Camtek - Earnings Call - Q2 2025

Transcript

Speaker 2

Ladies and gentlemen, thank you for standing by. I would like to welcome all of you to Camtek's Results Zoom webinar. My name is Kenny Green, and I'm part of the Investor Relations team at Camtek. All participants, other than presenters, are currently muted. Following the formal presentation, I will provide some instructions for participating in the live question and answer session. I would like to remind everyone that this conference call is being recorded, and the recording will be available from the link in the earnings press release and on Camtek's website from tomorrow. You should have all received by now the company's press release. If not, please review it on the company's website. With me today on the call, we have Mr. Rafi Amit, Camtek's CEO, Mr. Moshe Eisenberg, Camtek's CFO, and Mr. Ramy Langer, Camtek's COO.

Rafi will open by providing an overview of Camtek's results and discuss recent market trends. Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe, and Ramy will be available to take your questions. Before we begin, I'd like to remind everyone that the statements made by management on this call will contain forward-looking statements within the meaning of the Federal Securities Laws. Those statements are subject to a range of changes, risks, and uncertainties that may cause actual results to differ and vary materially. For more information regarding the risk factors that may impact Camtek's results, please review Camtek's earnings release and SEC filings, and specifically the forward-looking statements and risk factors identified in the results press release issued earlier today, and other risk factors as discussed in Camtek's most recent annual report on SEC Form 20F.

Camtek does not undertake the obligation to update these forward-looking statements in light of new information or future events. Today's discussion of the financial results will be presented on a non-GAAP financial basis unless otherwise specified. As a reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release. Now, I'd like to hand the call over to Mr. Rafi Amit, Camtek's CEO. Rafi, please go ahead.

Speaker 1

Thanks, Kenny. Hello everyone. Camtek concluded the second quarter with a record performance. Q2 revenues reached $123.3 million, reflecting over 20% growth year over year. We also maintained our gross margin at around 52%, contributing a record operating income of over $37 million. Revenue distribution remained in line with our expectations and closely matched last quarter's results. High-performance computing applications contributed approximately 45% to 50% of total revenue, while other advanced packaging applications accounted for about 20%. The balance came from CMOS image sensor, compound semiconductor, front-end applications, and other general applications. We continue to observe a shift in COAS-like production towards OSATs, a trend that plays to our advantages given Camtek's strong market position in this segment. We continue to see strong momentum heading into the third quarter.

Based on the current orders, our sales pipeline, and ongoing customer engagement, we expect Q3 2025 revenue to be approximately $125 million, representing an annualized run rate of half a billion dollars, a significant milestone for the company. In addition, we have healthy orders flow and pipeline into the fourth quarter. The advanced packaging segment is rapidly evolving with technological changes to support the fast-paced evolution of high-performance computers for AI applications. Based on analysts' research on the semiconductor industry, the advanced packaging market that supports AI-related applications is expected to grow at an exceptionally rapid rate over the next few years. This growth is being driven by the adoption of new packaging technologies such as hybrid bonding, micro copper bumps with densities below 10 microns, RDL with line widths of 2 microns and below, and more.

This advancement requires state-of-the-art inspection and metrology capabilities, combined with AI-based algorithms to detect defects, filter out non-critical issues, and classify defects, and ensure that only high-quality components enter the HPC module assembly line. By integrating advanced inspection and metrology tools, manufacturers can significantly increase yield and gain valuable insight into defect types, empowering continuous process refinement and production optimization. Camtek anticipated the upcoming technological shift several years in advance and made significant strategic investments to develop innovative solutions addressing these emerging opportunities. We have invested heavily in developing cutting-edge platforms that combine exceptional mechanical precision with state-of-the-art optical technologies. These efforts have culminated in the launch of the OC and Eagle G5 systems, delivering breakthrough performance and significantly higher throughput compared to our existing systems.

