Cohu (COHU) 2 May 242024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to Cohu's First Quarter 2024 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 Jeff Jones, Chief Financial Officer. Please go ahead.

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

access our need accessed by or on may the conjunction Investor a in release, copy with you also Cohu our Investor of Cohu's There's presentation If you at website a contacting may Relations be slide it Relations. cohu.com today's from website that earnings section. in call

same call page this Replays will concludes. via the the be after of available call

Now to harbor. safe the

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

Our X, no XXXX, after comments call. statements these and today, developments this for May of to update assumes obligation Cohu only as speak occurring

reconciliations earnings during financial measures. our certain this discuss slide GAAP release most the non-GAAP and call, presentation to refer Finally, comparable Please we for measures. to will

to I'd Now like Cohu's CEO. Luis Muller, President over and to turn the call Luis?

Good afternoon.

the first to margin First the We quarter through at results the the XX% X of quarter, and of guidance gross test of were up point better EPS as end estimated non-GAAP or utilization semiconductor in navigate eye line storm with cell $X.XX we of XX%. than cycle. in

two we for more remain start another or seeing conditions quarter business this expect We level less improvement. to before or at

our to at point automotive [indiscernible] for although with There next-generation, U.S. approximately testing for was threshold capacity semiconductor XX%, system IDMs of industrial selected their slightly still are bright OSAT leading with sequentially. to Test and a high-fidelity XX% utilization a fabless below well trigger X improved utilization the in cell manufacturer the demand at quarter, down has MicroSense couple XX%. microphones. buys spots computing, down

tester up our projected And microphone next According years, We to an billion. attractive industry is rate the revenue devices sensor $X.X estimate of the systems, when of delivers this an XX.X% grow over testing approximately to a inspection Microsense microphone annually This buy analysts, latest over integrated for solution the X product the parallel. Sense+ XX is market reaching X% in opportunity MEMS automation combined state-of-the-art to market in MEMS portfolio. Cohu's of vision making midterm. platform, with test estimated in

In for the saw a high-performance interface contactors testers, automotive demand ADAS products European optoelectronics A automotive and radar testing automotive LED for selected sensors. increased market handlers customer. RF leading our for customer has production from Cohu's we

for of ago. this we years developing opening Finally, Korea, the of test in in final market customer started at growth display next the qualification the a for of completed revenue driver large stage we few ICs Diamondx that important a door

segment in market This Cohu diversify a for revenue. which to a has strategy differentiate tester fundamental business can a been add and

cycle, business more base a Recurring rate it the provides which mostly approximately growth compound revenue with consumable a about stable last Cohu's worldwide. revenue moves delivered over serving of months of XX,XXX installed X.X%. of XX an recurring profitable in million systems first recurring $XXX industry products. the remains of the revenue quarter, of our Cohu's As business, to X-year XX% its leverage to for through stream strategy critical was

engage to modern published construction energy and rainwater we to the installations our Philippines. factories Philippines with harvesting emissions recently energy with the or the targets. our of with goal initiative, solar and improvements science-based develop source the report Malaysia XXXX increased in to reduction new has targets in completed system XX%. a near-term at science-based in Finally, sustainability investing with areas. are committed Renewable Cohu facility many SBTI We usage also

As managing flow and execute growth product to to customer continuing through buys. best on remain win capacity enable design cash industry cycle, customers new critical focused we while grows the initiatives developments this resume when

Let Jeff now turn me guidance. and first to XXXX provide it further on quarter over details to results second Jeff? quarter

Luis. Thanks,

financial and and Investor refer note our through please that investor to walk of included I'll QX non-GAAP I are the Before the the located page figures. to follow, which are other about disclosures non-GAAP GAAP presentation, . in my the accompanying on reconciliations earnings QX non-GAAP comments release guidance, measures, that including Information and results the website.

to QX revenue the total midpoint more than guidance. largely results. revenue, Recurring delivered and our revenue revenue consumable-driven turning QX the was represented Cohu and of stable financial of is above QX. revenue Now million. systems which XX% in $XXX.X profitability

was one the in more QX guidance margin than higher basis first accounted business. During better-than-forecasted on quarter, than XX%, margins the driven XXX sales. about Cohu's customer recurring automotive gross market by of resilient points XX% for

for labor expenses labor-related by million $XX.X lower and Operating costs. at QX guidance driven lower than were

from foreign million EBITDA The pretax with assets. non-GAAP tax net profits valuation $X.X foreign interest our on consists loss tax income, profits, million. income deferred no loss quarter and loss, loss was U.S. of reflects X.X%. was combined foreign income tax in QX tax a approximately First expense, due operating currency on U.S. benefit the debt extinguishment allowance but a the was breakeven to against and provision of QX adjusted of approximately of Interest $X.X

reserves the first the million Additionally, jurisdictions. the non-GAAP one-time is QX Non-GAAP reversal was quarter EPS net credit provision of in $XXX,XXX for tax for tax foreign in X.X positions of uncertain $X.XX. for a of

