Good day, and welcome to the CyberOptics first quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Dr. Subodh Kulkarni. Please go ahead. Thank you. Good morning, and thanks for participating in CyberOptics earnings conference call for the first quarter of 2022. Joining me is Jeff Bertelsen, our CFO and Chief Operating Officer, who will review our results in some detail following my overview of our recent performance. We then will be pleased to answer your questions at the conclusion of our remarks. In keeping with Regulation FD, we have made forward-looking statements regarding our outlook in this morning's earnings release. These forward-looking statements reflect our outlook for future results, which is subject to a number of risks that are discussed in our Form 10-K for the year ended December 31, 2021, and other filings with the Securities and Exchange Commission. We urge you to review these discussions of risk factors. Turning now to our recent performance, CyberOptics reported strong sales and earnings in the first quarter of 2022. Each of our product groups, 3D and 2D sensors, semiconductor products, and inspection and metrology systems, posted strong double-digit year-over-year sales growth in the first quarter of 2022. The competitive advantages of these products are allowing CyberOptics to further penetrate our targeted growth markets in the areas of advanced surface mount technology or SMT applications and semiconductor capital equipment. This makes us confident about CyberOptics' second quarter and full year prospects. We reported sales of $24.2 million for the first quarter of 2022 ended March 31, an increase of 37% from $17.7 million in the first quarter of 2021. Net income for the first quarter of 2022 was $3.6 million or $0.47 per diluted share, an increase of 149% from earnings of $1.4 million or $0.19 per diluted share in the year-over-year quarter. These strong operating results are evidence that CyberOptics is continuing to perform at a high level. Now, for the next few minutes, I'll briefly review the performance of each of our product families. Sales of 3D and 2D sensors increased 27% year-over-year to $8.1 million in the first quarter of 2022. Within this category, sales of 3D MRS sensors rose 15% year-over-year to $4.9 million in the first quarter. Semiconductor inspection and metrology applications are continuing to generate demand for our 3D MRS-based sensors. Sales of 3D and 2D sensors are forecasted to post solid growth on a year-over-year basis in the second quarter of 2022. Sales of semiconductor sensors, principally our WaferSense line of sensors, increased 34% year-over-year to $6.8 million in the first quarter of 2022. Strong global demand for semiconductors is in turn driving demand for semiconductor capital equipment where our WaferSense products are utilized. Sales of semiconductor sensors are forecasted to post strong double-digit growth on a year-over-year basis in the second quarter of 2022. Sales of inspection and metrology systems rose 49% year-over-year in the first quarter of 2022 to $9.4 million. Driving this strong growth were sales of SQ 3000 multifunction inspection systems, which increased 45% year-over-year to $5.9 million. This advanced product is continuing to gain traction among both existing and new customers. Total SQ3000 sales related to Mini-LED applications came to $619,000 in this year's first quarter. In the first quarter of 2021, we did not book any Mini-LED related SQ sales. As the year progresses, we anticipate receiving new orders for Mini-LED related applications from both current as well as new customers scaling up production. We are confident Mini-LED related inspection and metrology applications will make another strong contribution to our full year revenue stream. First quarter system sales benefited from customer acceptances of $1 million for 3D MX3000 final vision inspection systems and sensor kits for memory modules. New orders totaling $3.5 million for 3D MX 3000 systems were received during the first quarter, which brought our quarter-ending MX backlog to $5.9 million. Orders in the current backlog are scheduled to be recognized as revenue over the balance of 2022. We expect to receive additional MX orders as the year progresses. Given normal sales fluctuation of capital equipment, inspection and metrology system sales are forecasted to be relatively flat on a year-over-year basis in the second quarter of 2022. CyberOptics backlog at the end of this year's first quarter totaled $47.4 million, up from $47.3 million at December 31, 2021, and $32.4 million at the end of first quarter of 2021. We are forecasting sales of $25 million-$28 million for the second quarter of 2022 ending June 30, compared to $25.2 million reported in the second quarter of 2021. Our sales forecast for Q2 assumes roughly $1 million of MX-related revenue in the quarter. The lower end of our sales forecast assumes limited shipments of SQ systems to China in Q2 due