Orbotech Ltd. (ORBK)

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Orbotech Ltd. (ORBK)

Q3 2009 Earnings Call

November 2, 2009; 09:00 am ET


Rani Cohen - President & Chief Executive Officer

Amichai Steinberg - Deputy Chief Executive Officer, Global Finance & Operations

Erez Simha - Vice President of Finance & Chief Financial Officer

Adrian Auman - Corporate Vice President


Jim Ricchiuti - Needham & Co.

Sergey Vastchenok - Oppenheimer

Shannon O’Callaghan - Barclays



Welcome to the Orbotech Limited Q3 2009 conference call. At this time all participants are in a listen-only mode. (Operator Instructions)

Now I’ll turn the call over to Mr. Adrian Auman. Sir, you may begin.

Adrian Auman

Thank you, operator. Good morning. This is Adrian Auman, Corporate Vice President at Orbotech. Joining me on the call today Rani Cohen, President and Chief Executive Officer; Amichai Steinberg, Deputy Chief Executive Officer, Global Finance and Operations; and Erez Simha, Vice President of Finance and Chief Financial Officer

You should have all received a copy of the press release, which was issued for earlier today. If you have not received this released, please refer to Orbotech’s website at www.orbotech.com. I’d like to take this opportunity to inform everyone that management will be presenting at the upcoming First Midwest Securities Small Cap Ideas Conference in New York City on November 16. The Barclays Capital Global Technology Conference in San Francisco on December 9 and Needham & Company 12 Annual Growth Conference in New York City on the January 13.

Now before starting the call I’d like to mention that certain statements that are not historical or forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words estimate, project, intend, expect, believe and similar expressions are intending to identify forward-looking statements and these forward-looking statements involve known and unknown risk and some uncertainties.

Any factors could cause the actual results performance or achievements of the company to be materially different from those that maybe expressed or implied by such forward-looking information. Additional information regarding risk and uncertainties associated with the company’s business are included in, but not limited to the company’s reports filed from time-to-time with the SEC.

With that said I’d like to turn the call over to Rani Cohen.

Rani Cohen

Thank you, Adrian. Hello everyone, thank you for joining us. In general, business conditions continued to improve in both at PCB and FPD markets we see more confidence and less anxiety, businesses are beginning to come out of the bunkers. We nevertheless have to continue to be vigilant in monitoring business conditions.

Starting with the FBD market, the industry is doing well with existing fabs running it close to full capacity utilization in most geographical regions and supply and demand appear to be equilibrium. Growth in the industry is being driven by significantly higher LCD-TV demand from China and other emerging economies.

We expect this to lead to significant increases in CapEx over the next two years and this in turn should lead to increased business for Orbotech in late 2010 and into 2011. In this type of industry environment, the competitive landscape will be challenging, but we are confident in our ability to maintain our leadership in this industry. I’d also like to mention that a full year has now passed since we closed our acquisition of PDI.

Thank to the outstanding efforts of our employees all over the world, we have successfully concluded a very complex and challenging integration process. Our comprehensive product portfolio combined with our significant accumulated, FPD know how and expertise has positioned us very well to face the challenges, which the coming ramp up in the FPD industry will present.

Turning now to the PCB market, in general the market conditions to improve, IT budgets essentially frozen for the last two years are now being released. There’s increased confidence and optimism, in addition to the general recovery, there are emerging technologies and significant new product introductions and applications that are contributing to the recovery.

They include smartphones and netbooks as well as the introduction of Microsoft’s Windows 7 operating system, these should all helps stimulate growth. Industry fabs are currently operating at over 80% capacity utilization driven by these communications, consumers and computer related products. These trends are most evident in China and Taiwan, where significant investments are being made. Other regions, such as Japan and the west, which are characterized by niche applications and technologies, are stabilizing as business conditions continue to improve.

We had a good quarter and direct imaging. We sold 11 systems, the same as last quarter. In addition, we recently introduced a new direct imaging system. The Paragon-Xpress 9 was designed for high speed throughput and addresses the need for mass production of advanced applications. It offers much higher throughput with the same resolution and performance of previous systems. It compliments our already strong portfolio of direct imaging solutions, broadens our addressable market and significantly strengthens our competitive position.

The new system reflects our ongoing commitment to our customers by continuously developing better solutions even during tough times. The system has already been field proven in rigorous mass production environments with excellent results. We expect the new system to start contributing to revenues already in the fourth quarter.

Gross margins in the third quarter were adversely affected by the product and geographic mix of our product sales. Adrian will elaborate more on this later on. So I will just say that we expect them to improve in the fourth quarter. As for guidance, we expect revenues in the fourth quarter to be around $95 million to $100 million.

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