COHU - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Cohu, Inc.

Second Quarter 2018 Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Mr. Finance Financial President, Vice Jones, and Officer. Chief Jeff you may begin. Sir,

Jeffrey Jones

CEO, discussion and today most and welcome afternoon, of by Müller. to President joined Good I'm our Cohu's results. recent our Luis financial

second quarter remarks, we'll our of for well Following our quarter the provide as third opening XXXX for our details performance our XXXX. outlook as

contacting may our website, from If a of copy one you our or obtain Cohu by need relations. earnings release, you investor cohu.com,

course the the this all reflecting are be and business. that aware we by abrupt assessed, information we make conference These we current Before you will which rapid during call, even changes. its begin, should management's that current company's statements of forward-looking is statements nature to have on expectations based concerning future subject

our the in pins tax last on acquisition, XX-Q progress including you Statements future most industrial statements response automotive rate, customers, as products comments debt targets guidance, future review in model about acquisition registration the contactors, Form We Cohu's growth filings midterm on to and comments Kita XX XXXX as Form results to well statement and section new Forward-Looking plans encourage pro Commission, the recently Forward-looking EPS strength including your repayment, Securities other make cDragon and the of Exchange and the questions. Form release company's effective and Xcerra and S-X. QX and and we any earnings XX-K, regarding accretion, the with markets, semiconductor integration formas, and sales timing, months' sales synergies, and cHybrid include filed

not of of comments reference from to these Cohu to precluded agreements. specific after call. developments as as statements nondisclosure to will only as customers any make our August today, speak by and obligation our result are X, update responses questions Further, such assumes we occurring disclosing this any a information and no comments XXXX, Our

financial I'll And non-GAAP the to earnings discuss to today, measures. will over our reconciliation call it we the measures. during release now Please for turn also certain GAAP Finally, to comparable Luis. a refer most

Luis Müller

and for everyone, thanks Hello, us this joining afternoon.

results cash reflecting continued solid strong our quarter market generation. and gross second momentum, by earnings margin, were expansion The complemented expectations, above

sales while of period the same gross XXX over basis margin First XX% in and frame. the per XX% half same million last $XXX share increased non-GAAP XXXX points non-GAAP earnings year grew time increased

automotive sales for for markets, for parity orders in strength testing ICs, with XX% the and Continued analog growing industrial recurring semiconductor drove book-to-bill quarter the total. to particularly of at

X at and captured infrared for in the traditional vision otherwise module, detection not introduced in subsurface chip inspection is vision announced which -- handlers wafer-level This defect silicon, yield structure enhanced mid-July over-rejection, is exciting Cohu micro-crack the new market. saves the inspecting disruptive growing we customers surface new combination significant through previously a This quarter, helps metrology, inspection new that our and reduce Infrared differentiation output and strengthens underneath million Aquilae and Flex imaging inspection for and and systems. the customers. very with can on see greatly our XD packages. technology a module vision costs During observable with package improves SEMICON scale West $XXX in that for

gained made growth traction of we and one at pins business. pin had base installed quarter, During customers expanding XX% and We and computing another in by and the contactor orders large inroads European handler in strong an automotive Kita application. our for deploying sales sales record quarter recurring recurring handler driven our sequential contactors

been has segment, customers. Market multiple performance XX%. orders contactor tests. for in segment handler the mixed mainly penetration of quarter-over-quarter, device to In completing analog at signal into qualification of power For contactors due turret cHybrid the in first our rate the market reflecting and installed contactor time, the the pins XX% Kita grew anticipated, our exceeded successful precision of in attachment high cDragon slower base than penetration delays the digital

end starting the quarter, qualification later of enabling third We volume orders year. expect to this this complete by

LED microcontroller customers that signal double system a consumer One second semiconductor fact more communications, markets. about Cohu's We order by and slight IoT by orders -- applications. automotive applications. driven orders. orders, audio orders mixed Looking China, in system of of X% portfolio, device last product was our develops mobility increase customers' and digital system reflecting Power the than by X%, more in signal a and significant across customer applications. quarter new and handlers handlers demand of We segment. and of strength medical and continued for integrated quarter circuits turret from by develops of XX%. applications. was captured sales orders discrete strong in chain received for quarter, customer quarter-over-quarter mixed specific XX% mainly Small of the driven in computing the from and quarter, prior home high-end signal in testing even for applications. modest the X prior were by processors. ICs and from was our XX audio smart signal the was a with markets. mainly points MEM segment. cutting-edge handlers And represented a considering for system XX% requirements increase and traction to lower system was for the system orders, of is the Digital at mobile handlers automotive, used automotive of specific smartphone of for that which and same management a industrial Processors due growth discrete quarter, XX% for half but computing units soft equipment industrial, large voice quarter for sensors the aligned XX% other Mixed Sensors prior as impacted percentage lower this consumer XX% orders, and And signal semiconductor last with RF about down also in

