Camtek (CAMT) Q4 2021 Earnings Call Transcript

Camtek (CAMT -5.67%)
Q4 2021 Earnings Call
Feb 10, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Kenny Green

Hello, everyone. We'll be starting in a minute or two. We're just waiting for -- We're giving a bit more time for people to enter into the room. Ladies and gentlemen, thank you for standing by.

I would like to welcome all of you to Camtek's results zoom webinar. My name is Kenny Green, and I'm part of the investor relations team at Camtek. All participants other than the presenters are currently muted. Following the formal presentation, I will provide some instructions to participating in the live Q&A session.

I would like to remind everyone that this conference call is being recorded, and the recording will be available later on from Camtek's website. You should have all now received the company's press release. If not, please view it on the company's website. With me on the line today, we have Mr.

Rafi Amit, Camtek's CEO; Mr. Moshe Eisenberg, Camtek's CFO; and Mr. Ramy Langer, Camtek's COO. Rafi will begin by providing an overview of Camtek's results and discuss recent market trends.

Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe, and Ramy will be available to take your questions. Before we begin, I'd like to remind our listeners that certain information provided on this call are internal company estimates, unless otherwise specified. This call may also contain forward-looking statements.

These statements are any predictions and may change as time passes, statements on this call are made as of today, and the company undertakes no obligation to update any of that forward-looking statements contained whether as a result of new information, future events, changes in expectations, or otherwise. Investors are reminded that actual events or results may differ materially from those projected, including as a result of the effects of general economic conditions, the effect of the COVID-19 pandemic on global markets and on the markets in which we operate, including the risk of continued disruption to our and our customers, providers, business partners, contractors' business, risks related to the concentration of a significant portion of Camtek's expected business in certain countries, particularly China, from which we expect to generate a significant portion of our revenues for the coming few quarters, as well as Taiwan and Korea, including the risks of deviations from our expectations regarding timing and size of orders from customers in these countries, changing industry and market trends, reduced demand for our products, the timing development of our new products and their adoption by the market, increased competition in the industry, price reductions, as well as due to other risks identified in the company's filings with the SEC. Please note that the safe harbor statement in today's press release also covers the contents of this conference call. In addition, during this call, certain non-GAAP financial measures will be discussed.

These are used by Camtek to make strategic decisions, forecast, future results, and evaluate the company's future performance. Management believes that the presentation of non-GAAP financial measures are useful to investors' understanding and assessment of the company's ongoing cooperation and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings press release. I would now like to hand the call over to Rafi, Camtek's CEO.

Rafi, please go ahead.

Rafi Amit -- Chief Executive Officer

Thanks, Kenny. Good morning for everyone. The last quarter concluded a phenomenal year for Camtek. In Q4, our revenue was $74 million with operating profit of $21 million and 28% operating margin.

2021 was a record year for Camtek in all aspects. Revenue for the whole year was about $270 million, over 70% growth compared with 2020, and operating profit of $77 million. Since 2017, revenue has multiplied three times, a net profit seven times. We also achieved a very important goals.

We became the main leader in the inspection and metrology for the mid-end segment. We installed our system at all top semiconductor manufacturers. We penetrated the front-end segment, which now accounts for 20% of our sales. We reached an installed base of over 1,500 systems at over 130 active customers.

With 2021 behind us, 2022 is shaping up to be another growth year. We started the year with a healthy backlog and received over $40 million of order, since the beginning of this year, leading to a very good visibility for the first half of the 2022 with the second half of the year is starting to build up nicely. I expect revenue in the first quarter of 2022 to be between 75 to $76 million, with continued growth in Q2. Last November, we finalized a $200 million convertible notes offering at favorable terms.

The main reason for this transaction was to make sure that we have enough cash to support our growth strategy, including inorganic growth. In the fourth quarter, about 50% of our sales were for it's vast interconnect packaging mainly for heterogeneous integration and fan-out. 15% of our revenue were for expecting compound semi-wafers. These wafers are used for power devices and RF devices, which will go into mobile phone and for automotive industry, especially for electric cars.

