Welcome to Camtek's Second Quarter 2017 Results Conference Call. [Operator Instructions] 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 and Public Relations at 1-646-688-3559 or view in the news section of the company's Web site at www.camtek.co.ir. I would now like to hand over, call over to Mr. Ehud Helft of GK Investor Relations. Mr. Helft would you like to begin.

All of you I would like to welcome all of you to Camtek's second quarter 2017 results conference call. I would also like to thank Camtek's management for hosting this call. With us on the line today are, Mr. Rafi Amit, Camtek's CEO; Mr. Moshe Eisenberg, Camtek's CFO; and Mr. Ramy Langer, VP head of the semiconductor division. Rafi will provide an overview of Camtek's strategy going forward and Moshe will discuss some of the recent development and summarize the financial results in the fourth quarter. We will then open the call to take your questions. 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 obligations to update any of the forward-looking estimates contained whether as a result of new information, future events, changes in expectations 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 contents of this conference call. In addition, during this call certain non-GAAP financial measures will be discussed. These are used by management to make strategic decisions, forecast future results and evaluate the Company's current performance. Management believes that the presentation of non-GAAP financial measures is useful to investors' understanding and assessment of the Company's on-going core operations 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 CEO. Rafi go ahead please.

Thanks, Helft. Good afternoon and thank you for joining us on our call today. To discuss many of the changes that Camtek has undergone recently. As you recall our strategy has been to become a leading company in the semiconductor space in which we operate. Over the next few minutes I would share with you, the strategic steps we've taken and the rationale behind them after that Moshe will cover the financial aspects including our result as well the new financial model of the business looking forward. Three years ago we made a strategic decision to focus on the semiconductor pace and specifically the advanced packaging segment which is showing a very high gross rate. This trend is driven by new packaging technologies requiring higher level of inspection and metrology capabilities, expertise in machine customization, quick customer response and excellent onsite support. Over the years, we have built an outstanding team with unique expertise for this market, this differential Camtek from the competition and set the high barrier for new comers enabling high margin over time. Since we made this decision we have managed to more than double our semiconductor revenue from $44 million in 2013 to over $90 million expected this year. We expect this trend to continue and identify additional opportunities that may even accelerate the gross rate and further improve our profitability. To support the strategy we have taken a few steps, first has been to build and maintain our stake of our semiconductor product portfolio. We have launched several new Eagle models and we are seeing excellent performance in both to the inspection as well as to the increase the metrology. The second step as we announced two weeks ago was the sales of the PCB inspection business unit to a shanghai private equity firm principal…

Thank you, Rafi. I will first present our results of the second quarter, following the results summary, I will discuss our new financial model ahead; note that due to the expected upcoming sale of this Camtek PCB business, the result of this business unit are reported as discontinued operation in the Camtek financial statement in both the current year as well as the comparative terms. Furthermore, following the settlement with Rudolph Technologies, there is a one-time impact of $13 million on the GAAP results in the second quarter and we have booked related deferred tax benefit of $1 million accordingly. These amounts are excluded from this non-GAAP results. In addition, as a result of the expected PCB business sale, we have recorded a deferred tax asset of $4.5 million which we expect to utilize as part of the transaction completion. Second quarter revenues were $22.7 million, up 14% year-over-year. I know that the revenue do not include those of the PCB business, which were strong at $11.7 million. Given the guidance we issued last third quarter of the $33 million to $34 million, our semiconductor and PCB revenues combined would have been $34.3 million ahead of our guidance range. The result of the results will be related to the continuing operation only on a non-GAAP basis. As a consideration between the GAAP and non-GAAP results appear in the table at the end of the press release issued earlier today. Second third quarter gross profit was $11.2 million, representing a gross margin of 49.2%. This is compared with the gross profit of $10 million representing a margin of 50.5% in the second quarter of last year. Operating expenses in the third quarter were $9.1 million, same as the second quarter of last year. Operating profit in the third quarter was $2.1…

Thank you, sir. [Operator Instructions] The first question is from Craig Ellis of B. Riley. Please go ahead sir.