Looking quarter. to third the

are segment, smartphone subsystems this than for demand to similar semiconductor isolated testing thermal the also situation from muted application in various project acquisition semiconductor equipment to other Other acquisition. With States processors, close ground on Integration the to scheduled for meetings and such the we clearance in XXXX. recently in quarter, that subject soon progressing other the industrial conditions. well, sales other closing we manufacturers are approximately comment no customary we business. commentary early transaction handlers to pending annual closes. remain as mobility special required shareholder markets, plans where year-over-year expect United applications also One conditions regulatory as expect grow final impacted in our Xcerra across markets, and XX, Germany expect the clearances August in jurisdictions, approvals, IOT granted and X% hit the We the and and running and fourth and to strong. automotive And in

and the many test solutions the the encouraged to I'm with our greater for both receptivity opportunities acquisition with better We and that road leverage maps. on customers' alignment by customers, discussed have providing technologies from companies

Now second and quarter Jeff on the details provide will financials QX guidance.

Jeffrey Jones

reflecting Luis. million million operations cash to expectations million. $XX.X margins adjusted All capital Cohu's EBITDA the $XX.X strong results and Cohu our collections from the during on and at balance quarter, management. second we of non-GAAP working end $XXX.X cash respectively, XX.X% generated million increased generated million -- operating $XX.X quarter, approximately as Thanks, right. of of $XX.X and of and exceeded cash sales XX.X%, primarily our the QX

business contactor of Our for the XX.X% quarter. represented sales

the costs, of of valuation earnout comments adjustments from non-GAAP For intangible My restructuring and exclude items. the that QX include to of amortization all guidance, the QX, million which to to $XXX,XXX a purchased non-GAAP on $XXX,XXX Cohu's are Kita million including of the compensation expense, these acquisition the follow, $X.X related adjustment of stock-based $X.X acquisition. GAAP approximately based costs expense, $X Xcerra results, million impact

profits materials mentioned previously, with I QX effective tax where for allowance. holidays. profit to certain statutory generated for rate guidance outside income currently costs delayed million of and for a Furthermore, sales. of One Operating represented the rate sales favorable XX% income that And were second quarter foreign mentioned, to tax non-GAAP not quarter were XXXX. million U.S. of incur to was customer valuation XX% was and approximately tax second lower development exceeded lower to QX. do our tax XX% $XXX,XXX $XX.X XX.X% in as product manufacturing were million. sales gross of due in market and gain other in $XX.X above our the due QX. provision primarily the overhead of our I a quarter because product of in million countries and benefit mix. our guidance, currency U.S. As Cohu margin The the new XX% and rates below $XX expenses customer $X for and QX has tax No continues first half countries computing the from

these revenue end of our expenses the of QX days QX. a rate Accounts Fixed expected million. share, was the days of result million of with million. quarter. $X.X $X.X for additions decreasing cycle the approved We're flat in of on XX. increased be X Deferred record on to was QX at to operating $X.X to at sales days of the increased and margin were X shareholders $X.XX down overall, be per approximately QX end XX% approximately by down to payable XX June That's XX, approximately Inventory sequentially As Accounts full deferred increased end by approximately now days to XXXX, Directors factors, receivable be XXXX. million, of for October to sequentially. sequentially, for cash tax XXXX. expect million effective is $X.X expecting million. we XX% DSO QX our $X.X the by guidance $XX.X inventory first year $X.X depreciation payable quarterly decreased XXX. was by Gross by in and moving related X a And was $XXX,XXX million. XX, at Board Cohu's QX to to and the million asset profit August XXX. $XX dividend conversion to X approximately and the and And cash

