Camtek Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 12 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. I would like to welcome all of you to Camtek's results Zoom webinar. My name is Kenny and I'm part of the Investor Relations team at Camtek. All participants, other than the presenters, are currently muted. Green.

Operator

Following the formal presentation, I will provide some instructions for participating in the live question and answer session. I would like to remind everyone that this conference call is being recorded and the recording will be available on Camtek's website from tomorrow. You should have all by now received the company's press release. If not, please view it on the company's website. Green.

Operator

With me today on the call, we have Mr. Rafi Amit, Camtek's CEO Mr. Moshe Eisenberg, Camtek's CFO and Mr. Rami Langa, Camtek's COO. Raffi will open by providing an overview of Camtek's results and discuss recent trends.

Operator

Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe and Rami will be available to take your questions. Before we begin, I would like to remind everyone that certain information provided on this call are internal company estimates, unless otherwise specified. Green. This call may also contain forward looking statements.

Operator

These statements are only predictions and may change as time passes. Statements on this call are made as of today

Speaker 1

and the company undertakes no obligation to update any

Operator

of the forward looking statements Greetings. No obligation to update any of the forward looking statements contained whether as a result of new information, Grier. Investors are reminded that these forward looking statements are subject to risks and uncertainties that may cause Actual events or results could differ materially from those projected, including as a result of the effects of general economic conditions. Risks 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 Green from customers in these countries. Changing industry and market trends reduced demand for services and products, timely Developments of new services and products and their adoption by the market, increased competition in the industry and price reductions as well as due Green to other risks identified in the company's filings with the SEC.

Operator

Please note that the Safe Harbor statements and today's press release also covers Grier, and I'll now hand over to the conference call. In addition, during this call, certain non GAAP financial measures will be discussed. These are used by management Grier, to make strategic decisions, forecast future results and evaluate the company's current performance. Management believes that the presentation of non GAAP financial measures a useful to investors' understanding and assessment of the company's ongoing core operations and prospects for the future. Gray.

Operator

A full reconciliation of non GAAP to GAAP financial measures are included in today's earnings press release. And now I'd like to hand the call over to Rafi, Camtek's CEO. Green, Rafi. Please go ahead.

Speaker 2

Thanks, Kenny. Good morning or good afternoon, everyone. Green. Camtek closed the Q1 with revenue of $72,500,000 The gross margin came in at 47.3 percent, affected mainly by product mix and cost increase of some of the components. Green.

Speaker 2

Operating margin was 24%. Over 60% of our revenue Green. Frontend and Compound Semi segments Green. In the Q1, we shipped multiple system orders Green. These orders accounted for over 40% of the quarterly revenue.

Speaker 2

Regarding the DRAM field, Customers in the HBM segment account for over 10% of our revenue. Green. In the front end segment, we delivered system with a new hardware module for the first time. Green. We installed 2 Golden Eagle systems Green.

Speaker 2

For panel inspection at a new customer site for fan out application. We plan to ship additional systems to this customer in Q2 and Q3. During the Q1, we received an order for 9 systems Green. Regarding the Q2, we estimate the sales to be similar to Q1 'twenty three, Green, which represents a decline of 9% year over year. As we have stated in our previous call, We continue to believe that our leading position in specific segments, broad and diversified customer base Green.

Speaker 2

And long term strategic relationships with customers will enable us to outperform the industry. Green. Regarding the second half of twenty twenty three, based on our discussions with customers, Green. There is a potential for a moderate improvement in the business situation of our customers. At this stage Green.

Speaker 2

At times like this when the world is experiencing an economic slowdown, Green. We are monitoring our expenses carefully and adjusting them to the current situation rather than to the long term forecast. The field in which Grish. We cannot afford to reduce expenses is R and D because our customers continue to develop Green. And new technologies such as hybrid bonding, metagenous integration.

Speaker 2

They set a very aggressive roadmap Green. At the same time, we are aware of the fact that transition from slowdown to growth is swift in our segment. Green. That is why we need to maintain a sufficient inventory that will allow us to meet the requirement Green. Looking at the investment and increasing capacity In the R and D roadmap that our major customers are making in relevant segments, Green.