About 20% of our sales were for front-end applications, which continue to grow and has become a significant part of our business. In Q4, sales to Europe and US accounted for about 22% of total sales, and I expect these territories to continue to generate significant revenue in the coming years. China continues to be our largest territory this quarter. We have managed to ramp the business by 70% in 2021, and our operations were able to keep up with the pace.

We invested in our infrastructure and our facility is ready to support continued strong growth. We are investing substantial efforts to overcome the shortage and long lead times in the supply chain. So far, we have done this successfully. This is the major focus of the company and we'll continue to be so.

We have increased our R&D investment and we expect to launch several innovative products in 2022. 2021 was an exceptional year for the semiconductor industry as there was a great demand for semiconductor components, but elect of fab production capacity. At the same time, the COVID-19 epidemic continued to disrupt daily life. Obtaining parts and materials, due to the shortage in supply chain was also a challenging issue.

Despite all that, Camtek has managed to increase its revenue by 70%, compared to 2020. As for 2022, I am extremely encouraged with the strong start for 2022. The shortage in supply chain will continue to be a challenge and risk. However, we are doing all efforts to properly manage the shorter supply chain and make 2022 another growth year.

Regarding the 20 million order for both Tier 1 IDM that we announced earlier this week, these systems provide inspection and metrology solutions to the most challenging applications in the field of advanced interconnect packaging. On this occasion, I would like to thank those customers, who trust us and choose us as their main provider for the most challenging applications. And to all our dedicated employees and management for all the hard work, which was crucial in delivering such an amazing performance in 2021. I would like to hand over to Moshe for a more detailed discussion of the financial results.

Moshe?

Moshe Eisenberg -- Chief Financial Officer

Thank you, Rafi. In my financial summary ahead, I will provide the results on a non-GAAP basis. The reconciliation between the GAAP results and the non-GAAP results appear in the table at the end of the press release issued earlier today. Fourth quarter revenue came at a record $74.2 million, an increase of 53% compared with the fourth quarter of 2020, and 5% compared with the previous quarter.

This marks the 7th consecutive quarter of growth. The geographic revenue split for the quarter was as follows: Asia, 78% and the rest of the world accounted for 22%. This represents a significant increase in the revenue from US and Europe. Gross profit for the quarter was $37.8 million.

The gross margin for the quarter was 50.9% versus 48.2% in the fourth quarter of last year and 50.9% in the previous quarter. This is the fourth quarter in a row of gross margin of above 50%, a result of the significant increase in the business volume. I'll remind you that the gross margin also varies a function of the sales mix, typically within the range of 50.5 to 51.5%. We expect higher than usual gross margin in Q1 of 2022, due to favorable mix.

Operating expenses in the quarter were $16.8 million, this is compared with $14.2 million in the fourth quarter of last year and to the $14.3 million reported in the previous quarter. As we said in the previous call, both R&D and sales expenses increased in Q4, this was a result of a planned investment in R&D and the sales channel mix in the quarter. The effect of this was a slight reduction in the operating margin to 28% from 30.6% in the third quarter. We expect further increase in our opex in Q1, in particular, due to continued expansion in R&D and sales, yet with the higher gross margin, I expect operating margin to be similar to the current level.

Net income for the fourth quarter of 2021 was $19.7 million or $0.43 per diluted share, this is compared to a net income of $8.8 million or $0.21 per share in the fourth quarter of last year. Total diluted number of shares as of the end of the fourth quarter was $46.3 million. As a result of the successful completion of the convertible notes offering, we need to include the potential share of 3.3 million shares in the number of the diluted share. As the transaction took place in mid-November, the effect in the fourth quarter is partial.

In the first quarter of 2022, there will be further increase. In the company's GAAP results, we recorded a one-time tax expense of $5.3 million with respect to historical exempt income. I would like to provide some more details on this. The company elected to take advantage of the temporary rule, which is applicable to 2022 only and pay a reduced tax rate on its exempt earnings to allow the company to distribute dividends from these earnings in the future with no additional corporate tax liability.

