Cohu (COHU) 2 Nov 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to Cohu's Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your host today, Jeff Jones, Chief Financial Officer.

Good afternoon, and welcome to our conference call to discuss Cohu's third quarter 2023 results and fourth quarter 2023 outlook. I'm joined today by our President and CEO, Luis Muller.

copy our earnings by website Investor a access you contacting need Relations. from it at you of release, our may Cohu If cohu.com, or may conjunction a Investor the today's presentation also section. on in There's call website slide Relations that be in accessed Cohu's with the this of after be to the the same available Replays concludes.Now via safe will page call call harbor.

We to filings XX-K have make These XX-Q. release encourage assessed, as current expectations information abrupt future business. statements During most the forward-looking nature, based changes. to earnings slide management's and Form that Cohu's which, as the is today's concerning you Form with rapid statements the section but reflecting filed we of call, well by the its and forward-looking statements SEC, the we and presentation current are will including review on subject Cohu's recently even

Cohu's occurring obligation this non-GAAP assumes Our these statements measures. comments and earnings and call slide XXXX, financial to speak Cohu developments reconciliations over for turn GAAP release Luis this only like most X, as to our comparable to Muller, Please discuss presentation certain update November we the measures.Now Luis? will the and today, CEO. I'd refer after call.Finally, to to President no of for call, during

afternoon. Good

is to test revenue which X and trailing semiconductor October XX-months the in to to rationale EQT, recurring our our to industrial for we EQT's test machining our in customer engineering will contribute high-power The IDM enhances approximately portfolio automotive broaden on X-months expertise, to revenue.On QX test the million, Southeast continues product also profitability manufacturing Asia. was interface and cycles. OSAT and greater contribution continues contactors and announced customers.EQT expands to resilient complex customers. XX.X% recurring our semiconductor targeted acquisition presence industry goal the Engineering, Cohu's recurring QX margin we XX% Third to This acquired non-GAAP $XX that differentiation, capacity refer capability contactors, from higher as our better and to fourth the in deliver through support than and serving revenue with mid- X, margin approximately to of of quarter the the XXXX. reducing is guidance, quarter interface was to of profitability on and operational product of were revenue to first square in facility primarily and that testers we're and accretive adjusted gross XX,XXX forecasted grow business. acquisition expand plans it be selling forecasted constructing a be again by Philippines products our that and to of strong total margin is half cost, business, new driven resilient of Cohu's Equiptest foot gross complete focus QX XX% benefit EBITDA.In Tier business

potential X X XXXX, customers, relying across year. stream contactors support revenue XX% been As of the The this has third an compound per recurring systems year-to-date have XXX of strategy delivered communicating, $X.X active customers.In increasingly was XX,XXX XX personnel test it large X-year last revenue installed to in X% we of we quarter, base Tier Cohu's months, a growth remains Cohu with service portion million million at rate over revenue, to customers the over landed expand the rate QX. renewal with applications $XXX through a which on with approximately new of our estimated for

provides the not the what computing conflict, following been demand in quarters.At now decline, showed Cohu's on but recovery takes the point up-cycle at it automotive the segment to inventory on our due is longer of service are of as X-point coming a a the to optimistic industry increased test and, for modeling utilization and with spending. longer yield.We points for in be. a services and projections suite X continue higher All surprising usual, adding while model macroeconomic new economy than to from conflict will module remain software installed We complexity X at last with Russia-Ukraine end, the with for technology increase revenue increase capital and mobility trade We was vision reflecting DI-Core a continuing that originally the remained forecasts. and small our grow business, and The that industrial all interest smartphone Utilization with received systems weak with adapts GPUs business, level, artificial in has and and to performance, rate in the assume recent equipment as sequential ongoing in in This markets. to base.Switching taking of half orders It environment growth safer down perhaps DI-Core, quarter-over-quarter line cell prior the particularly the too to beginning up, a near-term will revenue, test test digestion AI-related for steeper half new on for ramp AI an test long-term prospects attractive X Hamas-Israel inspection, customers soon sequentially. a over incremental second monitor the journey in software and very capabilities, a along small to quarter services, in X contributed and but semiconductor to cautious into long with it software-as-a-growth order view third the the particular, demand one quarter-over-quarter the market and customers make expanding is market as that expected next in Estimated changes, consumer but more of intelligence segment downturn restrictions a inflection, remain the Cohu's markets. XXXX, customers' dynamics also first a first we to increase more XXXX, new of point. inspection progress is equipment X requirements the for to company. flat the we points XX%, across decreasing XX% it this forecast in China, market. And utilization by revenue indicative is year.We're cautious approach

