker Change: From that point, we are more relying now on improvement in product mix and Asp's.
Speaker Change: So it's hard for me to say you know, but generally speaking we are now at the point that we have some leverage and we will see some constant improvement in the gross margin and we believe that we will be able to maintain this level and hopefully even improve we can all over.
Speaker Change: <unk>.
Speaker Change: The next few quarters.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thanks, Brian.
Speaker Change: Our next our next question will come from Brian Chin of Stifel.
Speaker Change: Sorry, sorry, sorry.
Craig Andrew Ellis: Sorry, Brian Craig Ellis from B Riley.
Speaker Change: You May go ahead and ask your questions.
Craig Andrew Ellis: Thanks for taking the question good afternoon team and congratulations on.
Craig Andrew Ellis: Nice execution.
Speaker Change: Wanted to start with a nearer term question just to understand.
Speaker Change: The operating environment that you all are saying and it relates to order or pipelines.
Speaker Change: Conversion to order activity dynamics that you may have seen we've heard from a number of companies that have high bandwidth memory in and ship rate exposure at that are the latest increase in orders seem to happen concurrent with the big step up in U S. Hyper.
Speaker Change: Scale spending activity in the last month and a half. The question is is that something that served as a catalyst for a cam tack and.
Speaker Change: And can you compare just the intensity of customer discussions on future new orders or pipeline activity converting to orders with what you've seen maybe three and six months ago.
Speaker Change: Yes.
Speaker Change: And.
Speaker Change: You know what I'm trying to say.
Speaker Change: But I think also the way to six months ago, we started a lot of activities and there was a lot of intensive discussions and you started to see a booking already three to six months ago.
Speaker Change: I don't think there is a big change between Quanta Rigo and now no doubt the lots of discussions with the customers.
Speaker Change: There is a lot of a follow up to make sure that we're shipping on time, a definitely the industry needs to machines and this is what we were getting from our customers. They want to make sure that they can install the machine. Some time so from that point to fuel I think this is in line.
Speaker Change: <unk> of what you're seeing.
Speaker Change: Looking forward on your second half of the question.
Speaker Change: We believe from the discussions with customer to train.
Speaker Change: <unk> will continue into 'twenty four and further in 'twenty five, but it's too early to say something a very concrete.
Speaker Change: Overall, I would say environment and atmosphere is very positive and very intense discussions and we're constantly talking with the customers.
Speaker Change: That's really helpful color Rami. Thank you. The next question is a little bit more longer term and it relates to the 500 million dollar revenue target and the question is this we're clearly seeing a very rapidly growing and increasingly large chip led.
Rami: Unity for things related to high performance computing and AI, but regarding the 500 million revenue targa, how much does that depend on some recovery and formerly large end markets by the smartphone end market.
Rami: So the question is can we get to 500 million by powder recover in smartphones or to what extent when we made that smartphone or may be.
Rami: Our process control to make her a material or large or a contribution in the archdiocese.
Speaker Change: So I, you know, where I will start and Rafi will probably want to add to continue at something but I.
Rami: I mean, my thinking is that in order to meet the 500 million target under this assumption there will be a larger contribution from the other room.
Rami: What is today the the rest of the businesses today no doubt that the.
Rami: Capacity huge railroad and decides is low and as a result, you see munis investments in some of our other markets my assumption, but we will see some pickup towards the end of 'twenty four and definitely in order to reach the higher numbers 500 and beyond that.
Speaker Change: <unk> My assumption is that those markets will definitely be in larger part of the business and maybe Ravi you want to add something.
Ravi: I would say that the two major issue that can affect our goals to achieve the 500 million number one we want to see that utilization in the fab capital the normal number of about 90% and you know the GDP worldwide is is it a bit.
Ravi: Much normal and we can see some growth by end product line.
Ravi: And definitely China also can can be a big factor if they also get into this H B C C.
Ravi: Segment. So that there are many parameter that affect our ability to reach this $500 million, but definitely what we can see Q1 is not a normal totally.
Ravi: Because the high performance computing is very high and we expect the other segment also we see some recovery and then maybe we can feel more comfortable with it.
Speaker Change: That's really helpful color guys and then the last who will be for Moshi Moshi.
Speaker Change: First congratulations on the really really strong gross margins and you provided color. There. So I wanted to ask an operating expense question that somewhat relates to points made in prepared remarks by Rafi webs. The work you're doing with customers to custom.
Speaker Change: Customized solutions. The question is this as as the company.