to COVID-19. Our 3D MRS-based sensors and inspection systems and semiconductor sensors are enabling CyberOptics to capitalize upon significant growth opportunities in our targeted SMT and semiconductor capital equipment markets. For this reason, we see 2022 shaping up as another good year for CyberOptics. Thank you. Now Jeff Bertelsen will review our first quarter performance in greater detail. Thanks, Subodh. Our gross margin percentage in the first quarter of 2022 was 47.8%, up slightly from 47.3% in the first quarter of 2021, but down from 49.6% in the fourth quarter of 2021. The year-over-year improvement in gross margin percentage stemmed from a slightly better sales mix and related gross margins on inspection and metrology system sales. The slight sequential quarterly decline, which was previously anticipated and in line with our expectations heading into the quarter, was mainly attributable to lower price points on SQ3000 system sales. Our gross margin percentage for the second quarter of 2022 is expected to be down about one percentage point from this year's first quarter level, mainly due to revenue mix. Total operating expenses in the first quarter of 2022 increased 15% year over year to $7.6 million. The increase was due to higher third-party channel commissions resulting from the significantly higher year-over-year sales, along with higher compensation costs for new employees and higher spending for trade shows. Depreciation and amortization expense totaled $569,000 in the first quarter of 2022, and stock compensation expense came to $353,000. Total operating expenses in the second quarter of 2022 are forecasted to increase by a few percentage points on a sequential quarterly basis. Our effective income tax rate for the first quarter of 2022 was 11% and was favorably impacted by by an increase in the amount of income eligible for FDII and GILTI benefits due to a change in U.S. tax law requiring capitalization and subsequent amortization of R&D expenses. While the change is expected to have a favorable impact on our effective tax rate in 2022, it will most likely increase the amount of cash we expend for income taxes, particularly in 2023 and later years. Cash and marketable securities totaled $38.2 million at the end of this year's first quarter, down slightly from $38.3 million at December 31, 2021, and up from $32.3 million at the end of the first quarter of 2021. Given tight supply chains and extended lead times for certain key components needed to manufacture our products, we have deemed it prudent to keep additional inventories on hand so we can meet anticipated customer demands, particularly SQ systems for mini-LED related applications. These extra inventories will be worked down to more normal levels as we progress through this year. I should also emphasize that to date, part shortages and shipping delays have not had a significant impact on our business, and at this time, we do not anticipate a major impact going forward. We believe our capital resources are adequate for achieving our growth objectives. Our lineup of MRS-enabled sensors and systems and WaferSense semiconductor products are enabling us to capitalize upon important growth opportunities in our targeted markets. Our progress at penetrating our markets make us believe that 2022 is shaping up as another good year for CyberOptics. Thank you. We would now be happy to take your questions. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll take our first question from the line of Greg Palm. Please go ahead. Hey, Subodh and Jeff. Morning. Congrats on the good results here. Thanks, Greg. Wanted to start off with maybe some high-level commentary. You know, Subodh, maybe just talk about what you're seeing from an industry demand standpoint, and just kinda remind us, you know, exposure to China. What are you seeing over there, just given the lockdowns? Maybe just a little bit of color would be helpful. Sure. As we play both in the semiconductor as well as in the electronics manufacturing market, on a total basis, this market continues to be very healthy and growing in solid double digits right now. The growth rate seems to be getting to be a little bit slower than 2021. I mean, 2021 was a great year for semiconductors and electronics, and the reports say that the total market grew 20%-25% in 2021. At this point, it looks like the growth rate will slow down a little bit from 2021 rates, but still very healthy, solid double digit kind of a growth rate. Similarly, in 2020, analysts are starting to project what will happen in 2023. Again, the growth rate is expected to slow down a little bit, but continue to be solid positive numbers. China, clearly, and the COVID issues in East Asia clearly are impacting all these numbers, that's why some slowdown is starting to happen. Despite all the factors, COVID factors, the geopolitical factors, the Russia-Ukraine war situation, the overall industry, semi and electronics continues to be extremely