COHU - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Cohu, Incorporated’s First Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to host like Mr. today's now would introduce for your presentation, I Yerganian, Relations. Investor President Rich of Vice Sir, please begin.

Richard Yerganian

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

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

May B. XXXX California; June For conferences: Annual New May Technology Investor your in participating Conference Baird's TMT New following the XX on Conference Services & information, Consumer, in X York. will on Cohu in the York; FBR Riley XXth in Annual XX and Los Global investor be Conference on Cowen's Angeles,

Safe Harbor. Now to the

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

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

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

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

Luis Müller

everyone, utilization vision the and slight in will bottomed XX%, I first the Thanks, OSAT to Market IDMs utilization at utilization we At true in and business long-term the positive capacity share afternoon, same started their in that second internal into industrial see on of turn that last near-term importantly, will conditions particularly At reflecting we're update first fall. forecasting the integration the about to rise desktop mobility decline start the expect add current Desktop and joining and continue half an forecasts customers have quarter, And improving stabilized once is appear been XX%, the has has for Company this QX good environment strengthening us. some start has in quarter. Rich, today's again, for linked segments look more but they and year. recorded to to to since weak in thanks and mobility. a several and discuss markets time, call, synergies. automotive On to the for conditions

orders later of inspection LCD We application RF of are testing devices for test in have received handler expecting test quarter. new volume and April drivers demand and processors, and we for this

equipment. and global handler qualified have fourth PCB communications AI and Additionally, continued semiconductors. test to platforms a in strength in for of reflected revenues recurring our generation been the is infrastructure we orders quarter center, tester, third Cohu's demand The as cloud project data in forecast to contactor well where new new and a test as support

to market as IoV first bookings meantime, IoT, largest over in year. major segment lost automotive that been the the the increase In and strength, had three an the contributor system optoelectronics quarter. markets well has years, countering the this Cohu's last growth as industrial momentum in our and Now consumer a the early

markets Near-term, significant communications will a out that related across positive are building the the impact increasing the and will forecast XG in moreover growth the these have the industrial near-term, customers electrification, our automotive muted automation While deployment for the the of years. much network over fundamentals in and in of infrastructure industry. communications from come ADAS, end increasing three XG remained business vehicle strong next

that We should starting and we expect XXXX. for deployment to XG over the years. demand semiconductors of high mobile volumes XG XXXX, in going inspection expect of test in ramp Using standard a for communications-related opportunities the into devices expand five reference, into last as and

will industrial, computing, communication, a automotive, much sensing, edge autonomous More center vast extend enabling robotics, data and by data the importantly, XG of and consumer more. capabilities vehicles, processing beyond markets proliferation handsets truly to

solution and that yield planning Cohu is delivering this be We're significant not contactor to time expect enabling a into across just translate tester, and We to semiconductor the in content volume entire the a would increase forefront to of customers, wave, industry, this handler, production. the company. at

solutions We challenges. and best-in-class deliver to are inspection uniquely positioned customers' actually our test to

Now inspection. next-generation a platforms we're capabilities consolidated will investing interface and when defined improved for now generation and communicated that testers package conjunction in deliver our new having and the products, handler map, with utilizing customer road value vision

performance million should improvement three over-the-air Offsetting the are and the as on over margin to businesses. business years. one-third refining to product focused to immune performance define for markets, Cohu impact $XX In applications. deliver We the these to on capabilities an the parallel, the the manufacturing have of in starting specifications automotive we in obviously we Xcerra contractor of high-signal becoming was industry-wide This the completing the industrial of meaningful add solution months, mid-term this not weakness six new strength and high in are year and the and the five the of of XXXX. integration potential contactor products on next consolidated typically with reference over weakness impact next our capital is to nine which but is multiple on equipment working that that incremental the are gross millimeter-wave, a revenue $XX million customers slowdown believe revenue

model contactor revenue by rate attachment solution to our contractor our overall sales. xWave driven with in increase continue growth year handler this We and

We is to have million refer to upwards the of long-term. in grow business accounted recurring contactor the to our The $XXX opportunity the what of revenue. and business to over sales total XX% contributor first for quarter we a as significant contractor

represents approximately to Our of consolidated revenue. semiconductor XX% business test XX%

over We are module to expect few next leader test XG front-end RF derive the from benefit and deployment the years. in substantial

into certain become successful can in a where positions niche process customers. We we finalizing platform mainstream of the businesses to are strategies to our as solution grow market

We over to plans expect can generate mid-term. year a a incremental revenue successful $XX million execution of the million of these $XXX