Turning to some high-level balance sheet and cash flow metrics. We generated $21.5 million in cash from operations in the quarter. Following the convertible note transaction in November, total cash and cash equivalents and short-term deposits, together with the $32 million cash that we have in the long-term deposits is $430 million. Inventory level was $63.9 million, and it went up by $2.1 million over the quarter.

This is to support the current demand for our products and to ensure the availability of key components. We monitor the supply chain confirmed on an ongoing basis. At this point, we do not foresee any impact on our projected revenues. And finally, guidance.

We expect revenues of 75 to $76 million in the first quarter and continued growth in Q2. And with that, Rafi, Ramy, and myself will be open to take your questions. Kenny?

Kenny Green

Thank you, Moshe. We will now open the call for the question-and-answer session. [Operator instructions]. So we'll give a moment to review who wants to ask questions.

And our first question will be from Tom O'Malley from Barclays. Tom, you can go ahead and talk.

Tom O'Malley -- Barclays -- Analyst

Hey, guys. Thanks for taking my question. Congrats on the nice results. The order patterns look good to start the year here.

I just wanted to ask a question on the broader year. You've seen a lot of equipment guys report already and talk about a WFE growth rate that's above 20% for the calendar year 2022? Can you talk about why advanced packaging would be a greater or lesser growth rate than that for the year? And when you look at what's may be limiting you not getting to that greater than 20% growth rate, is it supply? Or are you guys just being kind of conservative to start the year here?

Rafi Amit -- Chief Executive Officer

OK. Rafi is talking. First of all, we have to distinguish between the front-end equipment and the back-end and the mid-end. There are some always delay between them.

If most of the front-end company, they announce about order and growing about 20%. I would say that if we take just specific investment, we can considering having for us the result about a year later, OK? There are always delay between the front-end and the mid-end this in general. Now the advanced packaging in other mid-end application sometimes do not behave like the front-end. This is from our experience being here that we saw that the front-end was almost -- we didn't see any increase.

We made an excellent increase. So it is not so easy to find correlation between these two. But in general, I totally agree that the positive trend in the semiconductor sooner or later will come to our field, and we will enjoy it. When exactly will be the timing, we don't know yet.

In general, in the mid-end, the delivery time is shortage than the front-end. Our customers can place orders six weeks, eight weeks, 10 weeks, that's good enough for them. I think in the front-end, the delivery time is much stronger, and it's a matter of infrastructure or building new fabs and expansion. So they know more about the whole year claim, OK? This is that to give you an idea about it.

Tom O'Malley -- Barclays -- Analyst

That's very helpful. I appreciate that. I just have one more. Moshe, you talked about the if-converted method, you saw shares tick up by about half of the amount of the convert that you described.

Is a good way to think about the March quarter having the other half come in, so close to 48 million shares. And when you just take the midpoint of your guidance, which is op margin in the 13.6% range, which is where you guys were in the December quarter, it looks like when you do the math there, you have EPS declining slightly. Is that the right way to think about the quarter over quarter, because of the change, do you see some EPS headwind?

Moshe Eisenberg -- Chief Financial Officer

First of all, with respect to the number of shares you are correct. The applicable number of shares for Q -- end of Q1 will be approximately 48 million shares. We will see -- I said that we will see same margin for the operating margin. That means that on a higher level of revenues, we will see an improvement in the absolute dollar value.

And I expect, therefore, that the EPS to be pretty much the same as this quarter.

Tom O'Malley -- Barclays -- Analyst

Thanks, Moshe. Thanks, guys. Appreciate it.

Kenny Green

The next question will be from Brian Chin of Stifel. Brian, you may go ahead and talk.

Brian Chin -- Stifel Financial Corp. -- Analyst

Great. Can you hear me OK?

Rafi Amit -- Chief Executive Officer

Yes, we hear you very well.

Brian Chin -- Stifel Financial Corp. -- Analyst

All right. Perfect. Congratulations on the good results, and thanks for letting us ask a few questions. And maybe just a couple here.

