Q2 2024 Camtek Ltd Earnings Call
and many more.
Operator: We've started one minute; we're just waiting for the last few people to enter. Ladies and gentlemen, thank you for standing by, and I would like to welcome all of you to Camtek's results soon webinar.
Kenny Green: We'll start in one minute; we're just waiting for the last few people to enter. Thank you. Ladies and gentlemen, thank you for standing by. I would like to welcome all of you to Camtek's Resolve 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.
Kenny Green: Following the formal presentation, I'll provide some instructions for participating in the question and answer session. I'd like to remind everyone that this conference call is being recorded, and the recordings will be available on Camtek's website from tomorrow. You should all have by now received the company's press release. And if not, you can view it on the company's website.
Kenny Green: With me on the call today, we have Mr. Rafi Amit, Camtek CEO, Mr. Moshe Eisenberg, Camtek CFO, and Mr. Ramy Langer, Camtek COO. Rafi will begin 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 Ramy will be available to take your questions.
Kenny Green: My name is Kenny Green, and I'm part of the Investor Relations team at Camtek.
Kenny Green: All participants, other than the presenters, are currently muted. Following the formal presentation, I'll provide some instructions for participating in the question and answer session. I'd like to remind everyone that this conference call is being recorded, and the recordings will be available on Camtek's website from tomorrow. You should all have all by now received the company's press release, and if not, you can view it on the company's website.
Speaker Change: I'd like to remind everyone that this conference call is being recorded and the recordings will be available on CAMTEC's website from tomorrow.
You should all have all by now received the company's press release, and if not, you can view it on the company's website. With me on the call today, we have Mr. Rafi Amit, Camtek CEO , Mr. Moshe Eisenberg, Camtek CFO , and Mr. Ramy Langer, Camtek COO.
Kenny Green: With me on the call today, we have Mr. Rafi Amit, Camtek CEO, Mr. Moshe Eisenberg, Camtek CEO, and Mr. Ramy Langer, Camtek CEO. Rafi will begin by providing an overview of Camtek's results and discuss recent market trends. Moshe will then summarize the financial results for the quarter. Following that, Rafi, Moshe, and Ramy will be available to take your questions.
Speaker Change: Rafi will begin by providing an overview of Camtek's results and discuss recent market trends. Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe, and Ramy will be available to take your questions.
Kenny Green: Before we begin, I would like to remind everyone that certain information provided on this conference call are internal company estimates unless otherwise specified. This call may also contain four listening statements. These statements are only predictions and may change as time passes. Statements on this call are made as of today, and the company undertakes no obligations to update any of that information or any of those four listening statements contained, whether as results, but new information, future events, changes, and expectations are otherwise. Investors are reminded that these four listening statements are subject to risks and uncertainties that may cause the actual events or results to differ materially from those projected, including as a result of the effects of general economic conditions.
Kenny Green: Before we begin, I would like to remind everyone that certain information provided on this conference call is internal company estimates, unless otherwise specified. This call may also contain forward-looking statements. These statements are only predictions and may change as time passes. Statements on this call are made as of today, and the company undertakes no obligation to update any of that information or any of those forward-looking statements contained therein, whether as a result of new information, future events, changes, and expectations or otherwise. Investors are reminded that these forward-looking statements are subject to risks and uncertainties that may cause actual events or results to differ materially from those projected, including as a result of the effects of general economic conditions.
Kenny Green: Risks related to the concentration of a 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 from our expectations regarding the 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 other risks identified in the company's findings with the SEC. Please note that the Safe Harbor Statement and today's press release also cover the contents of this conference call. In addition, during this course, certain non-GAAP financial measures will be discussed.
Speaker Change: Investors are reminded that these forward-looking statements are subject to risks and uncertainties that may cause actual events or results to differ materially from those projected, including as a result of the effects of general economic conditions.
Kenny Green: Risk related to the concentration of a 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 from our expectations regarding timing and size of orders from customers in these countries. Changing industry and market trends, reduce demand for services and products, the timing developments of new services and products and their reduction by the market, increase competition in the industry and price reductions, as well as due to other risks identified in the company's findings with the SEC.
Speaker Change: Changing Industry and Market Trends
Kenny Green: Please note that safe harvest statements and today's press release also cover the contents of this conference call. In addition, during this course, 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 current performance. Management believes that the presentation of non-GAAP financial measures are useful to investors' understanding an assessment of the company's ongoing poor operations and prospects for the future. A full reconciliation of non-GAAP financial measures is included in today's learning release.
Speaker Change: and today's press release also covers the contents of this conference call.
Rafi Amit: These are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes that the presentation of non-GAAP financial measures is useful to investors' understanding and assessment of the company's ongoing core operations and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures is included in today's earnings release. And now, I would like to hand the call over to Rafi Amit, Camtek CEO. Rafi, please go ahead. Okay, thanks Kenny. Good morning or good afternoon, everyone.
Speaker Change: In addition, during this course, 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 current performance.
Kenny Green: And now, I would like to hand the call over to Rafi Amit, Camtek CEO. Rafi, please go ahead.
Rafi Amit: Camtek ended this quarter with a record quarterly revenue of $102.6 million, representing a 40% growth compared with Q2 2016. The distribution of revenue in this quarter is... Over 50% of our sales were for high-performance computing-related products for the second quarter in a row, approximately 15% for OSOTs, mainly for advanced backers, and the rest were split between silicon carbide, front-end, CMOS image sensor, and other applications. This trend of product peaks resulted in increased profitability, and I am very pleased with the improvement in achieving a gross margin of 51% and an operating margin of about 30%.
Speaker Change: And now I would like to hand the call over to Rafi Amit, Camtek CEO . Rafi, please go ahead.
Rafi Amit: Okay, thanks, Kenny.
Rafi Amit: Good morning or good afternoon, everyone. Camtek ended this quarter with a record quarterly revenue of $102.6 million, representing 40% growth compared with Q2-23. The distribution of revenue in this quarter is over 50% of our sales, where for high performance computing related products for the second quarter in a row. Approximately 15% for OSATs, mainly for advanced packaging, and the rest were split between silicon carbide, front end, CMOS image sensor, and other applications. This trend of product peaks resulted in increased profitability, and I'm very pleased with the improvement of achieving a gross margin of 51% and operating margin of about 30%.
Rafi Amit: Approximately 15% for OSATs, mainly for advanced packaging.
Rafi Amit: This trend of product mix resulted in increased profitability and I am very pleased with the improvement of achieving a gross margin of 51% and operating margin of about 30%.
Rafi Amit: The demand in the HPC segment is reflected in the PR we issued a few days ago with an announcement about receiving multiple systems order of over $25 million from a global T1 customer to inspect HBM wafers. I am happy to share with you that since we issued the PR, this customer added $6 million, bringing the entire order to over $31 million. The industry trends regarding eye performance computing modules is also reflected in our view of our future revenue. Based on our current orders flow, backlog, and pipeline, our revenue guidance for the third quarter is $107 to $110 million, representing, in the midpoint, about 35% gross year over year.
Rafi Amit: The demand in the HPC segment is reflected in the PR we issued a few days ago with an announcement about receiving a multiple systems order of over $25 million from a global tier one customer to inspect HBM wafers. I am happy to share with you that since we issued the PR, this customer added $6 million, bringing the entire order to over $31 million. The industry trends regarding high-performance computing modules are also reflected in our view of our future revenue, backlog, and pipeline. Our revenue guidance for the third quarter is 107 to 110 million dollars, representing at the midpoint about 35 percent growth year over year. The main gross driver in the semiconductor market is HPC modules for generative AI. For example, our revenues in this quarter have grown three times since Q2 2023.
Speaker Change: The demand in the HPC segment is reflected in the PR we issued
Rafi Amit: a few days ago with an announcement about receiving multiple systems order of over $25 million from a global tier 1 customer.
Rafi Amit: I am happy to share with you that since we issued the PR, this customer added $6 million, bringing the entire order to over $31 million.
Rafi Amit: The industry trends regarding high-performance computing modules is also reflected in our view of our future revenue.
Rafi Amit: Based on our current orders flow
Rafi Amit: We expect continuous gross in the fourth quarter as well. The main gross driver in the industry; we are a key equipment provider. Our revenues in this quarter have grown three times since Q2 2021. from order we have on hand our pipeline and from discussion with customer we expect the month for our system for HPC related products to continue in the second half of 2024 and into 2025. HPC modules include mainly chiplets, HBM, and silicone substrates. The production technologies of HPC modules are developing rapidly, which require our continued development of advance and cost effective solutions. For example, one of our new key challenges is measuring and inspecting wafers with an extremely high number of micron-level interconnects at a very fine pitch.
Rafi Amit: We expect continued growth in the fourth quarter as well.
Rafi Amit: From order we have on hand, our pipeline, and from discussion with customers,
Rafi Amit: We expect demand for our system for HPC-related products
Speaker Change: One of our new key challenges is measuring and inspecting wafers with an extremely high number of micron-level interconnects at a very fine pitch.