Speaker 2

We are optimistic about growth potential. The release of new products later this year Green. In addition, we continue our efforts in the M and A to further increase our total available market. Green. And now Moshe will review the financial results.

Speaker 2

Moshe?

Speaker 3

Thank you, Rafi. In my financial summary ahead, Green. I will provide the results on a non GAAP basis. The reconciliation between the GAAP results and the non GAAP results appear in the table at the end of the press release issued earlier today. 1st quarter revenue came at $72,500,000 Grier.

Speaker 3

A decrease of 6% compares with the Q1 of 2022. The geographic revenue split for the quarter was as follows: Asia was 90%, and USA and Europe accounted for 10%. We expect to return to the eightytwenty mix Green. Gross profit for the quarter was $34,300,000 The gross margin for the quarter was 47 point This decline is a result of the sales mix as well as continued inflationary pressures on raw materials and labor, Grier. Focused on improving the gross margin through engineering and design changes, which in some cases require customer qualifications as well as supply chain initiatives.

Speaker 3

We expect gradual improvement in the gross margin from the current level, Green. Operating expenses in the quarter were $16,200,000 This is compared with $18,000,000 Green. In the Q1 of last year and to the $17,400,000 reported in the previous quarter. The current strength of the U. S.

Speaker 3

Dollar versus the Israeli shekel is beneficial to our current operating expenses level. Green. Operating profit in the quarter was $17,400,000 compared to $22,200,000 in the Q1 Operating margin was 24% compared to 28.8% last year Financial income for the quarter was $5,100,000 compared with $3,800,000 in Q4 And only $400,000 last year. The majority of the increase relates to the significantly higher Green. Interest rates on our deposits on an increased cash balance.

Speaker 3

Net income for the Q1 of 2023 was $20,400,000 or $0.42 per diluted share. Green. This is compared to a net income of $21,000,000 or $0.44 per share in the Q1 of last year. Green. Total diluted number of shares as of the end of Q1 was 48,400,000.

Speaker 3

Green. Turning to some high level balance sheet and cash flow metrics. Starting from cash, total cash including Green. Cash equivalents, short and long term deposits as of March 31, 2023 and we generated $17,100,000 in cash from operations. Account receivables decreased from $81,000,000 at the end of last quarter to $66,000,000 primarily due to a strong collection within the quarter.

Speaker 3

Green. Days outstanding for Q1 were 84 days, down from 90 days last quarter. Inventory level was at similar level as of last quarter. In terms of guidance, In Q2, we expect revenue at a similar level as achieved in Q1. And with that, Rafi, Rami and myself Green.

Operator

Thank you, Maher. At this time, we will open the call for the question and answer Green. Our first question will be from Brian Chin of Stifel. Brian, please go ahead.

Speaker 4

Can you hear me okay?

Speaker 1

Yes, we can.

Speaker 4

Green. Great. Good afternoon. Thanks for letting us ask a few questions. I guess maybe to start with, you referenced some meaningful Tier 1 customer activity.

Speaker 4

Green. And I guess, 1, what kind of impact does this have typically on blended gross margins? And 2, can you describe Green. What you're seeing from also your broader customer base, clearly wafer starts and utilization is lower as inventory corrections continue. But what are the specific areas Green.

Speaker 4

We do have some indications for some pickup in second half, and I'm thinking also about China specifically. Thanks.

Speaker 1

So let me start with the answer. So first of all, when we talk about the second half, We are talking about multiple territories. It's not related to a specific territory. Definitely, it's not just China. The main drivers, I would say, are the advanced packaging.

Speaker 1

No doubt this segment is healthy, Shows some strength and you can see that our Tier 1 customers are continuing to buy equipment. They're investing Green. And they are still increasing the capacity for certain applications. The second area that is driving the growth or will drive the growth Is the compound semi? Definitely the automotive market is strong and this market will continue to be healthy So I would say these are the major opportunities Green.

Speaker 1

In general, I would also like to specify here that we have POs on hand for some of these Now in general, the Tier 1 customers Do not have a negative but a positive effect on our gross margin. Where we've seen, I think, Moshe mentioned it In his notes is the mix here, apart from the issues of the I would say the increase in some of the cost side, there is definitely a mix issue or a mix, Green. A product mix in this quarter that is not favorable. And 2 of these reasons are for the low gross margin. Green.