To start with the magnitude of growth you're anticipating in the June quarter. I know you gave more of a directional indication. But again, the order intake and backlog does support good business trends, magnitude-wise, are we talking maybe ballpark 10% sequential growth? And I ask because I don't think seasonality is a strong factor for the business per se, but the past few years, Camtek has exhibited very strong sequential growth in prior June quarters?

Moshe Eisenberg -- Chief Financial Officer

Regarding the -- our estimate about the growth rate, again, it's not so simple, as I said before, because we know very well the first half, we don't have enough information for the second half. But in general, I don't see that we are going to lose any competitive position. I don't think we are going to lose any orders. And it doesn't matter when our customer in the mid-end plan to place order and some of them maybe surprise us and give it later.

Some of them will do it in shorter delivery time. So this is why we cannot give enough, I would say, a good forecast for the whole year. We can see very good the first half. By the way, a year ago, the maximum we can see the quarter ahead.

Now we can see two quarter ahead is excellent. But that's it, we cannot see more than that. But in general, I think the positive environment definitely can work for us, but we will know later about it, not now.

Brian Chin -- Stifel Financial Corp. -- Analyst

OK. Fair enough. And maybe this is a little bit related, but clearly beginning to see good order intake from the heterogeneous integration applications. If you had to put a finger on it, when do you think the spending has a real chance to begin to accelerate? Do you think second half this year, first half next? And also for Camtek, what do you think the customer breadth should look like? Or will it be a little bit more concentrated?

Rafi Amit -- Chief Executive Officer

Ramy, do you want to share about it?

Ramy Langer -- Chief Operating Officer

[Inaudible] the result. So no doubt that when we look at the advanced packaging as a segment, it is continuing to grow. And out in the advanced packaging, there are two main segments that are growing much faster, and this is the heterogeneous integration and the fan-out. As far the heterogeneous integration, this is something that already started in magnitude in '21.

And definitely, we are seeing this trend growing much faster in '22 and beyond. No doubt the applications are there, it's primarily the high-performance computing and when you look at the breadth of applications from the cloud applications and all the AI that is popping up in all the -- in many, many applications, definitely, this segment is going to grow. One good example is the high band memory, you can see that growing very fast. So we are seeing the heterogeneous integration really growing in two ways: One, you see it on the general heterogeneous integration and then you see the high bandwidth memory also accelerating.

We are definitely seeing a lot of [Inaudible] activities this year. And I think we mentioned it in previous calls, we will start to ship to the DRAM world, which is very much related to this segment already in the first quarter of this year. So that's definitely a positive news in the overall advanced packaging environment.

Brian Chin -- Stifel Financial Corp. -- Analyst

Great. That's very helpful. And maybe just to sneak one last one in. You referenced some new products this year.

Can you maybe just -- and talk about how large your existing SAM is? And how much of these new products could potentially increase your SAM and also whether you expect a meaningful contribution throughout this year?

Rafi Amit -- Chief Executive Officer

Rami, you continue with that?

Ramy Langer -- Chief Operating Officer

We look at our SAM, we estimate today at about $800 million and those products will definitely increase it. And I believe once we will launch them, we'll definitely go beyond the $1 billion mark.

Brian Chin -- Stifel Financial Corp. -- Analyst

Great. Thanks so much.

Kenny Green

OK. Thanks for that, Brian. Our next question will be from Jamie Zakalik of Bank of America. Jamie, you may go ahead and talk.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

Hi, can you hear me OK?

Rafi Amit -- Chief Executive Officer

Yes.

Moshe Eisenberg -- Chief Financial Officer

Yes.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

OK. Thanks for letting me ask a question. So some of your semi cap peers highlighted supply issues in late December that impacted Q1, some of them even up to 10% impact. Does your March quarter guide assume any sort of impact from supply constraints? And if not, what is Camtek doing differently from peers to mitigate these supply issues?

Rafi Amit -- Chief Executive Officer

OK. I think in general, we organized our purchasing and inventory maybe more than a year ago when we just started the beginning of this program. And we increased our inventory called the only item where order on time. And I think we have a very good operation system that doing day by day.