Speaker Change: Further engages with customers and chip what opportunities and others, how should we think about the potential growth in R&D through the year relative to what we've seen recently thanks everybody.
Speaker Change: Thank you Craig so.
Speaker Change: Anyway. This is already in.
Speaker Change: Lockheed prepared remarks regarding the work that we do with the major tier one players is already built into our R&D plans for this year.
Speaker Change: And my expectation is that R&D.
Speaker Change: At least the R&D portion of <unk>.
Speaker Change: The Opex will grow pretty much hand in hand, with the revenue growth. This year, the other expense items, such as sales and marketing and G&A.
Speaker Change: Will be less affected by the growth in the in the revenue and will represent an opportunity for.
Speaker Change: Leverage additional leverage that we have in the model.
Speaker Change: Thanks, Tim.
Tim: Thank you Jim.
Speaker Change: Thanks, Greg.
Speaker Change: Our next question will be funded Bassi Chartres from Evercore.
Bassi Chartres: Back to you May go ahead and ask.
Bassi Chartres: Hi, Thanks for taking my question and congratulations on solid execution.
Bassi Chartres: The first one I wanted to ask about is you're seeing HBM anchor, they're having you really really really fast in these markets.
Bassi Chartres: I guess, Dave Antolik back alive competition could you have little Angus Stang, what our competitive mode is so that you maintain that share ang gigabyte coughing.
Bassi Chartres: Yeah.
Bassi Chartres: So.
Bassi Chartres: So first of all it.
Speaker Change: It's a good question and thank you and let me try and explain first of all from a.
Bassi Chartres: Imperative situations.
Bassi Chartres: This market you know will only entertain business from a comparatively large players so from that point of view a lot of the competition that we see elsewhere and in other players in other industries will not apply here.
Bassi Chartres: So you know the main players are and I think we've studied on on our previous calls definitely our main competitor we're onto innovation supplier here.
Bassi Chartres: There could be some business from a food KLA coming into visuals, but the business opportunity is very large and it's growing.
Bassi Chartres: Now if you take our position and the reason that we have such a strong position in this market we have been working with the customers today that we are serving.
Bassi Chartres: For quite a few years there has been a lot of development work in doing all of the steps that we executed to date. This is not something that can be replaced to change very easily.
Bassi Chartres: We continue to work very closely with these customers and we are as we speak developing new steps and capabilities to meet the requirements of all of these customers limping believes in next year and the following years. So yes, there will be more competition no doubt as they are.
Bassi Chartres: <unk> to gross but I think we're very well positioned to maintain a significant share in the market. You are both in the H BMS MTG Blitz Arena.
Bassi Chartres: Okay.
Speaker Change: That's helpful. Thank you and maybe maybe asking a little bit on top of that a sell out how how a year. They had bleeding into the second half of <unk> are you starting to see a big chunk of Oregon, which kind of gives you that confidence that youll continue to grow sequentially again class.
Speaker Change: <unk> L. A S ifr visibility issue on what the second half of any oil in Ukraine. It intact commentary has changed.
Speaker Change: Since then.
Speaker Change: So definitely and we continue.
Speaker Change: Continue to see.
Bassi Chartres: One just coming in and we are in very intense discussions with our customers and we understand also when they will be placing orders for the second half. So overall, we are confident that we will retain the level of business away.
Bassi Chartres: Now with some growth in the second half.
Speaker Change: I would like to add towards something just to understand.
Speaker Change: Even if we get an order for let's say for Q4, okay.
Bassi Chartres: You have to consider that sometimes this order is depend on the customer to complete infrastructure construction facility. Other pyramid there that may be if not on time. He can delay this order to another quarters. This is why we cannot tell in a day.
Bassi Chartres: One for a long term you know what is going to happen. We can get all there we see pipeline to understand the demand and we feel comfortable but it can move you know additional months, an additional quarter based on the infrastructure is ready or not ready for that.
Speaker Change: That's helpful. Thank you and maybe a last one I think in previous calls you had a unit going in you have to.
Bassi Chartres: I have found that is ramping up sometime in 2024 could you give us an update on the V. I N that cross say aye.
Bassi Chartres: And the adoption that you are looking.
Bassi Chartres: So I.
Speaker Change: We want to be very careful here. Obviously these are things that we don't disclose on the call I think Rafi is compared notes discussed some of the things that we're doing we're definitely making a <unk>.
Speaker Change: Hedge ways and we are in process today of bringing in the.
