Q4 2024 Camtek Ltd Earnings Call
We will start the call into a minute.
We will start the call in two minutes.
This meeting is being recorded.
Ladies and gentlemen, thank you for standing by.
Kenny Green: I would like to welcome all of you to CAMTEC's Results Zoom webinar. My name is Kenny Green and I'm part of the Investor Relations team at CAMTEC. All participants other than the presenters are currently muted. Following the formal presentation, I'll provide some instructions for participating 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 CAMSEC's website from tomorrow.
Kenny Green: You should have all received, by now, the company's press release. If not, please view it on the company's website.
Speaker Change: With me on the call today, we have Mr. Rafi Amit, Camtex CEO, Mr. Moshe Eisenberg, Camtex CFO, and Mr. Rami Langa, Camtex COO. Rafi will open by providing an overview of Camtex results and discuss recent market trends. Moshe will then summarize the financial results of the quarter.
Speaker Change: Following that, Rafi, Moshe, and Rami will be available to take your questions. Before we begin, I'd like to remind you that the statements made by management on this call will contain forward-looking statements within the meaning of the Federal Securities Law.
Speaker Change: Those statements are subject to a range of changes, risks and uncertainties that can cause actual results to vary materially. For more information regarding the risk factors that may impact Camtex results, I would encourage you to review our earnings release and our SEC filings.
Speaker Change: and specifically the four looking statements and risk factors identified in the 2024 Annual Results PR and such other factors discussed in our Annual Report on Form 28F as published on March 21st, 2024.
Speaker Change: CAMTEC does not undertake the obligation to update these forward-looking statements in light of new information or future events.
Speaker Change: Today's discussion of the financial results will be presented on a non-GAAP financial basis unless otherwise stated.
Speaker Change: As a reminder, our detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release.
Speaker Change: And with that, I would now like to hand the call over to Mr. Rafi Amit, Camtec's CEO. Rafi, please go ahead.
Okay, thanks Kenny.
Hello, everyone.
Speaker Change: Comtech ended the fourth quarter and the old year with record results.
Speaker Change: Q4 revenue were $117 million, an increase of 32% year over year.
Speaker Change: The operating income was $36.3 million, 42% improvement year over year.
Regarding the old year's results...
Speaker Change: Revenue were $429 million, an increase of 36% year-over-year, and operating income came at $130 million, 56% better than last year.
Speaker Change: The distribution of revenue for the old year was around 50% for HPC and 20% for other advanced packaging applications.
Speaker Change: The rest was divided between CIS, Compound Semi, Front End, and General 2D applications.
Speaker Change: We are starting 2025 with strong business momentum and expect 2025 to be a year of growth.
well beyond the 5% WFE gross estimates.
Speaker Change: The main growth driver is expected to be High Performance Computing, or HPC, in which we are a key provider.
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Speaker Change: The demand in HPC segment remains healthy and overall we expect the contribution of HPC to our business to be at least 50% in the first half of 2025.
Speaker Change: Just this week, we received orders totaling over $10 million for HPC-related products, which reinforce our assessment of continued growth in the demand for this segment.
Speaker Change: We identify a shift in the market regarding manufacturing and packaging of HPC modules.
Speaker Change: where these models are gradually start to be manufactured not only by IDM and foundries but also by OSATs.
Speaker Change: This change in trend is a positive opportunity for us as we have a strong position with OSATs in the different regions.
Speaker Change: Our revenue guidance for the first quarter of 2025 is between $118 to $120 million, close to a 25% increase over Q1 last year.
Speaker Change: We also estimate that the demand for our systems for HPC-related products will continue into 2025 and beyond.
Speaker Change: In our last call, we discussed the two new models that we have introduced to the market, the Eagle, G5, and the AUK.
Speaker Change: The Eagle G5 is currently in operation at multiple customer's production lines.
Speaker Change: delivering excellent performance that align with both our expectations and those of our customers.
Speaker Change: Meanwhile, the Org has successfully completed qualifications with several customers, and we anticipate receiving more orders for it in the near future.
Speaker Change: We plan to officially launch the Ork in Semicon Korea show next week.
Speaker Change: A few words about the Orc and its distinction from the Eagle.
Speaker Change: The AUC is a new cutting-edge platform engineered for high-end applications.
Speaker Change: such as detecting 100-nanometer defects, measuring several hundred of million micro-bumps at a pitch lower than 10 microns, all while performing high throughput.
Speaker Change: These advanced requirements are beyond the scope of the EGLE platform.
Speaker Change: Although the Eagle models, especially the Eagle G5, provide excellent performances in a variety of applications.
Speaker Change: The AUX system has high capabilities, but also a high price tag, so there is room for both models.
Going back to our opportunity in the HPC segment.
A major part of our business supports HPC-related hardware.
