COHU - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Cohu Incorporated Fourth Quarter 2018 Financial Results Conference. At this time all participants are in a listen-only mode. [Operator Instructions] Later, we will have a question-and-answer session. And as a reminder, this conference is being recorded.

to IR. call pleasure Vice Rich my of President it's turn to the Yerganian, Now,

Rich Yerganian

Carmen. afternoon, fiscal CFO, Finance you, I'm Luis discuss and Thank Müller; Good quarter Jeff joined Cohu's call our first Vice President fourth Jones. to today conference and by quarter and for our and and outlook year our results and XXXX XXXX. welcome CEO, to of President

via www.cohu.com from or of our contacting earnings accessed you as same call our the on a through If website There section. page Cohu's need posted it at call the that Relations. slide a concludes. in is copy Investor available may Investor Relations you also call a link be the the presentation by today's PDF this Replays may after website webcast Cohu release, of also and access be is will accompanying

Now Safe to Harbor. the

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

call. these statements developments result Cohu today, XX, and update no only occurring assumes obligation of of speak to a as March comments after this Our as XXXX,

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

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

Luis Müller

demand weakened our demand reflects contactors fall, and has exception in fourth the discuss the XXXX industry today's the us. on our also the current period model, of thoughts provide for mobility volume expected of of production XXXX. there reflecting on one share business in plans fourth the XXXX. provide strength million customer testers, an the since drove although afternoon fiscal XXX.X Thanks our on handlers and year joining following last Rich. as for quarter the were for fourth the was environment, per of thanks Non-GAAP support positive close and October the early market results. than the to device Cohu's call, gravity and update driving quarter new data up Good Holding combination prospects On I'll our of had integration customers earnings and a Cohu analog our and AI particularly for IC X, in analog and $X.XX for handlers markets. I'll on commentary test automotive the Xcerra was with quarter well within relatively and power semiconductor were We and cloud the quarter first acquisition center, for guidance XXXX. strong Xcerra, reported testers, the sales contactors. better share launch for business

strong the customers market this into several While a outlook. New not all to serve a see maintaining in continued are Year, bullish demand

wins We design the also quarter. in had several

win were in a platform. and at capture new pick-and-place our semiconductor we qualified inspection market handlers three turret Our tri-temperature, European customers new with the automotive

to in continue for higher-volume engineering are for applications, in to later this demand We used ramp year. expected XG see which our testers

from year-over-year earnings Xcerra Cohu and reached the of transceivers. per still power amplifiers the We XG and antenna a design Several also customer have contribution xWave has manufacturing mobility of with including growth for radar wins $X.XX. non-GAAP share XXX.X weaker Despite conditions, applications. leading this had contactor adopters early volume modules, contactor sales begun at automotive annual testing market delivered ramping multiple million

in any markets and uncertainty even various are are impact the markets around consequently same industry demand includes automotive year, GDP and the and last and of beginning of they soft of trade to from the persist the impact for and customers China. What immune U.S. equipment softness long into industrial We growth, semiconductor this IoT China global from disputes, the and the feeling many market exact in started is contribution to difficult how the on having of seasonal particularly slower each mobility semiconductor are influences. continued This weakness factors will Today and including the demand is semiconductors. these pinpoint that affecting companies. fall not persist

from AI weakness year overall expected what resulting from continuing market point, center seasonally the year we ramp as This are been are this high the half. volume There stronger spots, into QX weak have At return to we industry. with change have and that strength only some Aside any customer bright on, data of seen middle the or in from several for is see is this typically the emerging a customers businesses significant later in but not specific tone related sentiment a we in customers. are to approach our continued cloud, now in we consistent working while projects second expecting growth year. period

could conditions. is at This current December expect which points utilization is we from data the showed consistent Our the with approximately what X survey down market given quarter-over-quarter. XX%, latest points equipment