Rafi Amit: The industry is moving from a pitch of tenths of micron to a single digit pitch. Moreover, customers use more inspection steps to maintain high yield, and they are evaluating our systems in process steps we have not participated in before. So we can see high potential for expanding our business with our current and new generation systems. Our new generation systems that we completed developing are equipped with state-of-the-art sensor and optics to perform all types of inspection, 3D bumps measurement, and metrology. That we believe will address the current and the next generation HPC-related products at high volume manufacturing throughputs.
Rafi Amit: The industry is moving from a pitch of tenths of a micron to a single-digit pitch.
Rafi Amit: Customers use more inspection steps to maintain high yield, and they are evaluating our systems in process steps we have not participated in before. So we can see high potential for expanding our business with our current and new generation systems, that we believe will address the current and next generation HPC related products at high volume manufacturing throughput. Clearly, a major growth in demand for capital semiconductor equipment is generated from the reality that countries with leading economies such as the U.S., Japan, China, and Europe consider advanced semiconductor components as strategic national assets and therefore expand their design and production capabilities by establishing new manufacturing facilities in their respective countries.
Rafi Amit: Moreover,
Rafi Amit: So we can see high potential for expanding our business with our current and new generation systems.
Rafi Amit: We also expect OSATs to implement packaging capabilities for HPC. This trend will allow fabulous and IDM companies to start producing HPC model that will be suitable for AI and additional applications. We expect that our strong position within the OSATs will benefit us with this industry shift as well. Clearly, a major growth in demand for capital semiconductor equipment is generated from the reality where countries with leading economics such as the US, Japan, China, and Europe consider advanced semiconductor components as strategic national assets. Therefore, expand their design and production capabilities by establishing new manufacturing facilities in their respective countries.
Rafi Amit: to implement packaging capabilities for HPC. This trend will allow Fabless and IDM companies to start producing HPC model that will be suitable for AI and additional applications.
Rafi Amit: Clearly,
Rafi Amit: such as U.S., Japan, China, and Europe consider advanced semiconductor components as strategic national assets.
Rafi Amit: Concern regarding geopolitical changes only accelerate the decision of those countries to have local infrastructure for the manufacturing of. The strong order flow, some for delivery in 2025 and the I Demand for HPC gives us a relatively clear long-term vision, which allows us to organize our operation efficiently to meet the expected demand. To sum it up, the demand for HPC, together with industry analysts' forecast for a growing demand for end-products such as mobile phones and PCs, and the establishment of new facilities in key countries, make us believe that we will continue growing in 2025.
Rafi Amit: which allows us to organize our operation efficiently to meet the expected demand.
Moshe Eisenberg: To sum it up, the demand for HPC, together with industry analysts' forecasts for a growing demand for end products such as mobile phones and PCs, and the establishment of new facilities in key countries, make us believe that we will continue growing in 2021. Now, Moshe will review the financial result.
Rafi Amit: To sum it up, the demand for HPC, together with industry analyst forecasts,
Rafi Amit: for a growing demand for end products such as mobile phone and PC and the establishment of new facilities in key countries make us believe that we will continue growing in 2025.
Kenny Green: And now, Moshe will review the financial result.
Moshe Eisenberg: Moshe? Thanks, Rafi.
Moshe Eisenberg: Thanks, Rafi. In my financial summary ahead, I will provide the results on a non-GAP basis. The reconciliation between GAP results and the non-GAP results appears in the table at the end of the press release issued earlier today. The US and Europe accounted for 8%.
Moshe Eisenberg: In my financial summary ahead, I will provide the results on a non-game basis. The reconciliation between GEP results and the non-GEP results appears in the table at the end of the press release issued earlier today. Revenue for the first quarter came in at the record $102.6 million, an increase of 39 percent, compared with the second quarter of 2023, an increase of 6 percent from the first quarter of 2024. The geographic revenue street for the quarter water follows: Asia 92 percent, Lewis in Europe accounted for 8 percent. The higher the normal contributions from Asia relates mainly to the big demand for HBM, which is currently manufactured in Korea and Taiwan.
Rafi Amit: Thanks, Rafi. In my financial summary ahead, I will provide the results on a non-GAP basis. The conciliation between GAP results and the non-GAP results appears in the table at the end of the press release issued earlier today.
Speaker Change: Revenue for the first quarter came in at a record $102.6 million dollars, an increase of 39% compared with the second quarter of 2023, an increase of 6% from the first quarter of 2024.
Rafi Amit: The geographic revenue split for the quarter was as follows, Asia 92 percent.
Rafi Amit: U.S. and Europe accounted for 8%. The higher than normal contribution from Asia relates mainly to the big demand for HBM, which is currently manufactured in Korea and Taiwan.
Moshe Eisenberg: Gross profit for the quarter was $52.4 million; the gross margin for the quarter improved to 51 percent, up from 50.6 in the first quarter of 2024, and 48 percent in the second quarter of last year. This is mainly due to a more favorable product mixed in the quarter and our ongoing efforts to improve the construction of our products, when anticipated gross margin would remain at a similar level in the coming quarter.
Moshe Eisenberg: The higher than normal contribution from Asia relates mainly to the big demand for HBM, which is currently manufactured in Korea and Taiwan. Gross profit for the quarter was $52.4 million. The gross margin for the quarter improved to 51%, up from 50.6% in the first quarter of 2024 and 48% in the second quarter of last year. Operating expenses in the quarter were $21.6 million compared to $17.1 million in the second quarter of last year and $20.1 million in the previous quarter.
Speaker Change: This is mainly due to a more favorable product mix in the quarter and our ongoing efforts to improve the cost structure of our products. We anticipate the gross margin will remain at a similar level in the coming quarters.
Moshe Eisenberg: Operating expenses in the quarter were $21.6 million, compared to $17.1 million in the second quarter of last year and $20.1 million in the previous quarter. The increase is mostly due to planned expansion to support gross operations. Operating profit in the quarter was $30.8 million, compared to $18.3 million reported in the second quarter of last year and $29 million in the previous quarter. The increase is mostly due to the increase in the revenue and the improvement in the gross profit. Operating margin was 30 percent, compared to 24.8 percent and 29.9 percent, respectively.
Speaker Change: Operating expenses in the quarter were $21.6 million compared to $17.1 million in the second quarter of last year and $20.1 million in the previous quarter. The increase is mostly due to planned expansion to support growth of operations.
Speaker Change: Operating profit in the quarter was $30.8 million compared to $18.3 million reported in the second quarter of last year and $29 million in the previous quarter.
Moshe Eisenberg: The increase is mostly due to planned expansion to support the growth of operations. The increase is mostly due to an increase in revenue and an improvement in gross profit. Operating margin was 30% compared to 24.8% and 29.9%, respectively. Financial income for the quarter was $5 million, slightly lower than the $5.8 million reported in the second quarter of last year and $5.6 million in the previous quarter. The decrease is mostly due to a lower cash balance following the $60 million dividend paid in April, slightly offset by the cash generated throughout the quarter. The total diluted number of shares as of the end of the second quarter was 49.3 million.
Moshe Eisenberg: Financial income for the quarter was $5 million, slightly lower than the $5.8 million reported in the second quarter of last year and $5.6 million in the previous quarter. The decrease is mostly due to the lower cash balance following the $60 million dividend. Net income for the second quarter of 2024 was $32.6 million or $66 cents per diluted share. This is compared to a net income of $29.9 million or $0.45 cents per share in the second quarter of last year.
Rafi Amit: Net income for the second quarter.
Moshe Eisenberg: Total diluted number of shares as of the end of the second quarter was 49.3 million. Turning to some high level balance sheet and cash low metrics, cash and cash equivalence including short and low term deposits and marketable securities as of June 30th, 2024 was $454 million. This compared with $466 million at the end of the first quarter. We generated $49 million in cash for operations in the quarter on the back of increased revenue and a very strong collection. Inventory level increased by $7 million to $109 million. The increase over the previous quarter is to support the anticipated sales growth in the coming quarter.
Moshe Eisenberg: Despite the increasing revenue, account receivables decreased from $86 million to $68.2 million in the quarter as a result of strong collection in the quarter. Our sales outstanding improved significantly from 81 to 61 days.
Moshe Eisenberg: Despite the increase in revenue, account receivables decreased from $86 million to $68.2 million in the quarter as a result of strong collection in the quarter. Our day sales outstanding improved significantly from 81 to 61 days. Finally, we expect revenue of between $107 million and $110 million in the third quarter with continued sequential growth in Q4. Our first question will be from Charles Shee of Needham. Charles, please go ahead.
Rafi Amit: Account receivables decreased from $86 million to $68.2 million in the quarter as a result of strong collection in the quarter. Our daily sales outstanding improved significantly from 81 to 61 days.