Our strong driven businesses. momentum PCB semiconductor quarter server, a had test the and networking by our with in communications consistent business markets,

deliver of Malaysia of for monitoring we of later we a direct going rate levels. consolidate to very million products $X and the million cost of to This finalizing move made talked is and plan will our progress year on this things one significant China much by an to progressively year. how this rate the plans our a acceleration projecting significant million control. restructuring achieving revenue million with $XX synergies. in all are plan the share quarter operations semiconductor this already a conditions, P&L this model cost cost in XXXX. the about through support announced synergies sales market in closely in past in year. Jeff achieved Germany are business for $XX we day a synergies going will operation, and by and California of annual close and at synergy and which quarter, in focused on end Taiwan, more on closed, different various that the test Combining year, transaction April announced details Last now the achieve will we can we forward the original model end We $XX While as these annual run and we benefit cost run this

cash accelerating benefit I'd because first is quarter to savings, markets. a call of to is substantial P&L we flow of Cohu increased and expansion secular that explain generation. developing inspection. very achieving believe the drive and significant Furthermore, mentioned, from results, business quarter will our model solutions position our Cohu things control, to quarters to industrial guidance. I we aligned second and our in turn a to and products best-in-class only over a for profitability like I'm have synergy and roadmaps our couple about transformation trends optimistic Jeff on and automotive from review focus and XG away provide future test already like that new in As the now can primarily

Jeffrey Jones

as Xcerra will of our better due significant first a our represents Luis on revenue. our second and we're year. achieved reviewing a QX gaining and our the acquisition also by in Today, for from higher expected than Luis. anticipated have impact recurring cycle, indicated, contribution margin review quarter low stronger which Thanks, progress half. I'll I'll the a sales the believe gross than synergies a planned Okay. of confidence and start results, business from point delivered milestone that accelerating to beneficial this the We

our review at expected for including revenue beyond, XXXX model business I'll Next, different levels. and profitability

refer our my Please note figures. all provide follow to I'll quarter second that Finally, that guidance. comments non-GAAP

disclosures, please investor accompany see to GAAP For and reconciliations the presentation. non-GAAP

customer these include of QX generated and adjustments $X.X $X of million including $XXX.X $X to quarter costs, We inventory revenue represents and impact million million operating to data GAAP approximately sales. of generated sales. cash After non-GAAP Cohu One of we a of cycle. of or a severance. of and acquisition during employee quarter. primarily XX%, XX% of In QX adjusted QX QX. due costs, approximately our in For approximately the accounted occurred was at expense, than mix to loss cash inventory $XX of of favorable amortization than X% that accounted expenses of XX.X% income in written intangible for On gainful which center, of the sales the include sales QX. were Operating cost revenue. tax in million or guidance Japan customer $XXX,XXX related $XXX of interest recurring operations the had forecasted in QX, No $X.XX. $X.X and levels GAAP assets of fixed delivered to Xcerra cash rate product higher Cohu step-up net provision, $X.X approximately the equipment higher XXXX, compensation million plant for first The QX, sales more million tax of of was approximately end expense effective end and roughly sales. a and million adjustments expense. X.X% realized sale expect we purchased the due $X.X near and of is the items $X.X of near $X.X change restructuring balance of of of not a property, on synergies other our primarily million, EPS customer non-GAAP loss AI and a million off in million bottom commissions higher by cloud from the is driven EBITDA. $XXX XX% or from pretax this and to to QX primarily mix margin because and stock-based million At non-GAAP The primarily of breakeven. non-GAAP gross million of

of As the profits operations and and we've of most taxed outside U.S. related are discussed generated previously, Cohu's

tax in did Additionally, benefit it of tax when generates our valuation the operation QX, tax no allowance. to asset there offset as deferred the U.S. because foreign is expense losses

after result, benefit tax our small driving on U.S. expense a from the profit loss. foreign non-GAAP any an without tax we pre-tax to loss, recorded in As QX, profits

levels expect and Xcerras's operation, business Germany original This the committed million since synergies been acquisition, major began of cost The to forward will approximately in and the ahead in in that in at savings. target. synergy approximately inclusive million essentially to was $XX this XXXX into restructuring the The profit impact this the cost synergies is XXXX. the pursuing for and we deliver This result forma cost we savings our cost revenue all rate opportunity goods with as level synergies the $XX synergies. calendar April, of when run million turning of period. plan of synergy to cost cost split pro three-year the generation once by we pulling $XX that million sold We're of the a for component million the Xcerra close modeling at And Now aggressively cost impact restructuring and into In point operating Cohu the XXXX place. revenue now Xcerra quarter. going the the model synergies model, we've business the exiting expense combined million is or is in strong that to expect reference, achieving this $XX five-year million we of end second business year. originally of finalized calendar model Rosenheim, per anticipated synergy $XXX favorably several a achieve $XXX revenue cash $XX of business are annual shows year, about annual

