Ehud Helft – IR, GK Investor & Public Relations Rafi Amit - Chairman and CEO Moshe Eisenberg - CFO.

Jay Srivatsa - Chardan Capital Markets Edwin Mok - Needham & Company J.D. Padgett - ALMAK Capital.

Ladies and gentleman, thank you for standing by. Welcome to Camtek’s Second Quarter 2015 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. 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 website, www.camtek.co.il. I would 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 and good day to all of you. I would like to welcome all of you to Camtek’s second quarter 2015 results conference call and I would like also 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 the results and Camtek's strategy going forward. Moshe will summarize the financial results in the second quarter. We will then open the call for the question-and-answer session.

Before we begin I would 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 the forward-looking statements contained whether as a result of new information, future events, changes in expectation or otherwise.

Investors are reminded that the 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 events or 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.

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

Thank you, Ehud. Hello to everyone and thank you for joining us today. We are very pleased with our results. Our topline revenue grew 17% sequentially and came above our guidance range. Additionally, we see these strength continuing into the third quarter, and we have guided for continuous sequential revenue growth.

Our strong second quarter results were due to strong semiconductor sales, in particular solution to the advanced packaging and CMOS image sensor related applications.

In the semiconductor business over the past few months we have had a number of successful penetrations with our Eagle system, and in some cases in to customers to which we have never sold system in the past. We see the advanced packaging part of the semiconductor space continuing its strong growth and increasing demand.

Looking ahead, in the third quarter continued growing demand for the advanced packaging solutions point to sequential revenue growth and looking further out we are well on target for ending 2015 year with 20% growth in our semi business, as we projected at the beginning of the year.

In the PCB market, the AOI business is stable and our focus on the high-end customers is enabling us to maintain our share in what remains a stable market. However, where we will see growth in the coming years in this market is from the Gryphon, our 3D functional Inkjet system for PCBs.

As time passes we are gaining over more confidence in our Gryphon solutions and advantages it offers to PCB manufacturers which I will discuss in few minutes. Our semiconductor inspections and metrology business continued to extend in Q2 slightly ahead of our expectations.

The Eagle product line is being well accepted by our customers, and during this quarter the majority of the semiconductor systems that we shipped were Eagles. We are experiencing continuous growth in the advanced packaging inspection and metrology segment.

As we discussed last quarter, the trend to bump wafers instead of wire bonding is increasing, and furthermore the major DRAM manufacturers are starting to use TSV or through silicon via technology which further accelerates the bumping trend. Furthermore, we are seeing growth in other segment and specifically for CMOS image sensor.

This market segment is experiencing continuous significant growth and Camtek is a leader provider of inspection solution to this specific market. As you may remember, we made an announcement in March about significant order to this market.

We are planning to expand the capabilities of the Eagle family, and we are regularly adding new capabilities and applications such as backside inspection. This capability will enhance our market position in software inspection applications. We continue to expect growth and believe Q3 will be stronger than Q2.

This is based on the success of our existing customers and the penetration of new accounts, coupled with growth of our market segment. We are on track for a strong year for our semiconductor sales and we expect to see year-over-year growth of approximately 20%.

Regard the AOI business for the PCB market; in general and specifically in the IC Substrate segment, our high-end customers invest a lot of efforts in new technologies for advanced IC carrier and embedded ICs.

We are supporting the R&D effort of our customers with advanced AOI and new features, and when they start ramping up we believe we will see more orders for our advanced AOI.

Regarding the Gryphon, 2015 is the first year that we have been actively marketing the Gryphon initially in the United States and more recently in Asia, and we are excited by the market feedback so far. Gryphon is a revolutionary and disruptive technology, which I am convinced, will eventually change the conventional Solder Mask deposition process.

The Gryphon brings to the market unique advantages over the traditional process. Not only it is more cost effective, but even more importantly it resolves the technological challenges of producing complex PC board. Our strong market position amongst the high end of the PCB market has enabled us to get a warm reception for the Gryphon.

As you know, the PCB industry is a very conservative industry, and new technologies are not introduced frequently. The close relationship with our AOI customers are helping us to market the Gryphon. We intend to leverage the existing sales and marketing and customer support presence in the PCB market for the Gryphon penetration.

Our annual investment this year to support this initiative is expected to be over $5 million in R&D, sales and marketing, and customer support. At the same time, this represents a major growth engine.

We believe the total addressable market is over $800 million a year as our business model includes selling the machine along with recurring revenue of proprietary ink. Our marketing effort starts by providing printed PCB sample for potential customers.

Customers are looking at many parameters including printing accuracy, the adhesion of our ink to the PCB and more. Based on the results of these samples, the customer then considers how to proceed with more significant qualification process including installing the machine in their production line. The process ends finally with the purchase.