Moshe Eisenberg: Finally, we expect revenue of between up $107 to $110 million in the third quarter, with continued sequinsia growth in Q4. And with that, Rafi, Rami, and I will be open to take your questions.
Rafi Amit: Finally, we expect revenue of between $107 million to $110 million in the third quarter with continued sequential growth in Q4.
Speaker Change: And with that, Rafi, Ramy, and I will be open to take your questions. Thank you, Moshe.
Kenny Green: Thank you, Masha.
Kenny Green: So, at this time, we will start the question analysis session. If you have a question, you can raise your hand via the Zoom platform. I will introduce you and ask you to unmute, after which you will be able to ask your question. We do have quite a lot of people on the call, so we will take a few moments now to call for questions.
Charles G.: Our first question will be from Charles G. of Needham.
Rafi Amit: Charles, please go ahead. I could ask the first question. I want to ask what's the thought of what's the current estimate from management on the overall contribution of HPC module for the full year. Charles, I think, as we discussed in any previous meetings, we expect the overall contribution from HPC or both HBM and Ghiblet modules to account to anywhere between 50 to 60% for the entire year. Okay, so let's say relative to like 90 days ago, is the percentage moving up or what you think is still in a similar ballpark? I think it's in a similar ballpark.
Charles Shee: Hey, good afternoon. The first question I want to ask is what's the thought or what's the current estimate from management on the overall contribution of the HPC module for the full year? Charles, as we discussed in previous meetings, we expect the overall contribution from HPC or both HBM and chiplet modules to account for anywhere between 50 to 60% for the entire year. Okay, so relative to like 90 days ago, is the percentage moving up, or do you think it's still in a similar ballpark? I think it's in a similar ballpark.
Speaker Change: Good afternoon. The first question, I want to ask, what's the current estimate from management on the overall contribution of HPC module for the full year?
Speaker Change: Charles, I think as we discussed in previous meetings, we expect the overall contribution from HPC over both HBM and chiplet modules to account to anywhere between 50 to 60 percent for the entire year.
Rafi Amit: Mark. Okay, thank you. Maybe the second question, do you see the HVM versus Schiffler that makes going to second half any changes to that? Because you did disclose for Q1, Rafi HVM versus Schiffler is a 2-2-1 ratio, but you didn't provide a number for Q2. If you can provide that number, that would be great, but more importantly, what would be the ratio of a second half? And so, you know, the ratios will change; will vary from one quarter to the other. In general, I think it would be more accurate to talk about the entire number, which would be anywhere between 50% to 60%, but overall both markets are pretty stable.
Charles Shee: Okay, thank you. Maybe the second question, do you see the HBM versus chiplet mix going into the second half, any changes to that? Because you did disclose for Q1 roughly HBM versus chiplet, the two to one ratio, but you didn't provide a number for Q2. If you could provide that number, that'd be great.
Speaker Change: Maybe the second question, do you see the HBM versus chiplet, the mix, going into second half, any changes to that? Because you did disclose for Q1, roughly HBM versus chiplet, the 2 to 1 ratio, but
Rafi Amit: But more importantly, what will be the ratio for the second half? And so, you know, the ratios will change and will vary from one quarter to the next. In general, I think it will be more accurate to talk about the entire number, which will be anywhere between 50 to 60%. But overall, both markets are pretty stable. Thank you.
Charles G.: Thank you.
Moshe Eisenberg: Maybe one other question for Moshe on gross margin. Definitely Gross margin has been improving every quarter. Well, actually, since I would say first quarter 2023, what's the expectation for the next two quarters?
Moshe Eisenberg: Maybe one other question for Moshe on gross margin. Definitely, gross margin has been improving every quarter, well actually since I would say first quarter of 2023. What's the expectation for the next two quarters of 51% in June, which is great, but do you see a sequential improvement from here for the next two quarters? In this gross margin has improved in the last several quarters. This was the result of an ongoing effort to improve the cost structure and obviously the product mix. We think that you know, anywhere between 50 to 51 and a half is a good range.
Speaker Change: Thank you. Maybe one other question for Moshe on gross margin. Definitely gross margin has been improving every quarter.
Moshe Eisenberg: Well, actually, since, I would say, first quarter of 2023,
Moshe Eisenberg: 51% in June, which is great, but do you see a sequential improvement from here for the next two quarters? Indeed, the gross margin has improved in the last several quarters. This was the result of ongoing efforts to improve the cost structure and, obviously, the product mix. A range that you know it's really depending on the product mix from quarter to quarter, so I don't want to commit now for the next couple of quarters, but it will be within this range that I've mentioned. Good afternoon.
Moshe Eisenberg: You know, it's really depending on a project mix from quarter to quarter, so I don't want to commit, you know, now for the next couple of quarters, but it would be within this range that I've mentioned.
Charles G.: All right, thank you.
Kenny Green: Thanks, John.
Speaker Change: All right, thank you. Thanks, John .
Brian Shen: Our next question is going to be from Brian Shen of Stiefel. Brian, please go ahead. They're good afternoon. Thanks for taking a few questions.
Unnamed Analyst: Thanks for taking a few questions. Maybe just a question on sort of your other more traditional and legacy businesses, like wafer level packaging, specialty, etc. You know, the implication this year is that, you know, back to sort of like the AI packaging, you know, inspection metrology business for you, other companies, not necessarily even competitors of yours, you know, in the business. Are you, you know, in terms of your business, are you seeing more diversification across maybe the main HBM players? There's a few people on the chiplet side.
Rafi Amit: Maybe just a question on sort of your other more traditional and legacy businesses and like wait for level packaging, specialty, etc. You know, it's the implication this year is that, you know, that 50% of your revenue is maybe even down this year, year on year. But are you starting to see improvement even sequentially on some of that revenue or kind of building some visibility towards growth in that business? Any kind of color you can provide would be helpful. So Brian, you know, we spoke about it, and I can say that definitely we see improvement on our other businesses.
Speaker Change: You know that that 50% ish of your your revenue is maybe even down this year year on year
Speaker Change: But are you starting to see improvement, even sequentially, on some of that revenue, or kind of building some visibility towards growth in that business? Any kind of color you can provide would be helpful.
Rafi Amit: Even this quarter in the census is already, I think there is some improvement. And as you can see, our overall, what we saw for advanced packaging, it's close to 70%, compared to 80% it was last quarter. In this quarter, we're starting to see some pickup on the offset business. Definitely, we're getting good indication about some business from the symbol image sensors. And overall, I think next year we will see improvement. What we are reading, what we understand from customers, that what we call our traditional businesses will definitely be better than this. here.
Moshe Eisenberg: will definitely be better than this year.
Brian Shen: Okay, that's helpful.
Brian Shen: And, you know, back to the sort of like the AI packaging and inspection and metrology business for you. Other companies, not necessarily even competitors of yours, you know, break out some of their customers or their business that they're seeing. You know, they've seen even this earnings season, maybe a lot of that business being dominated by, you know, a large creating customer. And then even seeing a bit of a period of digestion as that customer kind of takes a breather from buying. And they've seen sort of, you know, maybe a pause in the business. Are you, you know, in terms of your business, seeing more diversification across maybe, you know, the main HPM players? You know, there's a few people on the chiplet side?
Speaker Change: back to sort of like the AI packaging inspection metrology business for you. Other companies, not necessarily even competitors of yours,
Speaker Change: who break out some of their customers or their business that they're seeing.
Unnamed Analyst: Um, are you seeing those kinds of trends, or is it kind of more diversified in terms of, [inaudible] So, so first of all, you know, we had a discussion, and we heard some comments about the pause or digestion. But we do not see it.
Rafi Amit: Are you, are you seeing those kinds of trends, or is it kind of more, more diversified in terms of your business? So, so first of all, you know, we there was a discussion. We heard some comments about the pause or digestion. We did not see it. And it is really, you know, more related to the relevant customers on the HPC segment, the steps that you are doing. It's a little bit more complex, but at least from the business that we're doing with all the players on the HPC market, we do not see a pause. The business is stable.
Speaker Change: So, so first of all, you know, we, there was a discussion and we heard some comments about the pause or digestions, we did not see it.
Brian Chin: And this is really, you know, more related to the relevant customers in the HPC segment. The steps that you are taking, it's a little bit more complex, but at least from the business that we do with all the players in the HPC market, we do not see a pause. The business is stable. And I think, as Rafi said in his remarks, in the prepared remarks, we definitely see this business continuing into 2025.
Rami Langer: And I think, as Rafi said in the pre, in his remarks, in the prepared remarks, we definitely see this business continuing into 2025. So, from that point of view, we did not see it.
Brian Shen: Okay.
Brian Chin: So from that point of view, we do not see And maybe just one last thing, you know, when you have, you know, like, the press release to talk about the 25 million HBM Borders for the second half this year and into next year. And when that customer comes back and adds, you know, another 6 million on top of that, is that their misjudgment of the type of coverage that they need relative to maybe the challenges that they have in their business, or is there some other reason? Thanks, Brian.