Speaker Change: The growing demand for HPC hardware has placed Comtech in a leading position and allowed us to grow significantly in 2024, much beyond the market growth rate.
Speaker Change: The use of AI capabilities in large organizations is causing rapid growth in demand for HPC.
Speaker Change: And we are seeing significant investment in server farms around the world in recent years and expect this trend to continue.
Looking into the future.
Speaker Change: We expect to see AI capabilities penetrate edge computing devices such as automotives, robotics,
Speaker Change: PC, and eventually mobile phone, which require the development of powerful, dedicated hardware to be implemented in these edge devices.
Speaker Change: When this happens, it will be a great opportunity for us.
Speaker Change: In summary, our primary growth engine for the upcoming years will be advanced packaging, particularly in high-performance computing, HPC.
Speaker Change: We are strongly positioned in this sector, and with the introduction of our two new advanced systems, we will reinforce our leadership position.
Speaker Change: Thank you, Rafi. In my financial summary ahead, I will provide the results on a non-gap basis. The reconciliation between the gap results and the non-gap results appear in the tables at the end of the press release issued earlier today.
Speaker Change: Fourth quarter revenues came in ahead of our guidance at a record $117.3 million, an increase of 32 percent compared with the fourth quarter of 2023, an increase of 4 percent from last quarter.
This is the fifth consecutive record quarter in revenues.
Speaker Change: For the year, we ended 2024 at $422.292 million versus $315 million last year, which represents a 36% increase year-over-year.
Speaker Change: The geographic revenue split for the quarter was as follows, 92% Asia and 8% the rest of the world.
Gross profit for the quarter was $59.3 million.
The gross margin for the quarter was 50.6%.
Speaker Change: and improvements from the 49.2% reported in the fourth quarter last year and similar to the third quarter of this year.
Speaker Change: Operating expenses in the quarter were $23.1 million, compared to $18.2 million in the fourth quarter of last year, and similar to the $22.9 million in the previous quarter.
Speaker Change: Operating profit in the quarter was $36.3 million compared to the $25.5 million reported in the fourth quarter of last year and $34.2 million in the third quarter. The increase is mostly due to the increase in revenue levels and accordingly in the gross profit.
Operating margin was 30.9% compared to 28.7% and 30.4% respectively.
Speaker Change: Financial income for the quarter was $6.2 million, an increase from the $5.7 million reported last year, and similar to the $6.4 million in the previous quarter.
Speaker Change: Net income for the fourth quarter of 2024 was $37.7 million or $0.77 per diluted share. This is compared to a net income of $28.2 million or $0.57 per share in the fourth quarter of last year.
Speaker Change: For the year in a whole, we recorded net income of $139 million, 45% improvement over last year.
Speaker Change: Turning to some high-level balance sheet and cash flow metrics, cash and cash equivalents, including short and long-term deposits and marketable security, as of December 31st, 2024, were $501.2 million.
Speaker Change: This compared with $488.7 million at the end of the third quarter.
Speaker Change: We generated $16.2 million in cash from operations in the quarter.
And for the whole year, we generated $122 million.
Inventory levels increased to $123.1 million from $116.3 million.
Speaker Change: The increase over the previous quarter is to support the anticipated sales growth.
in the coming quarters.
Speaker Change: Accounts receivables increased to $99.6 million from $71 million in the previous quarter, mostly due to the tiling of collections.
Speaker Change: We have already recorded strong collections since the beginning of 2025, and we expect
Speaker Change: account receivable level at the end of E1 to be in line with revenue.
Speaker Change: DSO as of the end of Q4 was 77 days down from 90 days a year ago.
Speaker Change: With respect to guidance, as Rafi said before, we expect revenue of between $118-$120 million in the first quarter, and that we look forward to a year of growth in 2025.
Speaker Change: And with that, Rafi, Rami, and I will be open to take your questions.
Speaker Change: Thank you, Moshe. At this time, we'll begin the question-and-answer session. If you have a question, you can raise your hand via the Zoom platform. I'll introduce you and ask you to unmute, after which you may ask your question. So as we have a lot of people on the call, we will wait a few moments to poll for your questions.
Speaker Change: So our first question is going to be from Charles Chee of Needham. Charles, you may go ahead and unmute yourself.
Speaker Change: Yeah, thanks. Congrats on the good results and the solid guide. I think that my first question is about
Charles Chee: the guidance on the HPC contribution, the first half, 25. I think you guys mentioned about 50%, but from the commentary, it sounds like you're seeing HPC demand probably broadening more to OSAP where you have the historical strength.
Charles Chee: I recall like last year, I think you guys were providing a little bit more details into the HPC, part of that is HBM, part of that is chiplet.
