Hello, everyone, and good morning. Hosting today's call is Rafi Amit, Camtek's Chief Executive Officer; Ramy Langer, Chief Operating Officer; and Moshe Eisenberg, Chief Financial Officer.

Before we start, I would like to note that certain statements made on this call constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934 as amended and the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may use terminology such as believes, expects, will, may, should, anticipates, plans, or similar expressions to identify forward-looking statements.

Such statements reflect only current beliefs, expectations, and assumptions of Camtek. However, actual results, performance, or the achievements of Camtek may differ materially as they are subject to certain risks and uncertainties.

Such risks and uncertainties include, but are not limited to, those that are described in Camtek's most recent annual report on Form 20-F and as may be supplemented from time to time in Camtek's other filings with the SEC, including today's earlier filing of the earnings PR, all of which are expressly incorporated herein by reference. Camtek undertakes no obligation to update any such forward-looking statements unless required by law.

Camtek's public filings are available on the Securities and Exchange Commission's website at www.sec.gov and may also be obtained from Camtek's website at www.camtech.com. Also, on today's call, we will include certain non-GAAP numbers.

A reconciliation between the GAAP and non-GAAP results, please see the table attached in today's press release, which is also posted in the investor relations section of Camtek's website. So with us today, we have Moshe Eisenberg, CFO; Rafi Amit, CEO; and Ramy Langer, COO.

And I would now like to turn the call over to Rafi Amit. Rafi, you may go ahead.

Okay. Thanks, Kenny.

Good morning or good afternoon, everyone. Camtek closed the third quarter with revenue of $8.5 million.

Gross margin came in at 49%, which is a continued improvement over previous quarters as we indicated earlier this year. Operating margin was 28%.

Over 60% of our revenues came from advanced interconnect packaging applications, which with a significant portion coming from HBM and Chiplet modules. The remaining 40% is divided between compound semiconductors for power devices, CIS, and process control applications.

Regarding the war in Israel, I would like to explain how we have managed this situation. About 10% of our employees in Israel are on active reserve duty.

The remaining workforce has managed to compensate for their absence. Our facility is quite far from the border and we have some redundancy in our operations, which is done in 3 different locations.

Thus, any risk of interruption is minimized. Our delivery to customer has not been affected and we have not experienced any material or supply shortage.

So all in all, the war has not affected our operations or business. On October 31, we completed the process of acquiring FRT from four factor and we have begun the integration of FRT into Camtek.

We are in the final integration process of FRT sales and customer support functions into our global organization. The synergy of our products makes this process straightforward.

We have also started the integration of the other different organizations functions into Camtek and we plan to expand the facility in order to support potential growth and implement the Camtek's workflow into FRT. Now I would like to add a few words about the business environment.

Since the beginning of third quarter, we have reported orders received of about 150 systems and since then, we have received additional orders for about 90 systems. The last order we reported yesterday was for 28 tools from Tier 1 customer.

For HBM and heterogeneous integration applications, most of the orders are for installation during 2024. This healthy backlog and ordering pipeline point to a year of growth for Camtek and we expect a record year in sales in 2024.

No doubt that our high-performance computing is the bright spot for us. Based on several survey, the number of Chiplets is expected to grow at 35% CAGR in the next 4 years and the HBM at a CAGR of 22%.

We have strong position in this market, so we expect to expand our market share by winning additional inspection and metrology steps together with FRT products. In addition, in some territories, we see demand for other applications that are not related to the high-performance computer but fueled by mobile phones, server, automotive, and other segments.

We are also enjoying healthy demand from OSAT, serving multiple applications. We are greatly encouraged by the number of orders we receive for HBM and by Chiplet modules to be installed in 2024.

At the same time, we are aware of the technological changes soon to be adapted by our customers. We are totally prepared with innovative and creative solutions and will start qualification process at customer site soon.

With respect to Q4, we expect continued organic growth and with the contribution of FRT our revenue guidance is $87 million to $89 million. And now Moshe will review the financial result.