This sales process takes a long time. Following the positive feedback we received on the dual color Gryphon SL which can print both Solder Mask and Legend, we decided to make the Gryphon SL as the standard and we are focusing only on the SL version of the Gryphon.

This decision delayed our follow-up on shipment of system to June, which were originally planned for early in this year. As of now, we have two of the more advanced SL machine in the field. One is at the customer site in the US, and one is our demo center in China.

In addition, we plan to install the SL version in a major strategic customer in the US who has been testing already the older version, and plan to continue the valuation with the more advanced model. Our strategy is to install the machine at some additional key strategic customers.

Once these types of customers adopt our technology and convince the end user of the benefit of the new technology, it will act as a green light for the industry and following this we expect to see an acceleration in order from small and medium sized customers.

We recently launched Gryphon SL for Asia market, demonstrating it to the CTEK show in China and we saw strong customer interest there. We plan to use this Gryphon SL as a demonstration model in China, enabling our many Chinese and Taiwanese customers to visit and see the machine in operation.

We are geared to build 20 machines by year-end in line with our plan. This will enable us to deliver Gryphons within a reasonable lead time. Sub-systems will also be used for training, demo and R&D activities.

We believe that in the coming three months, we will shift more machines to key strategic customer in Asia and in the United States for qualification. At this point we expect revenue from the Gryphon to start in 2016. With this, I would like to hand over to Moshe for a more detailed discussion of the financial results of the quarter.

Moshe?.

China was the strongest region during the quarter representing approximately 28% of overall revenues. Asia, excluding China, Taiwan and Korea were 24%, Korea was 16%, Taiwan was 15%, USA were 11%, European sales were 6%. 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 in the tables at the end of the press release issued earlier today. Gross profit for the quarter was $10.9 million, representing a gross margin of 42.7%. This is compared with a gross margin of 49.5 in the second quarter of last year and 45.2% in the previous quarter.

Gross margin this quarter was exceptionally low due to product mix. Next quarter we expect to go back to our more normal gross margin range. Operating expenses in the quarter were $9.7 million. This is compared with $8.8 million in the second quarter of last year and $8.6 million in the previous quarter.

The increase this quarter was primarily due to an increase in G&A expenses which were $2.3 million versus 1.8 in the second quarter of last year and $1.5 million last quarter. The primary reason for the increase was legal expenses related to our ongoing litigation process with a competitor Rudolph Technologies.

As much as we don’t always have full control over the legal expenses, I believe that Q3 legal expenses will be lower. During the quarter, we filed the appeal with the Court of Appeal in Washington DC. We expect a resolution in early 2016, and we have good reason to believe that our case is solid and we stand a good chance of success.

Expenses have also grown due to increased R&D activities and sales and marketing efforts of the Gryphon. Operating profit in the quarter was 1.2 million, same as in the prior quarter. Net income for the second quarter of 2015 was $825,000 or $0.02 per share.

This is compared to a net income of 2.3 million or $0.08 per share in the second quarter of last year and net income of 335,000 or $0.01 per share in the previous quarter.

Please note that our total number of shares has increased from 30.6 million to 34.8 million due to the offerings that took place during the second quarter in which we raised $12 million [net] [ph]. Cash and cash equivalent, short and long term deposits as of June 30, 2015 were $32.1 million.

Out of which 7.8 million were restricted deposits, compared to 21.9 million as of March 31, 2015. The main reason for the increase in cash is the offering as I just mentioned. We reported a negative operating cash flow of $2 million during the quarter.

This was due to an increase in working capital, primarily in inventory in order to support our growth in the semiconductor segment and the building of the Gryphon machines. We expect to return to positive operating cash flow in the third quarter.

For the third quarter of 2015, we expect revenues between $25.5 million to $27 million, representing continued sequential growth. We will now open the call for questions.

Operator?.

[Operator Instructions] The first question is from Jay Srivatsa of Chardan Capital Markets. Please go ahead. .

So as you look into Q2, what do you expect the product mix to be between Semis and PCBs?.

You are talking about Q3 I believe, right, Jay?.

Q3, I am sorry. Yeah Q3, I apologize, Q3. .

We believe that PCB segment will remain the same and most of the growth or all of the growth will come from the semiconductor segment. .

Okay. Rafi, in terms of the Gryphon, I think in the past you had talked about certain number of shipments you could make by the end of the year, I think it was 20 machines.

Now given some of the delays in adoption, what is your projection for this year now?.

Actually it’s not easy to estimate it, because first of all we continue with our plan to build the machine because we cannot predict right now how many customer that we believe will install and eventually will recognize the revenue. So we also want to select the customers.

So I am not sure if we can make the 20, but definitely we can make something between 10 to 20, but it’s too early to estimate right now..