Charles Chee: So assuming OSAP is probably taking up more of the chiplet-related demand from the leading foundry, is the mix between HBM versus chiplet kind of shifting more to chiplet, at least through the first half of 2025? I know you guys...
Charles Chee: Don't give that details, but directionally, can you comment on that?
So
Hi Charles, this is Rami.
Speaker Change: In general, yes, we continue. Let me try and answer. I'll give you two views about the HPC market.
Speaker Change: So, I think what differs us from probably some of the competition is that we have a strong position at all the big manufacturers.
Speaker Change: and as a result we are less and we are performing several inspection and metrology steps at each and continually winning these steps.
Speaker Change: regarding the idea HBM. So yes we do not give the exact numbers but what I can tell you that we continue to see demand and we have significant orders on hand for the first half of 2025 that we plan to deliver.
Speaker Change: Any early view on the second half of this year at this point?
Speaker Change: You know, it's very typical. Obviously, we have a lot of discussions. We are starting to see a backlog building up for the second half.
Speaker Change: and I would say the discussions with our customers are positive. But still, you know, it's too early to give something more solid from a guidance point of view.
Speaker Change: I got it. So maybe my last question, what's the China revenue contribution last year? I recall you said it's somewhere around 30 to 35 percent. Is that number still the case based on the actual results and any expectation for China revenue this year? Is that percentage going up or going down or going to be flattish versus 24?
Speaker Change: Hi Charles, this is Moshe speaking. With respect to the geographical split for the year, indeed China went down a bit from 2023. In 2023 we reported 47% from China.
Speaker Change: This year, I mean 2024, we expect China to contribute around 30%.
Speaker Change: It's a bit early to say about 25, but we see demand coming also from China, so we expect somewhat in the range of anywhere between 30 and 35 percent coming from China in 2025.
Speaker Change: Thank you. Yeah, I would like, if you don't mind, you know, I would like to go back to your previous question and try to expand a little bit, you know, the view of HPC in general.
Speaker Change: As you know, the HPC includes three major components. We talk about the HBM, we talk about all the GPU, we talk about the interposers. There are more, but there are the main, the major three components. Now, if one of them
Speaker Change: We suffer of any issue of capacity or missing capacity, definitely it could affect the whole other.
Speaker Change: because if you cannot put your component on the interposer, nobody will make any...
Speaker Change: extra hbm or cpu if there are no room to put them on the interposer so so you you have to look always not just to the final demand of the end user the server farm but also in the
Speaker Change: capacity, in the production capacity. And you know, TSRC made an announcement. They said that they don't have enough capacity. They build extra, and hopefully, until mid of this year, they will make catch up.
Speaker Change: So you ask about the second half. I would say that this is one of the major issues.
Speaker Change: If TSFC can make the catch-up and expand its capacity and production capacity, definitely it may open the other player to provide the components.
Speaker Change: All the modules could be built. So this is something that probably you will see very soon.
Thanks, Rafi. I appreciate the insight.
Speaker Change: Thanks Charles. Our next question is going to be from Tom O'Malley of Barclays. Tom, you may go ahead and ask your question.
Speaker Change: Hey guys, this is Kyle Bluesenon for Tom O'Malley. Thank you for taking our questions.
Speaker Change: So I wanted to start off asking about the move to hybrid broadening. You guys have talked about it in the past about how your inspection steps actually goes up versus current generations.
Speaker Change: So I was kind of wondering, like, if you could refresh us, like, what your expectation is on timing for hyperbonding and what, like, the delta is, the number of steps you could address there versus in current solutions now.
and others. Thank you.
Hi, this is Rami. So, definitely hybrid bonding is starting.
to make the first steps in the market.
Speaker Change: I think in our segment, we're starting to see initial production. We have already installed machines at several sites.
that are being used, as we speak, for several steps.
Interhybrid bonding
Speaker Change: The hawk is definitely going to play a major role in this segment, although we also have machines from the eagle family as well there.
Speaker Change: Definitely, we are seeing activities there, but I think when we think about hybrid bonding and the contribution to production, high volume production, it's still a couple of years away. I would say starting 27, 28, we will start to see volume production there.
Speaker Change: and what else I can mention that definitely there are going to be some metrology steps where we will take part of it and so all in all as I said in previous schools we view the hybrid bonding as an additional opportunity in our market space.
Speaker Change: Yeah, and I would like to, I have one more, you know, comment on that.
Speaker Change: You know, it suffers from a very low yield because it's a very complicated, very high-risk process.
Speaker Change: It means that the hybrid bond is not going to replace.
Speaker Change: all the connection or the current, you know, connection method that we have today. Probably it's focused on very, very high-end applications and definitely cannot replace all the current application. That's our, I would say, observation at this point.