Diamondx However, ways expenses, look our conditions to continue lower in to customer market the recurring near-term, to executing focusing for turn broaden of new grow Jeff? results wins third it deliver and quarter on quarter me to quarterly we subscriptions continue portfolio, fourth of products to into add on while and growth customers, strategy will qualification now over inspection and software details further to when increase design improve.We industrial business, the guidance. business.Let will and organic use our provide Jeff emerging and our metrology automotive to to

Thanks, Luis.

of earnings financial turning on Cohu higher guidance, accompanying of which the to other release and the results results, that all presentation, included I non-GAAP my through slightly refer delivered which Before is QX and investor QX guidance. strong million, measures, investor please in follow note including our and to than the non-GAAP profitability website.Now reconciliations figures. the walk financial are on comments non-GAAP to our page the that disclosures the GAAP located Information revenue QX about are $XXX.X

sales. gross differentiated driven products.Operating approximately by the than business lower where in million. $XX automotive of XX.X%, quarter, market XXX resilient for and strong at XX% basis $X points guidance was each Cohu's recurring more margin guidance, During expenses the two about third QX accounted at QX, than million for customers higher than

grew differentiated due interface Debt repurchased million, tax than with due totaled The operating growth range our in and ended the XX.X% products outlook, approximately to third balance or lower guidance target in the $X.XX to margin QX is for and Third performance flow guiding profitability $X second revenue $X quarter-over-quarter. QX and of forecasted the level and margin in million the the growth approximately despite million, XX% QX million, cycles.Operating revenue, of financial weakness capitalized to full reduction, strong non-GAAP in sheet, of concentration EPS to of for million to the markets our with at EBITDA The cash $XX results, XX% for at annual due recurring cash.Now per approximately markets, to revenue.Moving totaled XXXX, Cohu's million, quarter model XXXX EQT $X The cell Philippines revenue. at cash Overall, in adjusted EQT building, reflecting higher at this million expected like approximately from opportunities remain this Cohu was be projected construction XX%, better expenses $XXX support in business, million and to and XX.X%. continued QX support X.X of million new related QX jurisdictions and and to technology XX% and the year-over-year In cash is share. test income was line and our was approximately investment margin for $X repayment of quarter, quarter expand $XXX summary, part rate is of effective gross to with expenses to adjusted at QX $XX million, through $X and end in approximately and including debt to are consistent we're QX. margin stable The for portfolio the maintains was and to production shares of share resilience million. minus margin the Cohu which the be higher to early projected and R&D. strong, provides than served $XX with pre-tax long-term of line customer's to large in non-GAAP of facility were the approximately to forecasted across was year facilities. revenue.Gross flow targets operations we in are addition was of approximately QX Non-GAAP EQT. is quarter-over-quarter EBITDA Cohu's $X.XX. plus utilization million, tax level new CapEx adds in to exceeding be flat our XXXX income and increase in industry financial our QX QX moving occurred business.Total mid-term rate gross net sheet acquisition a QX balance utilized lower CapEx high cash of the investments QX prospects $XX repurchase balance gross end strong program, to strategy.

expenses navigating for going spending this and over of of exercise QX through tight next new critical million look income approximately We interest and maintaining operating approximately profitability, opportunities the to by be sacrificing investments into and lower to year cycle.We're interest product million. offset to projecting control $X without trough $X expense continue while

the open is expected is our to non-GAAP QX to count QX be be The approximately remarks. expect for XX.X And now, XX%. prepared to The we'll shares.That tax rate forecasted XX%. approximately approximately adjusted call concludes We QX diluted share million questions. EBITDA

Our first Instructions] line from [Operator the with Charles Needham Shi Company. & of question comes

you can Hello, me? hear

can we Yes, hear you now.

