Camtek Ltd (CAMT) 2009 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Camtek fourth-quarter and year-end 2009 conference call.

(Operator Instructions).

As a reminder, this conference is being recorded March 8, 2010.

Before I turn the call over to Mr.

Ehud Helft, 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 Company plans, projections or future performance of the Company, the occurrence of which involve certain risks and certainties 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 risk and uncertainties which are detailed in the Company's filings with the various Securities authorities.

I would now like to hand the call over to Mr.

Ehud Helft of CCG Investor Relations.

Mr.

Helft, 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 fourth-quarter, 2009 results conference call and thank Camtek's management for hosting this call.

With us on the line today are Mr.

Rafi Amit, the CEO; Mr.

Roy Porat, Camtek's General Manager; and Mrs.

Mira Rosenzweig, the Company's CFO.

Roy will start the call by discussing recent developments within the Company and in the market and will also discuss the outcome.

Mira will give the overview of Camtek's performance in the fourth quarter and summarize the financial results.

We will then open the call and we would be happy to answer investors' questions.

Now, I would like to hand over the call to Roy.

Roy, please.

Thank you.

Hello, everyone, and thanks for joining us.

We are very pleased with the fourth quarter results.

It's continued and strong growth in revenues as well as non-GAAP breakeven and positive cash generation.

This fourth quarter ends a tough but also exciting year for Camtek.

The year included significant restructuring and cost-cutting in our more establish an inspection business of PCB and backend semiconductor.

At the same time, we took the opportunity of seizing two very promising opportunities through the acquisitions of SELA and Printar.

Although there has subsequently been an increase in running costs incurred due to the Printar and SELA acquisitions, our current cost structure still remains at levels below our 2008 levels.

However, the acquisitions have brought us significant opportunities of future growth in new markets.

At the same time, we continue to introduce new products into the market in order to better serve our customers.

The first quarter of 2009 was the third quarter of sequential improvement and growth in Camtek, bringing our establish inspection business in PCB and backend semiconductor close to the former levels which we enjoyed in 2008.

We are particularly pleased with the fact that we were able to turn a non-GAAP net profit in the fourth quarter with continued strong cash generation.

In the fourth quarter, we witnessed a recovery and growing demand in our backend semiconductor inspection product lines.

Our PCB inspection business, while improved, is still lagging behind with respect to the pre-recession levels of 2008.

Since we're operating in an electronic supply chain, we anticipate the growth we see in the front end to reach the backend and the PCB.

To provide more color in both industries, let me go now to each industry and individually.

In the PCB market, we witnessed early signs of recovery in the fourth quarter.

Systems utilization was consistently high yet the market remains slightly cautious in capacity expansions.

We also saw some technology-driven capital equipment investments in the non-AOI areas, which we interpret as a good sign.

We also witnessed an increase in activity, mainly in Taiwan and China, that has the brought us back to life all expansion plans that are now after the Chinese New Year back on the table.

We do expect our AOI business to pick up slowly, keeping in mind the first quarter of the year is seasonally low due to the effect of the Chinese New Year.

So although the total level of spending on capital equipment in the PCB market and AOI specifically in the fourth quarter is still below 2008 levels, looking ahead, we do anticipate growth going into the second quarter and beyond into 2010.

It is important to bear in mind that visibility in this business remains limited at levels of weeks.

In terms of new products, at the beginning of 2010, we introduced a new AOI model called Dragon [Elite].

This new system includes significant improvements to our current capabilities, and we hope this system will allow us to further strengthen our position in the market.

I would also like to update you on the status of our direct Material Deposition business, DMD.

Our first two [SolidCut] inject systems has been installed at two different customers and are now in beta testing.

Keep in mind this is new technology and still some risk pending proof, they remain very excited from the potential of these systems and ink business.

We are planning to present for the first time the new Camtek GreenJet system in the coming IPC show in April in the US.

Although we do see market demand for these systems, to ensure our success we are advancing process report sales of this technology.