In terms of just the test that you have conducted at the customer site, what has been the response so far? Are the performance metrics’ kind of what people were expecting; is it better than what they are expecting? Give us some understanding on what the reception has been so far..

I think this what I call in the evolution process with customer because usually customers when they adopt new technology they would like to get the most of the machine, and together with the customer we try to adopt new features and some of them are very successfully adopted and customers are very happy.

But I would say it changes from customer to customer; some customers discuss about thickness, some customer discuss about zero clearance, there are many features with each customer. So together with the customer even we find more application and nice feature that can help the designer to have better product.

So in general, we feel very comfortable with what we develop together with customers and we continue doing it with other customers. .

Last question from me; in terms of the CapEx spend needed going forward; I know you raised some money last quarter.

What are your cash needs as you look ahead to next year? Do you feel like you have adequate to ramp up the Gryphon product or do you feel like there would be some additional needs at some point?.

At least at this point we feel comfortable with the level of cash that we have on the balance sheet. We expect to return to a positive cash flow in the third quarter. We may need to invest additional money next year, but I don’t see any immediate need to raise capital now.

This may obviously change as we move forward and as need will arise, but at this point we feel comfortable. .

The next question is from Edwin Mok of Needham. Please go ahead. .

First question I have was on the Eagle product, looks like it’s doing quite well. In terms of like some of the compensation that you guys announcing, do you believe that’s the driver for growth for this quarter, or is it more just a market growing.

How do you quantify between market growth versus share gain?.

Are you asking whether Eagle by any sales force the driver or is it driven by the general market atmosphere, is that the question?.

Yeah, basically I am trying to understand if it’s like new penetration that’s really driving new growth for you or is it just a general market that is driving the growth?.

I believe it’s both, because right now I think that our strength in the 3D metrology mainly in the CMOS. So in these two area we feel the growth rate. So I am not sure if the growth rate is due to taking more market share or because they are all industry I mean the advanced packaging industry is - I think may be its both.

But I would say that I will give more for the industry growth trend..

I see. Okay, that’s great. In terms of customer the backend is typically a little more fragmented and there are many customers that you can go after.

Do you see the opportunity for some [inaudible] pay customer that you guys are not selling to right now, that could potentially come in the back half of this year?.

Edwin just if you could be kind enough to repeat the question?.

No problem at all. So I am trying to understand if there any big customer that you guys can winch here, any new customer that you might not sell to right now, that you might be able to win additional market share..

So we did add two to three new strategic customers this year. These are all new customers with potential to deliver multiple orders in the coming months.

We shipped for the first time to a major [inaudible] in the second quarter two machines, and I am trying to think out loud if there additional major customer that is on our radar screen right now that we haven’t shipped to.

Nothing that really comes to my attention right now, but I would say that in the third quarter and also in the fourth quarter, we will continue to ship to customers that we have penetrated to in the previous quarters. .

Okay, that’s actually very helpful. So basically you just continue ramping up some of these penetration that you have secured in the past, that’s great.

And then on the Gryphon side, can you tell me, you mentioned on the prepared remarks that you have a major strategic customer that you plan to ship in the third quarter, right? Will that customer return at all to Gryphon or do you think that they expect to achieve that too. .

First this key customer is already evaluation the previous model, the one color model of the machine, and his feedback is that he wants to move forward with the valuation process and wants to test also the dual color model.

This is obviously we have the intent to continue with the purchase process; however, we don’t have any purchase order yet from this customer. But the feedback so far from this key customer is very positive..

That’s helpful.

And then you mentioned, you guys had some sales in China on your trade show recently and start some dialogs with some customers there right? Do you expect all the shipment that you expect in the back half on the - do you expect some of that to come from China as well, and do you expect majority to come from China, or part of this come from China or majority to come from the North America, any way you can give us some idea there.

.

I would say, I don’t know 50-50 or so. I think we have a few customers in China that we are in dialog with them right now. We are also plan to test the machine with a few more US customers. So I would say that without getting in to very accurate number, I would say that we will have customers from both sides of the ocean. .

Great. That’s helpful..

And still we also consider starting this with Europe, later Japan. But it will take a few months before we can cover more territories. .

Last question is on gross margin, what happened last quarter, what drove that decline in gross margin last quarter, and on the prepared remarks to you say you expected to bounce back this quarter. Can you provide some more information around why do you think it will come back. .

Right. This has to do with a couple of major orders that drove the product mix and the margin profile down. As we see the current focus for Q3, we believe that we will be able to return to normal profitability on the gross margin level. So this was more like a one-time type thing. .

Yeah, was it because last quarter you had really big order from one customer and then this quarter you have more broad, multiple orders from more customers? Is that the driver?.

Yeah, this is correct. This is a fair way to describe it..

The next question is from J.D. Padgett of ALMAK Capital. Please go ahead. .