In parallel, we have been developing software solutions such as enhanced defect detection (EDC) and automatic defect classification (ADC) technologies that will strengthen our competitive edge in the market. The OC and the Eagle G5 have been exceptionally well received by our customers and are expected to generate approximately 30% of total revenue this year, with an even larger contribution projected for the next year. In addition, our MicroProf metrology system, originated from the FRT acquisition, has been successfully adopted and accepted by a tier-one customer for multiple metrology applications. Over 30 systems have already been installed and are now operating seamlessly in full-scale production environments. In summary, Camtek has solidified its position as a market leader in its domain. We believe the packaging technologies highlighted today represent significant growth opportunities for us in the coming year. Now, Moshe will review the financial results. Moshe? Thanks, Rafi.

Revenue for the second quarter came in at a record $123.3 million, an increase of 20% compared with the second quarter of 2024. The geographic revenue split for the quarter was similar to last quarter as follows: Asia, 90%, and the rest of the world accounted for 10%. Gross profit for the quarter was $64 million. The gross margin for the quarter was 51.9%, similar to the previous quarter, and an improvement from the second quarter of last year. Operating expenses in the quarter were $26.6 million compared to $21.6 million in the second quarter of last year and $24.4 million in the previous quarter. Operating profit in the quarter was $37.4 million compared to the $30.8 million reported in the second quarter of last year and $37.3 million in the first quarter.

These record results were achieved despite an increase in the operating expenses, which were mainly due to the exceptionally high shipping expenses related to the conflict with Iran. Operating margin was 30.3% compared to 30% and 31.5%, respectively. Financial income for the quarter was $4.9 million, similar to the $5 million reported last year and a decrease from the $5.4 million in the previous quarter. The decrease from the previous quarter was mainly an impact of the weakness of the U.S. dollar on reevaluation of certain balance sheet items. Net income for the second quarter of 2025 was $38.8 million or $0.79 per diluted share. This is compared to a net income of $32.6 million or $0.66 per share in the second quarter of last year. Total diluted number of shares as of the end of the second quarter was 49.3 million.

Turning now to some high-level balance sheet and cash flow metrics. Cash equivalents, including short and long-term deposits and marketable securities, as of June 30, 2025, were $544 million. This is compared with $523 million at the end of the first quarter. We generated over $23 million in cash from operations in the quarter. Accounts receivable increased to $112 million from $100 million in the previous quarter, mainly due to timing of collection. Inventory level increased to $149 million from $142 million. The increase over the quarter is primarily to support the anticipated sales growth of our new Eagle G5 and OC products in the coming quarters. As Rafi said before, we expect revenues of around $125 million in the third quarter. With that, Rafi, Ramy, and I will be open to take your questions. Kenny?

Speaker 2

Thank you, Moshe. At this time, we'll begin the question and answer session. If you have a question, please raise your hand via the Zoom platform. I will introduce you and ask you to unmute, after which you may ask your question. We'll give a few moments for everyone to put themselves in the queue. Our first question will be from Charles Shee from Needham. Charles, you may go ahead and ask your question.

Thanks for taking my question. Maybe the first question, I want to get a little bit of updated thoughts about the composition of the business, maybe for the second half of the year or maybe for the whole year, whichever time frame you guys prefer to discuss. I want to ask HPC, what's the expectation for the second half of the year, maybe from a mixed perspective? Clearly, the first half, it has been around that 45% to 50% level. Is it a similar level in the second half or for the full year? On a related question, I do want to ask, what's the current expectation for China's contribution to the total revenue for the year? Last time, I think you guys were more looking at the 35% to 40% of the total revenue. Has any of those numbers changed? Thank you.

Speaker 1

Thank you, Charles. Let's talk, and we'll start with your first question. We see a positive momentum in the second half. As we discussed in Rafi's discussion, we have a healthy order flow and pipeline. We provided positive guidance for Q3 and will provide the guidance for Q4 in the next earning call. Regarding the HPC, we expect the HPC contribution to our revenues in the second half to be not much different than the first half. Regarding China, the China contribution to the business, altogether, China is obviously significant to Camtek, has been so for many years. Last year, the number of the contribution was around 30%. We expect that this year the contribution will be a little bit higher than that. Still early to say how much will be the contribution for the second half, but we expect it to be a little bit higher.