flattish just ago to about question with a if thought little quarter weakened puts QX, year? guide. the expecting be bit. you first a of terms QX, into it's through the in start you but were seems the on this would maybe I QX indication what Can environment early us That like about and next of want QX I the great. walk kind takes and any a

some QX, the At of is the this sorry, see customers into we out XXXX. third in customers Yes, we QX. the our in automotive and time, and buy in of starting terms these takes, to Charles, some caution continued into same going deliveries of push some and orders actually puts industrial from saw quarter of the Luis. --

came down that wouldn't doesn't decline in in about quarter.At utilization utilization on the I same prepared or be a a couple quarter. As another of industrial a auto opposite side, little an has trend down, my point point I surprised fourth improved point and saw mobility quarter-over-quarter. bit we remarks, the And where said the if a time, of points in the came

indexed Cohu's was fact, absolute segment is in as analog on In more across and the that the you increase the saw in dollar semiconductor automotive towards customers. much only business third board know, orders we industrial an Nevertheless, terms, mobility quarter.

from going seeing guiding customers had not customer's next calling behavior.And of So analog what semiconductor announcement specificity quite at a honestly, seeing the as same to you're you we're quarter down. the large out year. next our We're seeing here we're be to is, quarter first this what few time,

and or here thing on see mobility, to industrial or going another quarter-on-quarter evolve automotive another we're we think improvement, and in improvement as for I this looking significant improvement turn markets. the go

question. Maybe a follow-up

is cell of what QX help down a I think is to doesn't a kind just levels. but projected would revenue of QX, any kind made the you made you from understand, correlation puts you of correlation Obviously, seems -- flattening out, I a the takes there or cell usually on us to test can of comment to versus commentary revenue test overall utilization given utilization be -- some bit, mean, level your revenue between But kind such and what mentioned. you indicate utilization exist? right,

additions, XX%. new to above utilizations to when technology-driven customers. above And a be socket their to they device end tend below at are that, and use see capacity tend We winning or customers application XX%, or more

So the goes on you XX% point a again, driven.On drops otherwise point, recurring side, it adds a utilization could equipment capacity drop recurring more and see capital side, point. technology for typically above, point, the

end QX, was the and QX. utilization But stable a as as see is down. of at of end utilization a out, of we more recurring lot pointed quarter-over-quarter just flat points So fluctuating from you up couple the

Brian Our next with the Chin of question Stifel. line comes from

at is for XXX-ish around Maybe sort financial Jeff. minus to plus Chin revenue Maybe or periods, with Stifel. off Compared when this start model. of level. you, prior Brian maybe was this

your operating discuss think guidance market company like And, I you changes to trough can challenging the XXX key I the that this protect the XXX higher, suggests in this basis cycle. does model trough-to-trough revenue? down gross firstly, profitability feel margins guess, maybe conditions? points secondly, in better to allow and

trough does of Yeash, on a like feel year. that, a don't next the first Luis said, certainly we lot it clarity of as have half

that we're week So playing by kind of here. just week

back in I XX% but higher with range. to As would the much revenue, were you referenced, margins go gross Brian, just XXXX

And that the increases price improve as and essentially the lot incurred, nature.So had I inflationary contactor efficiencies, costs done improvements in now, year-over-year, time, costs, product productivity, a same we're the made cover over of revenue that in handler a primarily things again, We've as holding some down the year. was last products of we've as so we've a we've as well XX% manufacturing reducing reduce in of gross lot products. my remarks, to but costs, some margin, approximately stated XX% that which to

So very that's cycle. Luis resilient, And as revenue higher volatility less margin the susceptible to carries know, of has been a stated, gross the recurring margin. as you

our helpful recurring that total that's that's And our a a really as And as grow obviously the so revenue. part of revenue. to key why becomes of higher percentage strategy it's well

you're which the and and ADAS, sort in the XQ being about more for, traditional follow-up. And talked equal seeing, Luis, incremental resilient? the auto of buckets of It's past, those across any either EV, softness can those All And right. or maybe Great. then duration you the you a markets? magnitude that slowdown regarding composition you've the give kind distributed revenues your decline, distinguish optimism auto of auto. parts, industrial. revenues of or of Does Based are on impacted in equally

and the and back else distribution EV about so the can everything ADAS same. Yes, it I from start here. auto, still stays across The

