Camtek Ltd

NASDAQ:CAMT

Earnings Call Analysis

Optimism for Growth and Profitability

The company is set to see growth primarily from its high performance computing segment, specifically chiplets and HBM, which will contribute over 30% to the business, with expectations for this architecture to become an industry standard in the next 2-3 years. Orders for 2024 are mostly weighted towards the first half of the year, with a strong pipeline indicative of continued demand. Furthermore, there's a projected revenue conversion from the existing 240 system orders for packaging. While gross margins have seen a positive trend for the past two quarters, the company is targeting a gross margin of at least 50% for the upcoming year, acknowledging that sales mix could affect the outcome.

Q3 2023 Performance Overview

Camtek, a manufacturing solutions provider, reported a Q3 2023 revenue of $80.5 million. This reflected a 2% decline from Q3 2022 but a 9% increase from Q2 2023. The company maintained a stable gross margin of 49%, mirroring the same period last year and showing a 1% improvement from the previous quarter. Operating profit saw a slight decline to $22.2 million, resulting in an operating margin of 27.6%, slightly less than the 28.3% in last year's Q3. Net income stood at $25.2 million, translating to earnings of $0.52 per diluted share. These earnings outperformed the previous year, which saw a net income of $23.3 million, or $0.48 per share.

Revenue Streams and Geographical Split

Camtek's revenue primarily came from advanced interconnect packaging applications, with a significant portion being HBM and Chiplet modules—representing over 60% of its revenue. The remaining 40% was split among compound semiconductors for power devices, CIS, and process control applications. The geographical distribution of revenues for the quarter was heavily skewed towards Asia (81%), with the U.S. and Europe accounting for the remaining 19%.

FRT Acquisition and Integration Outlook

Camtek completed the acquisition of FRT on October 31. The company has begun integrating FRT's sales and customer support into its global organization. This integration is expected to boost facility expansion to support growth. FRT's product synergies with Camtek streamline the integration process, thus promising a smooth transition. Despite the $100 million cash outflow due to the FRT deal, Camtek's balance sheet remains strong. Moreover, FRT is projected to contribute around $30 million in 2024, with their profitability aligning closely with Camtek's existing metrics.

Financial Health and Liquidity

By the end of Q3 2023, Camtek's cash reserves and marketable securities totaled $517.1 million. Q3 also saw cash generation of $12.4 million from operations. While inventory levels increased to $72.7 million, this was in anticipation of sales growth in forthcoming quarters. Accounts receivable increased to $91.4 million from $79 million as revenues climbed and collections were timed. The company anticipates a Q4 revenue between $87 million to $89 million, predicting a 7% increase over the last year's Q4 and setting the stage for growth momentum into 2024.

Future Order Delivery and Revenue Projections

A substantial portion of Camtek's recent orders, particularly for their 2 40 machines, are scheduled for delivery in 2024. The strong book-to-bill ratio exceeds one, underscoring solid demand for the company's products. This, alongside the FRT acquisition, feeds into optimism for record revenues in 2024. The existing backlog and pipeline confirm customer confidence and hint at potential business expansion. Camtek holds off on plans for R&D integration with FRT in 2024, prioritizing operational and administrative synergies for the immediate future.

Earnings Call Transcript 2023-Q3

[Operator]

Hello, everyone, and good morning. Hosting today's call is Rafa Amit, Camtek's Chief Executive Officer; Ramy Langer, Chief Operating Officer; and Moshe Eisenberg, Chief Financial Officer. Before we start, I would like to note that certain statements made on this call constitute forward-looking statements within the meaning of the Securities Act of 1933 as amended, and the Securities Exchange Act of 1934 as amended and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.Such statements may use terminologies such as believes, expects, will, may, should, anticipates, plans or similar expressions to identify forward-looking statements. Such statements reflect only current beliefs, expectations and assumptions of Camtek. However, actual results performance or the achievements of Camtek may differ materially as they are subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, those that are described in Camtek's most recent annual report on Form 20-F and as may be supplemented from time to time in Camtek's other filings with the SEC, including today's earlier filing of the earnings PR, all of which are expressly incorporated herein by reference.Camtek undertakes no obligation to update any such forward-looking statements unless required by law. Camtek public filings are available on the Securities and Exchange Commission's website at www.sec.gov and may also be obtained from Camtek's website at www.camtek.com. Also on today's call, we will include certain non-GAAP numbers. For a reconciliation between the GAAP and non-GAAP results, please see the table attached in today's press release, which is also posted in the Investor Relations section of Camtek's website. So with us today, we have Moshe Eisenberg, CFO, Rafi Amit, CEO; and Ramy Langer, COO.And I would now like to turn the call over to Rafi Amit. Rafi, you may go ahead.

