Camtek Ltd (CAMT) 2009 Q3 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to the Camtek Third Quarter 2009 Results Conference Call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded November 11, 2009.

Before I turn the call over to Ms. Fiona Darmon, I would like to remind everyone that statements contained in this conference call, which are not historical facts, contain forward-looking information with respect to plans, projections or future performance of the Company, the occurrence of which involves certain risks and uncertainties, which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include dependence on economic and political conditions in Israel, the impact of competition, supply constraints, as well as certain other risks and uncertainties which are detailed in the Company's filings with the various security authorities.

I would now like to hand the call over to Ms. Fiona Darmon of GK Investor Relations. Ms. Darmon, would you like to begin?

Yes. Thank you operator and good day everyone, I would like to welcome you all to Camtek's third quarter results conference call and thank Camtek's management for hosting this call today.

With us on the line is Mr. Rafi Amit, Camtek's CEO; Mr. Roy Porat, Camtek's General Manager and Mrs. Mira Rosenzweig, the Company's CFO. Roy will start by discussing the recent developments within the Company and the market, and discuss the outlook followed by Mira who will overview Camtek's performance in the third quarter and summarize the results. We will then open the call and happy to take investors' questions.

I would now like to hand over the call to Mr. Porat Roy. Please go ahead.

Thank you Fiona. Hello everyone, and welcome to our third quarter 2009 results conference call. On behalf of Camtek's management, I would like to thank you all for your continued interest in our business and for joining us today. The third quarter for 2009 was a good quarter for Camtek as we continue to improve our financial results while progress our business through development of new products to both the current market and new segments, as well as the acquisition of complementary businesses to widen our product portfolio.

Revenues for the third quarter of 2009 increased sequentially to $14.5 million, continuing the growth trends over last two quarters, and what we believe to be another indication of the market is back on track to a long-term gradual growth. Our revenues this quarter were driven by both growing demand to higher service revenues, as well as from successful integration of a recently acquired technology from Printar.

While revenues still remained well below our historic levels, we remain very encouraged and expect the trend to continue. These growing revenues, combined with prudent cost management contributed to a higher gross margins and to narrowing of both our operating and net losses.

In terms of cash flow, this quarter we increased our cash balance by $1.8 million, enabling us to end the quarter with $13.8 million in cash and equivalents.

This quarter, we witnessed a recovering and growing demand for both our PCB and semiconductor inspection product lines, as these markets continue to recover, driven by an increased capacity utilization, which has now returned to 80% to 90%. This time we are noting that the capacity increases are coming from both expansions to existing production lines, as well as new fabs being built. Over recent few quarters, many fabs held out on their expansion plans, and now as the risk narrows and confidence returns, they are seeking to swiftly increase their capacity.

Turning now to our two main markets, both of which contributed to our growth this quarter. In the PCB market we are witnessing a gradual recovery as system utilization continues to pick up, but driven by health increase in demand and across the board. This is driving a need for increased manufacturing capacity as our customers had substantially growing demand for Camtek products.

Revenues from our PCB business increased to $8.7 million this quarter up 18% from the last quarter, continuing the growth trend in recent quarters. Admittingly while the recovery process has been slow given the high competitive environment and the continued price pressure, I am pleased to know that we retain our market position.

This quarter we concluded the transition -- the transferring of the major parts of our assembly and testing of our PCB products to our Chinese facility in Suzhou. This is part of our continuous efforts to reduce our manufacturing costs making the process more efficient.

This quarter we continued to integrate the recently acquired technology from Printar, which contributed $0.5 million to revenues resulting from sales of the Legend technology.

Looking ahead we remain on track to install Camtek's first new Solder Mask Inkjet System before the end of the year, which incorporates the acquired technology. We expect to generate initial orders from this new innovative technology in the first half of 2010.

Turning to our semiconductor business, our market here is driven by demand, by increasing capacity and advancing technologies both of which drove demand to our products. Revenues for the third quarter increased [30%] from last quarter reaching $5.7 million.

Many of our customers, primarily in Asia are actively planning in increasing capacity. During the quarter we were able to take advantage of these capacity expansions to generate demand and expect to see continuous gradual growth in capacity expansions as we move ahead.

We are also seeing increased technology developments, driving numerous technology related purchases in the TSV LED and CMOS segments. This too is driving demand for Camtek Solutions. Looking ahead, we expect continuous technology driven capacity driven orders that will increase our semiconductor revenues in the fourth quarter and beyond into 2010.

Last quarter, we highlighted our plan to launch a new system based on new advanced image acquisition technology. Before the end of the year, it will target the front end of the semiconductor market. We are glad to report that we have successfully launched this product called the [GANET] and we expect to install the first system within Q4.

This quarter, we signed an agreement to purchase SELA, a leader in Failure Analysis arena with over 275 systems in operation worldwide at leading semiconductor manufacturers. We are very excited with the opportunity to make this acquisition in the tight economic climate.

SELA is a significant contribution to our technological assets and we are eager to leverage Camtek's infrastructure to capitalize in this investment. SELA will function as a business division within Camtek led by Mr. Colin Smith who will assume the position of VP, SELA division manager in Camtek. The transaction is still subject to formal closing but we expect this to occur very soon.