Our long-term to and capital support to million strategy the on balance of $XXX continues the maintained approximately dividend. be sheet expenditures operations, allocation capital cash

ramp. the $XXX to that synergies Our million $XXX in business debt generated is cash an the and cash eventual to the and business and will Company of conditions the plan paydown achieve used required subject of excess be support to million deliver

$XX we're $X.XX synergies. share of payable of the XX, XX, shareholders quarterly cash in Board Directors a the balance XXXX, approved of of cash to order of XXXX dividend payments Cohu's record on XXXX. achieve For to approximately million June projecting on targeted July per

the we're and is inspection, gross lower on guidance. to XX%. million. $XXX are second be Revenue be Operating quarter lower distribution $X $XX product mix X% XX% approximately expected the synergies be approximately PCB in margin QX basis in XXXX test expecting For margin to to projected the included or approximately mobility expected cost of million. to and quarter-over-quarter $XXX sales The be due test. market. million of semiconductor handler annualized The margin expenses range $XX million is million about is an Gross expected to for to guidance, are

We QX expect of QX similar amount. be adjusted the approximately the X% non-GAAP provision to EBITDA to total projecting midpoint at to And be guidance. tax in non-GAAP we're the

approximately profits for QX purposes, we and open we'll million with XX% normalized is revenue rate expect expected of business be count to our diluted in a tax that call XX.X of line remarks model. modeling The now, prepared or the questions. the $XXX million And shares. For on approximately effective more share concludes and to

Operator

first Instructions] D.A. comment line question comes from Diffely of Our from [Operator Davidson. Tom or the

Your line is open.

Thomas Diffely

afternoon. Yes. Good

you quick when first, exploring increase actually So question that Accelerated Reduction the of through to those on Cost that a the program, of went doing reductions? you process cost the

Luis Müller

quarters. No. They're largely the same forecasting previous Tom, as we've been in

Thomas Diffely

does the longer when is take at guess, you reduction some the Okay. million And that mid-term same along that mean the lines, above $XX cost I that look now? of programs to do,

Jeffrey Jones

available that some, we're taking the synergies So do the a of we then the further monitor single-digit look at continue say we're dollar we but I'd opportunities you going mid-term. and to believe are opportunities that that the ensuring over we're end on as by for to achieve $XX imagine, focused and million, cost million beyond year now there can

Thomas Diffely

to Okay. plant there the facilities just you quarter that Germany And clarify closing, you're said is last third were then? facility the two

Jeffrey Jones

be Penang mentioned The in as well. be previously would California yes. and I have a two facility would then the that That third, we

Luis Müller

is Luis, Tom. This

Germany bit is doing a Germany. Cohu with that what clarify consolidating the in to we're already little we're operation had in Just

Germany. just we're not but So facility a closing closing in we're We're operations consolidating.

Thomas Diffely

point And do as sense. crosscurrents trends. that then makes recovering or unclear, the automotive getting little clearly That looking stronger in sounds at the here. this is It at Okay. like you industry there a It's mobility were little see the business well?

Luis Müller

step-by-step in think an the but a say. stick of the look see with There in a no, the increasing automotive has at said, bit improvement automotive through been at should automotive. as that we uptick But first year, progressing of in hockey we I quarter orders sort don't I

Thomas Diffely

acceleration contractor the when or kind cost anything of do finally, your you contractor opportunity, to the then negative at for the does positive of cutting outlook either And the look Okay. growth?

Luis Müller

the of But terms think an referring and In cost I impact profitability, to probably have that. on cutting yes, you're Tom. revenue won't synergies

call Cohu the We place rate prior legacy talked for have attach strategies handlers. the calls, – in we've on other let's the and increasing about it

and about still So still we're we're those. those excited opportunities pursuing

Thomas Diffely

I modeling this Okay. new appreciate model, to so look Great. Well slicker forward your…

Jeffrey Jones

Thanks, Okay. right. All Tom.