As end positions by rate cost California the X run of are approximately These in year. and and by Penang, annual closing Fontana, million in end integration Xcerra, resulting XXXX. the handler our facilities the about XXX reduced operations, for the facility closings late in eliminate by rationalize contactor announced this of global expected manufacturing Malaysia our we and November of plan to the to

announced expenses going our plans XXXX. with half business September expected in opportunities. to business We More margin to generating communicated This in improvements and agreed certain the increases effectively of to direct of are XXth, that to Taiwan, to we expected and consolidate these customers, date have XXXX. regions second China the in early have March and handler tomorrow additional is accelerate product operating also in lines reductions an of products profitability in recently, to ability new lead Xcerra to for regions termination into starting distributor help these previously instead gross

recall of within year may first to committed of acquisition of run schedule. and these synergies ahead the a years $XX two million put the about cost annual we rate You actions us

of Turning to market SoC We likely be segment our the million for market test XXX market about inspection to semiconductor billion. year-over-year. to to XXXX, range XXX billion handler to X.X in be XX% contract million approximately we largest and tester that forecast XX% non-memory non-memory the to estimate to XXXX in X.X and the

millimeter expect XX% markets applications in decline model flat market to approximately decline inspection infrastructure the product the also to XG about traditional We in contactor segments. some and other be and with offsetting PCB wave year-over-year test

All of these assume take estimates shape. expectations our customers' a midyear of recovery

XG starting meaningful to solutions is on turning business. to work Our

way is test new methods PCB to test concern back-drills, the leading high-frequency of signal Our with accuracy transmission. quality the critical high for a

the will growth of the and Overall, content expansion the volume year, that contactors win to in industrial customers and semiconductor should into of IoT the continued XG due continue in the data creation, while of also into proliferation the optimism sensors only not wave and automobiles over are but initial and of storage orders the industry from to grow equipment, accelerate volume to market in and infrastructure existing to millimeter production. IoV opportunities ramp starting new handlers. related if X.X we semiconductor adoption will general half expect Our in continue so is midterm, testers also the second and that XG processing. for applications, translate There investments in

would fourth over guidance. to quarter like quarter and I turn Now, Jeff review to provide to it results first our

Jeff Jones

Okay, Luis. thanks,

XXX.X our the model operating which as and Let margin we financial fourth of generated of XX.X XX.X me quarter. adjusted of cash million operations X EBITDA sales begin million Cohu's quarter business on strength Cohu during million. by reviewing approximately of from fourth delivered the margin million results, demonstrates of non-GAAP

million Our by due to cash cash XXX of quarter million related the the synergy sequentially to end of the primarily decreased expenses at savings. balance approximately X

XX.X approximately acquisition of inventory, XXXX. and life primarily of by GAAP compensation costs, to million in include X.X adjustments reduction the property, of receivable QX, and inventory expense, and the in indemnification charges million equipment non-GAAP amortization stock-based and XXX,XXX adjustments plant severance product to For intangible purchased XX.X of driven connection with step-up approximately million the to of acquisition due acquisition to Xcerra employee expense, Ismeca X.X cost. XX restructuring million of the and costs related include million the GAAP non-GAAP

of follow, net guidance employee on and severance QX million the these X comments are related results, cash for cost. My Cohu's QX of based impact to including million non-GAAP approximately is which exclude the impact our items. XXXX, items acquisition these X.X XXXX all that For

Xcerra For one achieved million, of sales. fiscal XXX.X sales Company of XXXX, year including the record quarter

EBITDA the XX.X%. of generated approximately year operations fiscal margin non-GAAP margins Cohu balance we from the adjusted operating cash increased of delivered and full X.X during XX cash For year, our million. million XX.X% of and