Moshe?

Thank you, Rafi. In my financial summary ahead, I will provide the results on a non-GAAP basis.

The reconciliation between GAAP results and the non-GAAP results appear in the tables at the end of the press release issued earlier today. Third quarter revenue came in at $80.5 million, a decline of 2% compared with the third quarter of 2022, an increase of 9% from the second quarter of 2023.

The geographic revenue split for the quarter was as follows: Asia 81%, and U.S. and Europe accounted for the rest 19%.

Gross profit for the quarter was $39.4 million. The gross margin for the quarter was 49%.

Similar to the third quarter of last year and an improvement from the second quarter of this year, which was 48%. As mentioned before, we've been taking measures to improve the gross margin.

In the last 2 quarters, we have seen the initial impact, and we expect to see continued gradual improvement in the coming quarters subject to sales mix. Operating expenses in the quarter were $17.2 million very similar to the third quarter of last year and to the previous quarter.

Operating profit in the quarter was $22.2 million, compared to the $23.2 million reported in the third quarter of last year. Operating margin was 27.6 compared to 28.3.

Financial income for the quarter was $5.7 million at a similar level to the previous quarter and much higher than the $2 million reported last year. The increase from last year relates to the significantly higher interest rates on an increased cash balance.

Net income for the third quarter of 2023 was $25.2 million or $0.52 per diluted share. This is compared to a net income of $23.3 million or $0.48 per share in the third quarter of last year.

Total diluted number of shares as of the end of Q3 was 49 million shares. Turning to some high-level balance sheet and cash flow metrics.

Cash and cash equivalents, including short and long-term deposits and marketable securities, as of September 30, 2023, were $517.1 million. This compared with $506.3 million at the end of the second quarter.

I know that in line with the FRT closing in October, our cash balance has decreased by approximately $100 million, which will also affect our interest income. We generated $12.4 million in cash from operations in the quarter.

Inventory level was $72.7 million, it went up by $4.4 million over the quarter, to support the anticipated sales growth in the coming quarters. Accounts receivables increased to $91.4 million from $79 million in the previous quarter.

Primarily due to the increasing revenue and the timing of collections. As Rafi mentioned before, we expect revenue of between $87 million to $89 million in the fourth quarter, with is about 7% increase over the fourth quarter of last year.

And that we look forward to a year of growth in 2024. We will provide more color next quarter after we announced our Q4 results.

And with that, Rafi, Ramy, and I will be open to take your questions. Kenny?

[Operator Instructions]. So our first question is going to be from Brian Chin from Stifel.

Hi, there. Firstly, best wishes and I hope that you're all well.

And, thank you for letting us ask a few questions. May maybe to start.

Rafi, of the 240 system bookings since the beginning of 3Q, is the right way to think about this as maybe 80% to 90% of that relates to shipments that will occur next year? And, also, I think your book-to-bill was probably at least 2 times, 2 to 1 in 3Q.

So maybe it won't be quite that high, but do you expect the book-to-bill will still be well above 1 in 4Q?

Look, as we mentioned in all the announcement, most of the order we receive are for 2024. Okay.

And on top of that, I think we don't really discuss any specific, we don't answer to specific question about the backlog or about the book-to-bill and other type of that, but maybe Moshe can elaborate a little bit about that. Moshe, could you add something?

Yes, indeed, most of the orders the 2 40 machines that we have received so far are for deliveries in 2024. I don't have the exact percentage, but most of it is for 2024 deliveries.

With respect to book-to-bill, obviously, in Q3, the book-to-bill was much higher than one. We are still in the middle of the fourth quarter, so it's still early, for me to say whether the book-to-bill this quarter will be greater than 1, but my expectation based on orders that we have received so far, plus, orders that we have in the pipeline that indeed it will be greater than 1.

For a follow-up, for calendar '24, you stated that this should represent a record revenue year the company, FRT certainly adds to this. Can you give us an idea of the impact to the model, gross margins and expenses from FRT?