Thanks. OK, specifically on China, no additional quantitative view for the year. Maybe a second question, a little bit more at a higher level, and maybe this is more about product and technology. KLA has been making a good amount of inroads in 2.5D, especially at the leading foundry. It looks like they are looking at the HBM opportunity as well. So far, it looks like it's more around hybrid bonding-related HBM opportunity, maybe a little bit concentrated at one customer that is focusing on hybrid bonding. I want to get your general thoughts on Camtek's position versus potential entry of KLA in your existing HPC markets. What's management's thought on how to compete effectively versus KLA? Let's go from there.

Let me start with the hybrid bonding. We see the hybrid bonding as a great opportunity for us. This field is still in the early stages, and we're running our tools today at strategic customers. We believe that we have the necessary capabilities and inspection and metrology to address the hybrid bonding opportunity. You know we discussed the KLA penetration and trying to get into this market. I think we discussed it also in the last call. We've already been engaged in competition with KLA on multiple occasions, different customers, I would say, for the last couple of years. We demonstrated that our equipment is highly competitive. I think we're very well positioned to meet the specific requirements of this unique market. With our latest products, the OC and the Eagle G5, even more than in the past, looking into the future, we offer a very competitive market.

In general, the advanced packaging is our market. We are well known. We have excellent relationships with our customers, and we understand exactly their requirements moving into the future. Therefore, I think if I would like to summarize, the unique combination of our technology scheme, which is important here, and flexibility are key reasons why many customers choose to work with us over larger competitors who often are slower to respond.

Thank you. That's all from me.

Thank you. Thank you.

Speaker 2

Thanks, Charles. Our next question is from Matthew Patrick Prisco of Cantor Fitzgerald. Matt, you may go ahead and ask.

Yes, thanks for taking the question. For your product ramps, can you go over where you're seeing the greatest traction today for both the Eagle G5 and the OC in terms of applications? What are the primary drivers behind the strong customer reception here?

Speaker 1

I think it's a few things that drive the new products. Let me start with the OC. I think the OC provides two very important capabilities that are, first of all, very high throughput. That is very important where people are very sensitive to the footprint in the fabs. On the other side, it provides the path to very, very, I would say, difficult applications that people will need now or into the future. I think people that are looking into this changing market, that the products are changing, and people are not sure what they will need in a year or two, the OC provides a path to address those challenges with the capabilities it has today. This obviously relates to the micro bumps, you know, with the pitches coming very small, very high number of bumps, hybrid bonding, a lot of challenges in the inspection market.

All of these challenges, the OC provides a very, very good solution moving forward. On the G5, I think compared to the Eagle, it's much faster. I think it addressed it again from the optics point of view, the ability to detect, I would say, defects that we couldn't previously address with the current products and other capabilities. For the, I would say, for the price tag of $1 million plus, no doubt today the Eagle provides the best-in-class solution into the market. I would say it's two different reasons. It's two different product lines. I think what I've discussed, these are the reasons for the very high traction by our customers. As we said in our prepared notes, we were able to achieve 30% of our revenues this year with two product lines, which is exceptionally well. I expect that we will see more next year.

Maybe a few words about the applications. As I said, and I said it may be not clear enough, I just want to make sure that it's well understood. First of all, the applications are, I would say, a large number of bumps. That's very important. Very small defects. The OC will address defects down to 150 nanometers. This is challenging. This is very important for hybrid bonding and other 2D inspection requirements. Of course, the throughput and similarly the Eagle G5 on a different, I would say, not to the extent of the capabilities of the OC, but definitely a very good solution in the price range that is being offered. Have I answered your question?

Thank you. As a follow-up, given the success you're seeing in these new product ramps and continued success into next year, can you maybe offer some early thoughts based on your visibility and customer conversations and how you're thinking about Camtek's growth prospects overall for the company into 2026? Thank you.

When's that, 2026?

'26.

'26. Look, regarding 2026, I think our market, and specifically the high-performance computing, are expected to grow rapidly in the coming years. This market also technologically changes, and the HPC is undergoing a lot of changes that we believe will create a lot of opportunities for us. For example, and I think Rafi mentioned it in his prepared notes, fine pitch micro bumps, hybrid bonding, HBM4, and many others. If I look at these opportunities at our market position, assuming a positive market environment in 2026, we'll no doubt support another growth year for Camtek.