healthy, demand continues to be strong, and the markets continue to grow at a solid double-digit clip. That's the overall macro backdrop commentary, if you will, from our perspective. Within that we continue to do well. As you can clearly see, our Q1, we had a great growth rate of 37%. We continue to believe we will grow solid double digits through the rest of the year. We feel pretty good about our position, our technologies, our products, in a healthy, macro climate right now. Okay, that's great. Specific to Mini-LED, you mentioned that you still expect orders in 2022. What's your visibility at this point? I mean, do you see any risk of stuff pushing just given what's going on with supply chain and the lockdowns over there in China? There is some risk. I mean, clearly, the COVID situation in China, the chip shortage worldwide, and there are some specific chips that are needed for Mini-LED applications. Some of those external factors may impact the scale-up rate. Directionally, we are pretty confident, the scale-up is going on of different products. Different, consumer electronics companies are getting into the market. Exactly as we have been predicting, Mini-LED will continue to grow. Exactly which quarter and how many systems, that's tough to forecast. It is possible, given what's going around, there may be a few months delay. Overall, we feel pretty good that the Mini-LED market will continue to grow at a healthy run rate, and we will continue to benefit from that by selling SQ systems in that marketplace. To be clear, you're expecting, you know, both significant orders and significant revenue generation in 2022, correct? Correct. Okay, good. Then maybe just one last one, more of a housekeeping question. The $5.9 million of MX backlog, can you confirm whether that's all 3D, and how should we think about recognition of that full amount throughout the year? I think some in Q2 based on the mix comment, but you know, should we assume that you know, maybe a third or how should we kinda think about it at this point? Yeah. Of the $5.9 million, $5.3 million of it is 3D. There's a little bit of 2D in it, but it's virtually all 3D. In terms of right now how we kind of see that laying out through the balance of the year, you know, certainly, you know, we're expecting $1 million in Q2. You know, right now, you know, just using round numbers, you know, I'm anticipating $3 million then in Q3, and then the balance in Q4. As we get closer, you know, to the end of the second quarter, there's a chance that the $2 million in Q4 could move into Q3, but we'll know more about that in the next few months. We will certainly get more orders that have potential to impact Q3 and Q4 numbers. Okay, great. All right, I'll hop off the queue. Thanks so much. Thanks, Craig. Thank you. We'll take our next question from Orin Hirschman. Please go ahead. Your line is now open. Hi, how are you? Congratulations on the results. Just to follow up one or two questions from the last round of questions. In terms of the orders for the micro-LED inspection, does the China lockdown affect that type of order flow or not so much because it's gotta be done way in advance? You know, are you hopeful that there'll be more orders imminently? Has anything changed in the overall dynamic, positive or negative for micro-LED side? Orin, if I understand your question right, you're asking about the China lockdown and how does that impact the Mini-LED overall business? Mini-LED, yeah. Sorry. Yeah. micro-LEDs on my tongue. Sorry. That's okay. Indeed, China lockdowns' unpredictability of how the lockdowns are being done is impacting how the scale-up is happening in China. Because as of today, most of the manufacturing lines that are making Mini-LED displays are in China, so these lockdowns are impacting current production as well as investment plans. It is a little uncertain on how things will go from here given the uncertainty nature of their lockdowns. There's also another impact, which is there are some custom chips that are needed for Mini-LED displays, and those chips are in short supply. It's a combination of the China COVID lockdowns and chip supply that are impacting the scale-up of Mini-LED. Having said that, we still think it will continue to scale up. As I mentioned, in the earlier question, there may be a delay of a month or two or three here, but nothing fundamentally changes. Mini-LED will continue to get scaled up, and we still feel pretty confident that the business will be a solid growth generator for us in 2022 and beyond. You know, and let's assume that the lockdowns lift. You know, can you kind of recap in terms of it's really been primarily one customer for you with interest from lots of other customers. You know, with as much detail as you're comfortable providing, can you kind of give us the lay of the land on the Mini-LED inspection side in terms of one customer versus multiple customers? You know, if any other dynamics. There are multiple