Camtek Ltd. (NASDAQ:CAMT) Q3 2022 Earnings Call Transcript

Charles Shi: Got it. Got it. So maybe my last follow up is, in your backlog, what’s the, based on your backlog, what’s your visibility into first half 2023? Can you see something shipments scheduled? Well, what’s the latest? Is it the second quarter 2023? Or is it the still first quarter 2023? Thank you.

Rafi Amit: Well, looking into the backlog, we have backlog today, that is already including, machine shipments in the first and the second quarter. However, we still need, in order to complete shipments for both quarters, we will need to converge some of the pipeline into POs. And that’s exactly what we’re doing today.

Charles Shi: Thank you.

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

Craig Ellis: Hey team. Thanks for taking the question and congratulations on the execution in the third quarter. A lot of discussion around backlog and orders and visibility into calendar 2023. So, I wanted to pivot to gross margin. Moshe, you talked about some large customer dynamics that impacted gross margin in the quarter. Can you just identify if there were any other factors that impacted gross margin and what should be expected with gross margin, beyond the calendar fourth quarter? Would they get back to that 51% level? Or their input cost or other large customer items that would have them maybe sub 50, or right around 50%?

Moshe Eisenberg: So the main impact of the, the relatively lower gross margin for the third quarter was indeed a few large orders that we have delivered in the quarter. And we will continue, we will complete a delivery of them, over the course of the fourth quarter. So you will see some improvement in the fourth quarter, but not to the full extent. We should go, above the 50% mark, next year. I’m not sure to the full 52%, the upper limit, but we should be able to go back to above the 50% level.

Craig Ellis: Got it. That’s helpful. And then the second question just relates to operating expense, and I acknowledge we’re dealing with an unusually uncertain environment, but the question is this, if order trends and other dynamics meant that we weren’t seeing the backlog conversion, to firm orders, as you look at operating expense, do you feel like you have any flexibility to reduce operating expense tactically or given the significant increase in customer engagements? Do you really have pressure on R&D to scale that up, so that you can do the work that you need to do to serve all these new customers?

Moshe Eisenberg: So, the two key elements in our operating expense structure is the R&D and sales and marketing, G&A stays pretty much flat. We believe that, our business model is pretty agile, so we can change, some of the old expense mix between, direct and indirect. On the R&D front, I think Rafi mentioned in his prepared remarks that we want to continue to invest. We have plans to introduce new products and new capabilities. So this is definitely an area that we don’t want to affect, but within the certain marketing, there are certain activities that can be changed based on activity level.

Craig Ellis: Yes, that makes sense. And then for my final question, a real strong, cash performance in the quarter. Here we are with $460 million in cash and equivalent. Rafi, can you just give us an update on how you’re thinking about M&A? I know you’ve talked about it in the past, and one of the things that precluded significant progress was that we had a COVID environment that really made it hard to get out and meet potential targets in person. But what should investor expectations be as we exit 2022 and look into 2023 on potential there? Thank you.