Thank you, guys.

Speaker 2

Thanks, Matt. Our next question will be from Ezra Gabriel Weener of Cantor Fitzgerald. Ezra, please go ahead and ask your question.

Yeah, thanks for taking my question. I guess it's a two-parter. First, can you talk a little bit about the content uplift from HBM3/3E to HBM4 for you guys? I know there's a couple different paths people are going with it. What you're seeing there. The second part of that question would be from a CapEx perspective, what you're seeing at your customers and what you're seeing for HBM specifically as we wait for potential qualification. Thank you.

Speaker 1

Obviously, the HBM market from a capacity point of view continues to grow, and we're seeing customers adding capacity. In general, the uplift goes in a few ways. First of all, there are more HBMs per product we see. The density is growing, not drastically. I think the major jump in density from the HBM will come probably late 2026, early 2027. On the four, it's moving to more layers. Eventually, this means that we will scan more wafers. There is some change in the number of bumps, some pitch differences. All in all, we've already been qualified at some customers for the HBM4. All in all, it's a very positive path. We're getting very good, I would say, inputs from our customers. I expect that definitely HBM4 will be a positive opportunity for us.

Got it. If you could just talk a little bit about what you're seeing in terms of timing for customer spending and kind of the shape of that spend in terms of HBM4 specifically.

In HBM4 specifically, I would say that customers are talking to us. HBM4, we are starting to see initial forecasts to support the uplift of the HBM4. I think more than that, I will not be able to discuss during this call.

Understood. Thank you very much.

Speaker 2

Thanks, Ezra. Our next question will be from Craig Ellis of B. Riley. Craig, you may go ahead and ask your question.

Yeah, thanks for taking the question. I wanted to follow up a little bit on HBM4 to start. It sounds like it's a very immaterial part of revenues today, and the visibility may not be clear on when you'd get the crossover from HBM3 to HBM4 related revenues. If you have some idea of that sounding like 2026, it would be helpful. The question is more this. When you look at the specific feature enhancements in either G5 or OC, what are they that are very advantageous for HBM4? What does that mean for the trajectory of gross margin as we move through the HBM4 ramp-up period?

Speaker 1

OK. Thank you, Craig, for the question. First of all, the equipment that we sold, or most of the equipment that we sold to HBM3, will be used for HBM4 as well. It's not that what we sold in 2025 or 2024, this is immaterial for the additional growth. Some of this equipment has already been qualified to address the HBM4. Specifically, this is in general. There is an uplift. There is going to be an increase in capacity for the HBM4. What I indicated in my previous answer is that we are already in the process of talking to customers about the forecast for HBM4. Definitely, this will start to happen early in 2026, where we will ship equipment to support the HBM4. More than that, I will not be able to give you any details.

Now, going to the OC versus the Eagle, the advantage of the OC, as I discussed in one of the previous questions, are two things. First of all, it's the throughput, which means immediately much better footprint in the fab. It's the ability to address a large number of bumps, and the HBM is going into this direction. Its inspection capabilities today are already down to 150 nanometers. Already, we are demonstrating it at customers. This capability will be able to support also the hybrid bonding requirements. All in all, when a customer is looking today whether he wants an Eagle versus he wants an OC, those that are thinking about the future and want to ensure that they will be able to support their products in two or three years, some of them lean towards making a higher investment today and buying the OC.

From gross margin, in general, the OC is more expensive, and it will have a positive contribution to our gross margins. Did I answer your question, Craig?

Yes, it does, Ramy. Thank you very much. The next question is a somewhat intermediate to long-term question. I'll start with congratulating the team on being just inches from driving the business to its $500 million run rate target. Good for you for getting so close to that target. The question is this: if we look at the list of incremental growth drivers, we spent a lot of time on HBM4, and it sounds like that would be at the top of the list. As we think about growth through 2026, what are the next couple of applications that we should be focused on as your bigger incremental growth drivers over the next 18 months? Thank you, team.