And also, how do you plan to integrate the technology into new and existing platforms? And does the acquisition also provide favorable customer synergies?

By the way, regarding the acquisition of FRT, I think that in 2024 when we discuss about to integrate to Camtek, we mainly mean in the operation in sales and customer, we are not, we don't have any plan right now to start to integrate the model from here to there and to come with some new tool, this is not in our priority. FRT has its own backlog for what they did in the last few years, Camtek also have enough backlog.

So we believe that 2024 in term of R&D integration, let's call it, we are not going to put too much focus, but more on the administration, operation and other aspect of the 2 company to work together as one. This is regarding the FRT and Camtek.

Just to add, you asked about the contribution to the financial model. So I would say the following.

We said, when we announced the deal, the day we plan a contribution of around $30 million for FRT next year, and we feel that this is still a good number. For the fourth quarter, their contribution is expected to be pretty much in line with this run rate.

And, overall, this business is quite profitable and it's very similar to the profitability metrics off Camtek.

And just to clarify, Moshe. You said 4Q in line with the 30 million run rate run rate, or is that 1Q?

Because I guess 4Q, you only have it for 2 out of 3 months?

So the 2 out of the 3 months is within the run rate. It's only 2 months within the fourth quarter.

Correct.

Next question will be from Tom O'Malley from Barclays.

So just a little confusion on Q4 there, and I want to kind of…

Oh, sorry. Tom, you there?

We lost you.

Yes Can you hear me?

Yes.

So just wanted to just run through Q4 a little bit here. So in the slide deck you had on the web this morning, you had 82 to 83 for Q4.

So I assume that that was the organic revenue, and then you're guiding to 88, so that would imply a $5.5 million contribution from FRT. Can you just walk through what the exact contributions are in Q4?

Just because I'm seeing a couple different numbers here?

No. I'm not sure what the $82 million to $83 million where this number comes from, but maybe a typo.

As I said, you know, our $87 million to $89 million includes some organic growth from Camtek plus contribution from FRT. In a level that is pretty much the run rate of the $30 million that we expect next year.

So the correct guidance is 87 to 89 combined with the FRT contribution.

So $30 million run rate and you're going to adjust that for the 2 or 3 quarters. That makes sense.

Going into the out year, are you expecting an acceleration of that FRT business, or is that 30 million still, what you're sticking with for the contribution from the acquired business for '24?

For '24, what we said and we're staying with this assessment that it will be 30 million for '24. Of course, as we learn the business, we will be more we will learn it, but that's the expectation as we go into 24.

And then lastly, when you guys look at a booking’s year traditionally, I would imagine that just given the amount of orders that you guys have, your visibility is a lot better. When you guys say record revenue for '24.

Is that record revenue fully backed on existing orders today? AKA with the orders that you have in the book, is that already a record revenue year, are you expecting some turns business year-over-year to get you above that record revenue?

So first of all, the record revenue today, it's an expectation. The backlog today that we have in hand still does not support the record revenues.

But understanding what we have with the pipeline, talking to customers, our expectation is to be for a record year. Very similar to what we said a quarter ago.

Next question will be from Craig Ellis of B. Riley.

Thanks for taking the questions. And I also wanted to pass on just the best wishes for operating in a very unusual and war impacted environment and best wishes to the team.

So the first question I wanted to ask is around, some of the orders that are in hand, and some that could come in. There's a lot of attention on both, AI related orders and heterogeneous die, and yes there have been parts of the business for industry that have seemed pretty muted this year, whether it's CIS or front-end and some other areas.

So one of the things I wanted to better understand is the degree to which the orders for the 240 systems that you have is really more heterogeneous plus AI versus some of the other applications and areas of exposure that the company has? And then the second part of the question is, to what extent do you think some of the areas that have been more muted this year have potential to emerge as areas of strength next year?

So first of all, thank you for the best wishes, Craig. Yes, it's indeed a challenging time, but we'll manage to it.