Speaker Change: All right. Thank you. That's very helpful. And then for my follow-up, I wanted to ask on the HPM market. So of like the three or the three big customers, I know you can't talk by like by customer specifically, but if one of them ends up having a slowdown in spend or has trouble getting qualified on leading production, do you expect like other customers to be able to pick up any sort of gap?
Speaker Change: from one of the big players, or I'm kind of just trying to figure out, like, I know you talked about the first half visibility being very strong for HBM, just what it could look like in the long term across those customers.
Speaker Change: So, you know, this is a commodity product at the end of the day, so definitely, you know, if there is a slowdown in one customer, the other customer will pick it up. I believe there, you know, there are some that are doing better than others.
Speaker Change: But as we said, we have a very strong position in World War III, so from our point of view, we expect to continue and play a major role in this specific market. I want to reiterate, we will ship machines.
Speaker Change: in the first quarter, and I think also, of course, beyond.
Speaker Change: Rafi made a very important statement just a few minutes ago that really this high-performance computing is built out of a few building blocks.
Speaker Change: It's the GPUs, it's the HBM, it's the interpoles, and other things.
Speaker Change: So basically, as we understand, the TSMC are going to double the capacity next year. This is going to free
Speaker Change: additional capacity to other players to enter this market, and there are more places that the OSOT, so definitely we see this market developing, growing, growing at a very high rate, the growth rate of the COAS and COAS-like
Speaker Change: technology, the number of packages, the growth, the KDR is in the range of 50% over the next few years.
Speaker Change: So, definitely, this is a market that is going to draw a lot of HBMs to it, and we feel very comfortable with the long-term future of this market.
Thank you.
Speaker Change: Thanks Kyle. Our next question is going to be from Matt Prisco of Cancer. Matt please go ahead.
Matt Prisco: Yeah, thanks for taking my question. I think it would be great if we could talk about the product traction across Eagle G5 and
Matt Prisco: and Hawk. Maybe an update on orders and early customer reception. And importantly, what type of market opportunities do you view these opening for Camtech? Is this kind of I'm going to expand your current, Sam, or is this more to address future issues? Thank you.
Speaker Change: So, so first of all, there are two aspects here. So, first of all, there is one aspect of being more competitive.
Speaker Change: So the Eagle G5 or fifth generation that is a much faster, more accurate, brings in more capabilities, will make our position more competitive and we expect to take more and more market share.
So this is on the G5.
Speaker Change: The Halk will open new markets for us, markets that today are beyond the capabilities of the Eagle product line.
Speaker Change: And there are quite a few. I'll give you an example. It's the high number of micro bumps on wafers.
Speaker Change: or logic devices, you are talking about 500 million devices on a single wafer. That's an application that is starting to develop that is beyond the capability of the current product line.
Speaker Change: So definitely, the hawk will increase our total available market and it's a couple of, I would say, at least 200 million and potentially more. It will free up
Speaker Change: some front-end applications and so forth. I think I won't be able to give you more details in this call, but definitely it will increase our available market, it will take us to places that our current products today just cannot perform.
Speaker Change: Although we have an excellent product line for our existing market.
about the orders.
Speaker Change: We made an announcement last November that we received orders for over 50 million dollars
Speaker Change: We also said in that announcement that we expect to get additional orders and indeed this is the case.
and we plan to ship these machines this year.
and for the G5 we've already received.
Speaker Change: a comparatively large number of orders. Again, we already started to ship them. Actually, in the fourth quarter of last year, we shipped the initial machines. They're already in production, and we are starting to ramp the G5 into production.
I would say that the AUK in general
has two major capabilities.
Speaker Change: Probably we will see more and more by the end of the year, next year, because, you know, while R&D running production and it's moved to production, it takes some time.
Speaker Change: But the other aspect of the org is very, very high support, even in current applications.
Speaker Change: So, if customer, the throughput is very important for him and he is willing to pay the price tag, definitely he may choose the AUC. So, the AUC definitely can serve customer that the main issue is higher throughput.
Speaker Change: But when we designed the AUC, it was designed mainly for high-end applications, so it can answer for both of them.
Speaker Change: Very helpful, thank you. And then for my follow-up, as the industry transitions to technology such as, you know, HPM4 and COASL, how does that impact Camtex opportunity, or maybe process control intensity in general? Thanks.
So, in general, it's a positive, I would say,
Speaker Change: It's a positive trend, but what you call process control, the intensity will probably grow as, you know, you're putting more and more dyes in the same module, so you would like to make sure that none of the dyes have any defects on them.
Speaker Change: So, in our view and our discussions with customers, this will have a positive effect on the quality control.
Speaker Change: Yeah, but you know the main application is 100% inspection and metrology. Our customers use our machines to inspect and measure each wafer.
Matt, that answers all your questions.
Brian Chin: That is perfect. Thank you guys. Okay, thanks. Our next question is coming from Brian Chin of Steeple. Brian, you may go ahead and ask.