one those each about I on segments. of one-third think we're currently one-third, about

we As a drop with X-point revenue a on markets. associated X-point drop associated far automotive, as with really saw industrial and the the drop revenue on quarter-over-quarter,

same semiconductor reality customers you been and those the told, market is tend than CapEx continues if for the because revenue our industrial proportion XX% be in not see through is Generally in constructions the at and the And CAGR quarter-over-quarter looking they So tool this the I'm the in this question to way, across X%. the and auto-related the by mistaken, board industrial actually size, to to for is facility confidence a QX to year. other automotive be related growth investing at of significant XXXX, we facilities, industrial many customers, it's on think is auto go we've QX.I forward speaking, basis. look more plan forecast a up

open year.The do QX? growing forecast next point facilities question start both start bat we them seeing at a to automotive highest orders in facility those already come segments here the the on. be industrial or the do continues still that with at expectation and of some seeing So the tooling late an line, we to is, QX question. those That's up hundred are semiconductor start part But constructions is, million in

line TD Cowen. comes the question next of Our from Sankar with Krish

sort on bit would This each you segment terms that's first of the progress? to just the test for with the is Is individual across expect through December into board utilization. the been Mertens looking better? color market it gave is there I in of to Krish. a is Bob quarter, you segments how down? the probably those But progress one think and just market My just holding utilization any up on of quarter? dipping trying some know sort of how the Or ahead end

points. automotive that utilization the end the shape and trend consumer of market current down based We up continue to down I'll does my would I continue QX, the prepared by industrial XX% X X perspective seen utilization mobility IDMs up mobility And of give QX, kind but and may and correlates don't picking to the we've seen sort with are QX.How out typically remarks, also haven't X forecast trend of and I we point, that will I industrial to utilization, up automotive something down end today? that X We've of from you order points here. – venture in say think mentioned quarter-over-quarter the point, from forecast and Bob, QX up and don't and that that qualitative approximately market, X to know. by with on point. by consumer well OSAT I

one quarter a starting or to the some think start industrial here: flush the see pausing two; the inventory levels up forces and one are out we competing two as two pick segments. in is to and is those and other momentum for mobility the there is market I consumer automotive

Got I to business markets terms That's million automotive you Did in And towards of sure quickly trailing right. revenue then you revenue the more terms wanted helpful. $XX the the heard profile, and on in that just industrial that's it. just the was profile? acquisition of make I that say geared XX-months

That is for X tailored in Asia. was industrial segment. a It's Tier few in And of They contactor good million. all it our towards power particularly doing XX-months job were it to really correct. automotive the revenue recurring. approximately more portfolio, Yes, market. OSATs mid-to-high EQT and the test had a and customers trailing us, a serving IDM And Southeast $XX adds

So think in more an the terms in industrial power and application. -- in and about of an vehicle EV or or management auto

Our comes a line from with next Christian Craig-Hallum question of Schwab Capital.

them to Great. of last I be have you be going been the In $XX of quarter, one. answered. that that's orders going about worth that not your out we were obviously, talked thought were million accepted, to just have pushed handler guidance Most happening. from

of there, what give going could So please? is think you you update an us on

Well, down XXX were on now. we had about be substantially waiting systems come to do That – have number integrated. that sitting has we testers

is That's of quarter. see a market what of kind automotive the today pretty fourth we going into much I demand status. So the industrial the really but said before, and weaker restating what that's

Okay.

kind we've that it that So all of appears, okay. of satisfied

we begin as So --

some to waiting well. that testers typically But clarify see to on on handlers that back we are never on we just level a and cases come as zero, it's Christian, I'm has assuming testers as quarter-over-quarter right? a normalized number wait