Speaker 1

I would say, I would state again, it's reiterated, it's important, our Tier 1 customers affect positively on the gross margin.

Speaker 4

Green. Okay. That's helpful. And then just for my follow-up, what was the significant advanced packaging order that's shipping in 2Q and 3Q, is that memory related? And I guess Whether or not it's high bandwidth memory related, can you also discuss how large that market opportunity is, your market share Green.

Speaker 4

And how process control intensity is maybe favorably impacted as more die are stacked together?

Speaker 1

So first of all, the My machine orders are not related to memory. So that's I would say it's other advanced packaging applications. Green. So now going back to the memory and DRAM specifically, first of all, this is a obviously healthy segment, Because there is a transition to the use of the high bandwidth memory, I think everybody is using it. Memory going into servers and gaming and other application, definitely that's an area that is going to grow Green.

Speaker 1

And we are seeing the other business. So in general, we have a very strong market share Green, and we serve all the major players. From the size of the business, I think we mentioned it in the notes, Green. It was 10% of our revenues in this quarter. It's still too early to say what it will be in the next quarters,

Speaker 4

Green. Thanks for the answers.

Operator

Thank you. Thank you, Brian. Green. Our next question will be from Charles Gee from Needham. Charles, you may go ahead and unmute.

Speaker 5

Green. Thanks, Kenny. Thank you for letting me ask a question or 2. Good afternoon, Rafi, Rami, Mosheya. Green.

Speaker 5

I think the first thing I want to clarify a little bit more is that 9 machine order you said in the press release, it's a Can you expand a bit? I understand it's not in memory, it's Green. But why you consider it a strategically important order? Just need a little bit more color on that. Thank you.

Speaker 1

Hi, Charles. The reason that we see this as a strategic order, This is first of all a very important customer of ours. It's in the advanced packaging and there is a potential for Significant number of machines in the second half of this year and in 'twenty four. So definitely, it's The strategic nature is the potential quality of machines that we will be selling to these specific customers Green.

Speaker 5

Is there any I mean, I understand the size of the business. Yes, definitely sounds it's strategic, it's important. But from technology or product perspective, Green. Any other thing noteworthy, these 9 machine order, is it something like a more finer pitch, Green. Higher bump density, I mean, something that basically requires a higher level of capability from your machines, Green.

Speaker 5

I understand the business side, but I also need to understand technology side, yes.

Speaker 1

From a technology point of view, no doubt, this entire industry He's tightening the dimensions of all of our applications and we will see a similar trend on this customer as well As we increase the number of bumps, we reduce the pitch, the RDLs for the fan out applications are coming down and also the defect size is becoming smaller and smaller. So I think from the Application requirements point of view and I would say the number of applications in this customer, First of all, there will be quite a few of them. And definitely from a technology point of view, it's definitely going to be tighter Green. I think this is as much as I can disclose at this stage, Charles.

Speaker 5

Yes, Rami. No problem. Appreciate the color as always. So Moshe, I have a question Green. On the financial side, in terms of your forward financial planning here, I understand that you want to exercise more cost Green.

Speaker 5

Going into the next few quarters, I think you said that you're going to respond to the near term dynamics a little bit more. So wonder what's your thought on the overall OpEx this year? Are you thinking about flat year on year Green. And based on what kind of market assumption, especially in second half, are you making improvement on the second half Green. In terms of the business for any of the OpEx budgeting you're thinking as of today?

Speaker 5

Thank you.

Speaker 3

So in terms of the operating expenses, first of all, in general, Green. You already see in the Q1 somewhat reduced operating expenses versus last year. Green, and we will continue with this level pretty much Throughout the year, as Rafi mentioned in his prepared notes, the focus would be on R and D. So You will see over the next few quarters an increase in the R and D level. And somewhat, if we want to keep The OpEx, the same level.

Speaker 3

You'll see on the other aspect, the SG and A, a reduced level of expenses.