Operating labor guidance product to lower business million, our customer XX.X XXXX. than As higher or I for or more quarter was conditions. favorable No costs to for were fourth for due response to one quarter for in than accounted X of in XXX.X were mix. year sales million. and sales the full of XX% primarily approximately lower expenses mentioned, margin of XX.X% the XXXX QX due guidance the million XX% soft quarter the gross

tax the accelerated repatriation. X.X anticipated Our cash on non-GAAP Xcerra XX%, a withholding QX an future rate the for taxes synergy million From integration of accrual effective related including happening is was to pace. for perspective,

operating the operations. in main We handler essentially and of XX synergies first expect approximately and XX The interface ahead cost million synergies XX consolidation of million accelerating approximately months the target cost our in factory rate The million the in schedule. of product from timing total sold savings. X reflects to was the XX goods factor annual run million achieve within of within year, in expense our

termination the Taiwan the factor anticipated of and is for Another than distribution China. initially third-party earlier agreement

years test three Our additional which midterm million first sales optimization. is of main the consolidations spares, base. synergies includes fourth installed revenue five products, in business, the our that double which revenue Revenue recurring and is and The total was also for from our initial of facility by as spares manufacturing well mainly revenue XX% for for equipment, capital next equipment and represented year through to another a contactors million total installed contactors service three support the within interface quarter. target as service XX to test composed of XX of base pins, of sources the recurring

QX, years, millimeter automotive the recurring contactor for test adoption and approximately million were next sales of revenue rate believe of expect our we applications. handler wave XG stream near rate the sales our million portion for efforts market-leading test grow an cross-selling to approximately sales, significantly Contactor XX and the annual contactor position contactor in XXX few through of Over million. current years. an and to the attach our the business grow to have Based opportunity represents to which over five next on three market we XXX this radar we

as and XX, of of turning overall and million and cash. December total sheet, in debt XXXX, liabilities, was million to end the at loan Now the the million prior of days the approximately in deal total acquisition. assumed in periods XXX Gross a and B term assets had of end of of Cohu's bank cash including the result or Accounts net inventory compared debt the the to XXX XXXX, receivable XXXX, course we XXX balance increase DSO Xcerra At is investments. was XX Kita at XXX. the

the was QX XXXX X.X X.X Deferred QX were in profit X.X and asset million QX December up million X at million. Fixed sequentially. end million, million. interest third approximately about depreciation of was X.X quarter. up revenue related of was million at million deferred totaled X.X and from additions XX.X X.X the approximately debt During The was million repayment the expense end

to cash to the pay Our long-term down intend Company. cash of the support and million in the maintaining be the dividend. will de-lever debt continues capital on be XXX and generated to million cash balance XXX operations, expenditures, strategy used excess We to of sheet

above on of dividend first approximately XXXX. Board cash conditions achieve previously we February Cohu's and XXXX expected cash to revenue be quarter April in semiconductor QX, million, $X.XX minimum to distribution to is to expenses be The XX, and share upcoming Directors cost make to quarterly periods which on meaningful. expected an to which XX% test test, breakeven million, to basis. sales which of during XXXX X.X on XX, are requirements or shareholders effective synergies, rates Given expecting inspection million. approximately expected a includes X% operating realizing million be to approximately below and plan synergies approximate for XX are we is the XX%, debt approved now gross QX are PCB annualized current total margin repayment business slightly guidance, record cost of approximately tax per of XX the be debt XXX not And for million is payable X.X or

QX, to expect provision we to zero. For the be tax nominal

year The for approximately rate QX XX%. we XXXX, effective million share approximately XX.X tax of the full For to count estimating are is diluted expected be shares. an

we'll Now discussed synergies the call XX% Profitability annual of approximately XX the remarks of That previously. benefit on margins of that gross sales and we of questions. midterm, the over XXX are our concludes and targeting to quarterly now targets cost million. million prepared EBITDA open I XX% totaling include

Operator

question Brian first from our And is Stifel. Instructions] [Operator with you. Chin Thank

now open. Your line is

Brian Chin

Maybe first question.

in to think that to markets? it And comments to decline is attributable downside to the going of those and last year terms back weakened accelerate the sales the QX, fair more sort and industrial curious, recently. markets Just of more XQ seem I sequential maybe your this to is in auto say wireless

flattish qualitative of sort now. terms one, some number trends characterize XQ? you of Can for pickup we current but know fair also some And which second order that? kind potential you in So that QX suggest to I to half, in of relative that into on are a sales the way infer almost maybe a provided XQ is commentary