Brian Shen: And maybe just one last thing. And when you have, you know, like the press release that talked about the 25 million of HPM orders for the second half this year and into next year. And when that customer comes back and adds, you know, another six million on top of that, is that, is that, you know, their misjudgment of the type of coverage that they need relative to maybe the challenges that they have in their business, or is there some other, you know, circumstance behind that? So, so first of all, I'm not, you know, aware of the real reason, but, you know, these customers are big customers.
Speaker Change: of HBM Borders for second half this year and into next year. And when that customer comes back and adds, you know, another $6 million on top of that, is that?
Rafi Amit: And it's not going to be the continue to buy machines, and they will continue to buy machines. In this instance, there were some adjustments to the number of they felt that they wanted a few more machines. And I think what you're seeing, and I think the sense is that our customers are predicting the this business is going to go. And, and they are ready to invest because they are very confident about their future business and the single single future.
Brian Shen: Okay, great. Thank you.
Speaker Change: Thank you.
Craig Emes: Thanks, Brian. Our next question is going to be from Craig Emes from Be Riley. As a reminder, if you would like to ask questions, please raise your hand on the platform. And Craig, you may go ahead and ask. Yes, thanks for taking the question. I wanted to start off just by asking a follow-up to Rafi, given comments regarding expectations for OSATs to add HPC and Shiplet-related capacity to be a bigger part of the supply chain.
Brian Chin: Yeah, thanks for taking the question. I wanted to start off just by asking a follow-up question to Rafi, given comments regarding expectations for OSATs to add HPC and chiplet-related capacity to be a bigger part of the supply chain there. The question is this, Rafi, where are we now in OSATs actually building out the degree of capacity that they'll need? And how do you expect that to play out for Camtek both in the second half of this year and in 2025 for your business? Rafi, do you want to answer or do you want me to take this answer?
Speaker Change: Yeah, thanks for taking the question.
Rafi Amit: had HPC and chiplet-related capacity to be a bigger part of the supply chain there. The question is this, Rafi, where are we now in OSATs actually building out?
Rafi Amit: The question is this, Rafi, where are we now in OSATs actually building out the degree of capacity that they'll need, and how do you expect that to play out for Camtek both in the second half of this year and in 2025 for your business? Rafi, you want me to take this answer? Rafi? Rafi, you're on mute. I'm sorry, I'm sorry, I was in mute. I was afraid I left you speechless, Rafi. As we said, our visibility usually is in general; it's about two quarters ahead. And over that, we can read, you know, analysts' forecast and discussion with customers; they prefer their budget for next year in the coming few months.
Rafi Amit: So based on all the information, as Rami mentioned, as I mentioned, we definitely can see that the HPC business continues growing. We mentioned, you know, I think a few quarters, the analysts talk about over 20% growth in some product, even over 30% growth year over year. And I must tell you, that's what we see today. This is the gross rate that we can see from our customer from discussion, but we don't see any change right now. Now, and even the customer that just Rami mentioned, he didn't say this is for 2025; this is just what he need today, and he definitely predict to place more order in the next few months.
Speaker Change: The analysts talk about over 20% growth in some product, even over 30% growth year over year. And I must tell you, that's what we see today.
Ramy Langer: Now, and even the customer that just Ramy mentioned, he didn't say this is for 2025; this is just what you need today. And he definitely predicts that he will place more orders in the next few months. So we are very optimistic about that type of product, and we are organized for delivery. Okay, so it sounds like, Ramy, if I'm hearing you and Rafi correctly, that the engagement with the broader ecosystem, as well as with those SATs, is in the realm of what we would call discussions about the pipeline, and the pipeline is starting to look good.
Speaker Change: in the next few months. So we are very optimistic in that type of product and we are organized for delivery.
Rami Langer: So we are very optimistic in that type of product, and we are organized for delivery. Rafi, if you add the credit, you use the credit. So definitely, we know today more than we knew a few weeks ago. Definitely, some of this capacity of what is called the COLA slide capacity is starting to move to OSATs. And we are getting some discussions from OSATs that are talking to us about the business in 2025. This one, it will happen. And it, in the process, it will come in 25. And obviously, the OSATs, it's an area that we are very strong.
Speaker Change: Rafi, it's really odd that Craig, you spoke with both of us. So, so definitely.
Speaker Change: And it's in the process. It will come in 2025, and obviously the OSOT is an area that we are very strong, so we believe that this is a positive move from our point of view.
Rami Langer: So we believe that this is a positive and more from our point of view.
Rami Langer: Okay, so it sounds like, Rami, if I'm hearing you and Rafi correctly, that the engagement with the broader ecosystem as well as with those sats is in the realm of what we would call discussions for the pipeline, and the pipeline is starting to look good. And, and as the calendar clicks forward, we would expect that to convert into promoters as we've seen in the last month of July, where you had 45 million and now one upside by 6 million. Okay, that's that price. In general, you are right. I don't want to get into numbers, but definitely our pipeline looks good, and this will start to convert into reviews.
Craig: Okay, so it sounds like, Ramy, if I'm hearing you and Rafi correctly, that the engagement with the broader ecosystem, as well as with those SATs, is
Ramy Langer: And as the calendar clicks forward, we would expect that to convert into firm orders, as we saw in the last month of July, where you had 45 million and now one upside by 6 million. Is that right?
Ramy Langer: In general, you're right. I don't want to get into numbers, but definitely, our pipeline looks good, and this will start to convert into real peers. That's helpful. And then the second question is for Moshe.
Speaker Change: In general, you're right. I don't want to get into numbers, but definitely our pipeline looks good, and this will start to convert into real deals.
Moshe Eisenberg: So, Moshe, I think we've heard Rafi identify that business activity overall is lending the kind of visibility that results in more efficient operations. And I would expect that to be a tailwind for gross margin, but I know the company's also been working hard on things like input costs and other manufacturing optimizations. As we look at the business now, and as we look at the improvement in gross margin over the last year, how much of that is just volume versus some of the company's controllables? And as we look ahead, what are the levers to drive gross margin incrementally higher from where we are today? Thank you.
Rami Langer: That's helpful.
Moshe Eisenberg: And then the second question is Pruski. So Moshe, I think we've heard Rafi identified that business activity overall is lending the kind of visibility the results in more efficient operations. And I would expect that to be a tailwind for gross margin, but I know the company’s also been working hard on things like input costs and other manufacturing optimizations as we look at the business now. And as we look at the improvement in gross margin over the last year, how much of that is just volume versus some of the company controllables. And as we look ahead, what are the levers to drive gross margin and criminally higher from where we are today.
Speaker Change: That's helpful. And then the second question is for Moshe. So Moshe...
Speaker Change: I think we've heard Rafi identified that
Moshe Eisenberg: business activity overall is lending the kind of visibility that results in more efficient operations and I would expect that.
Speaker Change: to be a tailwind for gross margin, but I know the company's also been
Speaker Change: working hard on things like input costs and other manufacturing optimizations. As we look at the business now, and as we look at the improvement in gross margin over the last year, how much of that is just volume versus
Speaker Change: some of the company controllables and as we look ahead, what are the levers to drive gross margin incrementally higher from where we are today? Thank you.
Moshe Eisenberg: Thank you. So really gross on the gross margin level, volume has certain contribution but not as much as on the operating level. And since most of the expenses are direct expenses, absolutely the fact that we can organize ourselves ahead of time is a big contribution to the overall efficiency. How much is that you know exactly translates into improvement in gross margin is a little bit early to say, but it should help you know, smooth out the operation and with hiring people with processes. But again, it's a bit early to say how much of that will contribute to the gross margin.
Moshe Eisenberg: Absolutely, the fact that we can organize ourselves ahead of time is a big contribution to overall efficiency. How much that exactly translates into an improvement in gross margin is a little bit early to say, but it should help smooth out the operation with hiring people and processing. But again, it's a bit early to say how much of that will contribute to the gross margin. Hi, this is Michael Mani from Vivek Arya.
Speaker Change: Absolutely, the fact that we can organize ourselves ahead of time.
Speaker Change: How much of that exactly translates into improvement in gross margin, it's a little bit early to say.
Speaker Change: But it should help you smooth out the operation and with hiring people, with processes But again, it's a bit early to say how much of that will contribute to the gross margin
Kenny Green: Okay, got it. Thanks team, appreciate that. Thank you. Thanks. As a reminder, if you have a question, please raise your hand on the platform.
Speaker Change: and others.
Speaker Change: Thanks. As a reminder, if you have a question, please raise your hand on the platform. Our next question is going to be from Vivek Arya from B of A. Vivek, please go ahead.
Michael Mani: Next question is going to be from the area from the way that. Please go ahead.
Rafi Amit: Hi, this is Michael Moni from Mech area. Thank you for allowing us to ask a few questions. So I think a couple of your team customers have provided very strong guidance for volume and sales into 2025. And so does your confidence in hitting that eventual 500 million sales target increase? In other words, do you feel the more confidence that you'd be able to hit it maybe earlier than expected, given the increase intensity of orders. And in addition, how much of that entertaining that target is contingent on a recovery in your more traditional business. Thank you.