Cohu QX and and approximately of shares approximately $XX to stock. sheet. repurchase B million decreased common by $XX $XX loan due variable Moving $XXX totaling during plus pay Cash million to investments the million the $XX to used remaining taxes balance off balance comp to million to term million XXX,XXX payroll and

and the supporting a our our operations opportunities approximately support capital Malaysia, repurchase portfolio QX $X strong served CapEx line $X.X for to growth to share factories program. million in and through interface our and continues to our technology Cohu our return in businesses. markets Overall, in strategy expand shareholders was with to automation and balance with Philippines sheet related investment to maintain million

gross financial QX utilization across level moving to consistent outlook. profitability QX $X We're to guiding Now is minus of cash high-margin flow plus test stable provides production to low products XX%, the cell adds markets this approximately be at revenue facilities. reflecting our better be in part weakness and and Cohu's million, business, forecasted $XXX which of continued industry or range customers' QX than and through resilience to our model to margin million, end differentiated target the large due in cycles. at revenue recurring

to expenses force primarily projected infrastructure increase our completed about with million to for revenue margin device are costs. gross optimizations we recovers expect as $X.X with broader again our to a QX semiconductor factories a market Operating in million recovery when to We absorption reduction developments. of better in quarter-over-quarter certain and decrease due $XX.X approximately product

noted expenses of sacrificing I navigating we product our without this have investments the operating action to reduce cycle. taken As trough call, new while critical through during earnings last

to foreign million half at currency this expenses approximately As average net a second modeling We're to interest $X of operating year. QX quarter in expense impacts be we're projecting now income current of the million approximately and result, rates. per interest $XX interest

approximately EBITDA QX loss. $X.X to X%. on is expect million without profits adjusted non-GAAP QX to because U.S. benefit expected tax We The from be provision be tax of approximately foreign the

as in shares. to in million Additionally, share open for is recorded credit a our repeat and to remarks, navigate we cycle. expect we count recover, expected million provision this expected QX prepared concludes the profile The QX. to QX tax now not XX questions. That the we'll is through approximately call the markets $X.X Until be basic similar

Our [Operator Instructions] comes Chin. question Brian of the line from first

to utilization confidence have sort second full starting QX, recurring much. think But start with, maybe a of few business, revenue maybe to was think also revenue in of of the that feel that you your lot the less say has you even you stabilized not recurring that [indiscernible] more, I'd that trend don't are your anticipated bit visibility actually by Do of have industrial did revenue sort revenue what's companies customers half? have the now system curtailed automotive if bit. a some QX, I that more might will to the a Do stabilize. in even given have you're seem rates that questions. decline than on quite you again, improve down that production And seeing? that do little even I the Q-on-Q semi-related a sequentially, the Maybe

the the obviously, therefore, turnaround and the when utilization it that from both end well Brian, expectation and kits a now as there to a increase seen Luis. to be does we've is when up stable cannibalizing quick The we spares, contactors. eventually device what starts stabilizing this spares recurring, well. is past see increase, as and And and unutilized right utilization equipment of Yes. recurring the seems so and then for is utilization up on as in typically, usage way the picks equipment with customers

utilization expect utilization when again. so to and recurring return starts it is to moment, would is stable, particularly So an at increase, this rise to

there stay level, quarter in revenues every which half? business, branching at going And in another what of in some second When half this in period kind after this terms you something it. at now this maybe your of Is first back you sort the talk across or system about sort degrees end of to Got optimism is to more of of customers, guess out terms sort here bit comment a retrenchment of of two. point. I your right, some does kind at point give of terms market, of in pickup

are line. customers same to in There is turns It's way. that the in -- inventory correction a is some inventories over we -- everybody claim the at not One never But right? point, seeing have we their are X been things. starting

so So in sequentially we've our so seeing revenue segment little to particularly actually, up a seen traction of was happening much that QX QX. mobile -- and bit from that

that now. bottom, have claiming at the stability are still We but basically they're other customers

indicates stability the step is that next So improvement.