Luis Müller

Luis. is This

of you're correct yes, the your part question, in So first to assumption. your

As the industrial we data have I IoT on actually in and fourth in quarter, AI our softening but mobility relatively weak the industrial first markets. held the seen the in were well. But stated, do automotive automotive into markets also centers quarter, XXXX going

QX, ramps. this I XXXX. same sentiment as of your Needless game. device the any some large, half be happen on And in second we part the more launches the QX for of well, projects the markets the stated and see half the the weaker improvement we that and first with based in those having the by second cycle. going are say, for the assumption seasonality would as stage currently our correct significant customers and the this into to industry do about points the has year they as we But timing So, were of for question, about now of should the is in think in new have of customers year volume this

Brian Chin

questions. Maybe I have just two other

in the of sort or breakeven financial communicated, XXX And given kind of in of model, the curious, you the temporary for measures First, roughly just of reductions terms that any beyond either accounting reduction already planning there is right cost the just level million you're taking if have recent the Company? pullback business? is permit I'm kind

Jeff Jones

terms few of haven't of some really breakeven significant and cost discretionary will. taken The Jeff. at levers the spending if permanent we've some taken a is -- in pulled the mark, you XXX a actions This But is reducing amount of reductions million moment. reduction that we've to travel, closer

move going to reduce With today's forward, declining that synergies. we and breakeven structure, margin. in say million I that improve additional on as XXX million but XXX we would be we So, gross as range, capitalize are in the will OpEx future is cost

Brian Chin

question last perhaps one back Luis. the for Maybe

XXX that just growth a weakness, rate over cyclical in years. and even million the five annual next rate business, starting million beyond you looking current going the or million let's contactor Just horizon. pretty that three to reiterated run over robust say from That’s the XXX test XXX

that insights rate large base, the installed types you into factors was Luis, straightforward I in influence most maybe, kind device pretty as curious, terms growth understood that couple narrative the hoping your key is business well right see the I'm that but customer of the for and will which can of picking? adoption think of are in you markets and So, provide supporting I

Luis Müller

correct just me let here. Brian, few things a

would XXX about on million can contactor business to we that up the said have take million. and that the at we handler, annual rate rate XXX% it to are on We our if attachment run XXX get

Now said, a also CAGR the are with today. in business that modeling about XX% we

you're this to to in XXX So, if about correct million year three that you not statement. horizon think to to just get five going

far the opportunities we greatest and As the right? of as some are see see in do attachment where the automotive applications. We actually industrial

we We have RF with have high-frequency opportunities fleet of in radar in as conjunction a applications, But whether wave device the testers. large unique handler test. base millimeter our and solutions it's got installed well very as do or good

Operator

from comes D.A. question next Tom Diffely with Davidson. Our

now open. Your line is

Tom Diffely

you the growth? say contactor or on on was question. clarification that’s XX% expected your last business a the growth market Did the just the First CAGR

Luis Müller

Yes, expected that’s our growth Tom.

Tom Diffely

one on earlier the that XXX% the about handler for And clarification, to tester both memory business script, then more you and in Was XX% maybe the decline. a talked and portion? business

Luis Müller

was to decline essentially serve and test and test all that market in inspection the aggregate testers, XX% we contactors as semiconductor total XX% in the The addressable handlers, for aggregate, well.