So when we look at the business, all-in-all, I look at the 240. We're looking forward at what is in the backlog.

So, we are above 60% of our business, it's what we call advanced packaging. No doubt the triplets and the HBMs, by itself, it's about half of it.

No doubt, and this is emerging as, I would say, as a relatively new business, we had this business, but from the volume point of view, it was much smaller. So, indeed, this is an area that will take us to a different level in the business, and this is why, really, this contribution makes us feel give us the expectation for a record there next year.

Now when we look at the other areas, so on the heterogeneous integration is definitely becoming more and more dominant in the business. We're seeing a lot of business there from OSATs and also from IDMs.

That's another portion that is growing in the advanced packaging and in the advanced packaging, we're also seeing the fan out is still being dominant in this business. So I think that these three areas really make today our advanced packaging business.

Now the rest of the businesses are there. I think we spoke about healthy backlog from OSATs, and that's lots of applications, advanced packaging, CMOS image sensors, some RF, so they are there.

The silicon carbide, and I would say the front end, when we look forward for next year, they're above 20% of our business. So I think these businesses are going to be healthy.

It's very hard to give the exact extent of what they do, but definitely that's in areas that will continue to see business. What is interesting when you look at the FRT business, the FRT business is really in these areas of the Silicon Carbide and the advanced packing.

So this really strengthened our position there because we are going to do as a company more steps on the same processes and we'll be exposed to new opportunities that were in there for us in the past.

The second question maybe more of an operational question, and it's regarding tool lead times given how significant the recent order activity has been, and admittedly, to your point, Rafi, this is vastly for shipment in 2024. But can you just talk about tool lead times, shipment times, and the company's confidence, given how dramatically orders have surged that you can hit, end customer shipment windows and capture all of the order potential?

So I think with that, Greg, the fact that these orders we are getting today for 2024 give us enough time to really get prepared. And we do not see any issues with our supply chain.

It's very solid. We have the inventory in place.

We have the manpower in place, and to meet the forecast that we are looking at, and the surge in the business that we are forecasting. So from that point of view, we are ready, and I think we have enough, I would say, head on time or we are seeing the things early enough in the game to make sure that we will have all the material and we'll be prepared to deliver all the machines on time.

And then lastly, for me, before I drop back in the queue. Rafi, you and I have talked on numerous calls in the past about the company's M&A aspirations, and FRT looks like a really nicely synergistic fit, and it looks very EPS accretive, intermediate, long-term.

With that deal now closed and working nicely through integration. Does that mean M&A is something that will be off the table for a while?

Or how do you think about M&A from here with FRT now in the pool?

I know it's not off table. But we continue searching for potential.

But the same as FRT, this is what we call a perfect synergy. And this is definitely one of our preferable M&A consideration.

To look for company that it's easy to integrate, they are, probably, I would say, the same environment, the same system, not copy exact, but not something that totally different for what we are doing or If maybe issue that we are not understand very well the market and the potential. So we continue and we're definitely considering more M&A.

Our next question is going to be from Gus Richard of Northland Gus.

Just in terms of, as you ramp, do you foresee any capacity constraints or maybe a better way to ask the question is, where do you need to focus to make sure you have capacity as, demand grows?

You are talking about the capacity here to manufacture Gus?

Correct. Yes.

Is it in lead times on OpEx? Is it manpower, floor space?

Just sort of where would you first run into a capacity constraint?

So first of all, I think we discussed in previous calls, we have today capacity. We've increased our capacity last year.

And today, we have enough capacity for roughly $0.5 billion in sales annually. So the clean room, which is the longest time is there and also the manpower training, we have enough.

So the rest is really planning. And as I said, because we understand more or less what is going to happen next year.

We have backlog already for next year. So we have we're talking to customers.

We understand what we to stand what we will need to ship. We have already put in orders for what we need from material point of view.

We have enough inventory on hand for the next few months, so we do not foresee any reason not to shift all of the machines in 2024.