Speaker Change: Hi, this is Michael Mani. I'm from Vivek Arya. Thank you for allowing us to ask a few questions. So I think
Vivek Arya: Thank you for allowing us to ask a few questions. I think a couple of your HBM customers have provided very strong guidance for volume and sales into 2025. And so does your confidence in hitting that eventual 500 million sales target increase? In other words, do you feel you have more confidence that you'd be able to hit it maybe earlier than expected, given the increased intensity of orders? And in addition, how much of attaining that target is contingent on a recovery in your more traditional business? Thank you.
Speaker Change: a couple of your HBM customers have.
Speaker Change: In other words, do you feel you have more confidence that you'd be able to hit it maybe earlier than expected, given the increased intensity of orders, and in addition, how much of that, of attaining that target is contingent on a recovery in your more traditional business? Thank you.
Rafi Amit: Let me maybe let me maybe start, and you can complete it. Okay, I would say, you know, the gross rate depends on two major issues: number one is the market. And you know, some customers maybe have great demand, but they don't have enough facility; takes time to build facility. So even if they want, they cannot build everything they want. So it's not everything depend on us. We can provide system, but sometime the facility is not ready for installation and running production. So there are too many elements that affect the overall requirement. So from our side, we feel very comfortable with our ability to build machine to deliver machine and to keep our competitiveness.
Speaker Change: Let me start and you can complete it. I would say, you know, the gross rate depends on two major issues. Number one is the market.
Ramy Langer: And, you know, some customers maybe have great demand, but they don't have enough facilities. It takes time to build facilities. So even if they want to, they cannot build everything they want.
Speaker Change: So,
Rafi Amit: Because customer asked for more feature for more more special requirement. And we feel very comfortable. Definitely after we complete a lot of R&D efforts to meet the future demand. So for everything depend on us. We believe we did everything to maintain our market and potential growth. Now we have to go to the market. We have to be sure that customer can have enough capacity and the infrastructure they can expand it and have enough room to, you know, to put the production line and to meet the market demand. So the market demand is there. We are ready.
Speaker Change: Everything depends on us. We believe we did everything to maintain our market and potential growth.
Speaker Change: Now we have to go to the market, we have to be sure that customers have enough capacity and their infrastructure, they can expand it and have enough room to, you know, to put the production line and to meet the market demand. So the market demand is there.
Ramy Langer: We are ready. The next question is if all our direct customers can do it, can really make their facilities ready for the demand. Ramy, do you want to give some information? Let me start.
Rafi Amit: The next question is, if all our direct customers can do it, can really make their facility ready for the demands. I understand.
Speaker Change: We are ready. The next question is if all our direct customers can do it, can really make their facility ready for the demands.
Michael Mani: Thank you.
Speaker Change: Understood. Thank you. And maybe one on your next, your upcoming platform. So nice to hear this.
Rami Langer: And maybe one on your next upcoming platform. So nice to hear this additional color on this next generation system.
Speaker Change: Do you have any updates on when we expect this to be released to the market? Is this more geared towards hybrid bonding as an application? What kind of uplift from ASB do you expect?
Rami Langer: Do you have any updates on when we expect us to release the market? Is this more geared towards hybrid bonding as an application, and what kind of upload from ASB do you expect?
Rafi Amit: Ramy, do you want to give some information? Let me start.
Speaker Change: Ramy, do you want to...
Ramy Langer: So first of all, I think that at this stage, it's too early to provide more information. We will definitely provide, I would say, we will start to provide more information to the public in the next few months. It's not something that we'll do tomorrow.
Speaker Change: So first of all, I think that at this stage it's too early to provide more information.
Rafi Amit: So, first of all, I think that at this stage, it's too early to provide more information. It's definitely a, we will provide the, I would say, we will start to provide more information to the public in the next few months. It's not something that will take tomorrow. And we're not at this stage really, you know, ready to say more information. What I can say, definitely, is that there will be an ASB improvement on these new products. Now, now, as we said, for example, just to be clear about it, that we could see some of them, for example, as I mentioned in my script, that customer move from about, let's say, 100 million bumps per wafer to 500 million bumper wafer.
Ramy Langer: It's definitely, we will provide, I would say, we will start to provide more information to the public in the next few months.
Ramy Langer: And we're not at this stage, really, you know, ready to say more information. What I can say, definitely, that there will be an ASP improvement on these new products. It's a lot. It's totally five times more. And we need to develop a solution. Now, it's not enough to inspect it at a fine pitch.
Ramy Langer: that we could see some of them, for example, as I mentioned in my script, that customers move from about, let's say, 100 million bumps per wafer to 500 million bumps per wafer.
Rafi Amit: It's a lot. It's totally five times more. And we have to; we need to develop a solution. Now, it's not enough to inspect it in the fine pitch; also, the customer looks on the efficiency on the economic. You want to be sure that you can meet its cost. So all together, it's a lot of parameter that allow customer to maintain its cost rupture and to make to get a good result. So some of that is still in the beginning. Not all of them are already in high volume.
Speaker Change: It's a lot, it's totally five times more and we have to, we need to develop a solution. Now it's not enough to inspect it in the fine pitch, also customer look on the efficiency.
Ramy Langer: Also, customers look at efficiency and economics. You want to be sure that you can meet its cost. So all together, there are a lot of parameters that allow customers to maintain their cost structure and to get a good result. So some of that is still in the beginning. Not all of them are already in high volume.
Speaker Change: On the economic, you want to be sure that you can meet its cost. So all together, it's a lot of parameters that allow customers to maintain its cost structure and to get a good result.
Speaker Change: So some of that is still in the beginning. Not all of them are already in high volume. This is after they finish the R&D. They start moving from R&D to production.
Ramy Langer: This is after they finish their R&D. They start moving from R&D to production. And we will see that, I believe, in the next year. We can see more and more very tough, I would say the application moving to high volume. Thank you very much.
Rafi Amit: This is the finish day, the R&D. We will start moving from R&D to production. And we will see it. I believe in the next year, we can see more and more very tough. I would say the application moving to our volume.
Rafi Amit: Thank you very much. Thanks.
Gus Rishardt: Thanks a lot. Our next question will be from the VATI short term from Evercore. VATI, please go ahead. Thanks for taking my question. So the first one I wanted to understand was, you know, the remaining pieces of your business. You talked about strength in the traditional markets, like the compound semi CIS front end. Could you give us a sense of how the revenue split out between the three and the specific area where you're seeing more strength versus 90 days ago? So I think in general, we're seeing improvements. I would say mainly in the front end and the compound semi, definitely these.
Unnamed Analyst: Hi, thanks for taking my question. So the first one I wanted to understand was, you know, the remaining pieces of your business. You talked about strength in the traditional markets, like the compound semi CIS front end. Could you give us a sense of how the revenue split out between the three and the specific area where you're seeing more strength versus 90 days ago?
Speaker Change: Hi, thanks for taking my question. So the first one I wanted to understand was, you know,
Speaker Change: The remaining pieces of your business, you talked about strength in the traditional markets like the Compound Semi, CIS, Front End. Could you give us a sense of how the revenue split out between the three and the specific area where you're seeing more strength versus 90 days ago?
Moshe Eisenberg: I think in general, we're seeing what we call the non-HBC business, definitely the offset business, is already stronger this quarter than it was in the previous one, and we're expecting these businesses to start to grow in the coming quarters. So definitely, that's a very important part of the business, and I'm confident at this stage now, from the numbers that I'm seeing, that we will continue to see this improvement in the next few quarters.
Speaker Change: So, I think in general we're seeing improvements, I would say mainly in the front end and the compound semi, definitely these we see some improvements as we speak.
Rafi Amit: We see some improvements as we speak. and on the theme of image sensors, we're getting indications for improvement. I would say ladies here beginning of next year and the overall business of what we call, you know, the non-HBC business, definitely where the old set business is already stronger, this quarter, than it was in previous one. And we're expecting these businesses to start to grow in the coming quarters. So definitely that's a very important part of the business, and I'm confident at this stage now from the number that I've seen that we will continue to see this improvement in the next year quarters.
Speaker Change: On the theme of image sensors, we're getting indications for improvement, I would say late this year, beginning of next year.
Speaker Change: and the overall business.
Speaker Change: of what we call, you know, the non-HBC business. Definitely, we're the old-fashioned business.
Speaker Change: is already stronger this quarter than it was in the previous one, and we're expecting these businesses to start to grow in the coming quarters. So definitely that's a very important part of the business.
Speaker Change: And I'm confident at this stage now from the numbers that I'm seeing that we will continue to see these improvements in the next few quarters.