Speaker Change: The new products into the market. It is too early for us to make a formal announcements and we will probably make them as we you know things progressing during the year, it's a little bit too early to give you more details Dan Ives, we've just given so far.
Dan Ives: Sure. Thank you.
Speaker Change: Thank you vivek thanks capacity.
Speaker Change: Our next question will be from Gus Richard of Northland as Gus you May go ahead and ask.
Auguste Philip Richard: Gus you need <unk>.
Auguste Philip Richard: Gus.
Auguste Philip Richard: Sorry about that I was looking at the model congratulations on the strong results and.
Auguste Philip Richard: My first question is in terms of.
Auguste Philip Richard: <unk> are you starting to see that spread out into the <unk>.
Auguste Philip Richard: Aim.
Auguste Philip Richard: There are discussions about it.
Speaker Change: I think there are this already each starting to happen, but it's still I think relatively low volumes.
Speaker Change: I think that it will happen, but I think this will happen later this year or in 'twenty five.
Speaker Change: Got it and then in terms of F. R T and opportunities for backside power, we're about a year out from backside power ramping into production are you starting to see.
Speaker Change: Copper or having conversations with your customers about ramping for that process change.
Speaker Change: Yeah.
Speaker Change: First of all you know from FERC definitely do you see something that is proceeding on track specifically on the question of this specific application.
Speaker Change: I don't have the answer right off the bat is this is something that we.
Speaker Change: We can I can look into it and we can have the follow on colon out I'll give you the answer the guests.
Speaker Change: Thanks.
Speaker Change: And then the last one for me is.
Speaker Change: You know clearly HBC is very strong and driving a lot of demand.
Speaker Change: However, the <unk>.
Speaker Change: Move of system in package to client has been somewhat less.
Speaker Change: Slower than I would've expected I think due to cost or potentially yield and I'm, just wondering or it could be capacity constraints and I'm just wondering what youre seeing from your customers in terms of.
Speaker Change: Demand from the client side of chip lots in particular.
Speaker Change: No no I think the you know obviously, there's been a lot of discussions on the yield and you know how good the known good die or no I think we're getting very in <unk>.
Speaker Change: Strong demand indications from our customers that they're going to ramp and one further and I think that from the technical side I think I think the industry has solutions forwards.
Speaker Change: I think there was more concern on the HB inside but I believe that all the players today are on track to resolve those issues that should be slipped we are hearing on our side, but as you know this kind of information is very confidential.
Speaker Change: Got it alright, that's it for me. Thank you. So much. Thank you your orgasm well, we'll have a follow on to just answer. The question. Yeah. We are not I'm not able to answer them.
Speaker Change: Fair enough.
Speaker Change: Thanks, Gus our next question will be from William <unk> of Barclays. William You May go ahead.
William: Hi, guys. Thanks, so much for taking my question. My first question has to do is just H B M. In the general time frame you're seeing now.
William: Most of the large dicky large H B M. Three players are sold out through 2025 are your conversations focus now beyond that and further capacity ramps.
Speaker Change: Look the conversations don't go this way.
Speaker Change: Talking in general and give you would you know.
Speaker Change: First of all when you talk as usually and when we talk about a purchase orders, it's usually for the same year or as Rafi mentioned up to 12 months ahead.
Speaker Change: And but the indications are from people that we speak that they see this segment continuing to grow.
Speaker Change: And let's.
Speaker Change: Let's say the sales and the trained and what we hear we believe that you know the HBM and <unk> growth will continue into 'twenty five.
Speaker Change: Definitely we don't have the picture of what will happen beyond except from the understanding where these markets go.
Speaker Change: And you know just to give you sense today, the HBM, it's about around 6% of the entire DRAM business.
Speaker Change: So.
Speaker Change: The indications are that these numbers will be much much larger than a few years. So you know from understanding or this market is going to end the potential application definitely the growth should be beyond 25 and should be in the foreseeable future, but this is something that.
Speaker Change: It's way too early to say and understand because you know this industry is very dynamic and many things can happen in between now and the end 25. So.
Speaker Change: Give you something very specific and concrete obviously, we cant understanding where this market understanding the technology and the trend definitely this is something that we believe would grow continue to grow in the foreseeable future.
Speaker Change: And from time to time, we can see customer that really start with construction and infrastructure in order to expand the fab capacity.
Speaker Change: To meet the demand for the next few years. So it's also a good indication.
Speaker Change: Okay.
Speaker Change: Thanks, guys.