Operator

you. Thank

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

open. is line Your

Brian Chin

for cost questions. to this Tom's the question ask Hi. get Good afternoon. congratulations of point also kind terms questions Thanks of model. following actually That's up to a and on work the first my hard few letting in us on

Just we make of that to or kind are I to sure rewind here clear.

is? the $XX there's then So as $XX and earnings end that's million at a million additional to another from getting next million is of And $XX by coming of rate that $XX of the and looking March then terms XQ, incremental the million million quarters? of upgraded year, kind to $XX consolidation few call, Can that this annualized $XX be what the XQ, of end remind Germany, again million, in fiscal savings you you've annualized in $XX what role us million. clearly the that of X-K Thanks. now in you end of that so also

Jeffrey Jones

All Brian, from Jeff. you're million China further of previously rate we going on cost that gaining the up plants specifically sales closures in and synergies additional the asking from and had California terms the in savings run from this related Penang $XX about right. to direct comes model that to of plus Taiwan. about million a talked The is clarity $XX going in the really

more in the or clarity more an less opportunity. around it's an seeing So as that update we're those gain we synergies increase

part of So now question. second onto your the

million $X at QX $X QX end $X.X to grows progressed over me, in we're the QX. then QX. and million progressed to the with million, – in grow of just let's the baked it we We've of little $X quarter, about million start start excuse as guidance. I'll into the through to to synergies through So projecting with year, QX $X That about million

$XX if of very per will, XXXX run us quarter. that rate, close So that you million to brings

Brian Chin

Got it.

Thanks, in a – And of hit advantage revenue helpful. those the cost full Very the of the those levels basis, on have revenue Okay. year once – on that now you that the you full end run slides, sensitivity Jeff. synergies take you sort that right? of the based that's that's model based before rate

Jeffrey Jones

That's correct.

Brian Chin

back Okay. Great. itself. And then also the to now you're going business

terms kind you know those rates increased And you if some maybe call, market, leading visibility. you've that you programs second you of flush even into, you terms talk to particular just that can booking be your earnings out seen could half maybe color improve? last Luis, but standpoint what in outlined can a expressed, whether indicators any you on I confidence You of want would leading look a curious in even in specific utilization of bit terms little on but of qualitative provide helpful? Thanks. any

Luis Müller

Yes. Two Brian. from different angles, perspectives two coming here

to them if actually is, One which mobility. the essentially we and is by At some same that business, associated it at improvement side driven OSATs, the up fourth on of time, into guys going projected to ticking tester quarter market, utilization, projects an do related the the indicates fab-less the results have at in the starting quarter. you are in third mainly with mobility yield look

that a have seen April. We here And market infrastructure already some quarter. activities associated mobility third have orders mobility with into the – XG a in in are ramp due handlers also to the ramp in for we for

made in improvement So showing quarter higher and mobility starting here the together conditions call. – signs business all the we that mobility or comments of the third that put forecast in for of thus both infrastructure essentially improving are

Brian Chin

to that down industrial a just we're one little the if – math quarter. by QX surprised level. breakdown the in right, sequential was I question, for sequential end last up Maybe saw did revenue seem I market and automotive I Okay. the

much over does terms little sound of And in you markets like least it a don't up expect the so at interim. surprised, bounce those although

curious is of in more kind and So bit center of that down, that second kind just part about little data of like lumpy a looks it lumpy, QX.

moving what could how of and of into kind us segment kind business, goes the forward? fully on goes that what about remind bucket to you Just that think consolidated

Luis Müller

Yes.

quarter recurring here we could to the I market, a what of think little and automotive as not the through and have a systems, I climb continue remains first prospects the cloud strong really, you business to is so right. highlight have market seen And we're the a particularly we throughout it segment, data the say thing before center, do to sort be are, in automotive and is first the business, Brian, here that the recurring improve to market the bit I the we and first But an did I substantial continue people but quarter. as these will and in in it would in think year. automotive said year about talking AI lumpy, think has nevertheless of uptick now that

Brian Chin

Okay. much. All right. Thanks so

Operator

Thank you.

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

is open. line Your

David Duley

Yes. I'm I a Thanks repeating on late, for I question. sorry, if so signed apologize. taking I'm questions, bit my

give mentioned what rates You utilization overall utilization rates the uptick. you Did point? this are at

Luis Müller

XX% Hi, at IDMs. Yes. We fourth decreased, of market. at to at overall rate increased first decreased actually of and pie proportionately looking And OSATs end it much the of The a went that with that's were it quarter With end point. the Dave. has about quarter. said, the at the mobility has across the down utilization the XX%

David Duley

any an is into signs or to other would guess in to starting come are the going can I second that – of in the coming that you OSATs utilization is that One see I might signs QX about of look then order, there is, to to the the half, you you indications get say is, things And are heard that what recovery? one indicate signs Okay. rates. some in increase better

Luis Müller

in And projects and third up to the that Well for have speed pick in some more mobility. those a I here due in to projects us, are it think becomes bit we specific certain quarter. XG

case that specific than more our it's Duley. So in

David Duley

Okay.

that we if will programs overall third industry and as pick in pick see also the up quarter, an from recovery, those well? So fourth up there's would a

Luis Müller

Yes.