[Rafi Amit, executive]

Okay. Thanks, Kenny. Good morning or good afternoon, everyone. Camtek closed the third quarter with revenue of $80.5 million. Gross margin came in at 49%, which is a continued improvement over previous quarters, as we indicated earlier this year. Operating margin was 28%. Over 60% of our revenues came from advanced interconnect packaging applications, which with a significant portion coming from HBM and chiplet modules.The remaining 40% is divided between compound semiconductors for power devices, CIS and process control applications. Regarding the war in Israel, I would like to explain how we have managed this situation. About 10% of our employees in Israel are on active reserve duty. The remaining workforce has managed to compensate for their absence. Our facility is quite far from the border, and we have some redundancy in our operations, which is done in 3 different locations. Thus, any risk of interruption is minimized.Our delivery to customers has not been affected, and we have not experienced any material or supply shortage. So all in all, the war has not affected our operations or business. On October 31, we completed the process of acquiring FRT from 4 factor, and we have begun the integration of FRT into Camtek. We are in the final integration process of FRT, sales and customer support functions into our global organization. The synergy of our products make this process straightforward. We have also started the integration of the other different organizations functions into Camtek, and we plan to expand the facility in order to support potential growth and implement the Camtek workflow into FRT.Now I would like to add a few words about the business environment. Since the beginning of third quarter, we have reported orders received of about 150 systems. And since then, we have received additional orders for about 90 systems. The last order we reported yesterday was for 28 tools from Tier 1 customer, for HBM and [ heterogeneous ] integration applications. Most of the orders are for installation during 2024. This healthy backlog and ordering pipeline point to a year of growth for Camtek, and we expect a record year in sales in 2024.No doubt that our high-performance computing is the bright spot for us. Based on several surveys, the number of chiplets is expected to grow at 35% CAGR in the next 4 years and the HBM at a CAGR of 22%. We have a strong position in this market, so we expect to expand our market share by winning additional inspection and metrology steps together with FRT products. In addition, in some territories, we see demand for other applications that are not related to the high-performance computer, but fueled by mobile phones, server, automotive and other segments.We are also enjoying healthy demand from OSAT serving multiple applications. We are greatly encouraged by the number of orders we received for HBM and by chiplet modules to be installed in 2024. At the same time, we are aware of the technological changes soon to be adopted by our customers. We are totally prepared with innovative and creative solutions and will start qualification processes at customers. With respect to Q4, we expect continued organic growth. And with the contribution of FRT, our revenue guidance is $87 million to $89 million.And now Moshe will review the financial results. Moshe?

[Moshe Eisenberg, executive]