customers who are getting involved in Mini-LED right now. It's no longer just a single customer situation. There are many projects that are going on. Many of them are in China, and that's why the lockdowns and what happens is important. There are other countries that are starting to get into Mini-LED as well. It's no longer a one customer, one country situation. Certainly China is important and, primarily the consumer electronics company that started scaling up Mini-LED is very important. It is beginning to become a more of a ecosystem now, a bit more companies, more applications, more products. We certainly expect growth to come from various different areas. I apologize, I don't recall. Have you actually shipped to more than one customer? We actually, as we have previously disclosed, we have shipped Mini-LED related SQ systems to multiple customers. Some of them, many of them are contract manufacturers who service more than one or two consumer electronics companies. Yes, we are shipping Mini-LED related equipment to multiple applications, multiple customers right now. I guess just my question was, do those customers have multiple customers or still one huge customer? They do have multiple customers. We are just not sure of the ratio of one customer to the other customer. They don't disclose those details. Got it. If you just do a search on mini-LED, micro-LED right now, you can get a list of all the different kinds of projects that are going around in the world with mini-LED and micro-LED. You will see a list of consumer electronics companies, and you may even see a list of contract manufacturers that support those consumer electronics companies. The ecosystem is becoming broader than just a single customer and a couple of contract manufacturers. Finally, my question on the new one of the new businesses for you, the wafer inspection side. You know, you've announced one big OSAT win. You know, are you hoping to announce, I guess A, are you hoping to ship that system, you know, during this calendar year? And are you hoping to get other wins during this year? What's going on there, and has the lockdown affected that at all as well in terms of the progress getting the next customer? Sure. If I understand your question right, it is about the WX product and how that scale-up is going. Yes. As we have disclosed before, we have two major customers right now for our WX system. One is we are servicing through our Chinese system integrator. We actually sell only sensor and software in that case. The other major IDM, we sell the whole WX system. We have two customers we are servicing. As of right now, we are talking to multiple other customers for WX. These are long evaluation processes, take a long time for selection. They have to make sure that they go through all their analysis, and sometimes it takes months, if not quarters, for them to come to that conclusion. As I mentioned before, in the semiconductor area, there is a significant concentration of customers. There's only 30-40 customers that matter in this space. Once you go beyond that. Right. The market becomes really small. Every win is a big win, but it takes a long time to win. Right now, we feel pretty good about the two wins we have, and one of them has started scaling up aggressively. They are scaling up multiple systems right now. The other one, we still have to ship our first system, but we expect them to start scaling, buying more once they are happy with the performance. We are talking to more, so we are pretty confident we'll get a couple more by the end of this year. It does take a long time to go through their evaluation processes and qualifications. Just to follow up on that, thank you for that clarification. That would be amazing if you can get more customers on the system side. On that one large customer on the system side, any idea when you're going to ship that first system? It is sometime in this quarter. Frankly, it would have happened had it not been for the lockdowns in China. That does impact us because we are building the final system in China right now. The lockdowns did impact us in getting the product built and shipped. It should still happen this quarter so long as the lockdowns become a little more reasonable. Okay. That is actually a bookable shipment in terms of the revenue from it? Yeah. That particular shipment right now, what we're anticipating is it will ship in the second quarter, as Subodh said. Just given the customer acceptance on it eventually, we're assuming it will become revenue in Q3. Got it. Okay. That's my question. Any guess, you know, I know it's truly a guess on your part, how long the evaluation will be, you know, with that first system? I mean, obviously they've done a lot of evaluation, you know, with wafers, et cetera, to get to this point, to pull the trigger. Do you think it's a six-month wait, a nine-month wait, or could it be shorter than that? Any clue? It could be shorter, but our experience suggests that