Rafi Amit: And would you provide a split of how the revenue split between the three? Is that something you can provide? I can say that what I can tell you, the taste water, for example, the compound in the front, they're well about 15%. It's a little lower. I mean, I would have expected in a better quarter to be closer to 20%, maybe even higher. At the scene of image sensor is really very low at this stage. It's ones and tools. Definitely, this is something that should be in the range of about 5%. When we talk about the overall business.
Moshe Eisenberg: And would you provide a split of how the revenues are split between the three? Is that something you can provide? I can say that I can tell you that this quarter, for example, the compound and the front are well about 15%. It's a little lower. I mean, I would have expected in a better quarter to be closer to 20%, maybe even higher. The CMOS image sensor is really very low at this stage. It's ones and twos.
Speaker Change: And would you provide a split of how the revenues split between the three? Is that something you can provide?
Speaker Change: I can say that, what I can tell you that this water, for example, the compound in the front well about
Speaker Change: 15%. It's a little lower. I mean, I would have expected it in a better quarter to be closer to 20%, maybe even higher. The CMOS image sensor is really very low at this stage. It's ones and twos.
Moshe Eisenberg: Definitely, this is something that should be in the range of about 5% when we think about the overall business. So these are the numbers. And we'll see.
Speaker Change: Definitely this is something that should be in the range of about 5% when we take about the overall business. So these are the numbers and we'll see. I think they will improve as we move along.
Gus Rishardt: So these are the numbers, and we'll see; I think they will improve the move along. Thank you. That's very helpful.
Moshe Eisenberg: I think they will improve as we move along. Thank you. That's very helpful. And then the next question I had was about your next generation systems that you talked about. Is this, you know, I understand that this is to address applications like the number of bumps increasing, but are you also kind of penetrating into the inspection step? And another question I had here was, how does the qualification process work?
Rafi Amit: And then the next question I had was on your next generation systems that you talked about. Is this, you know, I understand that this is to address applications like the number of bonds increasing, but are you also kind of penetrating into the inspection steps. And another question I had here was, how does the qualification process work? Like you have the products, you know, kind of shipping in, like I think a little bit into your customers, but how much time does it take to really qualify this into the headlines? So that's a good question. So first of all, we've already started with the process of qualification.
Speaker Change: Is this, you know, I understand that this is to address applications like the number of bumps increasing, but are you also kind of penetrating into the inspection steps?
Speaker Change: And another question I had here was, how does the qualification process work? Like, you have the products, you know, kind of shipping in, like, I think, a little bit into your customers, but how much time does it take to really qualify this into the fab lines?
Unnamed Analyst: Like, you have the products, you know, kind of shipping them in, like, I think a little bit into your customers, but how much time does it take to really qualify this for the fab line? So that's a good question, Vedvati asked. So first of all, we've already started the process of qualification, as we said in our prepared remarks, very few months of running the machines, but overall, it depends on the application, but in a lot of cases, the advanced packaging, HBM, the chiplets.
Rafi Amit: As we said, you know, I prepared the remarks. And this differs. I mean, in a lot of our customers that know us and look at the qualification and the, I would say testing that we have done here at Contact and would accept it as part of the evaluation process. They may ask us to run some waivers, and we will do it for them, and they would buy the equipment. It had our customers, you know, if we take a very few months of running the machines, but overall it depends on the application. But in a lot of the cases, the, I would say that the evaluation, it's, it's maximum.
Speaker Change: and this differs. I mean, in a lot of our customers that know us and look at the qualification and the, I would say, testing that we have done here at Camtek and would accept it as part of the
Speaker Change: evaluation process. They may ask us to run some wafers and we would do it for them and they would buy the equipment. Yet other customers, you know, it would take
Speaker Change: very few months of running the machines but overall it depends on the application but in a lot of the cases the
Rafi Amit: In weeks or very few months to cases, they will accept our equipment based on the results and the testing that we've done here. And is this addressing the newer generations? Are they addressing more inspection steps? Now it says, "your ego's life form." What would you see as the biggest difference here? So first of all, in a lot of it is inspection, but a lot of our business today is inspection. Even when we talk about, you know, advanced packaging, HBM, the cheaplets, a lot of this is doing also inspection stages. This is metrology and inspection. I will say, in general, our inspection business is much larger than our metrology business.
Speaker Change: And is this addressing, the newer generations, are they addressing more inspection step now versus your EGLE platform, like what would you say is the biggest differentiator?
Speaker Change: So first of all, a lot of it is inspection, but a lot of our business today is in inspection. Even when we talk about...
Unnamed Analyst: A lot of this is also done at the inspection stage. This is metrology and inspection. I would say, in general, our inspection business is much larger than our metrology business, and I think one of the advantages that we bring to our machine is that we do metrology and inspection. No doubt our inspection today is state-of-the-art.
Speaker Change: you know, Advanced Packaging, HBM, the chiplets. A lot of this is doing also inspection stages. This is metrology and inspection.
Rafi Amit: And I think one of the advantages that we bring on our machine is that we do metrology and inspection. Now that our inspection today is state of the art, we expect to continue and increase. This is a large market. There is a lot of market share that we can run after. And we definitely expect it with the newer machines; we increase our market share in the inspection even further. Got it, that's helpful.
Ramy Langer: We expect to continue and increase. This is a large market. There is a lot of market share that we can run after, and we definitely expect that with the newer machines we will increase our market share in the inspection even further. Got it. That's helpful. And I'll just squeeze in one last one.
Speaker Change: We expect to continue and increase. This is a large market. There is a lot of market share that we can run after, and we definitely expect that with the newer machines, we increase our market share in the inspection even further.
Unnamed Analyst: So can you talk about how what you're seeing in the China markets and how that has done, you know, in the first half of 24? I know you don't break it out on a quarterly basis, but any color there would be helpful given the trade concerns that have been coming up. So, you know, I would say that things have not really drastically changed in China, and the government there is backing this industry, this is a strategic move for China, and we definitely see more and more investments there, and all around in the trading-edge firms, and this is where we are playing in the front end, and we're seeing a lot of also business expansion, including advanced packaging, so we do not see a weakness in China, we see a stability and continuity of investment, and, We expect to see this business continue to grow.
Rafi Amit: And I'll just squeeze in one last one. So can you talk about how, what you're seeing in the China markets and how that has done, you know, in the first half of 24? I know you don't break it out on a quarterly basis, but any color there would be helpful given the trace concerns that have been coming on. So, you know, I would say that things have not really drastically changed in China. And the government there is backing this industry. This is a strategic move for China. And we definitely see more and more investments there.
Speaker Change: Got it, that's helpful. And I'll just squeeze in one last one. So can you talk about what you're seeing in the China markets and how that has done, you know, in the first half of 24? I know you don't break it out on a quarterly basis, but any color there would be helpful given the trade concerns that have been coming up.
Speaker Change: [inaudible]
Speaker Change: You know I would say that things have not really drastically changed in China
Rafi Amit: Call around in the in training edge vibes. And this is where we are playing in the front end. And we're seeing a lot of also business expansion, including advanced packaging. So we do not see a weakness in China. We see a stability and continued of investment. And we expect to see this business continuing to grow.
Speaker Change: all around in the training edge clubs.
Speaker Change: We expect to see this business continuing to grow.
Unnamed Analyst: I see. Could you give a sense of how China splits out advanced packaging versus like trading edge fabs? If you could provide any color that is bigger than the other, that would be helpful.
Rafi Amit: Could you give a sense of how that China splits out advanced packaging versus like trading edge. If you if you could provide any color, is one bigger than the other that would be helpful. I think for us in general, we've been in the our business primarily has been in the training edge. And, you know, it's the signal automotive applications. And this has been our main market, our target market. In general, we've not been running after, I would say, the, you know, the leading edge knows in China. This has not been our target market.
Moshe Eisenberg: It's I think for us in general, our business primarily has been in the trading edge. And you know, it's mixed signal automotive applications. And this has been our main market, our target market. In general, we have not been running after, I would say, the leading edge nodes in China. This has not been our target market, and all in all, I can say and Rafi, I will start, and maybe you can. Okay, okay.
Gus Rishardt: All right. Thank you very much. Thanks for that.
Tom O'malley: Our next question is from Tom or Maui.
William Levy: Oh, please, Tom, please go ahead. Hi, all. This is Will Levy on for Tom O'Malley. Thank you so much for taking my question. She said a question on the F R T acquisition. How is it trending since you acquired it? And are the upside you guys are seeing advanced packaging, any of this attributed to F R T at all?
Rafi Amit: Paulineau, I can say, and Rafi, I will start, and maybe you'll come. Okay, okay, fine.
Rafi Amit: So Paulineau, we're very happy with the acquisition. Obviously, there is an effort to integrate FRT into contact, and this is underway. From the business side, we're definitely seeing opportunities. The upside is not coming from FRT; FRT is still, as we said, it's a relatively small business this year. We said we gave the target of the Rafi 30 million; we will meet this target. So definitely it's not yet in the big numbers. We see opportunities. We are talking with customers; I think that, in general, customers are very excited about the fact that we acquire the Rafi.
