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Corporate Presentation- Confidential -
Corporate Presentation+ Q3 Financial Results 2008
January 2009
2- Confidential - Corporate Presentation
Disclaimer
Private Securities Litigation Reform Act of 1995 Safe HarborExcept for historical information, the matters discussed in this presentation are forward-looking statements that are subject to certain risks and uncertainties which could cause the actual results to differ materially from those projected, including industry trends, the timing and strength of the Company's or competitors’ new product and service offerings, the mix of product and service revenues, changes in the Company's or competitors’ business or pricing strategies, changes in the prevailing political and regulatory framework in which the Company operates or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis and other risks detailed from time to time in the Company’s SEC reports. The Company assumes no obligation to update the information herein contained.
3- Confidential - Corporate Presentation
A World Leader
Virtually every electronic device in the world is produced using Orbotech systems
• A world leader in yield-enhancing and production solutions for the electronics industry
• A leading provider of specialized application products for nuclear medical imaging
• A leading provider of recognition solutions for check processing and business process outsourcing
4- Confidential - Corporate Presentation
The Industries We Serve
Medical Imaging
Recognition
Bare PCB Production5500 systems installed
FPD Manufacturing1200 systems installed
5- Confidential - Corporate Presentation
Growth StrategyN
ew T
echn
olog
ies
for C
ore
Mar
kets
Bare PCBs
Flat Panel Displays
RecognitionSolutions
AOI
CAM
Plotting
DirectImaging
Inkjet
AOR
ProcessControl
AOI
Metrology
YieldMgmt
Test
Repair
Medical Imaging
New Markets for Core Technologies
6- Confidential - Corporate Presentation
Orbocar3%
Medical Imaging
7%
PCB Bareboard44%
Display37%
PCB Assembly9%
Sales Distribution Q1-3 2008By Product Lines
7- Confidential - Corporate Presentation
Global Infrastructure
IsraelHeadquartersMain R&D CenterProduction
Europe8 Offices 3 CS Centers3 R&D Centers
N. America3 Offices 5 CS Centers
Japan1 Office1 CS Center 1 R&D CenterPacific
18 Offices 20 CS Centers
Over 1600 Employees in over 30 Offices
8- Confidential - Corporate Presentation
Sales Distribution Q1-3 2008
Europe10%
North America
15%Other
4%
Korea23%
Taiwan13%
Japan10%
China25%
By Region
9- Confidential - Corporate Presentation
R&D Investment• Significant product sales are from products
introduced over the last 24 months
• Over 450 Scientists and Engineers
• Over $65M annual R&D budget
11- Confidential - Corporate Presentation
Bare PCB Production
Orbotech is the world leader• Automated Optical Inspection (AOI)
• Automated Optical Repair (AOR)
• Laser Direct Imaging (LDI)
• Laser Plotting
• Inkjet Legend Printing
• CAM / Engineering
Over 5500 Systems Installed
12- Confidential - Corporate Presentation
2009 PCB market• Challenging market conditions
• Forecasted decline in PCB $ value and area
• Recovery expected to begin in H2 2009
• Weakness in market driving applications• Mobile phones to grow by low single digit
at best• PC to grow at ~4%
• No major geographical shift• Minor shifts in China• Limited investments in Vietnam
PCB market growth forecast
11.1%
5.6%
3.4%
-6.5%
3.3%