I think, first of all, no doubt the high-performance computing is going to be a main driver for our business. This goes to metrology in general, 3D metrology. It's also in the metrology. Rafi, in his prepared remarks, talked about the, I would say, phenomenal success we have seen at the tier one customer with our metrology line. That's a line that's also going to contribute. I think it's a very good growth engine, metrology in general, for our business. I would say that the high-performance computing and getting into more and more applications, we are gaining more and more traction on the inspection part. Definitely, that's a big market with our capabilities on the G5 and on the OC specifically, ability to go and detect very small defects in the range of 150 nanometers. We'll definitely try a lot more applications outside also the high-performance computing.

I think we are going to gain some traction with our new software capabilities, which we discussed in the prepared remarks, the EDC and the ADC. I won't go into all of the details. Definitely, these are technologies that are going to push us much, I would say, going to give us a lot of strength on the inspection side. All in all, no doubt, we are in a market that's going to grow at the run rate with what I hear from all the different analysts, over 25% growth in the next few years. Definitely, I think this is the main driver. Of course, our task is to gain more and more applications in this market. We haven't forgotten the other markets. I would say the conventional advanced packaging, fan-out, and other applications still have a very nice momentum.

Last but not least, today, I think still we see a lot of opportunities in the front end. Compound semi is comparatively depressed in the last couple of years, but definitely, this is an opportunity looking into the future. Don't forget, we have, I think, about 350 customers, 200 active every year, a lot of ones and twos that all of them will definitely provide additional opportunities in the foreseeable future.

Thank you, Ramy.

Speaker 2

Thanks, Craig. Our next question is going to be from Gus Richards of Northland. Gus, please go ahead.

Yes, thanks for taking the question. Just in terms of the OSATs, can you talk a little bit about what you're seeing in terms of applications, how that compares to the traditional foundries that do advanced packaging for HPC?

Speaker 1

Hi, Gus. It's a very interesting process that we are seeing because I think we started to talk about it a year ago, that we expected the OSATs to start to take, I would say, a position in the high-performance computing. This is definitely what we are seeing. They used to do, they started to go into the heterogeneous integration a couple of years ago. Started with these applications. We are seeing major OSATs today. Some of them just do the COAS, and I think that TSMC made some remarks about it, about specific names. We are seeing all the major OSATs going into COAS or what we call COAS-like. It's something similar. It's becoming a significant business. It's a significant number of orders that we are seeing for these applications from the major OSATs. Gus?

Yep, can you hear me?

Speaker 2

Yeah, we can.

Speaker 1

Yes, did you hear my answer?

No, but I can follow up later. I don't want to take lessons.

All right. We'll have a follow-up later. Thank you, Gus.

Yeah. Follow-up is how do you see the opportunities for like chiplets and advanced packaging?

The chiplets, we look at the chiplets in general as part of the high-performance computing. You know, eventually, it's a chiplet, which is either the GPU or CPU, depends on the actual, I would say, design of the high-performance computer. With it, you know, it's surrounded by the high-bandwidth memories. From that point of view, when we talk about HPC, we specifically talk about chiplets, the high-end chiplets. In general, no doubt, this market is picking up as part of all the changes in the market. I think from all the numbers that I'm seeing, it will continue to grow in a very healthy way in the foreseeable future.

Got it. Thanks.

Speaker 2

Thanks, Gus. Our next question is from Thomas James O'Malley of Barclays. Tom, you may go ahead and ask a question.

Hey, guys. Thanks for taking my question. Apologies if this got asked already. I just hopped on from another one. I think you guys gave advanced packaging is about 20% of the revenue mix in the quarter. Can you talk about how much of that is HBM today versus a year ago? Has the percentage within advanced packaging grown pretty materially? Maybe give us an update of how much of that is HBM today?

Speaker 1

Let me get the numbers correct. 70% of our business goes to what we call advanced packaging. High-performance computing or HPC, whichever name you go, is part of our advanced packaging. Out of this 70%, 50% goes to HPC and 20% goes to what we call conventional advanced packaging, such as fan-out. In the HPC, we do not specify what goes to chiplets and what goes to the high-bandwidth memory. The reason for it is that there are changes, and it depends when the orders are coming, and it's too complicated. Therefore, we've been just talking about high-performance computing. For the last few quarters, we've been at a run rate where 50% of our total revenues went to high-performance computing, which includes HBM and chiplets.