Was just hoping if you could talk about the ramp of the Gryphon in terms of what existing process it would displace. Is it initially targeted to displace LDI or is it going to be more of the manual screening..

Just to be sure I understand you correctly - okay in general the technologies for applying solder mask right now are in general what we call the conventional technology, photo image able solder mask made by [exposure hardware] and developing.

And when customers come to accuracy issue then he looks for, what we call, fit to image solutions and for that there are two ways to do it or to go to DI or to go to our Gryphon. So if we compare these two technologies, I would say the two technology can solve the customers’ accuracy issues.

The DI actually follow the current technology, so customer doesn’t need to make any new evaluation, qualification. But this is very expensive process, its’ about twice expensive as our Gryphon. Therefore we believe that the Gryphon is more attractive solution for the customer with more, I would say, feature that DI cannot make it.

But for the customer they are the main two solutions. .

When you say DI, is that the same as laser DI or is that --..

No. Laser, actually the energy for queuing the solder mask is high energy and DI cannot make it successfully. It’s a lot of time, only very thin layer of solder mask.

So, most of the customers especially European and Asian customers they use Direct Image based on ultraviolet, and the problem is the exposure time is few minutes per side, and it is expensive tool in general. And you don’t save the developing in other process that makes some other problem to make this result.

But these [properly] are the two major solutions right now. .

Okay.

So your technology would compare well to the people that are doing DI with UV right now?.

The people who are doing DI, as I mentioned, they can make a good alignment called the principle as we do, and they can make, I would say in general they can make very similar to the current technology, because the photo image of the solder mark is very similar.

But the bottleneck of this process is developing and developing process makes some other type of problem like you cannot make drum the size of the drum must be very large, because if it’s too small during developing it will collapse. And there are some contamination caused because of the developing.

So ink goes in to the holes and you cannot wash it out. So developing process is, let’s say the developing process that everyone would like to eliminate it, but right now this is the only solution. While we do selective, so we only apply solder in the area that the solder stays there. We don’t put solder masks in places; we don’t wash it out later on. .

I think in your prepared remarks you talked a little bit about your initial traction would be with some of the smaller to medium sized customers. Why would that be? It seems to me that maybe some of the larger PCB guys would have a greater budget to be able to experiment and test your technology..

Yeah, I would say in general, as I mentioned, the main advantage of this technology is number one, accuracy or we call alignment accuracy. The second is the cycle time is quick. Saves you [all the] work, saves you a lot of time, and of course its closely compared with DI technology.

So you can see based on these who are the potential customers; number one is customer that do a very tough jobs and they need accuracy. So they have to find solutions whether it goes to DI or to Gryphon.

And the second group is customer who make a very QTA, quick turnaround delivery, they need to ship, board some time in an hour, in one or two days and they look for solutions to make it very quick.

So this is what we call the small and medium customer side that specialize in the QTA, most of them in the USA and the Gryphon is very low for such customers. But as you said, the problem that this customer has a limited budget to go and to invest 400 or $500,000 a product.

The key customers they have more budget and definitely the qualification [queue] is longer because they have very discipline and procedure how to qualify new process, new material, new equipment. So we try to go to these two customers, because in one hand the small customer can take easy decision in a short time and put this machine in production.

But the big customer they can influence the end user, they can discuss with end user, convince the end user to move to a new technology, while the small customer cannot make it like the big customer. So we have to manage these two group of customer in order to accelerate the penetration process. .

And then final question, you mentioned the one customer I believe in the US that’s probably furthest along in using the product.

What’s the process been like with them as they talk to their customers about using the ink and getting that qualified? Has there been a lot of resistance to using a new material for starters there or is that pretty easy hurdle to overcome..

Now I am not sure how many of them start discussing with their end user, because first of all our ink pass all the qualification. So officially if they are QTA short and customer do not ask for new material as long as it meet the specs, so sometime they tell, sometimes they do not.

Some of them even make a seminar with customers depending on the customers. The big players definitely will discuss it with customers and will inform. Now I am not sure if the end user understands all the potential, because we can change the design rule.

We can make thing like zero clearance that nobody can make and for some customer it is a very important tool. So our big customer definitely [continue] to develop this application and to sell it to his end user. Small customers I would say is they just plainly sell to customers, the end customer accepts it and [does it].

So it’s depended on the type of customer. .

Okay. So some of the smaller customers as long as the board meets spec they don’t necessarily care that it’s a new process. .

Correct..

[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 website www.camtek.co.il beginning tomorrow. Mr.

Amit, would you like to make your concluding statement?.

I would like to thank you for your continued interest in our business. I look forward talking with you again next quarter. Thank you and good bye..

Thank you. This concludes the Camtek second quarter 2015 results conference call. Thank you for your participation. You may go ahead and disconnect..