Thank you, Rafi. In my financial summary ahead, I will provide the results on a non-GAAP basis. The reconciliation between GAAP results and the non-GAAP results appear in the tables at the end of the press release issued earlier today. Third quarter revenue came in at $80.5 million, a decline of 2% compared with the third quarter of 2022, an increase of 9% for the second quarter of 2023. The geographic revenue split for the quarter was as follows: Asia, 81%; and U.S. and Europe accounted for the rest 19%. Gross profit for the quarter was $39.4 million. The gross margin for the quarter was 49%, similar to the third quarter of last year and an improvement from the second quarter of this year, which was 48%.As mentioned before, we've been taking measures to improve the gross margin. In the last 2 quarters, we have seen the initial impact, and we expect to see continued gradual improvement in the coming quarters, subject to sales mix. Operating expenses in the quarter were $17.2 million, very similar to the third quarter of last year and to the previous quarter. Operating profit in the quarter was $22.2 million compared to the $23.2 million reported in the third quarter of last year. Operating margin was 27.6% compared to 28.3 million.Financial income for the quarter was $5.7 million, at a similar level to the previous quarter and much higher than the $2 million reported last year. The increase from last year relates to the significantly higher interest rates on an increased cash balance. Net income for the third quarter of 2023 was $25.2 million or $0.52 per diluted share. This is compared to a net income of $23.3 million or $0.48 per share in the third quarter of last year. Total diluted number of shares as of the end of Q3 was 49 million shares.Turning to some high-level balance sheet and cash flow metrics. Cash and cash equivalents, including short, and long-term deposits and marketable securities as of September 30, 2023, were $517.1 million. This compared with $506.3 million at the end of the second quarter. I know that in line with the FRT closing in October, our cash balance has decreased by approximately $100 million, which will also affect our interest income. We generated $2.4 million in cash from operations in the quarter. Inventory level was $72.7 million. It went up by $4.4 million over the quarter to support the anticipated sales growth in the coming quarters.The accounts receivables increased to $91.4 million from $79 million in the previous quarter, primarily due to the increasing revenue and the timing of collections. As Rafi mentioned before, we expect revenue of between $87 million to $89 million in the fourth quarter, which is about 7% increase over the fourth quarter of last year. And that we look forward to a year of growth in 2024. We will provide more color next quarter after we announced our Q4 results.And with that, Rafi, Ramy and I will be open to take your questions. Kenny?

[Operator]

We will now open the call for Q&A. [Operation Instructions]. Our first question is going to be from Brian Chin from Stifel.

[Brian Chin, analyst]

Maybe to start, Rafi, of the 240 system bookings since the beginning of 3Q, is the right way to think about this as maybe 80% to 90% of that relates to shipments that will occur next year. And also, I think your book-to-bill was probably at least 2:1 in 3Q. So maybe it won't be quite that high, but do you expect the book-to-bill will still be well above 1 in 4Q?

[Rafi Amit, executive]

Look, as we mentioned in all the announcement, most of the order we receive are for 2024, okay? And on top of that, I think we don't really discuss any specific we don't ask a specific question about the backlog or about book-to-bill and other type of that. But maybe Moshe can elaborate a little bit about that.Moshe, could you add something?

[Moshe Eisenberg, executive]

Yes. Indeed, most of the orders, the 240 machines that we have received so far are for deliveries in 2024. I don't have the exact percentage, but most of it is for 2024 deliveries. With respect to book-to-bill, obviously, in Q3, the book-to-bill was much higher than 1. We are still in the middle of the fourth quarter. So it's still early for me to say whether the book-to-bill this quarter will be greater than 1. But my expectation based on orders that we have received so far, plus orders that we have in the pipeline that, indeed, it will be greater than 1.

[Brian Chin, analyst]

For calendar ‘24, you stated that this should represent a record revenue year for the company. FRT certainly adds to this. Can you give us an idea of the impact to the model, gross margins and expenses from FRT? And also, how do you plan to integrate the technology into new and existing platforms? And does the acquisition also provide favorable customer synergies?

[Rafi Amit, executive]

By the way, regarding the acquisition of FRT, I think that in 2024, when we discuss about to integrate to Camtek, we mainly mean in the operation in sales and customer. We don't have any plan right now to start to integrate models from here to there and to come with some new tools. This is not in our priority. Effort has its own backlog for what they did in the last few years. Camtek also have enough backlog. So we believe that 2024 in terms of R&D integration, let's call it, we are not going to put too much focus, but more on the administration, operation and other aspects of the 2 companies to work together as one. This is regarding the FRT and Camtek.