Gotcha. Thank you for that. I wanted to ask a little bit of a strange one, so bear with me. In a world right now where you have two major memory suppliers that are qualified on HBM for the largest guy in the world, and there's a third that's attempting to do that pretty aggressively, which world suits you the best into next year? A world in which it is still two guys that are qualified that need to add more capacity, or a world in which there are three qualified guys all who are serving the market? If you could walk through that, that'd be super helpful. Thank you.

We don't have any preference whether it will be two or three. All of the players today are very good customers to us. If one of them that is not qualified will be qualified, we will enjoy it with additional applications and steps. We're working very closely with all of them. We're fine with two, and we will be very fine also with three. Tom?

Speaker 2

Tom, you're on mute.

I'm all good with those two. Thank you, guys.

Thanks, Tom. Our next question will be from Edward Yang of Oppenheimer. Ed, you may go ahead and ask.

Hi. Thanks for the time. Moshe mentioned high shipping costs that may have elevated your OpEx. Is that moderated now?

Speaker 1

Yes. This has been kind of an exceptionally high level of shipping expenses due to the conflict with Iran. Now that the conflict is muted to some degree, the shipping expenses went back to normal rates. We don't expect anything like that in the third quarter if the situation remains as is.

Can you quantify what the impact was in the second quarter?

It was over $0.5 million. Yes.

Got it. Just to clarify on the positive momentum that Ramy was talking about and you're seeing in the second half of the year, are there any seasonal puts and takes that could impact fourth quarter? Should we also expect that to grow revenue sequentially? For the 2026 expected growth, you know, the Street is modeling about 7% total revenue growth, but that's slower than what's typical for you. Maybe you could help us reconcile any divergence there or any reason why we shouldn't see another year of double-digit growth for Camtek in 2026. Thank you.

It's too early definitely to talk about Q4, and we will discuss it in the next earning call. As I said before, there is a positive momentum in the second half. This is based on orders on hand, on orders that are in the pipeline. As we said, we did provide a guidance for Q3 that is positive. Therefore, I think the overall second half is definitely, as we said, it's a positive momentum. Now, I'm going back to 2026. There are lots of discussions today how 2026 will look like. Again, I think really this is much too early to discuss it. This is a very dynamic market. Things are changing so fast here. This is true with the technology. This is also true with everything that we do. As I said, the high-performance computing is growing rapidly and will continue to grow in the foreseeable future.

With the technical changes and everything that is happening in the market, we're assuming a positive environment in 2026 definitely will lead to another growth year for Camtek. What will be the percentage? It's really too early. Unfortunately, it is too early today. We'll talk it in future calls.

Fair enough. Thank you very much.

You're welcome. Thank you.

Speaker 2

Thanks, Edward. Our next question will be from Denis Pyatchanin of Stifel. Denis, please go ahead and ask your question.

Hi, thank you. This is Denis on for Brian at Stifel. For my first question, maybe you could discuss that for HBM4. What is the expected ratio of OC versus Eagle shipments? Would you expect it to be roughly even, or do you think for HBM4 that customers would require more of the newer system?

Speaker 1

First of all, this is very customer-dependent. We don't really give these numbers of Eagle versus the OC per applications. As I said, the OC has specific advantages in terms of capabilities in throughput, accuracy, and other aspects that for certain applications, and specifically for those that want very high volumes in the HBM4, may take some of the capacity will move into OC. This is very customer-specific. As we said, both products are very successful in the market. Definitely, there is, and don't forget, it's not just HBM. A lot of the business goes to the conventional advanced packaging. There are many other applications where the Eagle line, I think, is the best product for the price it is offered today in the marketplace. As time goes by, we'll be able to give you much more, I would say, clearer estimations and discuss this a little bit more accurately.

That's more or less what we see today.

Great. Thank you. Yes, can you hear me?

Yeah, yeah.

