Ehud Helft - IR Rafi Amit - CEO Moshe Eisenberg - CFO.

Sanjay Srivatsa - Chardan Capital Market Craig Ellis - B. Riley.

Ladies and gentleman, thank you for standing by. Welcome to Camtek’s First Quarter 2015 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.

You should have all received by now the company’s press release. If you have not received it, please contact Camtek’s Investor Relations team at GK Investor Relations or view it in the News section of the company’s Web site, www.camtek.co.il. I’d now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr.

Helft, would you like to begin, please?.

Thank you operator and good day to all of you. I would like to welcome all of you to Camtek’s first quarter 2015 results conference call and I would like to thank Camtek’s management for hosting this call. With us on the line today are Mr. Rafi Amit, Camtek’s Chairman and CEO; and Mr. Moshe Eisenberg, Camtek's CFO.

Rafi will provide an overview of Camtek's strategy going forward. Moshe will discuss some of the recent developments and summarize the financial results of the fourth quarter. We will then open the call for taking questions.

Before we begin I'd like to remind our listeners that certain information provided on this call are internal company estimates unless otherwise specified. This call also may contain forward-looking statements. These statements are only predictions and may change as time passes.

Statements on this call are made as of today and the company undertakes no obligation to update any of these forward-looking statements contained whether as a result of new information, future events, change in expectation or otherwise.

Investors are reminded that actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for services and products, the timely development of new services and products and their adoption by the market, increased competition in the industry and price reductions, as well as due to other risks identified in the company’s filings with the SEC.

Please note that the Safe Harbor statement in today’s press release also covers the content of this conference call. In addition, during this call certain non-GAAP financial measures will be discussed. These are used by management to make specific decisions, focus future results and evaluate the company’s current performance.

Management believes that the presentation of non-GAAP financial measures is useful to investor understanding and assessment of the company’s ongoing co-operation and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures is included in today’s earnings release.

I would now like to hand over the call to Rafi Amit, Camtek’s Chairman and CEO. Rafi, go ahead, please..

Okay, thank you Ehud. Hello to everyone and thank you for joining us today. 2015 started with sequential revenue growth of 6% to 21.8 million. We anticipate this momentum to continue into the second quarter and beyond. Our gross and operating margin also came in within our expectations.

Our in-line business for the PCB industry continues to perform well as expected. Our focus on high-end customers in the PCB market is enabling us to maintain our market share and we are leveraging our strong position in this sector to market the Gryphon - our 3D functional inkjet system for PCBs which I will get to in a moment.

In the semiconductor business as you know we had a number of successful penetrations with our new Eagle system and this underline our expectations for a strong Q2.

We are aware of the fact that some companies reduced their CapEx spending plans, however as we focus on the advanced packaging segment we do not see it, on the contrary this point we see more demand for our tools. I'd like to spend some time discussing our plans for further out this year.

We have now been actively marketing the Gryphon for a few months and we are very excited by the market perception. In the past few weeks we installed the Gryphon at a major U.S. PCB manufacturer for an evaluation process. This evaluation will take a few months but once completed we expect it to translate into multiple system orders.

Last month we announced the launch of Gryphon SL which enable both legend and solder mask deposition. The feedback from customer since then has supported our decision to make only this more advanced version combining the two time consuming processes. This version is a very attractive offering.

Based on this we made a decision to manufacture the more advanced dual color SL version of Gryphon only. This decision has delayed the commercialization process somewhat and we push the new installation schedule further into the second half of the year.

We are currently building dual head Gryphon SL machines in a [indiscernible] of customer’s evaluations and orders. Giving the customer reception in North America we are also beginning to market the Gryphon to the Asian market the world’s larger PCB market.

On May 20 we will launch the Gryphon for the Asian market as the CTEK show in China and we hope to see strong customer interest there. I do stress that typically there will a long lag from installation until revenue recognition.

The Gryphon is launching a number of new technologies and processes changes into a slow changing industry including a new proprietary solder mask material, our ink materials, as well as the new process must undergo approval by each PCB manufacturer and in most cases by the end user as well.