Brian Chin: Hi there. Good afternoon. Thanks for letting us ask a few questions.
Brian Chin: Maybe just to stick on the HBM4 topic for a moment here, how large of an increase are you expecting on the micro bumps per dye or per wafer for HBM4 versus 3E?
Brian Chin: and you expect your system shipments to be stronger really next year versus this year and is this, are there any applications there that are better suited for Hawk relative to Eagle?
So, let's talk about the HVN.
Brian Chin: Those applications range today for, if you take a wafer, it's over 100 million pounds and it's going to stay in this range at least for the foreseeable future. It's not going to go to 300 million pounds, at least not in the near future.
Brian Chin: So, from that point of view, definitely I would say that the workhorse of the industry is the Indian product line, and I expect that in most cases it will continue.
Brian Chin: And I think, as Rafi alluded to, there will be some customers that are very, very sensitive to the
Brian Chin: to the space and they prefer to take the Hulk in order to get a double throughput for the same space of the machine. So this is a potential, this is something that we will see over time.
Brian Chin: But from the capability of the Eagle to respond indefinitely to J5, it is a very good machine that can probably meet all the requirements of the HB.
Brian Chin: Now, as we said in the previous course, definitely, today we are doing, in most cases, 100% inspection and metrology, 3D metrology, and there are
additional metrology steps that are done in different areas.
Brian Chin: So definitely the intensity of the quality control is going to stay or improve in certain areas That don't do a hundred percent inspection and metrology
Hayley
Brian Chin: As we go into the HBM4 and beyond, definitely the opportunity for Contiq is going to grow. But you need to couple it with the larger number of COAS and COAS-like packages that are going to grow by a K-year of about 50%.
Brian Chin: in the foreseeable future. So the combination of the market expansion.
Brian Chin: together with the complexity of the dyes and the wafers and the need for higher intensity of quality control is definitely this is the ingredient for
Better Business for Countries.
Great, thank you and.
relative to the co-op opportunity,
Brian Chin: I think there's a fair bit of transparency about maybe what the size of that could be in terms of the expansion this year. Can you help us size maybe the planned capacity footprint for some of these OSATs?
Brian Chin: who kind of work in conjunction with the lead customer there. A sense of sort of how much capacity could they be planning to build out this year, next year, to kind of help to alleviate.
the overall industry constraint.
Brian Chin: and also your position, reinforce your positioning at OSF. Well, it's very hard now to give numbers, you know.
Brian Chin: What I can tell you from what we see, and what we see is that we fail, I would say,
Brian Chin: I would say a significant number of machines go to these OSOTs. Now, the point with the OSOTs is that you don't really know all the applications that they are doing, but it definitely, we are seeing OSOTs buying machines from us for these applications.
So, yes, the market is broadening.
Now you need
Brian Chin: to take into account that there are all kinds of fabulous companies.
Brian Chin: that you know are just making the entire design by themselves.
Brian Chin: some of the silicone they designed by themselves, the chiplets they designed by themselves, and then they buy the or you know buy the HPNs and have the OSATs do the full integration of the film manufacturing of the module for them.
Brian Chin: So, that's something that is very hard today to track down the capacity, but I think it's going to be a significant capacity in the next couple of years.
Brian Chin: Great. Maybe just one last question to maybe frame the market. There's been some discussion or...
Brian Chin: uncertainty whether the HBM TAM for inspection metrology will increase this year versus last year. If you're not comfortable maybe providing that update.
Overall, it sounds like you expect the overall TAM for
Brian Chin: AI packaging or HPC packaging, inclusive of COAS, et cetera, to increase this year versus last year?
Brian Chin: Definitely. We definitely expect it to increase and you can see the capacity. I mean TSNC are going to double the capacity. There are going to be a number of homesteads that are going to jump into this area that are actually already manufacturing some of them.
So this market is going to grow.
One of the building blocks
Please.
Brian Chin: HBM. And you know, the more complex the applications become, and they're going to become more and more complex, you're going to see more and more memory that is required. You know, we've seen from history that whatever memory you provide for your products, you know, the requirement is higher.
Brian Chin: So this is a trend that we've seen before. I think it will continue.
Brian Chin: And as you can hear, we hear that there is not enough capacity in the market to support the requirements of all the companies that are going to go into it.
Brian Chin: So, our view is that the market is going to grow, there is going to be requirements for more HBM, the available market or the market for these products is going to grow, and we believe that we will grow with it in the foreseeable future.
Thanks, Rami.
Thanks, Brian.
Speaker Change: Our next question will come from Vivek Aryeh from Bank of America. Please go ahead, Vivek.
Speaker Change: Hi, this is Michael Mani on for Vivek Arya. Thanks so much for taking our questions
Speaker Change: To start, could you give us a sense for between the Hawk and Eagle G5?