I couldn't say that we don't have an issue and challenge in some time. We have to find a replacement for some components. But in general, I think, you -- by the way, you've been seeing in the results that our inventory going up and one of the main reasons that some need a longed item, we have to place order even a year ahead. In the past, we didn't place other so long.

So I think we did it on time and we do it day by day. And up to now, we believe we manage it successfully. Hopefully, we continue doing it in 2022 as well.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

That's helpful. For my follow-up, you mentioned higher gross margins in Q1 on a favorable mix, which applications are most accretive to margins? And do you expect those markets to be faster growth markets throughout 2022, so maybe these higher margins could sustain throughout the year?

Rafi Amit -- Chief Executive Officer

Moshe, do you want to answer for that?

Moshe Eisenberg -- Chief Financial Officer

Yes. It's not necessarily -- first of all, advanced packaging, we have a nice gross margin on advanced packaging, but that is not different from previous quarters. It's more like a specific product mix or deal mix that we have in the first quarter that favor or resulting in a favorable gross margin.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

And did you quantify -- is it still within your long-term range? Or is it potentially above that?

Moshe Eisenberg -- Chief Financial Officer

We -- our gross margin, you know, typical gross margin varies between 50.5 to 51.5, as I've mentioned in my prepared remarks. This quarter, we expect it to be higher. And overall, we are making efforts and we are increasing -- we are making other activities within the operations to make it more productive and to improve the gross margin. To what extent this will have an impact this year, it's too early.

The visibility that we have for Q1 shows -- indicates the higher gross margin.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

That's helpful. And I'll squeeze one more in here, and then I'll jump back in the queue. But I wanted to ask some follow-ups about the $20 million design win, can you give any color on timing? Was anything recognized in Q4? Is it all going to be recognized in '22? And then also geographically, do these wins help expand your exposure to the US and Europe markets?

Moshe Eisenberg -- Chief Financial Officer

Well, first of all, this win relates only to '22. And so from that point of view, that's nothing to do with '21. No doubt this is -- as we mentioned, this is the higher-end applications of advanced packaging. So no doubt these orders are very important.

Obviously, we are very careful to speak with about customers' names and regions, but these are two leading IDMs and they're really in the very top of the list.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks, guys.

Kenny Green

Thanks, Jamie. Our next question is going to be from Charles Shi of Needham. Charles, you may go ahead.

Charles Shi -- Needham and Company -- Analyst

Hi. Thank you for taking my question. Rafi, Moshe, Rami. Maybe the first question, so a follow-up on the 20 million order you announced earlier.

You said it's targeting the most challenging applications coming from two of the Tier 1 IDMs. I know you probably are not going to name the customers, but can you give us a sense whether the IDMs are in the leading logic or memory or auto industrial or like your traditional market like a CMOS image sensor, but some end market color will be great? Thank you.

Rafi Amit -- Chief Executive Officer

Charles, we are very careful about names of customers. What I can say is what I said in the previous, it really is for the very top names on the list. I can say that it's not related to memory.

Charles Shi -- Needham and Company -- Analyst

So maybe the second question. I look at your order announcements history. It seems like every year at the beginning, you have a good visibility into the first half, maybe by the end of March, early April, you start to make new announcements on orders and that could contribute to like Q3 of the year? My question is, based on what you see in terms of the ordering? Are you expecting a similar pace of -- in terms of how your order book is filling up, especially for Q3 this year? And I have a follow-up after this.

Rafi Amit -- Chief Executive Officer

Ramy?

Ramy Langer -- Chief Operating Officer

Well, I'll tell you Charles, it's very hard to compare it, because the mix is different, and it's very hard to look at the year before and compare it to this year. I think as we said, the order flow of the orders and when we see the applications and we see the market trends, definitely, it's a very healthy first half, and we are starting to see a very nice buildup of applications, customers inputs and also backlog into the second quarter -- and into the second half of '22. It's a little bit too early to give the whole picture of '22, and this is very typical to the kind of business that we are in. The customers -- our customers, their forecast is a little bit, I would say, shorter or the visibility they provide us is shorter than if you compare it to the WFE, but no doubt it's building up to be a growth year.