We hope our plans will materialize in orders in the second half of 2010.

Turning to the semiconductor business, in the backend inspection business, we are witnessing growth in demand as increased capacity utilization and more significantly technology changes create demand for both our inspection tools.

The $8 million of revenues in the quarter for this business indicates two things for us.

The first, this business has returned to the pre-recession 2008 levels, and the second that we maintain a strong position in the market.

We are constantly continuing R&D efforts in this business to bring our customers the most advanced and competitive solutions adapting to their changing technologies and roadmaps.

We have recently introduced two new systems, the Condor, which is the improved new backend inspection platform, the first two of we expect to install in the first quarter.

The second is the Condor 5LED, a designated tool for that LED inspection, an area with very special inspection units in which we have been outperforming our competitors.

We do aim to grow at rates similar to the LED market segment forecasted that is forecasting a strong growth.

Going to our new frontend semiconductor business that includes our newly launched smartphone inspection tool, Gannet, and the SELA product portfolio.

In the fourth quarter, we reported our first sale of this tool, and we expect additional orders in the next few quarters.

This new market has challenges but the Gannet system is based on our material inspection know-how.

The risk, as I see it, is not if we can do it but only how long it will take us to gain significant market share.

We remain cautiously optimistic that this new business is a start of a significant growth engine for the Company's future.

Under our newly acquired SELA division, we are focusing on merging SELA into the Camtek operation, specifically on leveraging that Camtek sales and support organizations to obtain exact orders.

We believe that the newly SELA aimed technology brings undisputed advantages to customers in the high end of (inaudible) analysis sample preparation.

We are working on exposing and introducing this technology to widen our customer base.

We are busy in pushing our supply chain to enable us to supply our first few tools towards the end of Q2/beginning of Q3 of this year.

We aim to have our first installations.

We are also continuing our development plans to bring the maturity of the Xact platform while broadening and strengthening its position in addressable markets.

We would like to report that we anticipate to secure our first Xact order under the Camtek umbrella within Q1.

This order is expected to be delivered in the second quarter of 2010 and we do expect additional orders in the coming year.

To summarize, I believe Camtek's mature PCB and backend semiconductor business is heading towards the 2008 levels.

With it, we have great growth opportunities on three different fronts.

Firstly, the Gannet addressing the frontend [mark one] inspection market, which is a whole new potential market that we have already been able to snow first orders.

Secondly, Printar and the DMD product line also has great business potential in both sales of systems and, more importantly, ongoing sales of ink.

And last but not least, the growth potential of the SELA product lines that is targeting a substantial focused [RMB] [FID] markets.

As I stated, we are supporting both our existing business as well as our new product lines with OpEx levels below the 2008 level.

Looking ahead to Q1, we do expect our OpEx to rise compared to the fourth quarter of 2009, this with an increased level of activity, the return of salaries to the former levels before we took across-the-board reductions that were initiated during 2009, and the load of the sale activity.

As a result, our quarterly revenue non-GAAP breakeven point should be move up a bit between $18 million to $19 million, depending on the mix of revenues.

I will let Mira address our non-GAAP results, but I would like to address the discontinuation of our old models.

The global recession that occurred in 2009 has reshaped our service business environment we operate in and has forced us to restructure a more efficient global support infrastructure.

In light of these changes, the Company decided it will discontinue its commitment to support some of its old models.

Letters were sent to customers advising them the Company's decision and offering them different solutions.

We believe this decision will position Camtek in a better economic position while minimizing the actual effect on the customers.

With regards our outlook for Q1, I noted the first quarter in our PCB industry is certainly the weakest mainly due to the Chinese New Year.

However, this year, we expect revenues to be at a similar level that we just had in Q4 and we guide the revenues of between $16 million to $18 million for the first quarter.

We do anticipate further growth into the second quarter.

With that, I would like to hand over the call to Mira Rosenzweig, our CFO, to summarize the financial results.

Thank you, Roy, and hello, everyone.