Speaker Change: which one will be a bigger contributor to growth this year?
Speaker Change: and then maybe a little further out, as we think about the competitive landscape, especially as it pertains to what opportunities HAWQ can present to you guys.
Speaker Change: There's already a strong competitor who participates here, but based off your previous experience of product cycles and how your customers make allocation decisions.
Speaker Change: What sort of timeline do you expect for any share gains in this market? Could it happen more quickly just because of how rigorous the new technology requirements are?
Speaker Change: for some of these upcoming inflections like HBM4, or do you expect these share gains to unfold more gradually over time? Thank you.
and the whole project.
So you can see, you know,
There is a limited information that I can provide here.
Speaker Change: But I think that from the older size that we received from the Hawk, and you understand that we are getting more older.
Speaker Change: So you can understand that it's going to be a substantial number for the Hawk and I can tell you that it's going for the G5 to be also
Speaker Change: a substantial number. However, the Hawke ASP is higher, so it's here, I would say the comparison is not one-to-one.
Speaker Change: But in general, I believe that we will see a comparatively
cost of ownership to our customers, they understand it.
Speaker Change: That's on one side. On the other side, on the HOC side, it opens markets and applications that today we don't have and are needed by our customers that will be the second reason for buying these products.
And for the G5, definitely the Eagle.
Speaker Change: is a very, very popular machine. I would say it's the workhorse of the industry in many of the metrology, but also in many of our many 2D applications.
Speaker Change: In fact, we sell more machines eventually that do 2D than 3D.
Speaker Change: So we are very strong. Yes, there is competition in this market and an excellent competition, but we are doing pretty well.
and certain applications we dominate.
and we expect to have even a stronger...
Speaker Change: positioned in the 2D market as a result of the introduction of the Hawk and the G5. So yes, in fact, it's going to be a pretty, I would say, steep run into production over the first year.
Speaker Change: and Katina, many of our customers, and we have thousands of Eagle machines from previous generations, some of those customers
will not want to change anything.
Speaker Change: other production lines, they are very satisfied with what they have, will still continue to buy the regular Eagle, which is a very good machine, and that's how this industry, you know, behaves.
Speaker Change: certain customers are more conservative, are sensitive to making changes, others are willing to make those changes faster. So this is something that we'll see as we move along.
Great, thank you. And just a question on the
Speaker Change: other part of your business, Compound Semi, CMOS Image Sensors. I think last quarter you indicated that there were some green shoots.
Speaker Change: unfolding there. Just did those kind of persist into this quarter? What are your kind of expectations for that market this year?
Speaker Change: and if you do have a constructive view, what's really driving the growth there just because as we look at all the various end markets that it's exposed to?
Speaker Change: Right, you know, and demand seems to be pretty weak right now. So just any more color there would be appreciated. Thank you.
So.
Speaker Change: I think when we look at the, I would say, at the non-HPC market,
So, definitely, I would say a business is stable there.
Speaker Change: I think most of the applications are stable. There isn't now an application that is growing very fast. And the reason for that is the consumer goods in general.
Speaker Change: are not going there. There isn't an application there that is going very fast.
Speaker Change: We do see some improvement on the CMOS market. Apparently, there are new sensors.
Speaker Change: And so there is, I would say, some demand coming from...
Speaker Change: The CMOS market, the CMOS image sensors market, if I want to compare it to last year, I think when you look at the silicon carbide market, it's stable. The reason I would say huge growth there. There's a lot of capacity.
Speaker Change: out there that I think will take some time to digest it and we'll continue to see some business but I don't think there will be a major growth. I would say that the
non-advanced packaging which is about 30% of our business
Speaker Change: will grow next year, very much in line of what the industry expectations are, but most I would say the growth is going to come from the high-performance computing and other advanced technologies.
Speaker Change: packaging, I would say the more traditional advanced packaging application such as fan out and others that continue to grow.
Michael, that answers all your questions.
Speaker Change: Yes, it does. Thanks so much. Great. Thanks. Our next question will be from Craig Ellis. Craig or Stacey, please go ahead, from B. Riley.
Stacey: Yes, thank you. This is Stacy asking for Craig and thank you for taking the question. I was wondering if you can discuss a little bit about the digestion risk.
Stacey: and also the magnitude of it in HBM and or COAS and if it's related to in foundry or OSAT or kind of both. Thank you.
I will.
Stacey: Let me, you know, Stacy, this is Rami, let me try and answer and maybe Rafi and Moshe will jump in. In general, when we look at the HPC market,
We see a very solid business going into next year.
Stacey: We have, as we said in the prepared notes, we see a solid 50% of our business is going to go into this market.
Stacey: And the overall, specifically regarding the HBM, yes, we are going to shift to the HBM segment.