Charles Shi -- Needham and Company -- Analyst

OK. Got it. So a quick follow-up to that still kind of related to the second half. I know for most of the years in the past, you've kind of have a steady kind of linear growth throughout the year.

I mean, maybe with a couple of exceptions like in 2019. So I wonder what's your thinking so far, because last night, I think ASC, they talked about a relatively linear continued growth for their business. I don't know whether that's a good indicator for your business or not? But are you kind of extracting the similar seasonality pattern or revenue profile throughout the rest of '22. If that's going to be a little different, say, maybe second half going up or going down, what will decide -- what are the leading indicators you are looking at?

Ramy Langer -- Chief Operating Officer

So first of all, you know, Charles what's differs Camtek from this market is the fact that we have 130 customers. And we got a quite a few different segments that grow at different pace, and this is why it's sort of hard to say. I think that in our prepared notes, we said that we definitely see a growth into the second quarter, and we are behind it. Above that, things are building up positively.

It's very, very hard for us to give more accurate projection in this stage. But definitely, it's a very good start for the year.

Charles Shi -- Needham and Company -- Analyst

Thank you, Ramy. That's all for me. Thank you.

Kenny Green

Thanks, Charles. Next, we'll go to Gus Richard of Northland. Gus, please go ahead. Gus you need to unmute.

Gus Richard -- Northland Securities -- Analyst

Hi, there. Sorry thanks for letting me ask a question. In advanced packaging, can you give me a sense of how much is high bandwidth memory? How much is heterogeneous and how much is fan-out, just a relative mix?

Rafi Amit -- Chief Executive Officer

How much is it from a mix. I'm trying to think of the numbers. I would say -- and first of all, it's I want to try and look from a -- not just a quarter. When you look in the quarter, it's a little bit misleading.

But if I look at the entire year, so no doubt, first of all, there is the broad applications in the advanced packaging of all the different customers. And this would probably -- this is still a big portion. If I'm looking at the -- it's a significant percent, the heterogeneous integration in the overall business. The fan-out is also very significant, the high band memory is a little smaller in magnitude, and then comes a lot of different in smaller applications.

Gus Richard -- Northland Securities -- Analyst

OK. Got it. Got it. And that's just in terms of advanced packaging, correct?

Rafi Amit -- Chief Executive Officer

Absolutely. We are talking just about the 50% of our business that is advanced packaging.

Gus Richard -- Northland Securities -- Analyst

Got it. And then if -- could you do the same slit foundry, OSAT, IDM? In terms of advanced packaging, just to give us a sense of where the revenue in that bucket is coming from?

Moshe Eisenberg -- Chief Financial Officer

Well, this is a little bit harder for me just to give you this number from the top of my head. But definitely, the IDMs is an important portion. Then comes the OSATs that are very important, because there are many of them and they covers a lot of applications. Some of them are not high-end application in advanced packaging, but still the quantities are very large.

And then obviously, it comes the foundries and here, it depends, it differs. So it would be very hard at this stage to give you here an accurate number or an accurate indication.

Gus Richard -- Northland Securities -- Analyst

Got it. That's super helpful. Thanks. And then I'm just curious in your front-end applications, is that currently dominated by discrete or compound? Can you give any color on what sorts of front-end customers you have?

Moshe Eisenberg -- Chief Financial Officer

Well, the portion that we do is more related to the -- what we call the back-end of the line of the front-end. So here, you would see a variety of applications from trailing hedges to leading edges. It will be both, it's not just one of them. It would be many applications.

And this is, as we said, it's about 20% of our business, this is best portion. And then comes the -- what we call the compound semi that we separated and we look at it as a separate business, and this is about 15%. And this is definitely growing. A lot of it obviously is related to automotive, silicon carbide, but there are applications, they are like LIDAR, face recognition, which are more slightly different materials, but still in the same market segment.

Gus Richard -- Northland Securities -- Analyst

And then in the 10-K, do you disclose year-end backlog? And then if you do, can you give us a little preview of what that might be?