it'll be in the order of six- months or so. They will thoroughly test the system in their production environment for the rest of this year, effectively, before they issue multiple orders for the next systems. Yeah. Okay. Okay, thanks, Subodh. Thanks, Orin. Once again, if you'd like to ask a question, please press star one. We'll take our next question from the line of Greg Palm. Please go ahead, your line is open. Hey, Subodh and Jeff. Congrats on a great quarter. Thanks. Thanks, Greg. Yeah. Hey, if you could just give any color. I know this is a ways off, but with the memory and semi incentives and, you know, some of the, you know, production builds that are going here, what are you seeing there? How would you know, have us, you know, think about when that comes on and, is there anything outside of those as far as maybe even some of the consumer side that might be a little bit more domestic oriented? If I understand your question right, Greg, you are asking us to comment about the memory industry in general and U.S. production of memory. Is that correct? Yeah. You know, there's so many things that are building out here as far as production, and there's been some incentive obviously for less dependence in China and outside of the US. The memory chip in market, if you will, I mean, it's dominated by three large manufacturers: Samsung, SK hynix and Micron. Most of the fabs that these three companies have are not in China. They are in places like Korea, some in the U.S., Japan, those kinds of places. I don't think that the whole China-related discussion becomes that important when it comes to memory chip manufacturing. Regarding your specific question about the U.S. production, I believe you're specifically referring to the CHIPS Act that is being discussed at congressional level right now. As far as I can tell, most of the discussion around that is centered around processor kind of chips. I haven't heard too much discussion about memory chips in that kind of discussion. That's because of the significant exposure the world has when it comes to processor chips with respect to Taiwan and specifically TSMC. That's where a lot of the discussion gets centered. I rarely see any discussion about memory manufacturing when it comes to the CHIPS Act. I think just from our perspective memory is a very healthy market right now. We believe it will continue to stay very healthy for all the reasons that we have discussed it in the past. I don't think the U.S. CHIPS Act is going to significantly change where the chips are going to be made and those kinds of things. That may have more impact on the processor side and less on the memory side. Does that answer your question? Yeah. I'm just, you know, Are you playing in anything there as far as benefiting from all the build that is, you know, being done here? Certainly. I mean, we play in the front end of semiconductor fabs with our WaferSense product line. We certainly play in the back end area with our products like the Memory Module Inspection System, MX or SQ, and some of the sensors we sell and so on. We play across the whole spectrum, and clearly, we have a big exposure to the memory manufacturers because of SQ and MX specifically. If more chips get made in the U.S., it's good for us. Obviously we are here in this region. In all fairness, I mean, right now, more than 80% of our sales come from outside the U.S., and we have successfully penetrated the fabs, even though they are in Korea, Taiwan and other countries. That hasn't been a negative factor for us. Certainly we, as U.S. citizens and stationed here, we would love to see more fabs here in the U.S. It helps all of us as a country. I don't think we can say that our business has been gated because we are not in the U.S. as a fab. We have done a pretty good job of penetrating fabs wherever they are in the world. Did that answer your question, Greg, or do you have any further questions? Yep. No, I'm good. Thank you very much. Thanks, Greg. Once again, if you'd like to ask a question, please press star one. We'll take our next question from the line of Eric Slade. Please go ahead. Your line is open. Hey, congratulations, Subodh. Jeff, another nice solid quarter. Thanks, Eric. Thanks, Eric. Yep. Since we're talking about memory, the last gentleman, you're still working on the third. You have the first two biggest memory guys, so that third one's still, I would say, hot and heavy, right? Absolutely. We continue to work with the third large memory manufacturer. They are a customer of ours for our SQ systems, so they know us pretty well. They are a customer of ours for WaferSense, so they know us pretty well, but so far we have not been able to convince them to start buying our MX systems yet. Okay. Something to look forward to. Absolutely. Now back to the mini micro. It seems to be the topic today. On that $25.2 million-$28 million guide? Wait, is it $25.2 million-$28 million guide? I take it that you guys never speculate. In that $25.2 million-$28 million, is there any mini micro in that number, in those revenues or no? I mean, you know, we aren't anticipating any new orders for Q2 for Mini-LED in our Q2 guidance. There's a little bit of backlog left, and we're anticipating that, but no large orders are included in the guidance. Okay. Really, as we've talked before, Jeff, these orders come sort of out of the blue, don't they? That you don't really know the plan till the end, right? I mean, we don't necessarily have great visibility, Eric. The customers don't go into a lot of details regarding their plans. You know, they do tend to show up when they show up. I guess my point is, that $25.2-$28, if we get a nice lumpy order like we've seen in the past, which probably should happen at some point here, those numbers could be revised up quite nicely, right? If we got a nice lumpy order. Sure, it's possible. I mean, if we get in, you know, an unanticipated order, as you said, you know, later in the quarter, I mean, it's possible, but again, we're not including anything or necessarily expecting anything in our guidance. Well, that's the way to do it. On the WX3000, we'll jump over there for a second. I think we've talked about this before. You would think by the fourth quarter we'll start maybe seeing the ramp happening. Yeah, about six months, right? We'll start seeing the ramp happening. Yeah, I think, you know, as we've said, as the year progresses, I think we'll get some more orders for that. Yeah, it's certainly, you know, over time we certainly would see that business increasing. You know, as we continue to show the product and do more evaluations with customers, you know, we anticipate more orders going forward. Now, the other question I have, the one last one on the mini/micro is, my understanding, the only way to really play it, from a domestic side is on the back end, and that would be Kulicke & Soffa and then yourselves, right? There's no other public companies out there. I know Applied Materials, those, the big ones aren't involved. Is that correct? Well, it's a little more complex than that, Eric. I mean, the Mini-LEDs themselves are made in different kinds of fabs. Oh, okay. Right now, most of them are in Asia. The transfer process of the Mini-LED from your semiconductor substrates to whatever substrate you want to use, whether it's plastic or glass, that's where we get involved. Certainly, as you mentioned, Kulicke & Soffa with their PIXALUX system plays in it. We certainly with our SQ system play in it. There are a few other companies, like the ones who make ovens and pick-and-place machines, and other things that play in it as well. There's the whole final packaging process that makes the finished display. There are a few other companies that will get involved in it. It's a little more complex than just one or two companies making the whole manufacturing line. Oh, yeah. No, I realize that. I thought a publicly traded company is, I guess, that was my question. No, I know there's probably quite a few suppliers. I don't know if they're publicly traded, but that's not that important. The other question is, You're downstream from Kulicke & Soffa, right? Well, actually, we are both upstream and downstream. I mean, there are, as we have discussed in the past, 6 steps of inspection when that Mini-LED is transferred to whatever substrate of choice. There is a step, there's a couple of steps, actually, incoming inspection and solder pad inspections that happen before the pick-and-place operation happens in a Kulicke & Soffa PIXALUX system or some other pick-and-place system. A couple of our inspections happen before the pick and place, and the other 4 inspection steps happen after the pick and place. We are both upstream and downstream. I was gonna make a point real quick. You know, I was looking through, you know, mini/micro. It's hard to really get anything too concrete. You go to their site. I did pull something up, and I might have forwarded it to you, Jeff. It mentions all these companies I never really recognized, Asian companies. It's got Kulicke & Soffa, but they don't even know you guys exist. I've never seen CyberOptics in there. It just shows you how underfollowed. I don't know if, you know, you guys can do anything about that. On some of them, I think on one chart in particular, they listed all the companies. Not a chart, just the list of the companies. There was Kulicke & Soffa, but no CyberOptics, just to point that out. Great quarter, and I look forward to the next one. Thanks, Eric. Thanks, Eric. Yeah. Once again, if you'd like to ask a question, please press star one. There are no further questions at this time. Dr. Kulkarni, I'd like to turn the conference back over to you for any additional closing remarks. Thanks. Thank you all for your questions and interest. We look forward to updating you after our results in Q2. Thanks again. This concludes today's call. Thank you for your participation. You may now disconnect.