Therefore the qualification period for each installation can be six months or even more. This means we expect to start seeing the initial revenues for the Gryphons install by year end with more meaningful revenue in 2016.

We are very confident in our belief that inkjet technology for solder mask and legend printing will be the dominant technology in the PCB and advanced IC sub-stream industry for years to come. We also continue to invent R&D efforts to develop new models that can cover more segments and processes in the PCB and advanced IC carrier market.

With regard to our LOI sales to the PCB market our overall market position remains strong and our Phoenix platform continues to be perceived as the leading inspect tool in the industry.

We are very much leveraging our strong market position in this industry and our deep customer relationship with many of the world renowned PCB manufacturers in order to ensure the success of our new growth engine the Gryphon.

Regarding the semiconductor business, 2014 was a record year for our semiconductor inspection and metrology business and 2015 has started just as well with Q2 expected to be even stronger than Q1. Most notably our new Eagle product line platform has recently penetrated into several top tier semiconductor companies where we had no presence until now.

Through last year we strengthened our leadership in several market segment and target territories in particular we are commenting our self as the leader in bumping and advanced packaging inspection and metrology. Two areas growing strongly which position us well for growth in 2015.

The trend to bump wafer instead of wire bonding is increasing and furthermore the major DRAM manufacturers are starting to use [PUC] or [indiscernible] technology which further accelerates the bumping trend.

Based on our recent customer orders and indications as well as our penetration at new customers, we see ongoing market demand for our advanced inspection solutions and we expect new as well as repeat order in the coming quarters from customers. This underlies our strong sequential revenue growth expectation for Q2.

We look forward to strong year for our semiconductor sales in 2015 with double digit growth year-over-year. To summarize, as you can see I am very excited with regard to both our short-term future in 2015 as well as the longer term, as our growth engine really begin to contribute.

Our Q2 guidance of 23 million to 25 million at the midpoint implies 10% sequential growth in revenue. More importantly, we are now at the inflection point where our growth can really begin to accelerate.

Our new advanced packaging semiconductor product the Eagle has already begun to contribute which Gryphon is now generating very strong interest and in the coming months we will begin shipping to customers which will eventually lead to revenue from both the machines as well as ongoing revenue from the ink.

With that, I would like to hand over to Moshe for a more detailed discussion of the financial result of the quarter.

Moshe?.

Thank you, Rafi. Overall we are pleased with the results of the first quarter which were in line with our expectations. First quarter revenues came at $21.8 million, revenues were 1.6 below those of the first quarter last year and 6% over those of the previous quarter.

Revenue from sales and services to semiconductor industry in the first quarter were $14.3 million representing 66% of our total revenue. First quarter revenue from seven services to the PCB market were $7.4 million representing 34% of our total revenue in the quarter.

The geographic revenue split for the quarter was as follows, China was the strongest region during the quarter representing approximately 38% of overall revenues, Taiwan was 19%, USA accounted for 11%, Korea was 10% and European sales accounted for 9%, the rest of Asia was 8%, the rest of the world was the remaining 2%.

Unless otherwise stated I will summarize the rest of the results on a non-GAAP basis. The reconciliation between GAAP and non-GAAP results appear on the table at the end of the press release issued earlier today.

Gross profit for the quarter was $9.8 million representing a gross margin of 45.2%, this is compared with the gross margin of 45.9% in the first quarter of last year and 47.2% in the previous quarter. The change in the gross margin was mostly due to the product mix between quarters.

I note that the gross margin in the fourth quarter of last year was at particularly high level. Operating expenses in the quarter were $8.6 million, this is compared with $8.9 million in the first quarter of last year and $9 million in the previous quarter.

Operating profit for the quarter was $1.2 million, or 5.5% of revenue, this is compared with operating profit of $1.2 million in the first quarter of last year and $0.7 million in the previous quarter.

We reported financial expenses in the quarter of $624,000 compared with financial expenses of $159,000 in the first quarter of last year and $358,000 last quarter.

The reason for the high level of financial expenses was due to the significant fluctuation in exchange rates around the world especially the strengthening of the dollar versus the Euro and the Japanese Yen as well as the [$200,000] expense associated with placing the bond for the appeal regarding the Rudolph litigation.