Tom Diffely

there curious, or kind are between just those than handlers weaker I'm if of the segments, any two main meaningful one tests another? was difference

Luis Müller

said the Small the differences, new products. differences tester market, nothing do and year-on-year, and like offsetting about very essentially millimeter decline modeling our flat We I on applications particularly some contactor but market stay the the at are model small wave of to the earth standard and some shattering. XG small. that’s in handler There

Tom Diffely

back of XX%, a stepping looking sounds at and related then for backend rate healthy utilization company. just it And fairly your

return to tools of soon the returns you fields get as growth? pretty you that unit to growth thought don’t your is and market end So and the lot a as in have quickly excess will

Luis Müller

past well. conditions. down we better the soft Tom, on The market still from will have than quarter third is feel significantly be Yes, as that’s XX% seen we how

upturn much on market expect a yes, delay we and business our between our we we do wouldn’t So of and up. that seeing going a customers see pick up

Tom Diffely

the it and $XX more half Jeff about in reflected $XX sounds million finally, at in the this the like then the of Is look expenses, million OpEx the weighted? second And reduction or other is guidance. timing What's already year? rate it run you there that's so

Jeff Jones

$XX on now, run rate are we right. about Well, a million

we rate. time the million on exit we $XX XXXX, a by run So, be will

$X be up going X.X that and quarter the terms I'm are of so course in will the QX in two a to on in Of somewhere will that based next year, -- the pick to the $X we in over to second expecting what in million of that range that half kick quarters. we likely million three be realized actions

Tom Diffely

then be offset a on And based expenses that in the stronger how would of variable second half year? by much increases

Jeff Jones

it the Well, on yes, where so goes. all revenue depends right

And I impacts give OpEx today can So XX% then modeling at are when in significantly terms will we of which revenue around in again, midterm that right where includes model, XX%. of synergies. covering the total OpEx OpEx synergies the in the you model is higher terms spending if of all

so are we about of about in quarterly that where of million from XX in order million an are OpEx estimating expense XXX QX are increase sales in to increase where of in XX we operating from And QX. we million to achieve

Luis Müller

one are so variable one components of thing me OpEx cost here that Xcerra component China sales just Taiwan, product sales here, away. eliminating related in Let biggest former add the to more of commission on goes and of variable is we which now effectively

Tom Diffely

million rate. there growth, next So, is $XX expenses, increase million $XX so like you XX% about over the if of of looks incremental it

Okay, very well thank much. you

Operator

Duley is with go Please our ahead. question Securities. from next And Steelhead David

open. is line Your

David Duley

clarification of impact couple of or you negative particular revenue Taiwan. in agreement change? With there any China early Is I distribution eliminating questions. and the from guess that a Just positive

Luis Müller

impact as and a other something revenue needs, our there probably view no, no direct now. as than even There plans now we our But it visibility into honestly to negative that increased have is is contact right aligning as a roadmap pinpoint positive. development into no absolutely the the over impact really we more customers short their can I term a positive

David Duley

quarter? significant quarter Could than decline better better gross And current why of the and and taking the perhaps you the were and just much your then sequentially quarter. why then in were quarter about in the current business in current this talk guidance a gross down upcoming in going margins mix margin fairly

Luis Müller

And we Dave, it margin had revenue I achieved had we when recurring to forecasted. the had anticipated more so and we that mix revenue little we then as little that -- we of overall mix know tester of consider than really than you in the we cost on lose maybe would more be manufacturing course the higher as mix side. what the related standard XX%, mentioned, was look fixed higher have leverage a the And guided products side at QX, we goes systems. QX a as we a mix XX.X% to other than some it's bit of back our to with revenue is some of on on down and

David Duley

then test final confused five I'm clarification. just that that three take I the getting in -- And you years, that mentioned wasn't I revenue the because incremental guess Luis, but would it to thought, then you thought timeframe. business little would a contactor I mentioned Jeff

help that years? about guess and the the how you point, So have us talking been that timing unfold the couple if up over incremental just could I of next it $XXX understand on million picking this you will particular

Luis Müller

this we develop how a at this least for and opportunity rate We say we out Luis. We in timeline laid $XXX XXX this XXX% have Dave, attachment our did for on as year, subsequent that modeling picking is a a CAGR. will don’t we XX% million. are least modeling million handlers up for can have but year are a years, CAGR we a for XX% we at

see trend there. towards to eventually not get you three to going So, XXX can in million but you getting years, I guess it's should

Operator

Marascia next And Securities. Steven Capitol question our with from is

is now Your line open.