[Moshe Eisenberg, executive]

Just to add, you asked about the contribution to the financial model. So I would say the following. We said when we announced the deal that they -- we plan a contribution of around $30 million for FRT next year. And we feel that this is still a good number. For the fourth quarter, their contribution is expected to be pretty much in line with this run rate. And overall, this business is quite profitable, and it's very similar to the profitability metrics of Camtek.

[Brian Chin, analyst]

And then just to clarify, Moshe, you said 4Q in line with the $30 million run rate? Or is that 1Q? Because I guess, 4Q, you only had it for 3 months.

[Moshe Eisenberg, executive]

So the 2 out of the 3 months is within the run rate. It's only 2 months included in the fourth quarter, correct.

[Operator]

Our next question will be from Tom O'Malley from Barclays.

[Thomas O'Malley, analyst]

So I just wanted to just run through Q4 a little bit here. So in the slide like you had on the web this morning, you had 82 to 83 for Q4. So I assume that, that was the organic revenue. And then you're guiding to $88 million, so that would imply a $5.5 million contribution from FRT. Can you just walk through what the exact contributions are in Q4 just because I'm seeing a couple of different numbers here?

[Moshe Eisenberg, executive]

I'm not sure what the $82 million to $83 million, where this number comes from, but it may be a typo. As I said, our $87 million to $89 million includes some organic growth from Camtek plus contribution from FRT in a level that is pretty much the run rate of the $30 million that we expect next year. So the correct guidance is 87 to 89 million combined with the FRT contribution.

[Thomas O'Malley, analyst]

So $39 million run rate, you're going to adjust that for the 2 or 3 quarters. That makes sense. Going into the out year, are you expecting an acceleration of that FRT business? Or is that $30 million still what you're sticking with for the contribution from the acquired business for '24?

[Rafi Amit, executive]

Well, '24, what we said, and we are staying with this assessment that it will be $30 million for '24. Of course, as we learn the business, we will learn it, but that's the expectation as we go into ’24.

[Thomas O'Malley, analyst]

And then lastly, when you guys look at a bookings year traditionally, I would imagine that just given the amount of orders that you guys have, your visibility is a lot better. When you guys say record revenue for '24, is that record revenue fully backed on existing orders today? With the orders that you have in the book, is that already a record revenue year? Or are you expecting some turns business year-over-year to get you above that record revenue?

[Rafi Amit, executive]

So first of all, the record revenue to date is an expectation. The backlog today that we have on hand still does not support the record revenues, but understanding what we have with the pipeline, talking to customers, our expectation is to be for a record year, very similar to what we said a quarter ago.

[Operator]

Next question will be from Craig Ellis of B. Riley.

[Craig Ellis, analyst]

And I also wanted to pass on just the best wishes for operating in a very unusual and war impacted environment and best wishes to the team. So the first question I wanted to ask is around some of the orders that are in hand and some that could come in, there's a lot of attention on both AI-related orders and heterogeneous die and yet there have been parts of the business for industry that had seemed pretty muted this year, whether it's CIS or front end and some other areas.So one of the things I wanted to better understand is the degree to which the orders for the 240 systems that you have is really more heterogeneous plus AI versus some of the other applications and areas of exposure that the company has. And then the second part of the question is, to what extent do you think some of the areas that have been more muted this year have potential to emerge as areas of strength next year?

[Rafi Amit, executive]