the So we're of sort of the see bit. tide turn to starting little a

now As actually, at tailwind. little headwinds navigating the sense customers a of and of eye through I of it at beginning, starting the have I few right commented in we're it the the the a we of prepared stopped I point bit to mean see that really called in my here, storm, see and remarks

capacity of with So quarters, couple eventually, that having a we'd customers more expect starting And to buys. we'll utilization in up. pick be tailwind,

But buys a will customers all in need be installed to to new capacity obviously, and quarters. that quarters require pick we're I away utilization up level buy the ahead said, existing of gives don't on couple probably the again. to pick That two up here. will when or to start a things where phase a straddle if it not better us from I wins you equipment. over know same quarter. Now of capacity now heading it's Like towards confidence same quarter

for Maybe question Okay. one quick [indiscernible] Jeff. just is

obviously, I billion? trough. also gross very at went noticed margin go XX%. $X target gross composition Anything margins kind into that revenue the that in model considerations into of here increase? you terms to at Just Or that what of high raised of mix goes

with really inspection mix XX% automation went of test, We've increase. maintaining interface, XX% for and at revenue decision dollars XX% into that metrology. to product the billion results of sort Historical that XX%, of same roughly

margins. cost seen better profiles, So It's lower cost that doesn't better profiles, change. we've just

that So the the quarters target us we've to the XX. to last, on set over achieved confidence it, gave call X based what here

will Our question come next [indiscernible] line Needham. with of Cole from the

of I'll Chi. behalf ask Charles this on question

what more side mobile all, you first see can drives market, on end tester incrementally So color positive cautious which of the here? you Are you your or on provide of business? the some

really yet. the Ross, more particularly so quarter in recovery mobile orders fourth positive in mobile. what first in seen revenue bit But quarter. in talking of this space, on an not yes, in we've we calling improvement the little RF about are IoT we've I'm seen devices, the incrementally market broad a

call, prior we that an market mobile the the of I question, our segment sorry. mentioned The only segment As revenue quarter-over-quarter. prior the on before is increased saw

Now on focus customer. that's the -- some more segment Android and as particularly we understand

in sales yet not for recovery. broad-based opportunity Korea, customers a and Our China

I is of mobile to full-blown story. incrementally XXXX But a late So year realistically, a I forward. better think will recovery be more this going think

ordering Great. or a second more on Are like ask right to a some X to the what little question And you months can activities if ago? starting especially relative green are I broadly shoots? quoting see now,

point, drives customers our have we is this we focused addition broad-based new capacity socket applications, activity demand. It's The some a -- have on that still particular of there is new very at say that win No, technologies, of Ross. can't much a much I qualifications.

win wins call, system we MEMS microphone as here shipped We a design selected. product, lab, system shipping a have a had here first and already the on the summertime. design We we It's for a in customer going their have reference new application. a production into a

We design see test, the completed call instrument win of I final had qualification new a our a driver, which display with tester PX. of for we

second So revenue of the that us drove in we qualified insertion now for selected of the This last a so year same XXXX, has for test. PX got is customer PX. $XX and million

much the the opportunities new more moment. than so at not that new So basically, capacity, happening products, general so is

Our next the line from David of Securities. question Steelhead with comes Duley

the segments first? think handlers maybe handicap think just will your recover, does for business which when end Cohu? you perhaps do And turn first testers equipment, wondering was I market recover you on or which will Yes. of

Dave, Luis, again.

that So a thinking that the start with in in Automotive mobile and about higher When we've question, first. that the is but still been dynamics and auto and today, and utilization said, we good been that by comment it really computing market industrial coming segment. at is it's Industrial said, thinking at look reality of hovering the XX%. utilization With segment we've and will

So pretty is close addition that threshold at XX%. capacity we call it's that to that

lower computing and at mobile While XX%. is at XX% much is

coming because, first. should that mobile So X one it's the one, be a believe tale stories computing on of and we here the

hand, we're other closer the a industrial. the to threshold in auto that lot and On

way of from what It ahead another said. actually saying, I have I come mobile. back that's it think of the could flip originally could auto on

to stabilized -- going down automotive biggest Okay. customers And I business. rates your with there, has done that hanging segment of -- done don't in and done in guess market with in that your utilization we're you correction, the and the say want I for but and that industrial inventory suggests were in

I that's think correct, Dave.

now. XX% has industrial think depressed stop customers' across mobile ability have utilization right really segments They about as is What for auto to I is buying done buying capacities hasn't actually It been that operate going but and we're just quarters. not also is auto are fairly mean the sunk industrial X in our very much. last below depressed right and encouraging down I now. really specific hasn't And now. largely threshold. sunk -- customers capacity. Nevertheless, right technologies, general the