9.0%10.5%
5.5%
2006
2007
2008E
2009F
2010F
2011F
2012F
2013F
13- Confidential - Corporate Presentation
PCB End Applications
Computers & Communication are Largest Markets
Computers32%
Communication22%
Consumer15%
Automotive4%
Industrial/Medical7%
Aerospace/Military5%
Semiconductor15%
2007 PCB Production Value by End Application
Source: Prismark (05/’08)
14- Confidential - Corporate Presentation
Single Digit Growth in Mobile Phones
• Gartner forecast -1% to -4% decline in mobile shipments• Samsung targets 11% growth; expects market to grow by single digit
or negative• LG targets 5% growth
Mobile Phone Shipments [M units]
9951144
12931228 1201
22%
15%
7%
-2%
8%
-5%
0%
5%
10%
15%
20%
25%
30%
2006 2007 2008 2009 2010
Actual Forecast Growth
Source: IDC (12/2008)
15- Confidential - Corporate Presentation
Slower Growth in Computers
PC Shipments [M units]
236
271
312300
354
9%
15%
11%
4%
13%
2006 2007 2008 2009 2010
Actual Forecast Growth
Source: Henderson Ventures (10/’08)
16- Confidential - Corporate Presentation
The Electronics Industry will Continue to Grow in the Long Run – ~ Double $
• New markets• BRIC
• MEA
• Latin America
• New applications
• Digitization & reliance on data – data handling & storage
• Mobility –wireless & miniaturization
Electronics Consumption/Capita (2006)
$17
$100
$150
$495
$700
$1,100
India
China
Brazil
S.Korea
Germany
US
2006 average: $2152020 average: $395
Developed countries: $500 and up
Source: Prismark EIR (01/2008)
17- Confidential - Corporate Presentation
Strong Growth in the High-End Segment from 2010
PCB production by segment [$M]
Commodity
4 & 6 layer
MLB
Microvia
IC Substrate
Flex
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
2009-2013 CAGR
2.8%
6.0%
6.3%
9.0%
9.8%
9.0%
Commodity
4 & 6 layer
MLB
Microvia
IC Substrate
Flex
We are here
-8.6%
-7.5%
-4.9%
-5.0%
-6.9%
-5.7%
Source: Prismark (10/2008)
18- Confidential - Corporate Presentation
iPhone ExampleTwo Main PCBs, Several Flex, Many IC Substrates
Wireless board Application board
Source: Prismark (06/’07)
20- Confidential - Corporate Presentation
Product Line Summary
Discovery™ AOI Systems
Paragon™ LDI Systems
PerFix™ AOR Systems
LP™-9 Laser Plotters
Sprint™ Inkjet Legend Printers
Frontline CAM / Engineering Software
21- Confidential - Corporate Presentation
Discovery™ AOI Systems
Industry’s Best Selling AOI Solution
• Simple with Push-to-Scan™• The easiest AOI solution in the industry
• Intelligent with Visual Intelligence™• Detect all you want and only
• Powerful impact with new AOI economics• Maximum output with maximum availability
Over 1000 Sold Worldwide
22- Confidential - Corporate Presentation
Paragon™ & Paragon Ultra™ LDI
Industry’s Only Field Proven Laser Direct Imaging (LDI) System
• Enabling technology for complex and advanced applications
• Increased adoption for high-end mainstream applications
• Used in all segments including packaging and solder mask
Over 1000 sold worldwideOver 300 Sold Worldwide
23- Confidential - Corporate Presentation
Perfix™ Automated Optical Repair
The Industry’s Only Automated Solution
• Accurately repairs any type of excess copper short on fine-line PCBs
• Overcomes traditional limitations of manual repair
• Significant cost-savings by reducing panel scrap
New Introduction
24- Confidential - Corporate Presentation
Sprint™ Inkjet Legend Printers
Next Generation Solution• High speed, high accuracy