Speaker 5

Got it. Got it. That's kind of based on stable business outlook Green. Or do you expect some moderate improvement in the second half in that assumption? I just Grier.

Speaker 5

Really want to understand how you're thinking about the OpEx here relative to the market environment. Thank you.

Speaker 3

So just in general, we still don't have a clear view on the second half. On one hand, we do hear some positive feedback Griggs. But we are not taking it to the bank yet, and we don't have all the orders in hand to support growth. So at this point, we provided guidance for the Q2. We gave some indication for the second half.

Speaker 3

It's too early to say whether second half is going to be stronger. So my current assumption on the operating expenses is based on

Speaker 1

Green. I would like just to add one more thing, Charles, and I think I Grieg. I said it in the previous answer, but I want to reiterate it. I would say the positive signs that we see Green. Are coming from discussions with customers in multiple territories.

Speaker 1

It's just not related to 1 or 2 customers. So yes, we are hearing in multiple customers from major customers, I would say some positive note, But as Moshe said, some of it isn't supported by POs, but still it is too early in the game

Operator

Green. Our next question will be from Craig Ellis from B. Riley. Craig, you may go ahead.

Speaker 6

Green. Yes. Thanks for taking the question and congratulations on your revenue execution team. I wanted to start just by following up on Green. One of the comments around high bandwidth memory and just clarifying the business' potential for Green.

Speaker 6

This year, is the view that the strength you're seeing in high bandwidth memory sufficient to drive year on year growth in 2023 versus Green. 2020's levels or was that more about the business' strength in the very near term perhaps in either 2Q or 3Q?

Speaker 1

So first of all, I'm expecting, let's say, we are about 10% revenue of our revenues for this segment alone. Green. And I would say that I'm expecting something similar at least for the next quarter. I think throughout the year, Green. This is an area that is picking up and you see all everybody is talking and it's not just related To one specific vendor, people understand that this is a growth area.

Speaker 1

So definitely, this is something that will be significantly larger What we saw in 2022, it would be meaningful and I think it will help us to keep the numbers.

Speaker 6

That's really helpful, Rami. Thank you. Green. And then the second question is regarding the compound semiconductor part of the business, and it's a longer term question. Green.

Speaker 6

One of the things that investors have been concerned about over the last few months, given some of the Green. The pressures that have been seen in the global automotive market is the ability for compound semiconductor to be Green. So without providing any guidance, can you just talk about Green. Your confidence that Compound Semi, after what looks like will be a strong this year, could be a business that could provide growth in Green. What are the gives and takes to that being a sustainable growth driver?

Speaker 1

First of all, we are continuing at a similar rate than we experienced last year, which is already a good note. Now in this area looking forward for this year, we are backed by POs from some of the customers. And definitely, we are seeing and with discussions with specific customers that are thinking of expanding or getting into this market. I'm getting the feeling that this market will continue to invest in increasing the capacity, at least throughout 'twenty three and 'twenty four. So from that point of view, I would say we are looking at this market positively.

Speaker 6

Green. That's really helpful, Rami. Thank you. And then for my last question, I'll flip it over to Moshe. Moshe, can you just talk a little bit more about Green.

Speaker 6

Some of the things that are happening with gross margin, there were repeated references to mix dynamics in the quarter. Green. Was that mostly on a product line basis or with the end market served, whether it was advanced packaging or Green. Hi, Ben with memory, etcetera. And then you mentioned that there would be some improvement in gross margin.

Speaker 6

Can you provide a little bit more color on the timing with which you'd expect to see that? Thank you so much, guys.

Speaker 3

Thank you, Craig. With respect to gross margin, first of all, obviously, this is an area of focus of us At this point, and we understand that we need to improve the gross margin. So on the product mix, I would say that it's across the board. And Rami mentioned before, The Tier one customers which are driving relatively higher gross margin. So it's relatively the smaller customers That are driving the margin a little bit down, but that's not the whole story.

Speaker 3

Most of the issue is on the cost Green. In here we are very much focused on reducing the bill of material of the product Grier. Through a few initiatives, first of all, we and obviously, we cannot pass on to the customer all these Green. So what we do is, first of all, we do some we are making some changes in the design of the system. But you have to take into account that in some cases we need to get customer qualifications for that.