I'm So yes, encouraged by the [indiscernible] guys. industrial

are can to -- times remind your I just then kind back levels And you but Okay. us normalized what curious now. what levels, are they're lead just of normalized imagine now? I'm

new, XX about to selling about X largely we're about new weeks, that, quarter, about It's a about a a a and that lot for right? from of for say longer. They're head. technologies, are I processor our that system, that's handlers, lead lead new talk contactors brand if sort on a the a super weeks. test. last and configurations little testers tricky time new times dissipation, Tcore number, when of system a to you Well, talk is It's little unchanged high we're weeks handler With So fair is have thermal selling power Dave. XX

go having new probably greater up would are bit at buys despite go -- of if again. that a lead So I demand, get times expect we we're standard times down first products technology lead little little would before selling applications, more first see capacity the they longer. we a

Okay.

GPU servers? about Could handlers cycle going an over cycle intelligence into might that kind that lot artificial just conditioning upgrade content. impact CPU maybe your associated when all of There's Now pending those server think upgrade be final that's that new the components going look for me would upgrade you the to to and and a question more lines? server how I go would talk product from are the you out uptick is -- Like see cycle. thermal your for

question AI of upgrade for do we business? that hit my when your servers. the impact like that's that How So part the is will cycle

Yes.

to very better high The us low the center bit you volume. more you data equation is is cycle So going be cycle for the data volume, get data here, the volumes. lower than changes cycle. the actual server very center The semiconductors, center upgrade a ASP

assuming of think, revenue the So of that, in or data year, bit to momentum said. second came really to computing the was, would cycle X% it's being it center a expect about last X% I little up our X% -- quarter that on sorry, out half QX. at I as that going pick it is improve

the I data me or mean so server, you're which to versus or. referring servers do And what understand servers understand help saying cycle there? you center you're just just AI when the Traditional

I'm sorry. sorry. server I'm meant the say to cycle. . I

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

remember correctly, I to, it answered. This just actually higher in bit but of down, utilization March I higher But and side, [indiscernible]. despite X of terms sales down to you the in quarter, sales auto I over guess, If have the compared was the -- the sort has were is a up shaped markets, the the how Robert a test of can know ago. utilization months those industrial a you bit. continue and bit on see already been quarter mentioned December

trying how the entered the business in think year. looking to the quarter Just half of are second of at June you market that or

Yes.

at but both first it's first from and same the utilization, auto holding quarter, said, the side right? quarter, So pretty sequentially look, as up -- The much industrial fourth I'm and well, the down revenue the with on quarter going to I start same rate. pretty was

segment order little to on predict just I'd quarters. forward, at go a based the really we industrial automotive be side. weaker, automotive be better that the industrial pattern But -- ahead say -- for bit up than revenue future looking market may -- to don't will by Looking industrial hold tempted

to some quarter industrial in ground the first . think to orders and quarter continue I lose side relative revenue. second the therefore, other markets the

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

is maybe to do, or where to But goes and is drifts Luis, shorter-term gives is near utilization more this would we in the the question with more over a and seasonality levels. comments of the inflated current significantly business wanted utilization quarter. I in question. much that a side side. half. levels try be would stronger seasonally much about downstream of Typically, What longer-term and shorter-term up the on back a the business takes little the one And normal systems just the bit quarters. second think do How a in then around be And fourth off couple assuming the than But recurring. typically, next some down

So unusual far? just of can understand about help the we we seasonal the dynamics year you should us how have given some think thus

Sure, Craig.

XXXX are all classical much And As . And going one you and call we're the the indications because obviously, overlay you're not when trough multiyear, to quarter. cyclicality wave moment. that's have off you this the you where I we both seen the to in order exit XX-month improve It's In cycle I very know, seasonality year. just be the pattern it you'll a think coming into Again, is going don't of you should going weak as is cyclicality of what's take, this market. the and seasonality or When at a think the have typical case in or prior X, not And more happen recovery. obscuring year in cyclicality the I year pretty think cycles market again year. half cycle, you this the I strong this has the you being the seen think in when likely essentially period your well, starts with a second the possible the the I've as of period. see to seasonality just words, overshadows the a may environment. momentum where being and this other. year X-year next year the of with think going very, and the industry in otherwise, when in seasonal -- XX-month this the give right, a X-year a see I seasonality is It's that fourth you other dominating happening into a the seasonality

really target to model. And second related Luis. That's is question helpful, the the

see margin by to great gross target XX%. the business the points to So XXX raise basis

gross margin You strong guys trailing execution. X-year have really had X- to

the So I see My that on about question more that. can revenue. was line

north So levels, from $XXX quarter little we million. a third of annualized

that. you what going the I side so target? be biggest will are on team at from give for some talk wanted the are are see is better business you things demand What $XXX environment, growth, to go deliver just to X.Xx other target revenues drivers $X your in that billion? you path whether back the the it's that to out do to or And are on is product and the that the much the to And about that that of the million about a things opportunity on to working that annualizing