direct legend imaging• Integrated UV ink curing• High performance, high yields• Significantly cuts cycle time, cost-effective• Provides efficiency, reliability and flexibility• Supports the use of multiple commercial inks• MIL approved
New Introduction
25- Confidential - Corporate Presentation
LP ™-9 Laser Plotters
Top Quality, Automated Solution
• Builds upon success of LP series
• Designed as 24/7 workhorse
• Models for all manufacturing needs
• Ultra-fast throughput
• Sophisticated plotting for leading-edge design challenges
• Unattended operation
New Introduction
26- Confidential - Corporate Presentation
CAM / Engineering Software
Frontline PCB Solutions
• Automates entire pre-production process
• Engineering process planning systems expedite the decision-making stage
Joint Venture Company
28- Confidential - Corporate Presentation
FPD Manufacturing
Orbotech is the world leader in yield management
• Automated Optical Inspection (AOI)
• Test
• Repair
Over 1200 Systems Installed
29- Confidential - Corporate Presentation
Orbotech Presence
• Presence at all LCD fabs• Proven solutions for all generations• Future-proof technology: OLED, plastic-based & other
specialties
30- Confidential - Corporate Presentation
Market Assumptions and Trends
• Reduction in demand• Significant over supply for the next
few quarters• Panel makers experience rapid
deterioration in bookings• Tight inventory control and AR / CF focus dictates
significant cuts in production volumes• Taiwan in the 50% levels (AUO, CMO, HDS – 50%, CPT – 30%)• Korea in the 70-75% levels (SEC recently reduced to 70%)• Japan in the 80% range
• Short term price cuts do not increase demand (Deflation)
31- Confidential - Corporate Presentation
Market Assumptions and TrendsModule Shipments (000s) and ASP
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Oct'07
Nov'07
Dec'07
Jan'0
8Feb
'08Mar'
08Apr'
08May
'08Ju
n'08
Jul'08
Aug'08
Sep'08
Oct'08
$0
$50
$100
$150
$200
$250
NoteBooksPC MonitorsTVLA ASP ($/Unit)
Large Module Sales (US$ millions)
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Oct'07
Nov'07
Dec'07
Jan'0
8Feb
'08Mar'
08Apr'
08May
'08Ju
n'08
Jul'08
Aug'08
Sep'08
Oct'08
Sal
es ($
M)
OthersTMDisplaySVA NECSharpSamsungLG DisplayInnoluxInfovisionHydisHannStarCPTCMOBOEAUO
Source: DisplaySearch Q3 ’08 Supply/Demand
34- Confidential - Corporate Presentation
The Way To Reach Price & Size Goals
Substrate SizeAspect
ratio 16:9
Glass Size 32" 37" 42" 46" 57" 65" 75" 85" 95" 105"
G5 1100x1300 3 2 2 2 1
G5.5 1300x1500 6 3 2 2 2 1
G6 1500x1850 8 6 3 3 2 2 1
G7 1870x2200 10 8 6 6 3 2 2 1 1
G7.5 1950x2250 12 8 8 6 3 2 2 2 1
G8 2160x2460 15 10 8 8 3 2 2 2 1 1
G8.5 2200x2500 15 10 8 8 3 2 2 2 1 1
G9 2400x2800 18 12 10 8 6 3 2 2 2 1
G10 2850x3050 24 18 15 10 8 6 3 2 2 2
GEN
Source: ADR Nov., 2006
35- Confidential - Corporate Presentation
Implications of Large-Size TVs
TV Market Manufacturing Yield Management
• Image Quality
• Cheaper
• Larger
• More & NewTest Methods
• Rigorous QA& Repair
• Cost-EffectiveProcess Control
• Complex Design
• MinimizeHandling
• HugeGlass
FPD product strategy requires an integrated, multi-function yield management solution
36- Confidential - Corporate Presentation
PDI Integration update• Achievements
• Field activityDAP is working as one unified organizationWorking according to the same processes and policiesIntegrated Locations
• Cross training programs are in place and in process• Original cost saving targets were achieved (Pacific and SJ).