David Duley

Or is there any…?

Luis Müller

that right utilization rate recovery we now, Yes. be today. would very Overall we're have looking welcome. at But industry

IDMs much improvement start corner to think expect to these case, particularly it's think in I the for will have very been well, focused projection as going on in but turn by But realistically, we're the third an ramp I up driven right. just that the the to we programs we that's and picking quarter. qualified towards OSATs, our continue

David Duley

make about initiatives Okay. flat comment talk in your panel there? I or you you're think could the display market don't a for me and testing how is, doing

Luis Müller

So see that quarter that areas the that also third of I market should some one to consumer the towards the we that is pertains activity expect the mobility to say, and market end second into of quarter. the

We products next customers, test for the insertion certain have be to those in and of device forward on we're had qualified our part looking tests. ramp

David Duley

Thank you.

Operator

[Operator from from Ellis Riley Instructions] of comment you. the line next question or FBR. Craig Thank comes B. Our

line open. is Your

Peter Peng

This is my calling Craig strong Peng the for actually for on question. thanks and Congratulations Hi. in taking Peter execution. Ellis

end million or roughly $X per $XX run the be about gap it's quarter $X should like linearity is going is cost about How we rate. from synergy? to rate basis, to million think XQ's On XQ of it the quarterly run it back synergies, of a loaded. million annual kind On more

Jeffrey Jones

year? we're Peter, to are the cost synergies that during you referring achieving the

Peter Peng

Yes. million, the about quarterly how From – should $XX XQ to $XX roughly million quarters we about think million projects? $XX fourth

Luis Müller

Yes. Okay.

a right. estimated about And year. million $X million into QX. So roughly about, that's QX $X.X I $XX in got QX, million million looking million $X year, for at a as then about $X.X to we've million, we're give to roughly think $XX said so that Then baked

million-ish $XX annualized. So

beginning good in really position puts realizing to So a $XX start XXXX. the in us that million full

Peter Peng

the about is that's pickup. And but Great. can can markets end-market Thank doing you guidance, that end-markets, on well? you some of mentioned about automotive I end QX know you. which then involved, seeing you are talk a you your other talk specifically

Jeffrey Jones

Yes.

Peter, – as in see automotive. So do an uptick in said I we small uptick

compute the continue recurring center AI We and on to essentially strong markets, right. cloud data see

see mobility test We expect we the order display units processor handlers for market end of for with of have an the in double-digit April already in an also mobile associated quarter to and the tests. towards flat received a panel uptick

record have for see contactor much So pretty quarter you second performance story actually here, success first millimeter-wave that's the a had as good achieve can quarter. we high and for in the with really contractors applications. And revenue

So and into to over we balance year, contactors. also impedance we applications trend new to millimeter high expect air performance the for gain second that the and applications, also not continue low only for the – quarter of continue the wave, as sockets radar but

Peter Peng

before into Great. And queue. one back you. more hop Thank question I

You mentioned the to XX%. utilization from at the What's rate your customers? buy triggering historical rate capacity

Luis Müller

It XXs is low the buys. capacity usually on you see when

sort of XX%, You are to trending XX%. XX%,

in really a healthy You're state.

some across base. at that, just customers so position driving strength average a across Now that we moment. right, basically pockets weakness. weighted XX% is have have it's customer of all Within And pockets all already you buys. are of capacity and the broad a customers It's not based at

Peter Peng

Okay.

in or you would talk XX% XX-ish Would half at analog push near out? that the on range sales. above play the be and XX-ish foundries that increase that about half to if were bigger the of potentially Some range, the

Jeffrey Jones

an XX% think utilization increase, to I you'd think at a I Board. rate the across XX-ish Honestly, see range looking for be

Peter Peng

Great. Thank you, guys.

Luis Müller

welcome. You're

Operator

questions the queue in time. Instructions] any for this additional no over back to closing remarks. like I'd conference to turn Thank I'm you. the showing at management [Operator

Jeffrey Jones

Thank on Howard, Have and for conference. you, today you the everyone hopefully in thank upcoming evening. you us a an good joining call we'll and see

Operator

concludes Ladies This for in program. and the gentlemen, conference. participating today's you thank

disconnect. day. may have Everyone You now a wonderful

Cohu (COHU) 6 May 192019 Q1 Earnings call transcript