Camtek Ltd (CAMT) 2009 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Camtek second-quarter 2009 results conference call. All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded August 12, 2009.

I would now like to hand over the call to Mr. Kenny Green of G.K. Investor Relations. Mr. Green, would you like to begin?

Thank you, and good day to all of you. I would like to welcome all of you to Camtek's second-quarter 2009 results conference call and thank Camtek's management for hosting this call.

Before we start, I would like to draw your attention to the following Safe Harbor statement. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the Company. These statements are only predictions and may change as time passes. Camtek does not assume any obligation to update that information. Actual read events or results may differ materially from those projected, including as a result of change in industry market trends, reduced demand for Camtek's product, the timely development of our new product and the adoption by the market, increased competition in the industry and price reductions, litigation risks, as well as due to risks identified in the documents filed by the Company with the SEC.

With us on the line today are Mr. Rafi Amit, Camtek's CEO; Mr. Roy Porat, Camtek's Israel General Manager; and Mrs. Mira Rosenzweig, the Company's CFO. Roy will start the call by discussing reasons developments within the Company and in the market, and will also discuss the outlook. Mira will give the overview of CapEx performance in the second quarter and summarize the financial results. We will then open the call and will be happy to answer investor questions.

I would now like to hand over the call to Roy. Roy, go ahead, please.

Thank you, Kenny. Hello, everyone, and welcome to our second-quarter 2009 results conference call. On behalf of Camtek's management, I would like to thank every one of you for your continued interest in our business and for joining us today.

We are content with the financial results of the second quarter and feel that given the tough business environment we performed well. The second quarter of 2009 was a quarter of improvement for Camtek, as we continued to tightly manage our expenses. We presented an increase in both revenues and gross profits compared to last quarter by narrowing both our operating and net expenses. Moreover, we put substantial emphasis on managing our cash position.

Revenues for the second quarter of 2009 amounted to $12.5 million, up 35% from the first quarter of 2009. We hope this level of revenue reflects the return of growth, though it is still far below levels experienced in the past. We remain mindful of the possibility that the markets will still have a slow recovery.

In terms of our PCB business, this quarter, we witnessed an improvement in this market environment, as reflected in increased system utilization. We are starting to see customers increasing their manufacturing capacity, but these are still early days considering the general cautiousness of our customers.

Revenues from the PCB business in the second quarter of 2009 totaled $7.4 million. Growth in the PCB business has been slower than anticipated, and though we continue to face price erosion, we believe that we have maintained our market share in this market. We are continuing to invest R&D efforts into [inkjet] technology acquired last quarter from Printar.

This quarter, we already started recording initial revenues from the service and sales of ink consumed by Printar's old install base. As mentioned last quarter, we aim to launch the first system incorporating the acquired technology before the end of the year.

In terms of our ongoing efficiency measures, we are currently in the final stages of transferring the major part of our assembly and testing of our PCB product to our Chinese facility in Suzhou. We expect to conclude this process before the end of the year.

Moving now to our Semiconductor business, this quarter, we more than doubled our Semiconductor revenues to $5.1 million, up from $2.3 million last quarter. Our revenues in the semiconductor market are driven both by our customers' increase in capacity, as well as demand due to evolving new technology processes that require more process control, inspection and metrology needs.

This quarter, we achieved a significant increase in our business from this market, mainly driven by technology purchases, among them Through-Silicon-Via technology, otherwise known as TSV. Camtek was chosen by a significant customer as a leading solution provider for this new TSV technology after a long benchmark with other leading vendors.

We currently also see an increase in capacity utilization, reaching levels that we estimate will drive customers to purchase additional equipment. We anticipate that these continued technology purchases and increased capacity utilization will continue to drive Semiconductor revenues up in the third quarter.

In terms of new products, we are planning to launch a new system targeting the front end of the semiconductor market before the end of the year. This new system will potentially represent an additional growth driver to the Company, as we expect it will open the door to a whole new addressable market, in addition to our existing back-end business.

It is important to note that with opportunity comes challenges, but we believe we can repeat our success in assembly and test back-end market to the new front-end market.

Finally, let me conclude with a few words regarding what we expect to see in the coming quarters. We expect revenues in the third quarter to slightly increase compared to the second quarter. Our visibility into the fourth quarter remains very limited, as expected in the current global economic climate.

Looking ahead, we are cautiously optimistic. Our revenues are up over the first quarter across two main sectors, the PCB and the Semiconductor markets. We monitor our expenses tightly and look for ways to improve margins by finalizing cost-saving measures, such as the move of our assembly and PCB product to China. However, we continue to invest in R&D, both in improving our current products and in developing additional products that will serve as growth engines in the future.

Looking ahead, and assuming that the current market trends continue, we believe that we will be able to continue to grow our market standing and improve our financial results. We look forward to continue updating you on the developments, and with that, I would like to hand over to our CFO, Mira Rosenzweig, to summarize the financial results. Mira?

Thank you, Roy, and hello, everyone. You can find the results in the press release issued earlier today. Revenues for the second quarter of 2009 were $12.5 million, 35% above the $9.3 million reported in the prior quarter and 45% below the $22.7 million reported in the second quarter of 2008.