2009 budget represents much higher cost reductions mainly due to market conditions.• The division's president was relocated to SJ and manages the division from there• A division CTO was put in place, relocated to SJ and oversees R&D from there
• Still to do…• Complete actions by 31/1/09 as set by steering committee• People and cultural Integration – creating ONE team• Large elements of IT integration• Revenue synergy/product roadmap within budget constraints
38- Confidential - Corporate Presentation
Product Line Summary
InVision™ In-Line AOI
SuperVision™ Off-Line AOI
FPI™ 6XXX AOI
FPI™ 7XXX AOI
Array Checker Test
Array Saver Repair
Value Added Applications
39- Confidential - Corporate Presentation
Value Added Applications
• Orbotech ClearSight™ Technology
• Peripheral Inspection
• Macro Inspection
• Metrology
• Defect Classification
• Eyes-2020
• Remote Review Station
41- Confidential - Corporate Presentation
Worldwide Medical Imaging Industry
5.5
4.5
4.2
3.4
2.1
2009E
4.4 4.7 4.9
3.3 3.4 3.8
3.3 3.53.6
2.62.9
2.91.5
1.61.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2002 2003 2004
Global sales of medical imaging equipment (2009)
X-ray
Ultrasound
MRI
CT
Nuclear
19.6
+2.3%
+3.6%
+3.2%
+3.0%
+4.0%
Worldwide nuclear medical imaging equipment sales are expected to reach $2.1B by 2009
15.116.0
17.0
$ Billion
Source: BCC report 2005
CAGR 2002-2009: +3.1%
42- Confidential - Corporate Presentation
Global Sales of Nuclear Imaging Equipment (2009E)
5.5
4.5
4.2
3.4
2.1
2009E
X-ray
Ultrasound
MRI
CT
Nuclear
19.6
0.8
1.3
Source: BCC report 2005
0.80
0.36
0.12
USA
ROW
Standalone SPECT
SPECT/CT
PET,PET/CT
2.1$ Billion 1.30
The standalone SPECT segment represents $120M from an end-user price standpoint
43- Confidential - Corporate Presentation
Medical Imaging Market Summary
• Growth rate: +4.0% (CAGR 2004-2009E)
• Main end-markets: • Cardiologist private clinics
• Cardiology departments in hospitals
• Product drivers (global macro perspective): • Aging population
• High prevalence of cardiac diseases
• Effort to reduce overall healthcare costs
• Increasing needs for outpatients management (shorter stays in hospital)
44- Confidential - Corporate Presentation
Orbotech Diversification Strategy Through Medical Imaging
Vision• Become a leading global developer & manufacturer of
innovative medical imaging solutions
Objectives • Be the leading OEM supplier of imaging systems, based on disruptive
technology, for industry’s leading vendors (GE, Siemens, Philips, Toshiba)
Short Term Objectives • Be a leading supplier of nuclear imaging cardiac
systems for the industry’s leading vendors• Set the platform for future growth development
45- Confidential - Corporate Presentation
Nuclear Medical Imaging
Leveraging our Core Expertise
• Specialized products for nuclear medical imaging industry
• Acquisition of Danish company, DDD
• A world leader in single and dual detector gamma cameras mainly dedicated to cardiac applications
Orbotech Medical Denmark A/S is leading manufacturer of dedicated imaging equipment for Nuclear Cardiology
46- Confidential - Corporate Presentation
Main Products
• Philips CardioMD • Siemens c-cam
Component Supplier to Major OEMs
Supply partner to 2 of 3 major OEMs worldwide
47- Confidential - Corporate Presentation
Orbotech Medical Denmark
• Sells mainly medical imaging equipment for nuclear cardiology (~$100M market)
• Leading OEM supplier of nuclear medicine gamma cameras in the U.S.
• Largest installed base of cardiac cameras worldwide (1,600 units of 2,400 total IB)
• Supply partner to 2 of 3 major OEMs worldwide (Philips and Siemens)
• Has a pipeline of new products expected in 2009, offering long-term growth potential
49- Confidential - Corporate Presentation
Recognition Solutions
Orbograph Ltd.