Moshe Eisenberg: So, all in all, we're very happy with the acquisition, and obviously, there is an effort to integrate FRT into Camtek, and this is underway. And from the business side, we're definitely seeing opportunities. But the upside is not coming from FRT.
Moshe Eisenberg: FRT is still, as we said, a relatively small business this year. We said we gave the target of roughly 30 million. We will meet this target. So, definitely, it's not yet in the big numbers. We see opportunities. We are talking with customers. I think that, in general, customers are very excited about the fact that we acquired FRT. They're very happy.
Speaker Change: We acquired <unk>. They are very happy I believe that we will get a significant numbers of significant business as we move forward and continue to integrate FRC will get a lot of opportunities there opportunities that we enlarge the FRC business.
Rafi Amit: They are very happy. I believe that we will get a significant numbers, a significant business, as we move forward. And the continue to integrate FRT will get a lot of opportunities there. Opportunities that we enlarge the FRT business, and also create new opportunities for us.
Gus Richard: I believe that we will get significant numbers, significant business as we move forward and continue to integrate FRT. We'll get a lot of opportunities there, opportunities that will enlarge the FRT business and also create new opportunities for us. So to summarize, definitely we are on track with the... Got it, thank you. Our next question is from Gus Richard from Northland. Gus, you may go ahead and ask a question. My apologies.
Speaker Change: Also create new opportunities for us so to summarize definitely we are on track with the <unk>.
Rafi Amit: So to summarize, definitely we are on track with the FRT acquisition, and in our thought process, that it will complement our business, and we will be able to sell these products through our sales force, our indeed correct. Got it, thank you. Thanks.
Speaker Change: First the acquisition.
Speaker Change: Indeed, our thought process that it will complement our business and we will be able to solve to sell these.
Speaker Change: Products through our sales force.
Speaker Change: Indeed, correct.
Speaker Change: Got it thank you.
Speaker Change: Yeah.
Speaker Change: Thanks.
Gus Rishardt: Our next question is from Gus Rishardt from Northland, Gus. You may go ahead and ask a question. Gus, you're still on news. Thank you very much. Well, it's hard, you know, in general. If we talked about close to 70%, about 20% is 15% to 20% of our tradition of what we call all such is about 15%, and the rest of the other customers doing what we call wafer level packaging. Fan out is a big number out of it, so I don't have the number exactly in front of me, but definitely fan out is a market that is growing.
Speaker Change: Our next question is from Gus Richard from Northland Das You May go ahead and ask your questions.
Gus Richard: Gas you're still needs.
Gus Richard: Thanks for letting me ask a few questions. In terms of HVM going from HVM 3 to HVM 4, does your inspection intensity increase, and, you know, do you have a sense of by how much? Okay, got it. And then, in terms of hybrid bonding, just clearly, your intensity goes up, both for chiplets and CPUs and SRAM. Definitely.
Gus Richard: My apologies thanks for letting me ask a few questions.
Gus Richard: <unk>.
Speaker Change: In terms of HBM gone from HCM <unk> does.
Gus Richard: Sure.
Gus Richard: Inspection intensity increase and do you have a sense of by how much.
Gus Richard: I you know.
Speaker Change: So I think it's it's a little bit too early at this stage to really pinpoint to steps that we will do on the on the HBM for its also based on the finally, I would say configuration or the technologies and processes that our customers will use but definitely a.
Gus Richard: Lot of our business in general in HBM are coming from inspection and yes, that's an area that we probably intensifies.
Gus Richard: As technologies move to hybrid bonding.
Speaker Change: Okay got it.
Speaker Change: And then in terms of hybrid bonding.
Speaker Change: Clearly your intensity goes up both for.
Speaker Change: Triplets and Cpus and <unk>.
Speaker Change: Ram.
Speaker Change: Definitely.
Speaker Change: Got it and then of your advanced packaging how much. These days is fan out.
Speaker Change: Well it's hard.
Speaker Change: In general if we talked about close to 70% about 20%.
Speaker Change: Is 15% to 20% is our tradition of what we call all such as about 15% and Derisked at other customers doing what we call wafer level packaging fan out is a big number out of it. So I don't have the number exactly in front of me, but definitely fan out is a market that is growing.
Unnamed Camtek Representative: So I don't have the number exactly in front of me, but definitely FANOUT is a market that is growing. There are many opportunities there. We have developed some new steps to address some of the challenges there, and it's going to be a number that you know in the range of 10 plus percent, and we expect to be able to meet our commitments, which means including deliveries, customer support, and development. I think we've gone through this, and this is the situation. Kim.
Rafi Amit: There are many opportunities there, and we have developed some new steps to address some of the challenges there, and it's going to be a number that you know in the range of 10% plus percent in how far business.
Speaker Change: There are many opportunities there.
Speaker Change: We have developed some new steps to address some of the challenges there.
Speaker Change: And it's going to be a number that you are now in the range of 10 plus percent.
Speaker Change: In our power business.
Speaker Change: Got it and this is a difficult question.
Rafi Amit: And this is a difficult question. You know, having forbid things, tensions escalate in the Middle East, but I'm just wondering, you know, how you guys are thinking about contingency plans. You know, is it impacting your business? And, you know, if it does get significantly worse, you know, how do you manage through it. So, so first of all, the team here in Israel is prepared for several scenarios, and we expect to be able to meet our commitments, and this means including deliveries, customer support, and development. I think we went through it, and this is the situation.
Speaker Change: Heaven forbid.
Speaker Change: Things tensions escalate in the middle East, but I'm just wondering.
Speaker Change: How you guys are thinking about contingency plans.
Speaker Change: Is that.
Speaker Change: Is it impacting your business and if it does get significantly worse.
Speaker Change: How do you manage through it.
Speaker Change: So so first of all the team here in Israel is prepared for several scenarios.
Speaker Change: And we expect to be able to meet our commitments and this means including deliveries customer support and development I think we went through it.
Speaker Change: And this is the situation.
Rafi Amit: And obviously, longer term, we are also thinking about production out of Israel, and we're planning to add manufacturing capacity in Europe, at our new FRT facility, Colony Germany. So, so we have a plan in the short term to overcome anything that may happen in the short term. Longer term, we also have a plan. And obviously, we can really, you know, be prepared, you know, to all, you know, possible, but we definitely made some efforts to be prepared to whatever we could prepare.
Speaker Change: Okay.
Unnamed Camtek Representative: Obviously, longer term, we are also thinking about production out of Israel. We're planning to add manufacturing capacity in Europe at our new FRT facility in Cologne, Germany.
Speaker Change: Obviously longer term, we are also thinking about production out of Israel.
Speaker Change: We are planning to add manufacturing capacity in Europe at our new FERC facility in Cologne, Germany.
Speaker Change: So so we have that flowing in the short term to overcome anything that may happen in the short term logos. There. We also have the plans.
Speaker Change: And obviously, we can freely.
Speaker Change: Be prepared to all possible, but we definitely made some efforts to be prepared to several we could propose.
Gus Rishardt: But I apologize for having to ask that question.
Speaker Change: Yes.
Unnamed Camtek Representative: I apologize for having to ask that question. And then, you know, in terms of your planning for capacity for next year and the year out, you know, how close are you getting to being, you know, filled out? Is the expansion in Germany part of the ability to deliver more product? And, you know, is there a significant investment required?
Speaker Change: Got it.
Speaker Change: Apologize for having to ask that question.
Rafi Amit: And then, you know, in terms of your planning for capacity for next year and the year out, you know, how closely you're getting to be, you know, filled out? Is the expansion in Germany part of the ability to deliver more product, and, you know, is there a significant investment required? So, so, so no, so from the overall investment, first of all, you know, our manufacturing, the basic manufacturing is done by two very big subcontractors, which are international companies to build and legs. And so, so from that point of view, we have an app capacity. And here in the facility in Israel, we have enough capacity for over 600 million dollars of manufacturing.
Speaker Change: And then.
Speaker Change: In terms of of your planning for capacity for.
Speaker Change: Next year in year out how close are you getting to be.
Speaker Change: Filled out as the expansion in Germany part of the ability to deliver more product in.
Speaker Change: Is there a significant investment required.
Unnamed Camtek Representative: So, no. So from the overall investment point of view, first of all, you know, our manufacturing, the basic manufacturing is done by two very big subcontractors, which are international companies, Jabil and Flex. And so from that point of view, we have enough capacity. Thank you. Thank you for allowing me to ask some questions.
Speaker Change: So so no so from the overall investment first of all you know our manufacturing the basic manufacturing is done by two very big sub contractors, which are international companies to build in flex.
Speaker Change: So from that point of view, we have enough capacity.
Speaker Change: Here in.
Speaker Change: In the facility in Israel, we have enough capacity for over $600 million of manufacturing and as I said, we will add additional capacity in Europe. So I think from the overall capacity for any scenarios of upside we have enough capacity.