Speaker 3

It's a long process. Green. So it takes time until we will see the benefit of that. The other aspect is obviously through supply chain Initiatives, negotiation with customers and now the market is a little bit softer. So we believe that we will be able to achieve here some savings as well.

Speaker 3

Taking into account the fact that we are seeing with Certain level of inventory with the higher cost structure. So as I said, Green. Gradually, we will see improvement, but it takes time until we see the full benefit of this activity. Thank you, Moshe. Green.

Operator

Thank you, Craig. Our next question will be from Duxin Zhang of Bank of America. Green. Dougsson, you may go ahead.

Speaker 7

Yes. Thank you so much for taking my question. Just to follow-up on the margin front. Green. I know you guys have a target model out that's for 52% gross margin target.

Speaker 7

Could you just remind us for what year that target is for and if you still think that is a reachable target?

Speaker 3

Yes. The target was not specifically to a year, but more for a revenue level. For the reasons that we've mentioned before, and yes, the answer is We are committed and we have a path. We know exactly what we need to do and we are executing based on this plan to return to the 50% -ish gross margin level. Green.

Speaker 3

But again, I would say that it's a gradual process and it's we will see the full benefit in a few quarters. Green.

Speaker 7

Understood. And then just one on China. So some of your front end peers recently have Received clarification from the U. S. Government.

Speaker 7

They believe they can ship incremental revenue to Chinese customers that they previously thought were restricted. Green. I know you guys said you didn't have any direct impacts from this kind of restriction before, but are you seeing any sort of increased activities around this?

Speaker 2

I would say that definitely we can see from China a lot of efforts to come with A solution where they cannot get or imported the high end component and they should find Green. A different way to get a high performance. And I would say the efforts Green. And this is a fit that we are very strong and definitely we can benefit from that.

Speaker 7

Understood. Thank you.

Operator

Green. Thank you, Duxham. Our next question will be from V. E. S.

Operator

Rochre of Jefferies. Green. You may go ahead.

Speaker 8

Hi, thanks for taking my question. So I just have one. So Intel and TSMC have really talked about their bump shrinking and eventually going into bumpless or hybrid bonding architectures. So how are you sort of strategically positioned for this? Does that involve sort of Using the same platform of tools that you have or does it involve a full reengineering once we start

Speaker 1

Graham. So thank you for the question. I would say that there are 2 paths here. And definitely, even with people talk about bumpers, And we will be able to address some of the applications with the current Green. But definitely, I think Rafi mentioned in his prepared notes that we are going to introduce new products.

Speaker 1

And these technologies are targeted party, not only for the hybrid bonding, but definitely Green. The hybrid bonding is one of the targets of these new products. We are working with customers that are doing hybrid bonding today. We understand the market requirements and definitely our products will be able to address the challenges It will be needed from both inspection and metrology in the I would say in the future.

Speaker 8

Green. And a follow-up to that. Does that kind of make this a more competitive Part of the market versus where you are right now, as in do you see yourself competing with some of the Like KLA and some of the leading process control players, does that change the competitive dynamics or

Speaker 1

Green. It's hard to say at this stage whether it will really change the competitive environment. It may change it in certain applications, But I think in most of the applications, I don't think it will change drastically. And again, there are very there are many flavors to hybrid bonding, it's not just one flavor. So I don't think there will be a change, but definitely it's a new process.

Speaker 1

Green. It's, I would say, making the advanced packaging and heterogeneous integration even much larger, more people will be using it. So definitely there are going to be more opportunities. And yes, more opportunities, it's going to be competitive. The market today is competitive.

Speaker 1

Green. But with our technologies and our R and D efforts, we are very confident that we will be able to continue and compete successfully there.

Speaker 8

Okay. That makes sense. And then one final question. Green. You talked about HPM being 10% of your revenues and heterogeneous integrations are being that 40% Green.

Speaker 8

Are the gross margins sort of different are the gross margins profile different when you targeting a logic kind of an advanced package versus HPM or do you think they're

Speaker 1

Green. So first of all, let's start, we said the 40% or the 6 Tier 1 customers accounted for 40% of the revenues and it's advanced packaging and heterogeneous integration. So it's both. At Progenius integration didn't account for 40% in this quarter, just to correct it. Green.