And then I think in your prepared remarks, I think you're starting to see chiplets expand into auto and I think you said mobile as well. And I'm just wondering if you could talk a little bit more about those opportunities and when you might start to see those impact your backlog or your shipments?

No, I think here in our remarks what we said that there are other opportunities for business that is not related to chiplets and HBMs, we see opportunities there as well. Our business will be in the range of, let's say, more than 30% for the HBM and the chiplets.

The rest will come from the other segments that we serve. So I think today, the market is focused on the chiplets and HBM.

This is high performance computing. I think this is going to what people call AI applications.

I think this is today, the main application. Definitely, this in 2, 3 years, no doubt, will become the standard in computing in the industry.

But I think there is time till we'll get to that point.

And then the last question for me in terms of demand obviously is going up because of unit volume, but I also wonder if you could comment a little bit about inspection times and increasing bump density and what's happening for how long it takes to inspect a wafer?

So you know, this is really application dependent, but no doubt. And I think Rafi mentioned in the prepared remarks that we understand where the market is going to.

So, we've talked about the fact that the number of pumps are becoming more. They're increasing numbers.

And obviously, they are becoming denser and smaller. And this will require new capabilities.

Some of those capabilities we already have installed with customers. There are new capabilities that we are going to qualified customers.

So those capabilities, first of all, we'll improve the throughput on one hand to address the increase in the numbers of bumps or the density. But definitely, all-in-all, some of these applications, they slow the inspection and metrology time in certain applications.

Obviously, I mean, this is the physics of the business and customers are required to purchase more machines. But we're doing on our hands our best from the, to supply the best ROI in the industry in improving the throughput, the accuracies and everything on our machines.

Next question is from Vedvati Shrotre from Jefferies.

The first one I had is on the 240 system orders that you for packaging. Could you help us understand how maybe these convert to revenues first half '24 versus second half?

Is there, is it more first half weighted versus second half? Any color there would be helpful.

Vedvati, obviously, the orders that we see for '24, so we said most of the 240, somewhere went to Q3 and Q4, some needed quick deliveries. But when we look at next year, obviously, the orders lean more to the first half naturally.

And on the second half, we have less the backlog, but we have an understanding from customers. This is where the pipeline comes into place, where people speak with us that they need certain machines in the third quarter of the fourth quarter some event ask for certain slot, but they have not issue yet the deal.

Moving the pipeline or converting it from a pipeline to orders, definitely, this is what we will be doing in the next couple of months.

And maybe zooming into that a little bit. So most HBM manufacturers and the Chiplet manufacturers have talked about doubling their capacity by 2024.

So with these kind of order volumes, do you think they have all the tools they need to achieve that target. Like, what is your sense here?

And I know the visibility may be limited, but any color here?

Well, what I understand and what we see. We think that they are getting the tools that they need.

And I can tell you that if there will be a shortage and they will feel that they will need additional tools, we have enough capacity and enough inventory in place to manufacture more machines. So I think we will not be the bottleneck if this will be needed.

At least from our understanding, what we're seeing, at least I would say for '24, at least the first half, I think they have enough tools.

And then another question I had was, there are some notebook desktop chips that are starting to use chiplet architectures which will start ramping soon. Can you help me understand what this opportunity means for you?

Do you think it becomes an opportunity as big as HBM that you're seeing right now?

So that's definitely something that will enlarge our market. And this is what I think will happen.

I think people are starting to use the same architecture, but not adding the HBM's. I think this what will happen, some of the applications of gaming and so forth actually require the HBM's, but many do not need.

And this is what I said in one of the questions before. I personally believe that as they ramp the HPM's, they will get the cost structure, which is today, I would say, one of the limiting factors.

But the HBM cost structure will go down with the volume. And then I don't want to say that it will become standard, but definitely it will become the preferred architecture for most of the computers.

So that's something and in most cases, the high-end becomes the standard over time. And I think this would happen in this case as well.

[Operator Instructions] Our next question is going to be from Vivek Arya from Bank of America Securities.