OK, great. For my follow-up, maybe you can tell us a little bit more about the OSATs. Do the OSATs continue to exhibit more signs of strengthening? Maybe you can tell us what's driving this. Is it just purely COAS or something else? Do you have any view of foundry or OSAT logic expansion plans for the second half of 2025 and into 2026?

2026 is too early to discuss the OSATs. Don't forget, a lot of these players are still planning 2026 and are still not in a position to release orders to give us the actual forecast. I think for OSATs today, where we see a lot of the growth is coming, first of all, from the HPC, as we discussed before. The major OSATs are starting to produce the COAS and COAS-licensed applications. This is definitely a very high growth area. I think this trend started a year ago. We see it undergoing today and will continue into the foreseeable future. Don't forget, there is a lot of regular advanced packaging, signed fan-out, and other applications. We see a lot of this business still strong in the OSATs, and we're shipping equipment to address those applications as we speak in each of the quarters.

That's some of the applications that OSATs are buying equipment from us. I would say from the OSATs, the major, I would say, two applications are the ones I discussed.

Wonderful. That's it from me. Thank you.

Thank you, Denis.

Speaker 2

Thanks, Denis. Our next question will be from Vivek Arya from Bank of America. Vivek, please go ahead.

This is Michael Sebastian Mani on for Vivek Arya. Thanks so much for taking our questions. To start, I just wanted to ask about one of your major chiplet customers, which is covering some challenges currently. They recently revised their outlook for their CapEx in 2026 pretty meaningfully. The question is, have you seen any major changes to the investment plans at any of your chiplet customers? To what extent could this already be reflected in your backlog? Could we see this demand be made up by some of your other customers over time as well?

Speaker 1

There are discussions about, you know, and the forecast may move by quarter here and there. This happens on a regular basis that people move around, you know, their forecast. We have not seen anything significant in terms of changes in the forecast or our shipments. I can't comment on anything more than I've just said.

Got it. Understood. Thank you. Just on your newer products, you said that 30% of sales this year would come from OC and Eagle G5. Could you give us an idea of how much of that is weighted in the second half? My main question, kind of in the spirit of other questions that people have asked earlier in the call, is how much incremental growth are these new tools driving for you? Would you say that they're mainly replacing, for now, mainly replacing demand that you would normally see for your older systems? Is it possible that we won't see the incremental growth from new applications, new customers, really until we get to something closer to HBM4? How would you frame the incremental growth opportunity over the near term from these new tools?

Let me answer your first question. First of all, the Eagle G5 was actually introduced in the market a little earlier than the OC. We started to ship it in larger quantities already at the beginning of the year. Actually, if I recall correctly, the first shipments were done in Q4 of 2024. We gradually increased it, so it was really loaded very nicely already in the first half. We continue to see the growth into the second half as well. The OC shipment actually started a little later. It is more, I would say, the load. Maybe I would say we started more in the second quarter. Most of the shipments will be divided on three quarters. Obviously, we will see more shipments, and I would say the percentage will definitely be higher in 2026. Now, going into applications, definitely, we are seeing more applications.

I will put it in a different way. I think that our product lines today, when we talk about the Eagle G5, are more competitive than the Eagle. It is definitely more competitive today compared with our competition. I think definitely this will mean for us potentially to take market share as we move into the future and gain some applications. These applications require, I would say, more performance. It is always throughput, and it is always better detection. This is in general. When we talk about the OC, these are capabilities that we did not have before. This will open a lot of opportunities for us as we move along. Still, it is too early to quantify it.

Great. Thanks so much.

You're welcome.

Speaker 2

Thanks, Vivek. That will end our question and answer session. Before I hand back to Rafi for his closing statements, I'd like to mention that in the coming hours, this call will be available from the Investor Relations section of Camtek's website. That's camtek.com. I'd like to thank all of you for joining this call. Rafi, please go ahead and make your closing statements. Rafi?

Speaker 1

OK, I wasn't mute. Sorry. I would like to sincerely thank all of you for your continued interest in Camtek. A special note of appreciation goes to our dedicated employees and exceptional management team for the outstanding performance and commitment. To our investor, I am truly grateful for your trust and long-term support. I look forward to updating you in our continued progress in the next quarter. Thank you.