Rafi Amit: And, as I said, we will add additional capacity in Europe. So, I think from the overall capacity for any scenarios of upside, we have enough capacity. And this includes also from a material point of view, we can, we can ramp up a clean room space people. So, we think we're very well covered from this point of view.
Speaker Change: And this includes also for material point of view.
Speaker Change: We can we can ramp to a clean room space people. So we I think we're very well covered from this point of view.
Kenny Green: Thank you. Thank you for allowing me to ask some questions. Thank you, guys.
Speaker Change: Thank you. Thank you for allowing me to ask some questions.
Ezra Wiener: Thanks, guys. Our next question is from Ezra Wiener of Jefferies. Ezra, please go ahead.
Kenny Green: Thanks, Gus.
Gus Richard: Thanks Gus.
Ezra Wiener: A next question is from Ezra Wiener of Jeffrey. That's right, please go ahead. Hi, thanks for taking my question. I guess two here. The first is just in terms of new orders. Obviously talked about second half into next year. Can you give a little more detail on the split, and I guess relative to your plan if any of that was incremental? And then the second would be you've talked about your long-term model and gross margins going to about 52% about at 500 million. Looks like you're getting pretty close to passing that next year. Can you just talk about what leverage would look like from there?
Speaker Change: Next question is from escrow Arena of Jefferies. Please go ahead hi.
Ezra Wiener: Hi, thanks for taking my question. I guess there are two here. The first is just in terms of new orders, obviously talked about in the second half into next year. Can you give a little more detail on the split and, I guess, relative to your plan, if any of that was incremental? And then the second would be, you've talked about your long-term model and gross margins getting to about 52% at 500 million. Looks like you're getting pretty close to passing that next year.
escrow Arena: Thanks for taking my question I guess two here. The first is just in terms of new orders. Obviously, you talked about second half or into next year can you give a little more detail on the split and I guess.
Speaker Change: Relative to your plan, if any of that with incremental and then the second would be.
Speaker Change: You've talked about your long term model and gross margins getting to about 52% about $500 million it looks like youre getting pretty close to passing that next year.
Speaker Change: Can you just talk about what leverage would look like from there.
Moshe Eisenberg: Yes, so with respect to your first question, what portion of this additional business is above our previous expectations? Well, you know, when we prepare our expectation, we're taking into account our current backlog on hand plus some potential upside from business that we are going after. So I think we are very close to what we have expected. You know, originally hard to say what part of it is an upside.
Ezra Wiener: Can you just talk about what leverage would look like from there? Yeah, so with respect to your first question, you know, what potential upside there is from the business that we are going after. So I think we are very close to what we expected, you know, originally. Hard to say what part of it is an upside. Then one quick follow-up.
Speaker Change: So youre right.
Speaker Change: With respect to your first question whats.
Speaker Change: Portion of the physician business.
Speaker Change: Above our previous expectations.
Speaker Change: When do you know when we when we prefer our expectation it <unk> take into account our.
Speaker Change: Calling backlog on hand, plus some.
Speaker Change: Some potential upside from a business that we are going after.
Speaker Change: So I think we're very close to what we have expected you know originally hard to say what part of it is an upside.
Speaker Change:
Moshe Eisenberg: But we are going to end the year very nicely with a nice Q3 and class additional continued growth coming into the fourth quarter as well. Your other question relates to the gross margin. So I think, you know, we're sending the next few quarters. We will operate at the level of 50.5, 50 to 51.5. We definitely have plans to reach 52% with the contribution of our new products that we are going to launch in the coming weeks or coming months. They will definitely have a positive contribution to the gross margin. So overall, we didn't, we are not going to change our expectation that when we reach the 500 plus million dollar revenue level, we should be able to operate on a higher gross margin, close to the or around the 52% that's been mentioned.
Speaker Change: But we are going to end the year with very nicely with a nice Q3 and plus additional.
Speaker Change: Our continued growth coming into the fourth quarter as well.
Speaker Change: And the other question relates to the gross margin. So I think we said in the next few quarters, we will operate at a level of 55 to 50 to 51 five.
Speaker Change:
Speaker Change: We definitely have plans to reach 52% with the contribution of our.
Speaker Change: New.
Speaker Change: Product that we're going to launch in the coming week for coming months.
Speaker Change: They will definitely have a.
Speaker Change: Positive contribution to the gross margin.
Speaker Change: So overall, we didn't we're not going to change our expectation that when we reach that.
Speaker Change: 500, plus million dollar revenue level, we should be able to operate.
Speaker Change: Yeah on a higher gross margin close to the or around 52% that we've mentioned.
Ezra Wiener: And then one quick follow up, you discussed advance packaging at 70%. Just want to clarify that 70's not 70, just trying to put all the pieces together and at 70, you would be down quarter to quarter there. If it is 70, not 70's, can you kind of give a little bit more detail on why that is. It's around 77, 0%, and the overall yes indeed, it's a little bit lower, and this is the result of the other businesses that are growing. And we were, as we say, the HPC was over 50%. Definitely, these numbers also vary from quarter to quarter.
Speaker Change: Got it and then one quick follow up.
Unnamed Camtek Representative: You discussed advanced packaging at 70%. Just want to clarify that the 70s, not 70, just trying to put all the pieces together, and at 70, you would be down quarter over quarter there. If it is 70, not 70s, can you kind of give a little bit more detail on why that is? It's around 70 or 70%. And the overall, yes, indeed, it's a little bit lower. And this is the result of other businesses that are growing. And we were, as we say, the HPC was over 50%. Definitely, these numbers also vary from quarter to quarter. You know, it's related to shipment and when customers are planning their clean rooms.
Speaker Change: You discussed advanced packaging at 70% just wanted to clarify that seventies not 70, just trying to put all the pieces together and at 70 you'd be down quarter over quarter. There. If it is 70.
Speaker Change: Not 70% can you kind of give a little bit more detail on why that is.
Speaker Change: It's around 77 zero percent.
Speaker Change: The overall, yes, indeed, it is a little bit lower and this is the result of the other businesses that are growing.
Speaker Change: And we will as we say in the HBC was over 50% definitely these numbers also vary from quarter to quarter.
Moshe Eisenberg: You know, it's related to shipments and when customers are planning their clean room. So I wouldn't pay too much attention here to the changes between quarter to quarter. I think the business in general, as we said, the HPC is indeed stable, and we expect to finish the year anywhere between 50 to 60%. And the other businesses, the wafer level packaging, the front end compounds, famous image sensors, and a lot of other applications that we're doing. Will continue to grow in the third and fourth quarter and definitely in 25. So this mix is something changes, but the big numbers will not change.
Unnamed Camtek Representative: It's related to shipments and when customers are planning their clean room, so I wouldn't pay too much attention here to the changes between quarter to quarter I think the business in general as we say the HBC.
Kenny Green: So I wouldn't pay too much attention here to the changes between quarter to quarter. I think the business, in general, as we said, HPC is indeed stable, and we expect to finish the year anywhere between 50 to 60%. The other businesses, the wafer-level packaging, the front-end compounds, CMOS image sensors, NEMS, and a lot of other applications that we're doing, will continue to grow in the third and fourth quarters and definitely in 2025. So this mix is something that will change, but the big numbers will not change. I would like to thank all of you for joining this call, and Rafi, please make your closing statement.
Speaker Change: <unk> is indeed stable and we expect to finish the year anywhere between 50% to 60% the other businesses the wafer level packaging the front end compounds Cmos image sensors nims.
Kenny Green: A lot of other applications that we're doing.
Speaker Change: We'll continue to grow in the third and fourth quarter and definitely hearing 25. So this mix is something changes, but the big numbers will not change.
Kenny Green: Thank you very much. Thanks, Ezra.
Rafi Amit: Got it thank you very much.
Rafi Amit: Thanks Ezra.
Rafi Amit: So that will end our question-and-answer session. Before I hand back over to Rafi, I would like to let everyone know that in the coming hours we will upload the recording of the conference call team. That's the relation section on Camtek's website at camtek.com. I would like to thank all of you for joining the school and Rafi.
Speaker Change: So that will end our question and answer session before I hand back over to rapidly I would like to let everyone know then in the coming hours, we will upload the recording of the conference call to the Investor Relations section of <unk> website.
Speaker Change: At <unk> Dot coms.
Speaker Change: I would like to thank all of you for joining us Goldman rapidly increase like your closing statements.
Rafi Amit: Please make your closing statements. I would like to thank you all for your continued interest in our business. I want to specially thanks the employees and my management team for all their tremendous performance to our investor. I thank you for your long term support. I look forward to looking with you again next quarter.
Goldman: I would like to thank you all.
Speaker Change: For your continued interest in our business I want to specially thinks the employees and my management team for their tremendous performance.
Speaker Change: To our investors I. Thank you all for your long term support.
Rafi Amit: I look forward to looking with you again next quarter, Thank you and goodbye.
Thank you and goodbye.
Kenny Green: Okay.