Steven Marascia

target debt balance XXXX you first quarter for stated the on of reduction at target Two for you X.X about Will questions. of all? talk about XXXX the Have million?

Jeff Jones

term I targeting What reiterated cash we're to haven't, order upcoming in used about cost we conditions on and into for amounts be the some she million And cash we balance QX. to we requirements to synergies, of did meeting wanted no, $XXX longer decided business the was with as operations in Steve. again de-lever. position soft our the the get that minimum with achieve some No,

Steven Marascia

If the generalized keep development here more XG of in streams talks second from administration of A to are that affect any market. market there wants question potentially toward the and participating your is. them Have XG revenue general that guys build-out away you you? of might terms U.S. the there talked question to in that customers about how and

Luis Müller

the Well, and anything the is Steve, reach. end a is a the in global in is XG frankly semiconductor industry global --

impact, the any negative certainly think customers So, if are being getting don't delays in Actually a see will in so XG contrary, to XG globally, much accelerated. delayed. totality the being of XG. nevertheless I market our is U.S. products it But selling delay have I

Operator

Thank you.

Craig Our FBR. Riley with B. is Ellis from next question

open. now is line Your

Peter Peng

and Peter Ellis, our taking for actually thanks calling Craig is for this Peng questions. Hi

little seems lower end it On versus expectation. to expectations? weaken markets relative the sales, fourth these quarter your in a any that bit Was

Jeff Jones

we were say No, the guidance that I would that Peter, within we gave.

below You're we always that examine and have right, forecasted some but upside every risks. it slightly midpoint, revenue we time was the

so, segment any industry. And wouldn't it or pin I on particular

Peter Peng

of to upward expecting the And given then model, we pressure on some be the just second should the direct half, kind OpEx transition? in transition customer

Jeff Jones

as and China this transition. Taiwan Over up the application been and prepare last for we quarter, engineers we've building our

be we redundant some the While away. you The nonproductive distributor those in we transition commission of place, away have paying costs customers. will out still we the non-GAAP goes commission will, headcount than will are as in to servicing our if

any result wouldn't the future pressure any as that. a of half second So, in I anticipate

Luis Müller

goes net effective there away, will be once completely cost synergies to direct contribute In We're the transition as were cost values. as should obviously it we out. transition completely synergy we're but temporarily fact there tomorrow,

Peter Peng

And tax assumptions tax rate of the then still rate kind low on in XX going forward? on the

Jeff Jones

general in comment see and Yes, Peter little view really It breakeven. goes make out low as we quarter becomes full XXs. the QX around where in is in as breakeven still did about the are of above XXs, But low that. little year, particular a The or now above any profitability rate for the window. levels you meaningful low really I right the year the such not it for the

Peter Peng

one And final for question me is.

about You handler versus and and being just tester? us growth the expectations Maybe contactor industry give talked on your some flat. XX% interface

Luis Müller

I So inspection that's mean see contracting. market going like year-on-year and question. semi good test we XX%, the said, overall I down the a XX% so

As you a to do to share. we continue target have know, gain market

can't how of is qualification out, balance to those I tell share market exactly products time Now, those are gain require certainly but a does going there you for to things happen.

aggregate, in contraction I be would say year. this a would So

growth our XX% and offset are the likely market think not our the I share gains to contraction to and contactors XX% in in overall test inspection market.