Net income for the first quarter of 2015 was $335,000 or $0.01 per share, this is compared to net income of $884,000 or $0.03 per share in the first quarter of last year and net income of $410,000 or $0.01 per share in the previous quarter.

Cash and cash equivalent short and long term restricted deposits as of March 31, 2015 were $21.9 million, out of which $7.9 million were restricted deposits. This compares with $26.8 million as of December 31, 2014. We reported a negative operating cash flow of $4.2 million during the quarter.

The negative cash flow was primarily due to an increase in accounts receivable as well as an increase in inventory levels in expectation for a stronger Q2 in the semiconductor segment and the buildup of the Gryphon SL machines in anticipation of customer evaluations and orders.

For the second quarter of 2015 we expect sequential revenue growth of 10% at the midpoint with revenue between $23 and $25 million. In summary we continue to remain well positioned for growth in 2015 in our two main markets, that of the semiconductor inspection and metrology and PCB. We will now open the call for questions.

Operator?.

Thank you, sir. Ladies and gentlemen at this time we will begin the question and answer session, [Operator Instructions] the first question Sanjay Srivatsa of Chardan Capital Market, please go ahead..

Thanks for taking my question, Rafi could you expand on your decision to make some of the changes you said on the Gryphon, is it something that the customers were requesting or are you seeing a different trend in the markets? Any color on that would be helpful..

Okay, as far as you know when we started to develop the Gryphon, particularly we -- by that time we got some of the platform ready for solder mask and we realized that the main -- the tough task is developing solder mask process that can meet all the chemistry inside this industry, so this was most of the effort.

At that time the legend was all ready, because the third generation of this system was the legend, so we focus on the solder mask. So when we saw that the solder mask is run well we realized that it make sense in one process just an additional task can make also the legend.

But since the machine was not designed for two heads, only one set of head for solder mask, we didn’t do any changes as we continued with the solder mask. And since we know that the perfect process is doing two dual head for both we start to evaluate the changing, that this platform can carry more than one set, maybe additional sales.

It took some time to evaluate, to use the subcontractor to make all the beset and when we got a positive answer we started to develop the dual head in the same platform without doing any changes. So this was the key because any changes on the design at this stage could take probably six months.

So when we found the solution to use the same platform, we tried to develop these solutions and when it was ready and we got some feedback also from customer we understood that this the only configuration that can win the market because nobody can do, any MDI, any other process you need to go from one process and then to go another process and it takes a lot of time.

So then we have to stop all the supply chain for the first generations luckily we didn’t have too many things and we shift everything for dual head. So we are so confident that this is the only concept that the industry must use and today every customer that we start offering insist of ordering only dual head, two colors this is enough for him.

So we are so confident and we get so many feedbacks from customer, so this is our decision. And practically it’s just a method of maybe three month delays in starting the -- and getting the first lot of production system.

So we believe that from beginning of June we start getting from the production the first lot of this dual head system that we can start shipping and installing at customer sites..

In the past you talked about the potential to ship 20 to 30 machines this year.

So with the shift and schedule what is the revised expectation in terms of the number of machines you expect to be able to ship in 2015?.

We haven’t changed our original plan, definitely we’ll be more under pressure because you have less time to install the machine. And I believe that most of the pressure will be by the Q3 and Q4 but we built our sales to ship such amount. We’re talking about roughly about 20 systems to install this year we are still keeping this plan..

The next question is from Craig Ellis of B. Riley. Please go ahead..

I wanted to ask a follow up to the prepared comments about the Eagle systems into account.

I was hoping you could provide more color on what you’re seeing there, whether it’d be just geographically or otherwise in some of the specifics around uptake at those accounts and other existing accounts?.

Just I want to make sure I understand your question, you would like to understand more about the Eagle system, where we can sale it, where is the -- what are the typical customers for it?.

Yes, Rafi I think you had mentioned that you were able to place Eagle in new accounts to the company, so I was wondering if you could just give more color on the number of accounts and that kind of thing?.

I will give you just few examples to understand. In general the Eagle is the new platform definitely better compared with the old generation and as a new platform the accuracy of the Eagle is few times more than the old generation.