So first of all, thank you for the best wishes, Greg. Yes, it's indeed a challenging time, but we'll manage to. So, when we look at the business, all in all, I look at the $240 million we're looking forward at what is in the backlog. So we are above 60% of our business is for what we call advanced packaging. No doubt the chiplet and the ABMs by itself is about half of it. No doubt, and this is emerging as, I would say, as a relatively new business. We had this business, but from the volume point of view, it was much smaller.So indeed, this is an area that will take us to a different level in the business. And this is why really this contribution makes still --give us the expectation for a record dairy next year. Now when we look at the other areas. So, on the heterogeneous integration is definitely becoming more and more dominant in the business. We are seeing a lot of business there from OSATs and also from IDMs. That's another portion that is growing in the advanced packaging.And in the advanced packaging, we are also seeing the fan-out is still being dominant in this business. So I think that these 3 areas really make today our advanced packaging business. Now the rest of the businesses are there. I think we spoke about healthy backlog from OSATs and that's lots of applications, advanced packaging, CMOS image sensor, some RF. So they are there. The silicon carbide, and I would say the front end, when we look forward for next year, they're above 20% of our business. So I think these businesses are going to be healthy. It's very hard to give the exact expense of what they do, but definitely, that's in areas that we'll continue to see business. What is interesting when you look at the FRT business, the FRT business is really in these areas of the silicon carbide and the advanced packaging. So this really strengthened our position there because we are going to do as a company, more steps on the same processes and will be exposed to new opportunities that were in there for us in the past.

[Craig Ellis, analyst]

The second question, maybe more of an operational question, and it's regarding to tool lead time given how significant the recent order activity has been and admittedly, to your point, Rafi, this is vastly for shipment in 2024. But can you just talk about tool lead time shipment times and the company's confidence given how dramatically orders of surge that you can hit end customer shipment windows and capture the order potential.

[Rafi Amit, executive]

So I think that Greg, the fact that these orders we are getting today for 2024, give us enough time to really get prepared. And we do not see any issues with our supply chain. It's very solid. We have the inventory in place. We have the manpower in place and to meet the forecast that we are liking at and the surge in the business that we are forecasting. So from that point of view, we are ready. And I think we have enough, I would say, head on time or we are seeing the things in early enough in the game to make sure that we will have all the material and will be prepared to deliver all the machines on time.

[Craig Ellis, analyst]

Rafi, you and I have talked on numerous calls in the past about the company's M&A aspirations and FRT looks like a really nicely synergistic fit, and it looks very EPS-accretive intermediate and long term. With that deal now closed and working nicely through integration, does that mean M&A is something that will be off the table for a while? Or how do you think about M&A from here with FRT now in the fold?

[Rafi Amit, executive]

No, it's not off table when we continue searching for potential. But the same as FRT, this is what we call a perfect synergy, okay? And this is definitely one of our preferable M&A consideration to look for a company that it's easy to integrate that there are probably, I would say, the same environment, the same system, not copy exact, but not something that's totally different for what we are doing or if maybe issue that we do not understand very well the market and the potential. So we continue and we're definitely considering more M&A.

[Operator]

Our next question is going to be from Gus Richard of Northland.

[Auguste Richard, analyst]

As you ramp, do you foresee any capacity constraints? Or maybe a better way to ask the question is where do you need to focus to make sure you have capacity as demand grows?

[Rafi Amit, executive]

You are talking about the capacity here to manufacture, Gus?

[Auguste Richard, analyst]

Correct, yes. Is it lead times on optics? Is it manpower, floor space, just sort of where would you first run into a capacity constraint?

[Rafi Amit, executive]

So first of all, I think we discussed in previous calls. We have today capacity. We've increased our capacity last year. And today, we have enough capacity for roughly $0.5 billion in sales annually. So the clean room, which is the longest time is there and also the manpower training we have enough. So the rest is really planning. And as I said, because we understand more or less what is going to happen next year, we have backlog already for next year. So we have, we're talking to customers, and we understand what we will need to ship. We have already put in orders for what we need from a material point of view, we have enough inventory on hand for the next few months. So we do not foresee any reason not to ship all of the machines in 2024.

[Auguste Richard, analyst]

And then I think in your prepared remarks, I think you're starting to see chiplets expand into auto and I think you said mobile as well. And I'm just wondering if you could talk a little bit more about those opportunities and when you might start to see those impact your backlog or your shipments?

[Rafi Amit, executive]

No, no. I think here in our remarks, what we said that there are other opportunities for business that is not related to chiplets and HBMs, we see opportunities there as well. Our business will be in the range of, let's say, more than 30% for the HBM and the chiplets, the rest will come from the other segments that we serve. So I think today, the market is focused on the chiplet and HBM. This is high-performance computing. I think this is going to what people call AI applications. I think this is today the main application. Definitely, this in 2, 3 years, no doubt, will become the standard in computing in the industry. But I think there is time until we'll get to that point.