You can find the results in the press release issued earlier today, and I will just provide a brief summary now.

Revenues in the fourth quarter were $17.2 million, slightly above the upper range of our guidance.

This represents a year-over-year increase of 39% and a sequential increase of 19%.

The revenue breakdown in the fourth quarter of 2009 was 51% from the PCB and IC substrates industry and 49% from the semiconductor, manufacturing and packaging industry.

Our a geographical breakdown of the revenues for the quarter was the total Pacific Rim, 84,% which consist of China, 27%; Taiwan 11%; and rest of Asia 46%; USA [9]%, and Europe 6%; and 1% for the rest of the world.

Revenues for the fourth quarter of 2009 from sales and service to the semiconductor, manufacturing and packaging industry were $8.5 million.

This was 47% higher than the previous quarter.

With regard to the PCB and IC substrate inspection, we generated $8.7 million in revenues during the quarter, contributing about 51% of our total revenue.

I will summarize the rest of our results on a non-GAAP basis, which excludes inventory write-downs, expenses with respect to the acquisition of SELA and Printar, as well as other items.

A reconciliation between the GAAP and non-GAAP results appears in the tables at the end of our press release.

Gross margin and a quarter was 43% compared with 24% of revenues in the fourth quarter of 2008 and 42% in the third quarter.

The improved gross margin was a result of higher revenue [driven] as well as more favorable product mix as compared to prior quarter.

Operating income for the quarter was $0.8 million and net income for the quarter totaled $0.5 million, or $0.02 per share.

This represents the achievement of breakeven after seven quarters.

Cash and cash equivalents at December 31, 2009 increased by $2 million and totaled $15.8 million, compared with $13.8 million at the end of the prior quarter.

The increase in cash during the quarter resulted primarily from the decreasing inventory levels and the increasing revenues.

Cash and cash equivalents as of December 31, 2009 decreased by $0.1 million from $15.9 million at December 31, 2008.

During the year, the Company generated positive operating cash flow of $3.9 million and repaid loans and the amount of $3.6 million.

We will now open the call for questions.

Operator?

(Operator Instructions).

David Dreman, Dreman Asset Management.

Sorry, I came into the call a little bit late.

Can you do me a favor and provide a little bit more color on your strategy with Printar and SELA?

When do you expect to see more significant growth in sales from these acquisitions?

Okay, well it is two different -- it is two separate businesses.

One is for the PCB and the other one is the semiconductor.

But I will start with the SELA one.

As I said during the talk, we do anticipate to get, in the next couple of weeks, our first order.

During the next couple of weeks, we hope to supply this first order within the second quarter.

Keep in mind we currently have -- we are currently generating some small revenues from SELA's old, mature equipment.

I'm specifically addressing the Xact system, which is the system that we are hoping will take significant business from the [FIB] market.

So that is something that is happening already, and we expect to have a first few orders in the next few quarters.

So this is something right here, right now on the SELA business.

If you have any questions on the SELA, then I can (technical difficulty)--

That's pretty good.

What about Printar?

The Printar is a little bit more complicated.

Printar is a process tool.

We have two systems at beta sites.

There is some still -- there is still some risk in the world in maturing the product.

The potential of this business is very big for us, but we are planning to show the first tool in April in a show in the USA.

I would say we anticipate that the second half of the year two record some revenue in this new business.

Okay, what about, in the coming year, 2010, do you have any plans of additional acquisitions?

I know you have got a significant amount of holdings in cash.

Our cash position is $15.8 million is near I advised, but no, we have no plans for additional acquisitions at this point.

Okay great.

I appreciate it, and good luck with the coming year.

(Operator Instructions).

There are no further questions at this time.

Before I ask Mr.

Roy 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 closing statement?

I just want to thank everybody for joining us today and hope to talk to you soon.

Thank you.

Thank you.

This concludes Camtek's fourth-quarter and year-end 2009 results conference call.

Thank you for your participation.

You may go ahead and disconnect.