By Rafi Amit, CEO of Camtek (NASDAQ: CAMT)
Our results for the quarter were very good. Compared with our guidance range of $33-34 million, our semiconductor revenues and PCB revenues compared were $34.3 million, so we came out ahead.
Most significantly though, were our recent changes from a strategic perspective.
Three years ago, we made a strategic decision to focus on the Semiconductor space and specifically the Advanced Packaging segment, which is showing a very high growth rate. Since we made this decision, we have managed to more than double our semiconductor revenues from $44 million in 2013 to over $90 million expected this year. We expect this trend to continue and have identified additional opportunities that may even accelerate the growth rate and further improve our profitability.
To support this strategy, we have recently taken a few steps.
We announced the sale of our PCB Inspection Business Unit to a Shanghai private equity firm, Principle Capital for up to $35 million. In general, the PCB industry has shown flat to modest growth rates with occasional peaks. Recently, an improvement in this sector opened up the opportunity to divest this business.
We also resolved our ongoing dispute with Rudolph (NASDAQ: RTEC). Despite our confidence that our technologies do not infringe Rudolph's patents, after more than a decade of disputes with Rudolph, we decided it is in our best interests to close this chapter and come to a final settlement. This settlement removes the significant management distraction and ongoing expenses, which we believe would have been well in excess of the settlement amount of $13 million. In addition, the parties agreed to a quiet period of three years, during which neither party may file any action seeking damages against the other party.
The fourth step we have recently taken relates to our Functional Inject Technology, or FIT as we call it. In parallel to our effort of finding a strategic investor, we decided to focus on ink development for the most stringent market specifications and slow the development of the next generation printer. To achieve it, we formed a strategic cooperation with Sun Chemicals, a world leader in the manufacture and supply of liquid solder-masks and other inks for electronic manufacturing. As a result, we adjusted our FIT expense structure to between $100 to $125 thousand per quarter, amounting to an approximate $2 million per year reduction in ongoing opex for the development of this technology. Our next step will be to leverage our strong infrastructure and strong cash position- to strengthen our market position possibly through an accretive acquisition of a company with synergistic value to Camtek.
Looking ahead, given the changes we have made, we expect to see longer-term higher revenue growth rates for Camtek.
From a financial perspective, we expect to demonstrate higher gross margins and lower operating expenses, leading to significantly improved operating margins. This should be evident already in the coming quarters, and we expect our fourth quarter results to already demonstrate approximately 15% operating margin with potential for further improvement in 2018.
All our recent steps have enabled us to become highly focused on our target market- that of semiconductor inspection and metrology, and positions us as a leader in this high growth rate market with better profitability than before.
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