• Leading developer of recognition solutions for U.S. check processing and business process outsourcing markets
• Processing millions of documents each day
• Reduces costs, improves operational efficiencies with rapid ROI
50- Confidential - Corporate Presentation
Recognition Software
• Check amount recognition (Orbocar)
• Field recognition (payer, payee, MICR)
• Image quality and field usability (IQUA)
• Image-based fraud detection• PNV
• Forgery
• Counterfeit
• Data mining for marketing
51- Confidential - Corporate Presentation
Outsourcing Solutions
Patented Key-Pay Technology
• Secure, scalable platform enabling “on-demand” access to certified data completion resources
• Web-based application delivers true anytime, anywhere functionality
52- Confidential - Corporate Presentation
Outsourcing Solutions
Patented Key-Pay Technology
• Hub for remote keying personnel
• Removes geographic barriers between people & jobs
Cost-Effective for Rapid and Accurate Daily Item Processing
53- Confidential - Corporate Presentation
Outsourcing Solutions
Products Using Key-Pay
• OrboCAR APEX• For check processing applications
• Outstanding for load balancing & leveling, disaster recovery, MICR repair automation
• Key-Pay® Convene™• For form processing applications
• Unique data completion solution ensures customer anonymity
• Ideal for medical, tax & other documents
55- Confidential - Corporate Presentation
Customer Support
• Strategic & necessary for customer relationships
• Differentiating factor vs. our competition
• Source of recurring revenue
• Consistent contributor to profitability
• On-going presence at customer sites
56- Confidential - Corporate Presentation
Customer Support Infrastructure
• Over 500 employees in 30 countries
• Supporting over 7800 AOI systems (PCB, ASM, FPD), 600 Test & Repair systems, 650 Plotters, 300 LDI and 4000 CAM stations
• 5 response centers, 5 customer training centers
57- Confidential - Corporate Presentation
Customer Support Services
• Response centers• Training centers• Remote access• Software upgrades & ECOs• Spare parts inventories• Application support• Consulting and site audits• Preventive maintenance• Local satellite offices• Local adaptation
58- Confidential - Corporate Presentation
Customer Support Example
• Convenient, efficient “hotline”
• Expert-level staff
• Remote diagnostic capabilities
• Many calls closed over the phone
• Dispatched calls for on-site service with diagnostic information
Increases Customer Satisfaction & Our Profitability
Response Centers
59- Confidential - Corporate Presentation
Cost cutting measures
• Over 15% reduction in worldwide workforce
• Reducing corporate management salaries by 15%
• Reducing employee salaries by lesser amount
• Carefully monitoring all expenditures
• Operational synergies from PDI acquisition of $20m in 2009
• Scaling down activities in PCB Assembly business
• Estimated annual savings - $60 million
61- Confidential - Corporate Presentation
Revenues
($ Millions)
303.3
76.6
333.3
83.1
266.6
94.2
187.9
69.1
222.6
77.7
0
50
100
150
200
250
300
350
400
2005 2006 2007 Q1-3 07 Q1-3 08
ServiceSales
379.9416.5
360.7
300.3
257
62- Confidential - Corporate Presentation
Revenues By Quarter
($ Millions)
101.4
86.1
100.5104.9
88.6
105.1 106.9
82.3
94.7103.3 103.6
0
20
40
60
80
100
120
Q1 Q2 Q3 Q4
200620072008
63- Confidential - Corporate Presentation
Net Income
1.30
1.75
0.49
0.08 0.22
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2005 2006 2007 Q1-3 07 Q1-3 08
($ per share) from ongoing operations
64- Confidential - Corporate Presentation
Net Income By Quarter($ per share) from ongoing operations
0.43
0.170.11
0.46
0.180.16
0.49
0.01
-0.05
0.38
0.12
-0.10
0.10.20.30.40.50.60.70.8
Q1 Q2 Q3 Q4
2006
2007
2008
65- Confidential - Corporate Presentation
Margin Analysis
43.0 45.5 41.6 40.0
0
10
20
30
40
50
2005 2006 2007 Q1-3
12.0 12.0
2.9 2.5
0
2
4
6
8
10
12
2005 2006 2007 Q1-3
11.4
14
4.52.5
0
2
4
6
8
10
12
14
2005 2006 2007 Q1-3
Gross Margin(On-going Operations)
Operating Income(On-going Operations) (On-going Operations)
Net Income
66- Confidential - Corporate Presentation
Financial Ratios
12/31 2005
12/312006
12/312007
4.64.9
133
77
41.6
4.5
126
77
45.5
14.0
4.2
120
75
43.0
11.4
9/302008
2.6
132
59
40.0
2.5
Current Ratio
Day’s Sales Outstanding
Equity/Assets (%)
Gross Profit (%)
Net Profit to Revenues(% ongoing operations)