B. Our comes Securities. line Riley of Instructions] Ellis from with next [Operator Craig question the

so arc follow-up I it bit and business some light in to of revenues term little of wanted this the way inquiry about next the way hard draw year's maybe on look that do just though ability shed environment, think to the I a but a it's even a demand what some different longer Jeff, on like. would the in and slow, Luis

more leave So what there's share are looks characterization product of wallet, to a wanted businesses. help the emerging to do, pointing your of if increased customer that confident you some expansion are are like, just of you they what or across see how could Are you just environment engagements for for that avenues closing I your activity things to some you SAM Luis, give us down in customer those this and that going newer success drivers engagement understand us finding of please? different

the funny thing Craig, engagements are the usually when and up markets when is up. the Yes, customer demand on go goes is engineering down,

it an of in. a that that these a exchange customer your had ago, acquisition and about have had be and And have of hear But sad that's is needs, space. the we'll this commented much set test not done into We actually, PMIC about a to e-mail little incumbent participating our let's interesting go But it's before product on wonderful I back bringing capacity they're qualifications lines this they time incremental an tester. happens not the Well, of now, we one through as have engagements too long performance, for the were it's the example.We how and tester hear, to one to current just not to that very and few qualification not Diamondx particularly get space relative faster now, is. call talking when satisfy to a great the buying products platform analog to this new start that quarter. market, how

can market handler of on the a imagine, less analog our handler on the PMIC share side.As fewer engagements dominant So we few space. side, quite you very do the on simply engagements because Diamondx have just

are serving the customers. large We already all

right that's wins activity $XX and the typical sum that's the new down a market right turns are quite don't could to for important usually again. win, million, smaller million, of engagements. but have be in from as up, lot OpEx downturn, versus time, million.So, We list Those the on picks we'll up up critical where they and equipment, side. very to the one bit want is a contactor also customer you the continue lower of $XX longer busy pointed cut extremely we the demand And the on the a when in the environment. activity, to Jeff place really out, look case at to be to those why, engagements of hand to developments market on a and capital count engineering product $XX tend ways back They and

That's really related deal. Luis. wanted get the into next helpful, to I to The question is EQT

is to you've have might but fair in given that mentioned $X that Jeff, X-year into a longer-term is think million guidance? it, it And more $XX baked you trailing company, about So revenue walk is, million this can just question through you business of integration with look further and you tech would some how the it could to before bolster for another this recurring? us be long steps in the like this

we're to go. We're I think right looking opportunity next for Well, now. ready the

we're another was not could they're So revenue think With downturn quickly. to that on out opportunity there ready. I If the outlook, immune the respect there, either. we pretty to capitalize

it's a you that than number I'm a missing run it's And or then one million mentioned, – lower sorry, not full rate I your $X think questions that's that. So there. of

involved was integration announcement. there? EQT What's about asking on some of I of steps the just

is the sort on the maintain have really is more future. EQT think the opportunities And for of to end. we as front approach their Yes, foreseeable of sort operations on we

our perhaps through some have operating into and move their gain some we think also of We manufacturing their some efficiencies new products to operation technology. opportunities qualifications,

technology sort the on million revenue to We're to of opposed well more the as the typical as something that's dollars on front. – gain cost going of operations we're So synergies. X thinking

going a qualifications products dialogue get are to starting EQT base, the few some lines. we're to have Yes, was the product our that they the just on front, interesting do I add so going to customer on of revenue

is And a take? or that long that call would Luis, that how Is longer two? quarter shorter? or process

speaking, I Realistically it Craig, quarters. would three give

it. Got

mode quarter mode think is something two. A two an they on is expedite quickly. to get want and a done ramp on quarter somebody I when a and

I they're think time. until their taking time are now right customers pressed for

quarters. I'm to going So say three

Sure.

didn't Jeff, businesses. Okay. last different of has just just that systems two and gross mix the for and And other on systems one slide that with and Can margin some shows cleanup usually the see item. little you the time. is the the recurring hit the gross margin? I stats, the us deck recurring this a then

problem. Recurring in no and quarter systems was XX%. the XX% Yes, was Sure. margin gross

the I right. systems down quarter. that from What number, And bit little prior All think, was a that? is

basis Yes, a down matter It's XXX mix. of points. just

although, mean, a we and Japan. factory as Malaysia, well, I factories have Lower in back we are – still we outsourced utilization right? got manufacturing, largely Philippines,

And on the of so, lower less systems overhead system there's with revenue, side. absorption

to That remarks. today's turn call back closing to Jeff question-and-answer for I'd session. concludes the like Jones

like a just you with look and and call, to forward thank speaking have for I'd you to everybody say day. Thanks, to today's nice we joining soon.

you. Thank

This Thank you participating. concludes call. today's conference for

disconnect. may You now