Xcerra. Now turning to

X million within forma the of publicly cost upon XX%. margin million. We combined last months operating pro both including million, and The model by of of accretion actual I $XX for synergies expenses Combining of approximately cost continue quarters based model years, goods last last XX% to by in results over sales XX%. million released $XXX in as XX of forma the EBITDA cost gross lowering EPS approximately $X and annual results pro of and XX of just the by $XX and Xcerra sold results adjusted synergies Cohu million, described, first $XX months companies

transfer the recently million. facilities, are mainly Using forma synergies XX%, $XX synergies, as last adjusted $XX leverage. Cohu to million, some the outstanding gross million manufacturing $XXX a margin $XXX leverage to and the post-financing, most operational our X net from means of for months expected effectively combination and to over EBITDA of through debt, and which balances targeting will of additional additional approximately doubling of and companies, midterm. X.Xx net to $XXX cash approximately efficiencies, be increase we to synergies reported result both million the the excluding of X cost Over gross again, anticipated years, midterm, debt achieving and handler pro will EBITDA million of Asia Considering have to the XX% XX ratios cash X.Xx annual

in approximately Our generated operations, take excess be cash That prepared the the capital cash on balance pay to maintain and $XXX be our will will questions. company. remarks, expenditures million acquisition now to your delever the the support happy of be million to and concludes of debt and strategy we'll dividend. the sheet down used post to Cash $XXX

Operator

from Ellis comes FBR. B. Riley [Operator Instructions]. question And Craig first from our

Craig Ellis

And from I'd decrease? on than are other of the start, that I a the take points quick Jeff. just What's in the with To operating basis is gross are to that trailing margin, trends. a like play guidance, XXX little in at quarter-on-quarter any clarifications takes increase guidance, gives XQ -- One, that on But there? down few do mix financial the more expense and absence there the currency sequentially it benefit. exchange

Jeffrey Jones

that. I'll the of part start last with

absolutely expense, of assumption On it's you're right, million QX. the currency gain having occur operating not that the in $X

forecast, on So the right $XX.X spending was -- million. about in QX was the

spending some delayed QX, from that similar materials for in we're a development Aside QX. was anticipating rate to

million to get we million. right, gross lower respect driven million. QX, how the the from to margin, you're that's $XX.X sales in yes, by $XXX XX% almost $XX the So to With

very recurring in a of well will, As which carry And sales, standard we're gross QX. mix, as QX, higher we strong for modeling margin. if had you a more

Craig Ellis

seems some I because part that stronger, the it But inflection. longer-term contactor the and dynamic. a the think comment the business use showing little little recurring of is a and I'll of signs pivot that's Got nice And Luis, it. to last the order bit maybe like of activity bit business a further part was

As trends you some pins, of et cetera? you that business, the with seeing at just you're comment the look on can and contactors broader

Luis Müller

Yes, booking mentioned you're strong I quarter, a right. mean, right? talked at prepared during remarks, we've about the parity. book-to-bill I

actually orders rate rate growing faster. of grow the recurring plan much It's So business, strong the over contactor in quarter. continues an both our stronger -- in is -- systems particular, year-over-year. The recurring growing plan be annual But than a were actually months the last to XX to and and XX% at systems at business. XX% the

sales million based just X the opportunity a is contactor with on once the a Now larger sales, $XXX reassess long approximately we base million rate that larger But the for complete from $XXX businesses, Still, Xcerra number combining for means we'll in we'll to we we from combined the have of having much recast which because approximately projection handler for to contactor a the obviously, acquisition. acquisition, combined. the of our growth fleet million have year. annual group, annual a need this runway have growth still $XXX

Craig Ellis

together I Then X% is think I the Okay. you you smartphone One, thought say two weakness impacting for basis We'll How that this follow-up is XXX what points, there you And for I tying you're mentioned that. the the business you that to growth you that overall application business? guidance. was was seeing it APU that? look impact forward thought question APU would then heard in that handicap having worth things. rate If the growth on potential year. headwind in so, was that's the points? XXX Is there basis the of

Luis Müller

correct. you're Yes,

X% backwards, able to of the of now last not you're year, down large correct, smartphones sales not down associated growth numbers, It's with but fact, we application processors. be for with how much quarter-over-quarter. right units last be is it's smartphone APUs, X% was year equipment to to I'm in revenues, would now but growth a slower year-over-year certainly sales our year-on-year. an of that percentage units right this for I XXXX it year modeling About Just and, about speaking handicap start in in even down think, year-over-year. are in -- -- testing our testing going

towards On hand, markets other semiconductor IoT well. automotive increasing. early We're in and applications are growing. LiDAR the are and industrial as standards applications work seeing some new XG some

Operator

question next from from our And David Duley comes Steelhead.