Stacey: TSMC is going to double the capacity with all the increased capacities in the different OSAPs and we are actually shipping machines for all two OSAPs and we will ship including in the first half of this year so we are seeing the market.
Stacey: expanding, the business is healthy, there is a lot of interest.
Stacey: There might be some for other people, at least we don't experience it.
Stacey: There could be some customer-related concerns, but when we look at the entire industry, as we serve all the customers,
Stacey: We feel very good about this market as we enter the 2020 month.
Stacey: Rafi, you want to add something? No, I think you covered it very well.
Stacey: Okay, yeah, thank you. And if I can add a follow up is, can you also talk about the, maybe the backlog levels through 4Q and 1Q to date, and the composition of those by end usage, and if possible, some degree of visibility, maybe through the, throughout the year 2025. Thank you.
So, you know,
Stacey: What we can comment on the backlog in general is that we have a very strong backlog for the first half of the year.
The second half is starting to build up.
Stacey: It's very, and for the first time, let me just complete that, we said that 50% will go to HBC.
Stacey: For the second half, it's starting to build up. It is much too early to say, to talk about the composition of the backlog or to give a feeling.
Stacey: on the actual numbers in the second half of this year and this is very typical to our business and as the lead times you know are three to six months so still we're starting to build up I think we will be in a position to understand the thing in the third quarter.
Stacey: I think we feel that next year, this coming year, the 25th, will be a growth year. We feel very well about the business, but still the second half, to really try and give you know more color on it, it's a little bit too early.
Got it. Thank you.
Thanks, Stacy.
Speaker Change: Our next question is going to be from Vithbhati Chhatra from Evercore. Vithbhati, you can go ahead and ask your questions.
Vithbhati Chhatra: Thank you. Thanks for taking my question. The first one I have is, how should we think about your revenues versus the COAS capacity that's being added? So if I go through TSMC CapEx on advanced packaging, it's doubling from 3 billion to 6 billion. Does that mean your revenues from COAS double as well as we go into 2025? Is that a fair interpretation?
and others. Thank you.
It's okay? So, okay.
Vithbhati Chhatra: Let's talk about how the business builds. Definitely, the capacity that was installed in 24 is now serving the market. So part of the growth
Vithbhati Chhatra: in 25 is built on the capacity that was built that was already built in 24 and this will go on so the capacity that we are going to install in the first half I assume will still be installed and serve the growth in the second half of 25.
Vithbhati Chhatra: What will be shipped in most of the second half will probably affect the tail end of this year and really contribute in 2026. And this is how this industry works. It's true for the COAS capacity, it's true for the HBM, it's true for most of the building blocks.
Vithbhati Chhatra: So we, I think in my mind, should look at the second half of this year, what will be shipped out, and a lot of it will be served for the first half of 2026.
Vithbhati Chhatra: and I think the additional capacity of what the TSMC are adding and the OSOT, some of it will still, you know, end up in this year, some will again will go to 26.
Speaker Change: Understood. And then for my follow-up, as you ramp Eagle G5 and Hawk products, how should we think about cross margins from here?
Speaker Change: So, I think as we are ramping these products, they are definitely accretive from day one.
Speaker Change: and specifically about the Hawken, I think we discussed it in previous course, we definitely expect
Speaker Change: So maybe just to clarify, you know, Vidbhati, overall the Hawks and the Gen 5
Speaker Change: has a positive impact on the gross margin and they are equated to the gross margin. However, if we are ramping the production this year
Speaker Change: Most of the impact, you know, to the gross margin level, you will see it only in 2026. This year we are kind of ramping the production, streamlining the processes, and next year you will see the benefit and the contribution to the gross margin.
That's helpful. Thank you. Thank you.
Thank you, Betsy.
Speaker Change: Our next question is going to be from Gus Richard of Northland. Gus, you may go ahead and ask.
for squeezing me in here, you know, is.
Speaker Change: You walk through the AI ecosystem, you know, a couple of major players are doing their own chips have moved to chiplets this generation, the hyperscalers, the revenue is constrained by their capacity in their data centers. And when you look at it, it looks like the new process.
Speaker Change: Co-Oz is what's sort of limiting the output of chips and servers, etc. And so my question is
Speaker Change: What's slowing the ramp? Is it facilities? Is it somebody else's equipment? Is it, you know, OSAT's coming up? You know, can you kind of help us understand what's going on there?
Speaker Change: So, you know, Gus, for us, it's very hard to know who is the limiting factor.
Speaker Change: But at least, you know, from our view things are starting, you know, to pick up, you know, you see there's a lot
Speaker Change: of additional capacity and so I think they will catch up pretty quickly. I expect them to catch up in these areas in the first half of this year. I believe they will catch up with most.
Speaker Change: of the capacity, and we will start to see hopefully the ramp for these guys in the second half of 2025, as Rafi alluded to in his comments.