Revenue breakdown in the second quarter of 2009 was 59% PCB and IC substrate and 41% Semiconductor manufacturing and packaging product. Our geographical breakdown of the revenues for the quarter were USA, 11%; Europe, 12%; the total Pacific Rim, 85%, which consists of China, 39%, Taiwan, 10% and the rest of Asia, 36%.

Gross profit for the quarter totaled $4.2 million compared to $3.5 million in the previous quarter. The gross margin is low due to low level of revenues. The declining gross margin this quarter compared to last quarter is mainly due to the change in product mix also within segments, as well as due to efforts to preserve our cash and reduce our inventory, as well as (inaudible) of lower [margin] use and demo equipment.

Our operating expenses reached [$6.3 -- 4] million in the quarter. This is made up of R&D at $2.3 million, ongoing SG&A of $3.5 million and additional $650,000 of legal expenses also recorded under G&A.

Operating expenses in the second quarter of last year were $9.3 million, and in the prior quarter, $8.4 million.

Operating loss for the second quarter of 2009 was $2.1 million compared with $0.5 million in the second quarter of last year and $5 million in the prior quarter.

Our net loss for the second quarter of 2009 was $2.1 million, or $0.07 per share, compared to $0.5 million, or $0.02 per share, in the second quarter of 2008. For the previous quarter, our net loss was $5.5 million, or $0.19 per share.

Cash and cash equivalents at June 30, 2009 amounted to $12 million. We continue to efficiently manage inventory to preserve cash. Furthermore, this quarter, we benefited from the contribution of the cost-cutting and reorganization measures implemented at the end of 2008 and during the first quarter of 2009. Needless to say, we continue to monitor our cash position very closely, and we are ready to respond to changes as needed.

Our DSOs were at 120 days based on our current level of revenues, compared with 156 days that we reported in the previous quarter.

We will now open the call for questions. Operator.

(Operator Instructions) [John Theismann], Shelter Rock Management.

I just have a couple questions. I guess the first is on your guidance for the quarter. I saw Orbotech saying utilizations are very high in PCB right now. Cisco had a pretty good spike in orders in the past months. And watching all of your peers saying that the supply chain is very tight, at least if I look at the past, your revenues had a pretty strong spike sequentially going forward, and yet your guidance seems fairly conservative. Can you kind of speak to this?

We can try to do that. I think it is still a very uncertain world we live in, and we do expect revenues to be higher next quarter, but to give exact numbers at this point is, I would say, not cautious, and we would rather be cautious.

I think that we will maintain our market share position in both markets, and if the market will go up, we will go up with the market as it occurs. We do see more utilizations of our PCB customers are using more machines. As we said before, some of them are actually buying new equipment because they need more capacity.

But it is still a very cautious world we live in and customers don't buy machines unless they absolutely need to. So the customers are very cautious still. I hope that kind of answered your question.

Yes. The second one is on the gross margin. I guess you mentioned that it is the mix shift. Can you speak more to this, and it is it likely to get back to the high 30% range over time?

I think overall, our gross margins are low because the level of the business is low. Of course, it depends on the mix, both within the segments -- each of our segments has products with higher margins and products with smaller margins, and that depends not only PCB/MEP mix, but what kind of products we sell to each market.

And second, we were very focused, I think, in the last quarter and still now on trying to reduce inventories and focus on cash. So if we have opportunities to sell machines from a demo or from -- used machines, we are trying to do that instead of selling a new machine that we need. And that could have affected the gross margin. Once business comes up, we do expect to get back and possibly improve our historic gross margins. This really depends on the level of the business.

Could I have one more question? Is that okay?

Sure.

I guess the last question is on the path to profitability. It looks like you did a pretty nice job improving the bottom line this quarter. Can you speak to breakeven levels and where do you see this? Is there any more cost savings that you see coming in quarters ahead?

Well, we are constantly doing a lot of action to reduce costs. But on the cash level, we estimate the breakeven to be between $14 million to $15 million.

Okay. Thank you.

(Operator Instructions) [Shay Ayalon, KC Pimenov.]

Can you update us with the situation on the lawsuit of Rudolph against Camtek?

Yes, I think actually there is not a lot to update because nothing has happened. We are still, I would say, waiting for the court to pass the judgment, meaning there was a jury decision, but the court has not yet approved the jury's ruling.

So we are still in kind of a waiting for the final official decision of the court, and after that, we will start the appeal process. But this is -- actually, there is nothing new here. I think there is a holiday or vacation -- summer vacation in the States, and as soon as that finishes, the process should move forward. But we anticipate to have a ruling from the court soon and then we can start the appeal process.

Okay, thank you. And one more question, if okay. Are you working now towards raising capital to increase your cash reserves at this point?

I will let -- maybe let Mira answer that.

Yes, as we said last quarter, we are under negotiation with bank to receive a loan. And we are working on that, and we put a lot of effort from that, and we believe we will finally succeed. At this moment, it's (inaudible).

You are saying you are in negotiations with the bank?

Yes.

Okay, thank you very much.

There are no further questions at this time. Before I ask Mr. Porat to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available on Camtek's website, www.camtek.co.il, beginning tomorrow. Mr. Porat, would you like to make a concluding statement?

I would just like to thank everybody for taking the time and joining the conference call. And we look forward to speaking to all of you in the future. Thank you.

Thank you.

Thank you. This concludes the Camtek second-quarter 2009 results conference call. Thank you for your participation. You may go ahead and disconnect.