Speaker 1

But going back to your question, look, the more complex applications And high bandwidth memory is definitely a complex application. You are required there to inspect a very large number of pumps At a very small time with phenomenal accuracies and then do the inspection. These kind of machines, the gross margin is high on them. So definitely, all in all, advanced packaging, the DRAM portion of it, the TruGenius integration in general, Green. The gross margins are healthy.

Speaker 1

And I believe that this is a good area, which will continue to dominate

Operator

Green. Our next Green. The question will be from Gus Richard of Northland. Gus, please go ahead.

Speaker 9

Yes. Thanks for taking my

Speaker 5

We lost

Speaker 1

Gus for a second.

Operator

Gus, I think we've lost you. Are you still there? You are on mute.

Speaker 9

Just in terms of your Tier 1s give you a forecast. And I'm just wondering is Green. Your next question comes from the line of Frank. Your line is open.

Speaker 1

Look, in general, from focus point of view, so the big customers, the The changes, yes, there are sometimes pulls in and push outs, but this is very regular Green. I think today the difficulty to forecast is customers may even give you an order, Green. They will give you the delivery or they will allow you to ship only very close to the shipment dates. And Green. So there is, I would say, they will ask for the machine delivery really when they have the need for it, they are sure that they finish the clean room, They know that the customer business is secured.

Speaker 1

And this is part of the difficulty today to give a longer term forecast. But from understanding the size of the business, the overall, we see the forecast, the pipeline Green. In general, Moshe talked about it. We are confident about a certain level that we are now. We think there is a potential, Green.

Speaker 1

As we explained for even a better second half, but the issue is really to get to the industry to be more certain to feel more comfortable

Speaker 9

In terms of the quarter, how has that changed? Is there an increase in percentage or

Speaker 1

So Look, in general, I would say that the changes within the quarter are minimum.

Speaker 9

Green. Got it. And then for a follow-up, It appears that higher volume products are adopting heterogeneous integration. And I'm Green. Just wondering is that a trend driving sort of some of these large orders you're seeing?

Speaker 1

Look, hybrid bonding is really starting. So until we will see large orders from hybrid bonding, I think we Green. We're a while away. It will take time. I think this is clear.

Speaker 1

I think this is mostly today in R and D. Green. We are working with our customers that are developing. We're involved in these activities. But the orders that you are seeing today are for Green.

Speaker 1

Advanced packaging, we are getting there a lot of the high band memory. Obviously, the I think very much Like a previous question that was asked, we are seeing more and more bumps going on the wavefares. The dimensions are shrinking. The RDLs are becoming are tightening to 2 microns and even beyond. So this industry is starting to get denser and denser.

Speaker 1

The next step will be hybrid bonding, but we are not there yet.

Speaker 10

Green. This is Will Levy on for Tom O'Malley. Just A few questions. First question, it has to do with advanced packaging. Just curious how you see that trending

Speaker 1

Green. I think that talking we discussed in one of the previous questions from talking to customers Gris. And multiple customers in different territories, we believe that this is a strength area. The business we mentioned is solid. And when we talk about the potential improvement in the second half, it's coming with the advanced packaging and compound semi

Operator

Quick,

Speaker 10

quick question on gross margin. I know it's been asked about enough, but as you guys

Speaker 3

Jack, yes, the answer is yes. The new products will come with a higher gross margin profile. But just to put things in perspective, the impact will be at least in the second half of this year will be relatively small Because we will only introduce them at that point. So the big chunk orders and numbers will follow only in 2024, but they will definitely have a higher gross margin contribution.

Speaker 10

Thank you so much.

Operator

Thanks, Tom. As a reminder, anybody who has questions, you may raise your hand on the platform. Green. Our next question will be from Alon Last of Meitav Dache. Alon, please go ahead.

Speaker 11

Sorry. Could you please quantify the HBM Grinch. What's the size of that potential Green. And how do you see it evolving over the next couple of years?