[Auguste Richard, analyst]

And then the last question for me in terms of demand, obviously, is going up because of unit volume. But I also wonder if you could comment a little bit about inspection times and increasing bump density and then what's happening for how long it takes to inspect the wafer.

[Moshe Eisenberg, executive]

So this is really application dependent, but no doubt. And I think Rafi, you mentioned in the prepared remarks that we understand where the market is going to. So we've talked about the fact that the number of pumps are becoming more the increasing numbers. And obviously, they are becoming denser and smaller. And this will require new capabilities. Some of those capabilities we already have installed with customers. There are new capabilities that we are going to qualify customers. So those capabilities, first of all, will improve the throughput on one hand to address the increase in the numbers of bumps or the density.But definitely, all in all, some of these applications, they slow the inspection and metrology time in certain applications. Obviously, I mean, this is the physics of the business and customers are required to purchase more machines. But we are doing on our hands, our best to supply the best ROI in the industry and improving the throughput, the accuracies and everything on our machines.

[Operator]

The next question is from Vedvati Shrotre from Jefferies.

[Vedvati Shrotre, analyst]

The first one I had is on the 240 system orders that you have for packaging. Could you help us understand how maybe these converted revenues first half, ‘24 versus second half? Is it more first half later versus second half? Any color there would be helpful.

[Moshe Eisenberg, executive]

Vedvati obviously, the orders that we see for '24. So we said most of the 240 somewhere went to Q3 and Q4, some needed quick deliveries. But when we look at next year, obviously, the oldest lean more to the first half, naturally. And in the second half, we have less backlog, but we have an understanding from customers. This is where the pipeline comes into place where people speak with us that they need certain machines in the third quarter or the fourth quarter, some even asked for a certain slot, but they have not issued yet the PO. So moving the pipeline or converting it from a pipeline to orders, definitely, this is what we will be doing in the next couple of months.

[Vedvati Shrotre, analyst]

And maybe zooming into that a little bit. So most HBM manufacturers and the chiplet manufacturers have talked about doubling their capacity by 2024. So with these kind of order volumes, do you think they have all the tools they need to achieve that target? Like what is your sense here? And I know the visibility may be limited, but any color here?

[Moshe Eisenberg, executive]

Well, you know what I understand and what we see, we think that they are getting the tools that they need. And I can tell you that if there will be a short and they will feel that they will need additional tools. We have enough capacity and enough inventory in place to manufacture more machines. So I think we will not be the bottleneck if this will be needed, at least from our understanding what we're seeing at least for '24, at least the first half, I think they have enough to us.

[Vedvati Shrotre, analyst]

And then another question I had was there are some notable desktop chips that are starting to use chiplet architectures, which will start ramping soon. Can you help me understand what this opportunity means for you? Do you think it becomes an opportunity as big as HBM that you're seeing right now?

[Rafi Amit, executive]

So that's definitely something that will enlarge our market -- and this is what I think will happen. I think people are starting to use the same architecture, but not adding the HBM. I think this what will happen. Some of the applications of gaming and so forth actually require the HBMs, but many do not need. And this is what I said in one of the questions before, I personally believe that as they run the ATMs, they will get the cost structure, which is today, I would say, one of the limiting factors, but the HBM cost structure will go down with the volume. And then I don't say that it will become standard, but definitely, it will become the, I would say, the preferred architecture for most of the computers. So that's something, and in most cases, the high end becomes the standard over time. And I think this will happen in this case as well.

[Operator]

[Operator Instructions] Our next question is going to be from Vivek Arya from Bank of America Securities.

[Vivek Arya, analyst]

This is Doug San on behalf of Vivek. A question on gross margins. I'm curious about your outlook into '24, not looking for a guide, obviously, but what are some of the puts and takes and drivers of margins next year? Could it return to your target 50-plus levels?