Thank you for taking the questions and Rafi congratulations on the evolution of the business that you had announced in detail today. The first question that I wanted to ask is related to the semi business it's very helpful - for not only the third quarter and fourth quarter with fourth quarter semi revenues rising quarter-on-quarter. Can you help us understand where the strength is coming from as we move out into the last quarter of the year?

[Indiscernible] comment on this in general as I think as we mentioned there is a diverse at end of business and we see strength today in all of the relevant segments that we address. Obviously the advanced packaging which is 50% continues to be strong and all of the discussions with customers and surveys and analysts we see this growth going into 2018 and definitely we see this strength in the second half of the year. Overall, what we see and we mentioned also the CMOS Image Sensors business has doubled in the last quarter and we see the strength moving forward. So overall most of the segments that we serve are strong and we see the trend, we are talking to customers and we're very confident about the second half as we mentioned before.

That's helpful color and related to that the quarter ago the company talked about volume purchase agreements which has been executed large in nature. Can you give us an update on whether there were any new volume purchase agreements announced in the second quarter. And the extent to which your shipping under those prior agreements in the back half of the year with some of the strength that you're seeing?

So we did not sign any new ones however we've actually three of the volume purchase agreement that we mentioned we're nearly fulfilled and we assume that we'll probably even exceed the sales as we discussed in those volume purchase agreement. And there is one volume purchase agreement that we've already started to ship but we don't think that we will exceed it or even get to the next. So overall and most of them will be completed we assume that one of them will probably see about 50% of what we assumed in the following purchase agreement.

That's helpful and then the next question is with regards to operating expenses if I heard you correct Moshe I think I heard you say that even after the further reduction in operating expense in the fourth quarter there would be some optimization in 2018 when did I hear correctly if so how significant would that me and would that result in an absolute dollar decrease or simply maintaining operating expenses while continuing to grow the top line very significantly.

So Craig, let me summarize this topic first the 15% operating margin that we are talking about we can achieve it without any major expense structure adjustments between now and the fourth quarter this is basically taking into account the four steps that Rafi mentioned earlier namely the fixed adjustments the legal expenses which will be reduced dramatically and the focus in the business. Moreover between now and the end of the year we will be walking on adjusting our G&A expense structure to adjust to the level of the current business and the full impact will be shown and reflected in our 2018 financial model on an absolute dollar value not just a percentage of business.

That's helpful and then last question is high-level question and I'll take it back to Rafi. Rafi it was helpful to get your strategic update on things as we look ahead with the business concentrated now in the high growth semi business. Can you help us better understand where your investment priorities will be both with incremental organic R&D and with the potential to redeploy either cash that currently exists or proceeds from the PCB sale in either advanced packaging, image sensor, MEMS technologies or in new areas that would add for the portfolio of breadth to what you already have? Thank you.

Okay as I mentioned now we're going to focus on our segment [Indiscernible] now some sub-segment that we haven't really penetrated until now because it takes time. So we are quite sure that we have the capability we have the technology even we have the product but we need to do some marketing and penetration of course in order to go to new subsegment in the overall semiconductor area that we are operating. This is one I would say one area that we are going to see expansion. The second one is definitely we consider M&A, we consider acquiring as I mentioned before a company in [indiscernible] like Camtek that already showing profit and positive cash flow and I would say that with these efforts I would like to see Camtek with these three years to about $200 million revenue per year. So we definitely are going to put more effort on executing the strategy.

Thank you, Rafi, good luck.

Thank you.

Thank you.

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

Hey thanks for taking my question congrats for a great quarter. So actually Rafi just a follow-up the answer you just gave to Craig so the $200 million per year long-term target -- based on your commentary I assume that the combination of organic and inorganic growth meaning like organic as well as acquisition. And is there a way to think about how much you're targeting in terms of acquisition?

No look this is - I would say any size from $25 million to our size above $100 million companies is fine with us to fulfill this target. Definitely we have to select we have to check out the parameter but this roughly I think is the reasonable size for us.

Okay that's helpful. And moving on to the business actually was the segment ruled out have you guys thought to just your conversation with customer had that made any change in your conversation with customer, has that -- made your customer more willing to get you from you or more interested in talking to you guys now that there is legal -- this legal issue is behind you. Any kind of feedback you got from the customer on this settlement?