Speaker 1

First of all, HBM, we mentioned it to be about 10% of our revenues. I don't think it can be a lot more, but I think it's not just when you talk about the DRAMK, there are other applications that can give us additional growth such as the DDR5 and other applications that are driving the DRAMs to go to advanced packaging To move away from wirebonding. So definitely all in all memories, long term has a potential to be even more than 10%. Green. The HBM, I'm not sure can be a lot more than 10% by itself.

Speaker 11

Okay. Thank you. And regarding the regional breakdown, could you Green. Please provide some color about which areas which regions were stronger or less strong this quarter? And Green.

Speaker 11

How do you see the competitive landscape within each region?

Speaker 3

So within Asia, the largest territory was China and then Korea and That's the largest within and the Green. The dynamics that with competitive landscape within each territory Let me add to here.

Speaker 1

I think the dynamics are not different Between the territories. In general, I think we are Green. The market size from their point of view is very small. All in all, I think across the board,

Speaker 11

Griggs. And then there are

Speaker 1

a few, I would say, 2nd tier players Grin. They are competing with us for years. So I don't think there is any major difference and I don't

Speaker 11

And what about U. S. And Europe? Same story. Green.

Speaker 11

Did you provide a breakdown of U. S. Europe?

Speaker 1

I think we mentioned it and it's 10% for this quarter. It's a little low Green. And compared to the previous year, as we look into the rest of the year, we believe that we will finish in the 2018 that we finished Last year.

Speaker 11

Okay. Thank you very much.

Speaker 1

Thank you, Alain.

Operator

Thank you, Alain. Last question will be from Shaha Cohen of Vistad Capital. Shaha, you may go ahead. So 5% or 6% decline in gross and I understand it's from the cost side. So Green.

Operator

If you can share more color about the cost or something specific happened, maybe some manufacturing mistakes, something that you can Green. And second is about the HBM. Given what we see currently, with AMD, NVIDIA, Green. Why do you think HBM basically will stay only 10% of your business?

Speaker 1

Graham. So let me start with the HBM and

Speaker 3

then we'll go to the gross margin question.

Speaker 1

So first of all, yes, we know the applications that are coming from NVIDIA and the gaming. At least when we talk to our customers, what we understand, this is more or less the business. And Kenny, grow maybe potentially will be more.

Speaker 7

I have

Speaker 1

doubts of it when you look at the overall numbers and the numbers that are needed And the machines that will be required. But definitely for us, it's not an issue. We'll be able to manufacture more machines. We're not limited if the market grows. And if there is a good opportunity and a good surprise that it will be larger, there's nothing limiting us.

Speaker 1

Green. But as I said, from our understanding, discussions with our customers and we're serving all the big ones, Green. This is what is our assumptions from numbers point of view, at least I would say for the foreseeable future. Let me

Speaker 3

address the first question regarding the gross margin, Johal. So we have very little Israeli based expenses on the gross margin level, most of the The salaries are below the line are at the OpEx level. So there is very little impact of the favorable Green. Exchange rates to the gross margin. 2nd, this quarter, it's a combination, as we said, the combination of Green.

Speaker 3

Product mix as well as expense structure. And overall, what we have described last time, and this is not Green. I mean, this is something that we already discussed is the fact that we experienced a gradual Expense increase over the last couple of years of our material. And now most of the inventory is with the higher material costs. This is why it will take time until we see the gradual improvement on the gross margin.

Speaker 3

I hope that this is Green, helping you to understand the issue.

Speaker 4

Thank you.

Operator

Green. Thank you, Shahar. And that ends our question and answer session. Green. So before I hand over to Rafi, I would like to let you know that in the coming hours, we will upload the recording of this conference call to the Investor Relations section of Camtek's website.

Operator

Green, and you should also soon be able to get to the recording via the Zoom link. I would like to Thank you everybody for joining this call and hand back to Rafi for the closing statement. Rafi, please go ahead.

Speaker 2

Okay. I would like to thank you all Green.

Speaker 10

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 10

Thank you.

Speaker 2

Thank you. Thank you. Our next question comes from the line of Kenny Green. Thank you. Thank you.

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Earnings Conference Call
Camtek Q1 2023
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