Operator

with Needham Our next & Bolton comes from Quinn Company. question

open. now is line Your

Quinn Bolton

quarter but did those How revenue? two March the sense missed into versus I trend you I give have the March recurring apologize, the a for equipment of this might the quarter? so businesses

Jeff Jones

XXs but a consistent, to to Quinn, We didn't. high it's it's low give that, it's we from would Jeff anywhere been look tend No, here. back XXs. say, been on I fairly

So is good XX% proxy. XX% a I think

Quinn Bolton

case which holds guess about been recurring drops the the that’s equipment I it revenue stream during the I volatility. So percentages and of revenue would if would then as periods much same that flat have guess recurring thought flatter equipment have I

can what as that address, look? is business to it down in kind think is of in forward just as much the you equipment just So it the recurring --

Jeff Jones

point. historical make you less gave right, that I good was percentage has reduced business a revenue the Quinn, so And levels recurring the Yes, piece fluctuation. the of

similar XX in range. high higher QX to going that’s be to going that’s to in periods So, the be

that be to that at going I range end it's you. So the high gave of

Luis Müller

surprised, to the doesn’t we it quarter. XX% fourth -- we it modeled if sort XXX to systems close of haven’t quarter we but completely it I once complete in -- relative wouldn’t about very low will be way, flip talk XX% meaning this it's It's the degree. mid so recurring the

Quinn Bolton

sounds less equipment should see businesses than okay. the volatility it it like, So,

Luis Müller

it absolutely. Yes, does,

Quinn Bolton

transition demand is I this from in a right? for direct The was the other you a question I [disti] had historically [disti] Taiwan. that responsible made model generation is assume China to

Luis Müller

right. That’s

Quinn Bolton

its over building bring obligated of that out list? channel that the application out to your kind find of Or customer to And application pretty so of and [disti] channel is about sort happens customer engineer you building support out protective they contact. is what I of in-house customers? go then are the you I potentially building and hand sales talked also yourself those mean, I and and part engineers list? its out would the think the mean

Luis Müller

So, year an two first. together test more both back actually was the had the less relevant put at had started all first but than little part obligated that a maybe came a Xcerra customer demand attempt customers Xcerra with of to and actually information team pieces, they transfer a applications directly time. half And The more place and that's half, they and one eventually and to in with by in and Taiwan separation China. already and the relevant to team countries. about customer applications that year ago. distributor When the deal I agreed the engineering built part. Yes, is want are last say a in list, relevant to the

So today, with we do contact have fast customers. direct forward to

them are, we augment that And with are basis. then customers We So, the on are who we the to the resources the regular them who for we managing responsible a to do projects talk basis. together those projects get then, with actually people to a know regular distributor commercial. know we on

with vendor transition set where customers direct regard. supply tomorrow, of we really all are know final not customers the So purposes chain infrastructure to switching to we exactly a in not, deal from already so up terms and a that who of go officially we at as much to

Quinn Bolton

you on just so And go across business, it completing rather kind of entire than you're of direct kind process entirely? making switch that

Luis Müller

infrastructure applications What those hire two Cohu that is train to where to infrastructure we to plan we the additional engineers had augment hire the countries, was service additional Cohu had had had. direct. table and to do we to in already here to brought engineers We augment test

in increase the it's start in the a an headcount the of organization, So, more of was to the an fill organization it's not that of relied distributor really gap. on

Operator

up Instructions]. a And [Operator Please from you go we with Tom Davidson. D.A. Diffely ahead. have Thank follow

Tom Diffely

for follow-up. Yes. the you Thank

question builds with need inventory Spirox. going own Just termination there kind to one any on of they hold inventory? do forward? more early Do is facilities the you of your Or

Luis Müller

have back pieces Yes, of through that will equipment do They working and determining purchase Tom. that and we're demonstration from equipment require them. which less more we we are or through going that

that going we're process So, now. through right

Tom Diffely

is it new and of meaningful equipment? service Do about components business? what of spares have services finally, And mainly Or spares? they and the a

Luis Müller

new mainly Yes, equipment.

Operator

would Thank you. any turn questions his like not sir, for comments. queue. I'm final further the to And call to in I showing Yerganian back Richard the

Rich Yerganian

us much Thank afternoon good evening all call on everyone this joining the you. night. you Thank and very for a have and

Operator

conference. thank gentlemen, you wonderful all for Ladies day. and in and This program participating today's concludes may you disconnect. a the Have

Cohu (COHU) 12 Mar 192018 Q4 Earnings call transcript