Speaker Change: or early in 26, but definitely all of these guys are going to add more and more, we need more and more capacity that will definitely increase the potential opportunity for us.
Speaker Change: some using more combination of organic and silicone, so there are also a lot of R&D involved in this product.
Speaker Change: because they want, you know, to be more efficient and getting better yield.
Speaker Change: But definitely we can see the investment, we can see the new building, and the construction. And it's amazing, if you just go and walk in some places, you see the amount of...
Speaker Change: building, wow, it's a big wow to see this investment. So definitely it will be convert to production and high volume. If it takes six months or three months or nine months, we really cannot estimate right now.
Speaker Change: Okay and then just looking beyond AI and HPC there's some evidence that maybe in 2026 some of the mobile guys might move to chiplets rather than move to two nanometer. I'm wondering if you know if that's another driver of growth for you into 26 or you know it's not something you have visibility into.
Speaker Change: We don't have a disability, but I think any move to treatment is very positive for us.
Speaker Change: Got it. And then just the last one for me, you know, if I was your most favored customer and needed a system as soon as possible, where would you slot me in at this point?
Speaker Change: Well, guys, you know, it's a difficult question because you are close to us. But so, look, I would say it depends really on the on the configuration and the specific models. So if you go from from a regular weekend, we will do it sometimes even weeks.
If you come to the G5
Speaker Change: It will probably be two months if somebody really needs a very good machine. On the hook, it will take longer.
and Pete.
Speaker Change: and it really is the complexity of the machine and the configuration that a lot of aspects are coming to. So, but yes, we will always, you know, find a slot for one of the important customers that needs a machine ASP, we'll turn the world around to make it happen. But obviously this is
Speaker Change: very small number of machines when you go to the larger orders that are three to six months in data.
Speaker Change: Got it. Perfect. Thank you so much. That was very helpful. Thank you. Thanks, Gus.
Speaker Change: Our next question is from Shachar Cohen of Lucid Capital. Shachar, you may go ahead and ask your question.
and other players. I want to ask about the
Speaker Change: The HBM or the mini HBM opportunity in mobile, we have seen what is called LLW DRAM.
We have seen both Hynex and Samsung
Speaker Change: adopting this mini-HBM, and we heard maybe some of the high-end phones may include this kind of stuff in 2026, anticipating.
Speaker Change: The AI phone which really have some requirement of better better bandwidth between the memory and the CPU. So
Speaker Change: Can you speak about this opportunity for you guys and how should, is it more like end of 2025 or 2026 and just the significance of that opportunity?
Speaker Change: So, hi Shachar, I think this specific DRAM, you know, it's still more under production. It will take some time until it will turn into, I would say, a real opportunity for us.
From our point of view,
It's not, there is nothing here that we need.
Speaker Change: especially to develop for it. This is a kind of device that will have the micro bumps on it. It's a really typical, I would say, advanced packaging. Yes, it's a challenging one, but it's definitely within the capabilities of our machines.
Speaker Change: But in general, I think if you ask me about mobile phones, I think this is more 26 and beyond capabilities, and still we will see this kind of an application ramping up. I don't think it is, at least in my mind, it's not immediate.
Speaker Change: And if it will be 2026, it's going to be significant.
Speaker Change: It depends on the, you know, the number of cell phones they will adapt it and so I think it is too early in the name. It's too early in the game. But look, in general, I think we discussed it in our prepared notes.
Speaker Change: Today, the application is very, very centered around serverless, and therefore it's a lot of hardware in it, and you can see the size of the business, it is very significant.
Speaker Change: As AI will go into cars, will go into robotics, and these are probably the next two things that we'll learn, that we will see these technologies, and then go to PCs that it's really
Speaker Change: a factor or more and eventually go to cell phones. So the more applications for us, it would create a very big opportunity. So long term, yes, all of these things, we will adopt these technologies one way or another,
Speaker Change: And we definitely believe and see that this is an area, the HBM, as part of the COAS, as part of a module, an AI module, is going to be a very, very big business for us.
Thank you.
Thanks, Shaka. That ends our question-and-answer session.
Speaker Change: Before I hand back to Rafi for his closing statement, I would like to let you all know that in the coming hours we will upload the recording of this conference call to the Investor Relations section of Camtec's website at camtec.com.
Speaker Change: I would like to thank everybody for joining this call, and we will see you next quarter. And I would now like to hand back to Rafi for your closing statement. Rafi, please go ahead. Okay. I want to express my gratitude to all of you for your ongoing interest in our business.
Speaker Change: Special thanks goes to our employees and management team for their outstanding performances.
Speaker Change: To our investors, I appreciate your long-term support. I look forward to our next conversation in the upcoming quarter. Thank you and goodbye.