Speaker Change: Just a quick follow on that to refresh my memory. When you ship on in these products, how long will it take the customers to ramp and make your machine.
Speaker Change: <unk> are fully functional in their fabs.
Speaker Change: I would say you know we are of the shipments these days because everything is shipped by air.
Speaker Change: On the timing to enter the facility until it starts to run its questions a very few weeks.
Speaker Change: <unk>.
Speaker Change: Can be.
Speaker Change: One two weeks and each one starts to run the product and any demand spurred the customer sometimes if you can go there, but it's a very short study.
Speaker Change: Great. Thanks.
Speaker Change: Thanks Williams there are any additional questions. Please raise your hand on the platforms and we will give us seconds to Paul.
Speaker Change: Our next question.
Speaker Change: In a minute.
Speaker Change: Okay.
Speaker Change: We have a few more questions. Our next question will be from Dobson Yang.
Dobson Yang: Please go ahead.
Dobson Yang: Alright, Thanks for taking my question along on behalf of tobacco.
Dobson Yang: I'm going to respond on your target model on a while back you gave out a model a $400 million at the high end and sales and alongside that you said, 52% to 53% gross margin.
Speaker Change: So Kevin we're reaching that 400 million in sales to this.
Speaker Change: Sure.
Speaker Change: Is that gross margin level on a chip.
Speaker Change: Or or or have things changed.
Kevin: Hum in General. This is this is achievable we gave the range and I believe that the ranges and even wider.
Speaker Change: <unk>, 51% to 53% and this is definitely a very achievable range. We are on the verge of this a range and we are pretty much at the run rate of 400 million daus.
Speaker Change: The moment, so and as I said you know there is a room for further improvement on the gross margin side as well as on the on the Opex side. So this is still a valid.
Speaker Change: Our range for the company.
Speaker Change: Got it.
Speaker Change: As a follow up.
Speaker Change: Think a while back you also mentioned that is H b M advanced packaging tools have roughly 50% ASP upside.
Speaker Change: On the non APM tools.
Speaker Change: Is that continuing to grow from.
Speaker Change: From say eight eight highest premiums to 12 high and then problem less of those advanced chip West Tomorrow or fast.
Speaker Change: Are we still see Asps upsides going forward okay.
Speaker Change: Sure.
Speaker Change: One of us in the soap so.
Speaker Change: First of all when we talked and we go back I think somebody asked a similar question. So first of all moving from eight to 12 doesn't change.
Speaker Change: Our business or our machines don't read anything into don't care, because we scan wafers.
Speaker Change: Those wafers are in dice and Dan assembled either eight or 12, so from our point of view it really doesn't matter, whether it would be an eight stack or a 12 stock and there is no difference not from the performance point of view and not from every aspect the machines are identical so he's there.
Speaker Change: Here any upsides for ASB equivalent known the reasons. Unfortunately from our machines once a it would not matter to them.
Speaker Change: Understood. Thank you.
Speaker Change: Thanks, Doug says next question will be from Alon lost of makeup dash alarm you May go ahead and ask your questions.
Speaker Change: Okay.
Speaker Change: Yeah.
Alon: Allow me we can hear you.
Alon: Hi.
Alon: Why does that person is about efficiency and edge NAND manufacturing you spoke about it a bit there.
Alon: When British quarter mentioning that debt.
Alon: The efficiency is going to be very low and there is the risk on behalf of fan contact that is efficiency grow demand for our inspection tools is less than the than what they could.
Alon: Could be potential can you speak about it a bit the mentioned.
Alon: You mentioned, what what kind of efficiency rates you see at the moment in the industry and what is the projection about it.
Alon: And the improvement in efficiency.
Speaker Change: Let's let me let me let me answer for the first of all.
Speaker Change: You know, we we are not we cannot share that's confidential information and even in our customer do not share it with us.
Speaker Change: But from time to time, we try to double check it to his customer indefinitely.
Alon: Would say that the rumor in the market about.
Alon: The low efficiency.
Speaker Change: Not true.
Speaker Change: And in most of our customer deny said none of it's not like that it's much better that is owning formation, we could share with us.
Speaker Change: Okay. Thank you. Another question is about the gross margin.
Speaker Change: Currently there is a 60% in <unk> and HBM, which means that then let's say that in high margin Nachos IRA IRA a large portion of that of the current third quarter.
Speaker Change: <unk>.
Speaker Change: And.
Speaker Change: What can drive that.