Now a few words on our lawsuit filed by Rudolph against the Company. We continue to believe that we will be successful in overcoming this unjust judgment. It is important to emphasize that the pending injunction relates to Camtek's US activity only. Camtek estimates that the injunction will not materially affect its level of overall sales.

All in all, we believe that our results this quarter together with the growth trend driven by growing capacity enables us to remain cautiously optimistic believing that the worst is behind us. Though we still have far to climb to reach our historic high revenue levels, we are very pleased with our return to growth. We are seeing improved visibility, and we are confident that we will continue to generate growth in the fourth quarter and beyond.

Finally let me conclude with our guidance. We expect revenues to be in the fourth quarter, to be between $15 million and $17 million. Looking ahead, over the past two years we have been investing substantial resources in developing new innovative products which will be the growth drivers for tomorrow.

These products each innovative in its arena leverage our knowledge, expertise in respective markets, and will introduce in the coming months. These new products paired with our leading market standing in our addressable markets and the gradually improving climate grant us confidence that we will continue to generate growth through the fourth quarter into 2010, while continuing to increase our market standing.

We look forward to continue updating you on our developments and with that I would like to hand over our call to CFO, Mira Rosenzweig to summarize the financial results.

Thank you, Roy and [hello everyone]. You can find the results in the press release issued earlier today. Revenues for the third quarter of 2009 were $14.5 million, 16% above the $12.5 million reported in the [prior] quarter, and 24% below the $19.1 million reported in the third quarter of the 2008.

Revenue breakdown in the third quarter of 2009 was 60% PCB and IC substrate and 40% semiconductor manufacturing and packaging products. Our geographical breakdown of the revenue for the quarter was USA 8%, Europe 8%, the total Pacific Rim 84% which consists of China 41%, Taiwan 6% and the rest of Asia, 36%.

Gross profit for the quarter totaled $6.1 million, a gross margin of 42% compared to $4.2 million or gross margin of 34% in the previous quarter.

Operating expenses totaled $6.3 million, at similar level [as] the previous quarter. This is made up of R&D at $2.7 million and SG&A of $3.6 million. Operating expenses in the [third] quarter of last year were $10.4 million. The Company continues to maintain a tight control of its operating expenses. Operating loss for the third quarter of 2009 was $180,000 compared with $3.8 million in the third quarter of last year, and $2.1 million in the prior quarter.

Our net loss for the third quarter of 2009 was $350,000 or $0.01 per share compared to $4.1 million or $0.14 per share in the third quarter of 2008, and compared to $2.1 million or $0.07 per share in the previous quarter. Cash and cash equivalents at September 30, 2009 amounted to $13.8 million.

The increase over last quarter was due to positive net cash flow of $1.8 million consisting of operating cash flow of $3.7 million resulted mainly from decreasing inventory level, and from increased collection. This figure was offset by $1.7 million repayment of convertible loans, and $0.2 million from investing activities mainly with respect to the acquisition of Printar.

We continue to monitor our cash position very closely, and we continue to believe that our current cash position is exactly right to support all our working capital requirement. Our DSOs were 104 days based on our current level of revenue compared with 120 days that we reported in previous quarter. We are very pleased with the results this quarter. We will now open the call to questions. Operator?

Thank you. (Operator Instructions). The first question is from David Dreman, [Dreman Asset Management]. Please go ahead.

Hi. Good morning everybody. I have a question in regards to the SELA acquisition. What are the prospects for Camtek in regards to the acquisition in terms of how it's going to fit into the Company and also what do you expect the SELA acquisition to contribute to results the coming year or two.

Okay. Thank you, David for the question. SELA potentially I would say is a Company that in the past has targeted very limited markets and has been a business of probably around $4 million, $5 million a year in the past. But its new technology, which is the main drive for our acquisition is targeting a much, much larger total available markets. With probably -- the total available market is probably over $200 million. We are targeting that market. Where -- we believe that within the beginning of next year we are going to see some additional revenues from the new technology called AIM and we expect that this is a very revolutionary technology very, very different from everything else our competitor is doing. We expect to see, I would say, moderate revenues in 2010 but the potential is very, very big. I think a question of how fast we can leverage this new technology and take significant market share in this market.

Okay, I appreciate it. Just another follow-up, so a different -- in a different note. Do you expect to sustain the current growth levels going into the fourth quarter?

It truly depends on the market but as far as we see the markets right now, the market is very active. The market is -- everybody is very busy, utilization is very high. So I would say, on our two conservative or normal markets which is the PCB and semiconductor, we expect to continue to grow with the market. We think the guidance we gave is reasonable and we also expect, maybe not in the next quarter but continuing to 2010, more growth from our new growth engines, which is the SELA business, the Printar business and the new machine, the GANET that we launched. I think all of these will contribute to more revenues in new markets for us or new segments for us.

Okay. I appreciate it and good luck to you guys on the coming quarter. Hopefully it will be a good one.

Thank you.

Thank you. (Operator Instructions). 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 at www.camtek.co.il beginning tomorrow. Mr. Porat would you like to make your concluding statement.

I would like to thank you all for your continued interest in our business. We look forward to speaking with you again over the next few quarters. Thank you and goodbye.

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