I a little about dynamic heading Well, to talk target, the Craig. that business bit can

pick to billion the then trough try necessarily to to can't explain target. that the cycle try $X of and You

low more Optimization levels grow of holding they a which right well now. tends by call the level. it's we from utilization the the moment. in How industry tester normalized wins low a translate just of at number to the you the scoring interface a in which is have is side, on combination think do $XXX wins don't considering the volume way, million and the the into on at been look there, to design we pretty typically overall which side, the be at we got million, through-cycle cycle, what what through cycle to revenue $XXX level, somewhere I through or

primary and And focus an are right? metrology Those inspection of the our areas. business, expansion

applications. I And -- for of on now amount strong We to a prospect the prospects are, from We're computing the long long-term you right the believer putting mean don't But edge, computing align data computing. or a are market edge, effort the more will. very AI think is tremendous we're after comes volume. a that, to just centers, low perspective, if at that necessarily wave which which at I AI

driving automated those manufacturing proliferated cars of into When with cell robotic when level get phones, tools. you get higher more and into systems autonomous

AI be the a processing should ultimately edge communication driver basically, at sensors, power. significant of So and computing

So the one more of the us the at when of edge, our is key and areas those today capturing products. on and for supplying systems speak, of subsystems at of consumer enable equipment or thermal so investments the to share thermal customers computing they implementation start AI to into -- processing supporting our level proliferating

So we the get billion. target to those see up as are $X to primary our drivers

the Toshiya line Our next Sachs. from comes question Goldman Hari with of

you've was seeing areas device of MCUs, end weakness would but to you're you're color device hoping market demand know any helpful. various specific you exposure quite an that Luis, relative have analog, what types, I terms what strength from relative end et you of be I a in RF, bit could share of or perspective. given or by seeing type. cetera,

the Okay. you some at in processor in dynamics semiconductor Toshiya, the can is also device -- of in microcontrollers. No space interesting significant the the type. the exactly by front I don't I space. general me as moment. see analog data qualitatively the analog We weakest have strength tell

to in more side. of quantity therefore, a is ASP high said better low be As I improvement migrating bit servers the little earlier, is quantities, said and on but more the to that it

analog mixed I FIC manufacturing today. demand threshold management in of management recently would bit for becoming and to on some but also weak, a of of is a systems, demand improvement but seen again. are BMS signal is handling device say at which part coming We've the systems -- it's battery end threshold Battery test the type maybe a of day, equipment.

segment gives a but we from didn't comment space. memory I bit does don't So today in on the memory, memory, a and hopefully, device of [indiscernible] color participate participate So right? in not size -- that you

then talked about in follow-up, drivers. helpful. you That's win as display really a quick And bit a Yes. little Sure. your

that But your I talked dominated market past currently of by about think that the you've as well. in think peers. I one is

would happy think your and a TAM it So if X ability you today? to I couple is, grow then know promising how can question that is hundred that, delivering -- we that very it's takes should are about for technology to customer how Korean that big since but helpful. time? of guys of share confirm time, I'm product have sure I guess I you. must you customers million. but opportunity bigger And is think the be But be over you super a your secured my

business. thinking about just So curious how you're that

part Toshiya, you're right The about now hundred is the is now? couple what of it problem you do million. TAM of at only is The the $XXX million. We peg it that said, problem.

So $XXX on average, it is a million TAM.

make up that of TAM. We are customers about now supplying to that XX% X

we're a basically doesn't to So it. $XXX we as opportunity. mean XXX% a going That of get million it view

with I competitors. think it we share our will

year, and with inch had Korean manufacturer. very have We been to have last [indiscernible] manufacturer, worked supplying and And the an first now we the their we generated us it insertion year. engaged last insertion, second $XX for XX% captured got capital spending, test. closely with now where is which a of final We revenue million qualified of probe represent their their about for

yet We're conditions going much we're be which how much the when get of remaining million that to a $XX to could here, of again. how normalize see opportunity, about business

now $XXX all million. million, in year is can depressed we $XXX that $XXX This serve of -- correct TAM. think all, about out I So million a you're

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

you call today, and joining I'd you soon. we for saying with just our to to close look seeing So thank like forward

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

You may now disconnect.