Rafi Amit -- Chief Executive Officer

No, actually, we do not provide in our 20-F, which is the equivalent of 10-K for US companies or foreign issuers. We do not provide any backlog information. So we typically, we do not provide it also in our conference calls.

Gus Richard -- Northland Securities -- Analyst

OK. Fair enough. Thanks so much.

Rafi Amit -- Chief Executive Officer

Thank you.

Kenny Green

Thanks, Gus. We'll now go back to Jamie Zakalik of Bank of America for a follow-on question. Jamie, you may unmute.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

Thanks for letting me ask a follow-up. I had a question on opex. It looks like it's starting the year pretty high based on my calculations, maybe in the $18 million range. How should we think about opex throughout the year? Is this the quarterly rate we should be thinking about? Is there -- are you guys going to potentially grow it sequentially each quarter? Basically, how should we think about it throughout the year?

Rafi Amit -- Chief Executive Officer

Well, without referring specifically to the number. I think what we plan on opex is pretty flat quarters. We do not plan to increase much above and beyond the increase that you already see in Q4 and Q1. So it will be pretty flattish opex level throughout the year.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

And my last one would be -- when you're looking at the year from the visibility you have now, if you had to rank order your applications on which could grow fastest and which might be slightly less fast growth this year. How would you rank the applications across advanced packaging, compound semis, front end, etc.?

Moshe Eisenberg -- Chief Financial Officer

So let's go back, no doubt. Front-end is 50% of our business. It's a very robust growth, and there are a couple of segments there that are going to grow very fast. And definitely, we are going to enjoy them.

So there, specifically, we talked about the heterogeneous integration, we talked about the fan-out and we talked about the DRAM transition to high bandwidth memory, definitely, these are three strong trends that are going to go -- are going to be very dominant in '22, and I believe also in '23. So definitely, this segment is very strong. It will grow, and we are very confident about it. I think we've grown very fast in the front-end.

We -- this is 20% of our business, we see continued growth there. We had a nice backlog for the first and second quarter for this segment. And similarly, the compound semi, which is about 15%, so those three segments are definitely very strong. And then there are the others that we didn't talk about, like the CMOS, image sensors, an area that we dominate that is around the double-digits of our business.

This business is definitely going to be there, and I'm expecting that it will be in a similar range in this year's way. And if you take 130 customers, so we are very confident that this is going to be a very -- it's going to be a good growth year.

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

Thank you, guys. Congrats on the results.

Moshe Eisenberg -- Chief Financial Officer

Thanks, Jamie.

Kenny Green

Our next question is from Udi Levin of Achords. Udi, you may go ahead and ask. Asked you unmute yourself.

Udi Levin -- Achord Investment Management -- Analyst

Hi. Hello. I just wanted to understand that if the margin of the research and the selling is supposed to be -- and still, I see that it's, kind of, lower than the other year? And I wanted to ask about the future if you see this continue.

Rafi Amit -- Chief Executive Officer

Udi, you came across unclear, if you can please repeat the question.

Udi Levin -- Achord Investment Management -- Analyst

Rafi, did you hear me? Do you hear me?

Kenny Green

Now, we hear you.

Rafi Amit -- Chief Executive Officer

But I could not understand your question.

Udi Levin -- Achord Investment Management -- Analyst

OK. I just wanted to ask about the margin of the research and development costs and the selling engine general administration cost, if I saw that the margins go lower. And I wanted to know if in 2022, it will continue the same margin as it was 2021?

Rafi Amit -- Chief Executive Officer

OK. Actually, we did say in previous calls, Udi, that we plan to increase R&D and sales and marketing, the company is growing and in order to support the growth, we needed to invest more in R&D and in sales channels. So what you have seen in fourth quarter, and you will continue to see in the first quarter is somewhat an increase in this level of spending. As I said to Jamie, after this, you will see more like a flattish R&D and sales and marketing for the rest of the year.

Udi Levin -- Achord Investment Management -- Analyst

OK.

Kenny Green

Thank you, Udi. [Operator instructions]. So we have a question. We do not -- or we do have a question from Alan Lars.

Alan, you may go ahead and ask.