[Moshe Eisenberg, executive]

So yes, we said basically that we took certain steps in the beginning of the year. We are seeing the fruits of it starting to affect our gross margin. This is the second quarter or the third quarter actually in a row of improved gross margin. We expect continued improvement gradually. The target is to reach 50% mark. The only give and take here is that it is all subject to sales mix. So in some cases, in some quarters, we have more favorable product mix. And in other quarters, this is less favorable.So this has also had an impact on the margin. But overall, our target for next year is to be at least 50%.

[Vivek Arya, analyst]

And then could you talk about your order trends outside of AP, maybe some of the visibility in compound semis, Esan mobile phones and automotive have also been encouraging. So I'm curious about your outlook there.

[Rafi Amit, executive]

So in general, our, I would say, advanced packaging, which includes the chiplets, HBM to genus integration and so forth. This is -- I would say, it's about 60% can come up to 65%. Then I would say, the next sizable business is what we call the silicon carbide and the front end. We combine them together. They would come to anywhere 20% to 25%. And then we have a few others, CMOS image sensors have been low lately for the reason that mobile phones are down. So this is more or less a couple of this business with mobile phones. I assume that next year, they will be better. This business can be anywhere between 5% to 10%.And then there are RF names, a lot of smaller businesses that will account to the 100%. But if we look at the -- I would say, the strongest driver, no doubt today is on the advanced packaging part, which is the chiplets and the HBMs, and that's no doubt a growth driver that is going to be dominant for the next couple of years at least. And then the silicon carbide and the front end, definitely, this market may be a little bit slower now, but definitely, this is overall the CAGR is in the range of 20% annually, definitely a market with a sizable opportunity.

[Operator]

Our next question is from Ella Pruski of Optimus Funds.

[Ella Pruski, analyst]

One question about the geographic revenue split for this quarter, please?

[Moshe Eisenberg, executive]

So ADR was around 80%, 8-0. And U.S. and Europe was 20%.

[Operator]

Our next question is from Shahar Cohen of Lucid Capital.

[Shahar Cohen, analyst]

And going back to Vedvati question about the some of the laptop or desktop publication. You spoke about HBA, but I'm not true HBM is applicable to these maybe try to understand as what you meant that HBM would be adopted in [Indiscernible], you meant the advanced packaging techniques will be adopted in those and given the magnitude of flip-top TPUs compared to, let's say, GPUs Wouldn't you expect a major leapfrog on your advanced packaging next year, giving you another laptop CPU, advanced packaging applications.

[Rafi Amit, executive]

There are 2 questions, and let me start with the first one. The question that came before is that you see today notebooks and in general, the PCs starting to adapt the chiplet architecture. Now down the road, they will add also HBM. Currently, they are not. I think the only application that I know of in the PC arena, that's using the chiplets and HBM is some gaming applications. So from the structure that's starting to use the structure of the chiplets, which eventually will probably start to use also HBM as well as they need more and more power. But this is still down the road. Now regarding your second question, no doubt there is an opportunity. But the question is how fast it will grow and how fast HBMs will go to other applications other than AI, this is still not clear. And therefore, definitely, as we said, this segment will be more than 30% of our business. I mean this is significantly more than this year, and dramatically bigger than it was a year or 2 ago. So definitely, this is part of the growth, one of the reasons for the growth of contact over the last few years, definitely, that's an area that's going to increase and definitely an area that is a very big potential for us. But how fast it will grow further than what it's going today, it's still hard to say.

[Operator]

That looks like it ends the Q&A session. So before I turn the call back to Rafi, just to let everybody know that a recording of this call will be available from the same Zoom link on Camtek's website in the next couple of hours. And Rafi, please go ahead and make your closing statements.

[Rafi Amit, executive]

Okay. I would like to thank you all for your continued interest in our business. I want to especially thank the employees and my management team for their tremendous performance. To our investors, I thank you for your long-term support. I look forward to talking with you again next quarter. Thank you, and goodbye.

[Operator]

Thank you.