Now this accuracy allows us to measure or to use metrology let’s say from two micron height of bump, all the way to 20s call the nano-bump with micro-bumps, this size or this -- we cannot meet such accuracy and tolerance in this area in the old generation.

And today all the [queue] because if you see looking for this type of accuracy and size of bump. So this is I would say one of the main benefits and right now you cannot find too many competitor that can make such metrology at such accuracy and so forth.

Now the second benefit or I would say unique feature -- it’s again because of stringent accuracy and the stability, if you talk for example all the CMOS [lenses] expense of today for the camera you can see that every Smartphone go to higher resolution and smaller pixel and they would like to detect much smaller defect compared with what they used to do when they just deliver few megapixel and not 12, 16 or even 20s, so they need magnification to look for it, higher magnification must be very accurate, very flat and sometime you have to do detracking so this is different platform Eagle can do it and definitely we get very positive results.

So the Eagle is really fit to all the new feature, the advance requirement of the advanced packaging and as we mentioned in -- in few months we get the few nice order and I will say that most of them we got after add-on evaluation.

So customer evaluate, check it, what it’s other competitor can provide and decided that the Eagle is the only tool that can give them answers for today and for tomorrow.

So in general everyone that's looking for this -- for small features, accuracy, I would say that the Eagle is in this position and this is why we feel very comfortable with the leaders, we can commit to the growth with this system..

Thanks for the follow up, or thanks for the color. On a follow up, Moshe can you provide some color on some of the gives and takes as we look at the second quarter, you mentioned some of the mixed dynamics in gross margins in the first quarter with what appears to be growth in the semi business sequentially.

How should we think about the gross dynamics and then great operating expense performance in the quarter, can those be held flat or would we expect them to move up as revenues move on..

I will Moshe talk about some financial data, but before that I just mention that what we can see right now for Q2 and even a little bit for Q3 that the main challenge is not sales and marketing, is more operation. How to build more systems, this is right now our major challenge to answer to the demand of the Eagle.

But maybe Moshe can give you more data about the other factors..

So, generally speaking we expect gross margin to be in line with this quarter margin, typically we are reporting between 45% to 46% and I don't expect any major variation from this margin.

With respect to operating expenses I do expect some increase in operating expenses, some is related to shift from Q1 to Q2, that's more like R&D projects that are delayed from Q1 to Q2, we do add more resources to support the Gryphon penetration and installation so this may add to the operating expenses level during the second quarter..

That's helpful, going back Rafi to your comments about a key issue in 2Q and Q3 being product builds, is the point that there is a cycle time issue with the build itself or is the point that, one more of getting enough of the components and supply in place so that you can meet the demand that your customers are placing on you for that system..

I just, you know -- okay I will try to say something about -- most of the Eagle and in general all the semiconductor system almost every customer every shipment has some R&D element, it is not like straight forward order that you have like a product and you sell it.

Every customer, every order you have to make quantification you have to add some, to develop some special tools because today there are many-many new technologies, every customer uses its own technique to make let’s say different process. So we have to support the customer with the [indiscernible] but build for him special feature.

So this always takes some more time because it's not just a standard.

So we have sometimes to run after special parts to install, to make integration, to run, to test, to use QC before we ship, so this all of it is called operational issues and also we need you know to expand the clean room because now we build more machines than we used to build in the few quarters, so everything now is -- I would say most of the pressure today is on the operating system.

Before as I mentioned, right now I think we get nice orders, but the main target is to build the machines based on the customer requirement and special features that most of them are not standard and we have to support customer..

Customization, point well taken. Thanks guys..

[Operator Instructions] There are no further questions at this time. Before I ask Mr. Amit 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 Web site, www.camtek.co.il beginning tomorrow. Mr. Amit would you like to make your concluding statement..

Okay, I would like to thank you for your continued interest in our business. We intend to present to investor and analysts at the CO Summit at the Semicon Conference in San Francisco in July. And we look forward to seeing some of you there. To the rest of you, I look forward to talking with you again next quarter. Thank you and good bye..

Thank you. This concludes the Camtek’s first quarter 2015 results [Call Ended Abruptly].