Speaker Change: Additional improvement in the margins and is it that the H B M. N chip that is going to be more than 60% or is it something that might drive the improvement in gross margins going forward.
Speaker Change: So the potential improvement in gross margin comes from the new products and the new platforms that we alluded for earlier in the call by Iranian Huffy, we're walking on releasing new models and new platforms and they will come with.
Speaker Change: Improved gross margin performance.
Speaker Change: And do you have any scheduled for that already.
Speaker Change: Okay.
Speaker Change: So we do not we do not have a formal launch time for these product lines, but that would come in the near future. They will have a positive contribution as they.
Speaker Change: Get to the market.
Speaker Change: Okay. Thank you very much.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thanks <unk>.
Speaker Change: Our next question will be from Jack Hu of East Spring investments. Jack You May go ahead and ask your question.
Speaker Change: Yes.
Jack Hu: Thank you for giving me the chest as question.
Jack Hu: Two questions for me.
Jack Hu: My first question is about.
Jack Hu: It is because right now.
Jack Hu: Your country.
Jack Hu: Confident with sniper so well.
Jack Hu: Conflict will impact to your operation and order shipment.
Jack Hu: It is my first question.
Speaker Change: After you want to answer.
Speaker Change: Honestly, it's fun alright.
Speaker Change #108: Alright, so so first of all from yes, it's unfortunate the conflict where having cut from the operations point of view.
Speaker Change: <unk> is operating as usual we've not missed in shipments to government is supporting us and from shipments air Freights dig.
Speaker Change: The entire environment is working in supporting these ready to industry and we do not expect.
Speaker Change: Amy.
Speaker Change: Any issues and.
Speaker Change: So from our point of view.
Speaker Change: At this point of view now Furthermore.
Speaker Change: We have a few locations, where we manufacture the machine here in Israel actually three different locations with redundancy between the different places.
Speaker Change: And longer term, we are also thinking of establishing a manufacturing facility outside of Israel.
Speaker Change: Yeah.
Speaker Change: Others think of is critical in the mine that's the question yes.
Speaker Change: They are free.
Speaker Change: Major memory vendors play.
Speaker Change: They are all announced they will grow by an H B and C E.
Speaker Change: Key products in the coming future.
Speaker Change: Well I mean his data.
Speaker Change: Which.
Speaker Change: Vendors, we are we will collaborate with plan further.
Speaker Change: One older three customer OTO three printers, we are deep.
Speaker Change: Deep deeply cooperated with them.
Speaker Change: So thank you for the question Jack So first of all as we mentioned before we have very good and close relationship with all of the vendors.
Speaker Change: Now when they will move from one type of H b into another Doug. This is something they do not disclose with us.
Speaker Change: These are they are intentionally internal plans, but from this really doesn't differ for us in the sense that we.
Speaker Change: Inspect and measure.
Speaker Change: <unk>, so whether they will do it a stack of 812 or 16.
Speaker Change: This really does not make any dip does not require any changes in the machine from performance point of view, we can meet all the requirements they need now and they will be down the road.
Speaker Change: Sure.
Speaker Change: Work with all the different vendors.
Speaker Change: Yeah.
Speaker Change #101: Okay. It's fair propelled both just one follow up question.
Speaker Change #101: So I'm interested or which customers are investing more in the SPN capacity expansion no.
Speaker Change #100: Thank you.
Speaker Change #100: So.
Speaker Change #106: And Jack we have no knowledge of that and then what you hear and what they make an announcement. This is really want to know.
Speaker Change #102: And obviously, we are under confidential agreement that we cannot disclose.
Speaker Change: Two who we sold and how many machines and this is something that is confidential. So I will not be able to help you understand John This question.
Speaker Change: Yeah.
Speaker Change #103: Thanks, Jack thank.
Speaker Change #104: Thank you.
Speaker Change #107: Thank you guys.
Speaker Change #105: And that concludes the question and answer session before I hand back to Rafi I would just like to let you all know that within the next hour. The recording of this conference call will be accessible from the same link and also from the Investor Relations section of <unk> website at <unk> Dot com.
Moshe Eisenberg: I'd like to thank everybody for joining this call and I would now like to hand back to Raffi for his closing statement Rafi. Please go ahead.
Moshe Eisenberg: I would like to thank you all for your continued interest in our business I want to especially thanks to the employees and my management team for the tremendous performance towing Victoria. Thank you for your long term support I look forward to talking with you again next quarter.
Raffi: Thank you and goodbye.
Moshe Eisenberg: Yeah.