This is Dodson on behalf of Vivek. A question on gross margins.

I'm curious about your outlook into '24. Not looking for a guide obviously, but what are some of the puts and takes and drivers of margins next year?

Could it return to your target 50 plus levels?

So, yes, we said, basically, that we took certain steps in the beginning of the year. We are seeing the fruits of it starting to affect our gross margin.

This is the second quarter or the third quarter, actually in a row of improved gross margin. We expect continued improvement, gradually.

The target is to reach 50% mark. The only give and take here is that, this is all subject to sales mix.

So in some cases or in some quarters, we have more favorable product mix, and in other quarters, this is less favorable. So this also have an impact on the margin.

But, overall, our target for next year is to be at least 50%.

And then could you talk about your order trends outside of AP? Maybe some of the visibility in compound semis?

You said mobile phones and automotives have also been encouraging. So I'm curious about your outlook there.

Thank you.

So, in general, our, I would say, advanced packaging, which includes the chiplets, HBM, Heterogeneous Integration and so forth. This is, I would say, it's above 60%, can come up to 65%.

Then I would say the next sizable business is what we call the silicon carbide and the front end. We combine them together.

They would come to anywhere 20% to 25%. And then we have a few others.

CMOS image sensors have been low lately for the reason that mobile phones are down, so this has more or less coupled this business with mobile phones, I assume that next year, they will be better. This business can be anywhere between 5% to 10%.

And then there are RF [mains], a lot of smaller businesses that will account to the 100%. But if we look at the I would say the strongest driver, no doubt, today is on the advanced packaging part, which is the Chiplets and the HBMs.

And that's no doubt a growth driver that is going to be dominant for the next couple of years, at least. And then the silicon carbide and the front-end, definitely, this market may be a little bit slower now, but definitely this is overall the CARG, is in the range of 20% annually, definitely a market with a sizable opportunity.

Our next question is from [Ella Przyluski] of Optimus Funds.

One question about the geographic revenue split for this quarter, please?

Yes. So Asia was around 80%, and U.S.

and Europe was 20%.

Our next question is from Shahar Cohen of Lucid Capital.

Going back to Vedvati question about some of the laptop or desktop publication. You spoke about HBM, but I'm not sure HBM is clickable to these.

Maybe trying to understand in your answer, you meant that HBM will be adopted in the laptop and desktop, or you meant the advanced packaging techniques will be adopted in those? And given the magnitude of laptop CPUs compared to GPUs.

Wouldn't you expect a major leapfrog on your advanced packaging next year, giving the ramp up of, so the, laptop, CPU advanced packaging applications?

There are 2 question and let me start with the first one. The question that came before is that you see today notebooks, and in general, the PCs starting to adapt the chiplet architecture.

Now down the road, they will add also HBMs. Currently, they are not.

I think the only application that I know of in the PC arena that's using the chiplets and HBM is some gaming applications. But from the structure, they're starting to use the structure of the chiplets, which will eventually, will probably start to use also HBMs as well, as they need more and more power.

But this is still down the road. Now regarding your second question, no doubt there is an opportunity.

But the question is how fast it will grow and how fast HBMs will go to other applications other than AI, this is still not clear. And therefore, definitely, as we said, this segment will be more than 30% of our business.

I mean, this is significantly more than this year and dramatically bigger than it was a year or 2 ago. So definitely, this is part of the growth, one of the reasons for the growth of contact over the last few years.

Definitely that's an area that's going to increase and definitely an area that has a very big potential for us. But how fast it will grow further than what it's going today, it's still hard to say.

That looks like it ends the Q&A session. So before I turn the call back to Rafi, just to let everybody know that a recording of this call will be available from the same zoom link on Camtek's website in the next couple of hours.

And, Rafi, please go ahead and make your closing statements.

Okay. I would like to thank you all for your continued interest in our business.

I want to especially thank the employees and my management team for their tremendous performance, to our investor. I thank you for your long-term support.

I look forward to talking with you again next quarter. Thank you and good bye.