Camtek Ltd. — FY2018 Form 20-F
Reporting period: Fiscal year ended December 31, 2018. Although the request refers to 2018 Q4, this filing is an annual report; it does not provide a clear standalone Q4 income statement or cash-flow value. Financial figures below are annual, in U.S. dollars unless noted. The audited financial statements state they were prepared under U.S. GAAP, although the cover-page accounting-standard checkmark appears to indicate IFRS; verify the applicable reporting basis.
Business context
Camtek designs and sells automated inspection and metrology systems and software for semiconductor manufacturing, with a focus on advanced packaging and related applications. Following the 2017 sale of its printed circuit board (PCB) business, semiconductor inspection and metrology is its sole operating segment. The company reported an installed base of approximately 930 systems at year-end 2018.
Key financial metrics
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $123.2 million | $93.5 million |
| Gross profit / margin | $60.8 million / 49.4% | $45.5 million / 48.7% |
| Operating income (loss) / margin | $20.0 million / 16.3% | ($3.0 million) / (3.3%) |
| Net income | $18.7 million | $14.0 million |
| Net income from continuing operations | $18.7 million | $1.7 million |
| Diluted earnings per share | $0.51 | $0.39 |
| Cash flow from operating activities | $16.8 million | $1.6 million |
| Cash and cash equivalents at year-end | $54.9 million | $43.7 million |
| Working capital | $80.1 million | $63.6 million |
At December 31, 2018, total assets were $141.5 million and total liabilities were $40.1 million. The filing reports no outstanding loans; an available $4 million credit line was unused, and the company said it was in compliance with its covenants. Current assets were $119.3 million and current liabilities $38.7 million. The company expected available resources and operating cash flows to meet liquidity needs for at least 12 months.
Changes versus the prior comparable year
- Revenue rose 32%, primarily from increased product units sold. Product sales were $117.5 million, up from $88.3 million; service revenue was $5.6 million, up from $5.2 million.
- Gross margin increased to 49.4% from 48.7%, attributed mainly to product and sales mix. R&D expense rose to $14.6 million from $13.5 million, while selling, general and administrative expense rose 19% to $26.2 million, mainly due to higher sales commissions.
- Operating income improved from a $3.0 million loss to $20.0 million. FY2017 included a $13.0 million Rudolph patent-litigation settlement expense; FY2018 had no such charge.
- FY2017 net income included $12.3 million from discontinued operations, primarily reflecting the PCB business sale. FY2018 net income came entirely from continuing operations. The PCB sale generated a reported $12.8 million gain in 2017.
- Operating cash flow increased to $16.8 million. Investing cash flow was a $2.3 million outflow in 2018, compared with a $26.6 million inflow in 2017, which included proceeds from the PCB sale. Financing cash flow was a $3.3 million outflow in 2018, mainly reflecting a $5.1 million dividend, partly offset by option-exercise proceeds.
- Inventory increased to $32.2 million from $22.7 million, and trade receivables increased to $31.6 million from $23.2 million. The company recorded approximately $0.1 million of inventory write-offs in each of 2018 and 2017, versus $4.8 million in 2016.
Outlook, commentary, risks and unusual items
- Outlook: The filing provides no specific company revenue or earnings guidance. Management cited uncertainty for 2019, including U.S.–China trade tensions and mobile-device demand. It referenced Gartner forecasts of 2.6% semiconductor revenue growth in 2019, versus 13.4% in 2018, and global GDP growth of 2.9% versus 3.1%.
- Market and geographic exposure: Approximately 80% of FY2018 revenue came from Asia Pacific, with about 71% from South Korea, China and Taiwan; China alone represented approximately 30% of revenue. Management identifies semiconductor-industry cyclicality, capital-spending changes, competition and regional trade or political disruption as material risks.
- Chroma transaction subsequent to year-end: Agreements signed in February 2019 provide for Chroma to buy 6,117,440 shares from Priortech and for Camtek to issue 1,700,000 new shares to Chroma at $9.50 per share. The company expects approximately $16.15 million from the new-share issuance. The transaction was expected to close by the end of Q2 2019, subject to shareholder, regulatory and other approvals. The parties also agreed to a technology license and voting arrangement; closing and final terms should be verified.
- Legal and operational items: Camtek paid $13 million to settle patent litigation with Rudolph in 2017; the settlement provided specified product rights and a three-year period in which neither party could bring damages claims against the other. The filing reports no material legal proceedings outstanding. Camtek ceased its Functional Inkjet Technology activity in 2018; it had written off related IIA liabilities after concluding payments were not expected. It disclosed approximately $7.0 million of unrepaid historical IIA grants, while noting no financed know-how is used in current or anticipated products.
- Other risks: The company relies on limited- and sole-source suppliers, has long customer evaluation and sales cycles, and faces inventory forecasting and obsolescence risk. It had no open foreign-exchange hedges at year-end and disclosed approximately $10.1 million of net NIS-denominated liabilities. Management assessed disclosure controls and internal control over financial reporting as effective at December 31, 2018; the auditor also gave an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Obtain quarterly results separately to assess FY2018 Q4 revenue, margins, earnings and cash generation; this annual filing does not provide clear standalone Q4 figures.
- Reconcile the cover-page IFRS mark with the filing’s statements that the audited financial statements are prepared under U.S. GAAP.
- Track receivables, inventory growth and customer payment/installation milestones against order demand and operating cash flow.
- Confirm the Chroma transaction’s closing, approvals, share issuance, proceeds, technology-license economics and resulting ownership and governance arrangements.
- Monitor semiconductor capital spending, China and broader Asia-Pacific demand, supplier continuity, currency exposure, and compliance with Israeli tax-benefit and IIA requirements.