David Duley

So just space, that kind are only the a the saw far any is quarter the year-over-year in basis? segment goes, as and mobility growing September as to weakness segments other of the on clarify you

Luis Müller

the that's processor or mobility, Yes, tests. We're -- weakness application application correct. in isolated and specifically, seeing more associated to with processor equipment

David Duley

do the the as look any know, about but current this far as in into about think have difficult, December quarter, that weakness spill Do over at some idea the And quarter? Okay. might -- I you you point? what quarter December when having it's like you would

Luis Müller

X% essence, about We remarks, in Well, year-over-year. provided the yes. talking growth on here an

quarter. and you can seasonally quarter this is QX, guidance X% last about than year So we're of strong QX slightly third out QX fourth squeeze actual, thinking here the growth which at for the sort and QX a take higher the quarter and point, how from still

David Duley

longer the the since are Okay. items and were and lead March quarter, parity -- spread got the bookings of out And -- that with into you the some December quarters? like orders time this of bookings at the so some for

Luis Müller

Dave. Yes. right, That's right. that's Yes,

QX until a smaller don't ship and that QX So doesn't got at the that actually amounts the backlog end there's ship until XXXX. even chunk of of we've

David Duley

is, the think it and in kind are market Okay. big for final your understand And can guys products the size what question And of think opportunity just from that how couple I inspection-related market? have of you you us is frame me inspection this at help point. you help now. a you do revenues us different maybe the for

Luis Müller

Okay.

semiconductor total we $XXX the We're we our and small The year, order in million supplier about products inspection still the Last in is sales package where space. specifically, $XX pure expand about the at $XXX look is million, is of for have So segment, inspection market and continue technology. we in inspection it that way to million. a that's were equipment. for

coming I that a infrared faster and Now applies say wafer-level and And inspection dies; this in this like seeing the consumer segment market. was these of to new infrared market, as market. module particularly even that of inspection to to and bare comes important and $XXX become possibly, segment become for package those norm want see increase, of the the to manufacturers and per that vision particularly, XXX% here high-end really some sort suppliers the brand-name in failures we I to cases, introduced that that expect imaging certain years of inspection to of manufacturers the would for tools devices, of don't products, cost phone cell down. coming device these big million electronic

Operator

And Ho question Stifel. from Patrick our next from comes

Brian Chin

on This pushes handler And handler first in to I roughly, are also Luis, Cohu for still market share overall think, you, your year? curious, this that for on XXXX market to in Kind points impact various Patrick. test and the how of pulls terms outlook the growth? X of the given for it's year-on-year X specific, market, the track gain you in does is market of question on Brian

Luis Müller

to I X quarter market a market expecting Korean, points I Yes. mid-single of are one year and points volume handler major gain, through going we're year share. this develop ago will customers, X the X in the and share that grow mentioned still have those going as about in a XXXX. Europe, But digit announced gain that we to said, of more successful I'm one like when into capturing to the

year handlers, than this and I'm we're contactor I alone, market little expecting think, the market, gain also for So than bit growing in a this X growth is of faster year. a in targeting share contactors handlers. points couple The about point faster

Brian Chin

it. got Okay,

I suspects Okay, some Q&A, order the of you of on than your backlog I'm I That the in turret and like very even of in going are typical out just times deliveries handlers. of sort Is the one early maybe early part seem auto, shipping questions visibility. on, gravity-feed that XXXX. back commentary sound The out think curious, sort mentioned helpful. think, longer Doubling they're lead does based the like industrial, like and things sort stretching reason there? of 'XX frame? time you're the

Jeffrey Jones

it's and No, the computing No. actually spaces. mobility more in

the at that the it industrial the of not automotive, the But -- So dates. ships approaching But related. to it's like of that of holding end of it's sort XXXX. a Actually, delivery said, I quarter lead it's X/X in normal of automotive, backlog not of got some of part the and we've about in times industrial couple most orders. QX, still first

Brian Chin

Okay. That's helpful.