In general, the litigation as concerned to customers do not really effect the business. We've been operating and Rafi talked about, doubling the business over the past three years, we did it while the litigation was ongoing. So no, this was not an issue with customers, I think customers understood and understood that lots of companies have litigation between them. Obviously as Rafi mentioned, this is something from disruption for management that is helpful there, moving ahead. But definitely do not affect any of the business in the past.

Okay. Great, thanks for clarifying that. And then I think you guys talked about actually last year, you guys launching 2D inspection tools. And you guys talk about going after that market given that, your share in 3D is much higher and therefore, makes sense to offer 2D type. Can you give us update on where you are with that market traction of the 2D product, and all because of various markets that you highlight beyond advanced packaging like RF, power, MEMS. Have you seen more traction in those markets or is it, new wins for multi and advanced packaging?

Let me first of all talk about 2D in general. Yes, we are continuing on the penetration of the new segments in the 2D. It's moving ahead. We are definitely getting a lot of customer traction with our new technology that is showing, improving very good performance at several customer sites. So that's 2D in general. You are talking about subsets of the 2D like MEMS, RF, obviously those as we said we're seeing more business. But that's not only because of the 2D improvements, these have been - I would say, a segments where we have been strong for quite a few years and not -- we have performed very well there in the past. So, not everything that we do in 2D is related to the improvement in the technology. So those I would say, the RF, the MEMS is more, I would say business development of existing businesses that have addressed in the past.

The efforts on the 2D that we mentioned all the time is mainly in advanced packaging, because these advanced packaging, at the beginning of the focus of the metrology of the 3D. Now, we see more and more penetration not only metrology of 3D, but 2D inspection and 2D metrology, this is a big change that we can see now.

I think we understand your focus on advanced packaging. We can think about, I think Rafi, you talked about a size of the market opportunity there. And 2D being actually frankly a bigger market than 3D metrology and advanced packaging. And then, what we can think about, where you stand in terms of market share and where you're seeing the markets…

On market share growth, market share of 3D. Can you repeat the question please?

Sorry. The question is, our understanding is, your 3D market share is higher than 2D, that's actually in advanced packaging, right. Anyway you can describe where you think where you are in terms of market share in 2D market right and where do think they go?

I think we are well over 50%, well over 50% on the 3D. On the 2D, this is very hard to measure and the reason that our managed segments. If you take the seamless image sensor where it's a 2D business and there we dominated with high market share. In others, it's much harder to put a number. But I think we're definitely in the double-digit market share. How far along in certain segments, it's hard for me to say.

At the beginning, some customer, use our tool only for 3D, but we already gave them capability for 2D. Now we can see more customer that use the hybrid solution, they can use the same machine only for 2D. So they start to use more and more 2D in the machinery [indiscernible] they use only for 3D. So when they get the technology and found very positive results, they now qualify our capability for 2D as well.

Lastly, Rafi, you mentioned on the [indiscernible] contraction of the software assets and probably comes from this difficult partnership and can you tell us where you all was gotten and how do you understand that the software so these can get to like 10% so the [indiscernible] software.

So we've started to install the software and we had already installed in several Tier I customers and so if there its operating customers are happy with it and I think we will not see a very large a dollar value, dollar revenues this year but it's definitely were setting the foundation for a most significant business next year but overall the software solution business getting to several solutions, several software solutions and it is definitely showing a lot of interest from the customers good performance and we're very happy with the results so far.

Great, that's good color that I have. Thank you.

[Operator Instructions] There are no further questions at this time. Before I ask, Mr. Rafi to go ahead with his closing statements, I would like to remind participants that a replay of this call will be available on Camtek's website at www.camtek.co.ir beginning tomorrow. Mr. Amit would you like to make your concluding statements?

I would like to thank you for your continued interest in our business. I look forward to seeing you in the Jefferies Semiconductor Conference at the month in Chicago, and team [indiscernible] Conference in early September in New York. I look forward to talking with you again next quarter. Thank you and good bye.

Thank you. This concludes the Camtek's second quarter 2017 results conference call. Thank you for your participation. You may go ahead and disconnect.