Unknown Analyst

Hi. Thank you for taking my question. You stocked every quarter also about the introduction of new products that are supposed to be in the coming quarters. Could you please provide some details about it? What kind of products are planned to be introduced? To what areas? And what's the prospect of they're selling in the coming year or two?

Rafi Amit -- Chief Executive Officer

OK. I can maybe, you know, we talk about new products. Actually, it's like -- we call it like ongoing. Almost every order we get, there are some special development, some special feature.

And many times, we develop product and feature, while we get the order. So there are many, many other -- many, I would say, new product that we launch all the time. We don't announce on any or of them. Only when we go to a new platform or something really major system, we usually make announcement, this is in general.

So we always said that in 2022, we plan to launch innovation product -- innovative product, we mean definitely, it will be some new platform, more features on the Eagle and the new platforms. So we have a lot of new, I would say, the innovative product will be launched next year. And by time, we will definitely we'll talk about it, I will explain what the purpose of this product and what we expect from that product.

Unknown Analyst

I had a follow-up, and it's related to the R&D intensity, we have seen in 2021, a quite significant decline in the R&D intensity, because of the increase in sales, quite robust increase in sales, while R&D was quite flat, which is speaking about the operating leverage. But to what extent this is something which is sustainable or is it a need to go to somehow higher levels of R&D intensity in order to support future future growth or future prospects of new innovations?

Rafi Amit -- Chief Executive Officer

But let me just give you something about your statement. Definitely, R&D the last year should support the sales and most of the R&D efforts were to support the sales. But while we support the sale, many of the support are what we call long-term product, long-term development that we already plan to launch in some time. So I couldn't say that all the efforts just go to support the ongoing without thinking about the long-term.

Now developing a new platform, usually, this is the project that takes a few years, OK? In our world, the accuracy, the demand, application, it takes time always to come with totally new product or new platform. So this is what we call we have a dedicated team that's working only on the long-term. But altogether, we definitely have a new product. And even while we put a lot of efforts in 2021, we came with the fourth generation of the Eagle.

We came to many feature of site inspection, side edge inspection, and back inspection and many different sensors, a lot of things that we don't make any last one for every one of them. But definitely, customers are very aware about our capability and what type of product we provided during this year.

Moshe Eisenberg -- Chief Financial Officer

Thank you very much. Just to complete [Inaudible] the answer. As we said, we -- indeed, R&D spending last year was somewhat lower than what we wanted, because it took us some time to hire people with a big race after talented engineers. So it took us some time to hire the people that we wanted and to increase the level of expenses, which are absolutely mandatory for our continued growth.

And I think that during the fourth quarter and in the first quarter, we have managed to improve this. We have added more people to the R&D team and sales and marketing as well. And as a result, what you will see in 2022 is a higher level of R&D expenses.

Unknown Analyst

Thank you all on this.

Kenny Green

OK. Thanks. That would end our Q&A session. Before I hand back to Rafi, I just want to remind everybody that in the coming hours, this call, the recording will be uploaded to Camtek's investor relations website.

And with that, I would now like to hand over to Rafi for his closing statements. Rafi, please go ahead.

Rafi Amit -- Chief Executive Officer

OK. I would like to thank all of you for your continued interest in our business. Again, I would like to thank all our employees and my management team for the tremendous performance, and we look forward to continuing it. To all investors, I thank your long-term support.

I look forward to talking with you again next quarter. Thank you very much, and goodbye.

Duration: 53 minutes

Call participants:

Kenny Green

Rafi Amit -- Chief Executive Officer

Moshe Eisenberg -- Chief Financial Officer

Tom O'Malley -- Barclays -- Analyst

Brian Chin -- Stifel Financial Corp. -- Analyst

Ramy Langer -- Chief Operating Officer

Jamie Zakalik -- Bank of America Merrill Lynch -- Analyst

Charles Shi -- Needham and Company -- Analyst

Gus Richard -- Northland Securities -- Analyst

Udi Levin -- Achord Investment Management -- Analyst

Unknown Analyst

More CAMT analysis

All earnings call transcripts