think EBITDA revenue the those you talked about I of XX%, and about that synergy being those you paying Over talked of frame extended XX-ish. you gross term, are margin of What the against over margin longer potential in targets? terms targets time an level margin doubling of cost some

Jeffrey Jones

growth today a from combined annual on rate are single-digit modest a sort basis. That's we where of low

would -- about be the million. as in last XX $XXX mentioned, that's combining for I months So today

So low into us rate growth adding to range. million $XXX $XXX to that million probably single-digit a takes the

Brian Chin

at haven't that which maybe there TAM when One into last that Okay, segue is maybe is Maybe even addressed? IP product anything good one Xcerra, broader that question a market, look historically is servicing the memory SAM, Cohu the very really -- that here. of the helpful. you portfolio, thing there

Luis Müller

Yes.

product for, a If the when and look past head-to-head for We -- that have that will in the leverage opportunity and provide in go differentiated in space. materializes, discussed we'll discontinuity if have that incumbent continue suppliers with discontinuity the market. to products. this in we memory to there's to we look our well-established technology an don't But intention

if continue to and that will when We that develops. you update on

Operator

from Capitol Our Marascia from next Steve Management. question comes Securities

Steven Marascia

is a any any just talk, your Actually, see answered. change order production all market one customers their their questions the was to on coming happens be was future other growth through my wait of they're given side? -- their potential have levels? was of going handler to tariff there to and about of going function front their or is patterns share Or discussed question whether to what My more orders that

Luis Müller

but our And haven't we'll related whether an Yes. no, answer in we that spending from any tariffs The continue said, would monitor at in situation moment. I simple think the now seen cause with nothing and increase change the this to impact yet on customers behavior tariffs. is any over semiconductor to time,

Operator

next question Needham Mok And comes from from Company. our & Edwin

Edwin Mok

my there that? way? is memory. pickup in in high on I bandwidth from on So few some to is any area. guys And Have you that that suppliers heard you stand a question stating that on seen demand benefit

Luis Müller

to? referring Sorry, were you area Edwin, which

Edwin Mok

was for I memory, to DRAM. referring high-bandwidth HBM

Luis Müller

Yes, no.

our this technology. I at the I But the Brian report products QX is and as can to memory product to opportunity to as about inflection way we answered way point really of Chin talk which tested to same an leverage in an continue or in portfolio in we'll -- we to nothing results. look the think have are monitor before is

Edwin Mok

there I at now? being see. that one multiple some mobile you us And an that I update customers, an where on give -- one discussing being auto And can then and were point, know customer. PANTHER, you right stand you on a with

see where on you kind that. to stand Just of

Luis Müller

that, still to in mentioned. device customer in product just automotive much The that is changed, F&PMIC requirements actually. our and we're working still Yes. and the the customer total small fulfill you of part not business has our a test And

change line. So not product that on of a quarter-on-quarter much

Edwin Mok

And you, guess, Jeff. then I last for question,

little a talk of kind about Just margin. bit

run the the of On a the Is go rate? Should to guidance, back I third to way about quarter. understand margin gross in the lower think kind we guiding there margin for line. XQ, color we model? back just us up that. on on a you're Should give margin slight going expansion? mentioned top Or bit some a your little Just expect you target

Jeffrey Jones

higher absolutely you're margin right. Actually, financial No, our Yes. than model. was QX

If quarterly you million XX%. modeling $XXX recall, at we're sales, in

we the driven product than So a It's mix. XX.X%. by model, came at higher little favorable in again, bit

QX. We also benefited some reduction that had small in manufacturing overhead

we're in at to in So sales, is $XX model. QX, that back million line quarterly model. And basically for XX% basically that with

Operator

And for from showing questions lines. over like the no would any conference Jones to remarks. to I am our further closing Jeff I phone back now turn

Jeffrey Jones

Well, upcoming we speaking conferences for you as thank or joining day. when a this with such the plan early you, attend have report D.A. us and results. good conference quarter today. month you We our to to the Thank third and look in forward Davidson we September later conferences at investor Jefferies XXXX Dougherty and

Operator

in for conference. you program, have and a conclude may gentlemen, wonderful thank and you disconnect. does today's all participating This Everyone, Ladies the day.

Cohu (COHU) 5 Aug 182018 Q2 Earnings call transcript