Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to Cohu's Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Jones, conference Chief Senior like speaker to Financial now Jeff today, Vice would hand over the your Officer. I President and ahead. go Please

Jeff Jones

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

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

Now to the safe harbor.

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

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

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

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

Luis Muller

us. and joining Good morning thanks for

second XX.X% at level. our revenue QX is Cohu's at XX% by non-GAAP margin. – target points year-over-year than of model. and gross approximately quarter Cohu's contributed business margin financial increased and resilient basis driven quarter strong, Second XX% business revenue model XXX was gross gross recurring this margin of better recurring profit

profitability annual key year through achieved of Cohu's business recurring three is baseline the X% new a driver and X%, of it growth compound industry rate cycles. Our to

facility business. end As support we're second a the through we At quarter, in our Philippines of supply our expanding quarter, XX% in last infrastructure increase foot the quickly of support that to construction We'll to become flexibility in local XX,XXX ramp new working the also XXXX. approximately communicated interface of the first growth in continue chain production square and half were needs. will customers' operational in of

second first DI-Core the software from received In third performance monitoring Cohu's we a IBM European a of order quarter, for handlers.

We subscription in RF the $X.X products at this at we customer. both early design driven mostly wins contactors a of interface our sales estimate potential business had approximately future in final test. our million probe stages, by several software Although year and cards, and performance products,

contributed business, margin. Switching it of XX% second over to XX% Cohu's approximately gross at revenue quarter systems

Cohu's the we expanding system to in below year. semiconductor with applications, is business historical and this product the Korea. our industrial company win currently there as outsource an As ATE to in this was portfolio segments from leading for XX% quarter case, is market positioning Other a second conditions the QX total. with – be a testing important new This growth the revenue Aligned mid-term. and the customer at winning to European OSAT deliver approach, in manufacturer. levels When continue soften mobility weak it combined focused expected, automotive of market main markets on remain particularly

with have expand platform to This Diamondx of a high Cohu's tests. analog IC value been target working use is we in

high test test. quarter. in Taiwanese and was a group power much for computing, distinct semiconductor those processors. in the including performance customer developing Finally, we another this in a We Then high scaling And wins design – the a segment. their hyper serve own had a handler for Cohu adding broader new with large second a to couple during foundry market, design in customer creates customer at the there broke a for to opportunity device win of an this expansion handler base handler thermal

to All XXXX growth. for in resulting the QX demand second lower thermal reduction at system test originally improving this delaying capacity a affecting product high downturn despite industrial for ending this us orders performance customers segments segments. mobility June, of computing, have revenue XXXX. automotive are market and paused for is down past driven order a of Several by year confidence and weakness But of customers ending give utilization Continue great quarter-over-quarter, guidance. other these the QX, into in the and points into power extended latter all June, planned cell approximately soft XX%. in part conditions recent utilization in handlers half expansion validations Estimated X revenue

a the forecast broaden control in of near Diamondx subscriptions We’ll current order key while to to add our grow is the business increase we’ll sequentially we’re business. to tightly want expenses third the that through strategy However, recurring profitability to grow on continue to use stress and industry our software metrology to executing In projected and industrial portfolio, committed into and again inspection business, term, winning new applications. I that quarter. expanding to is automotive continue cycles. customer emerging recurring customers, to focusing Cohu’s

guidance. presentation on third quarter over turn second Jeff? Let for to details this Jeff quarter results further and me now

Jeff Jones

Thanks, Luis.

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

strong the delivered our is of which $XXX.X higher financial the results. than turning midpoint on million, Cohu slightly to range. profitability revenue guidance Now QX of

products. in each differentiated of and sales. basis During the higher by was the points resilient driven recurring than XX.X%, at two QX for about strong second customers quarter, than more XX% gross accounted market Cohu’s guidance, business margin automotive XX

approximately QX lower $XX.X were for expenses at $X guidance than million Operating million.

XX.X%. pre-tax income EPS revenue, was tax in for of EBITDA projected $X.XX. income quarter than was effective rate second higher annual Second of tax guidance the was The XX%, to non-GAAP jurisdictions. quarter for was rate Non-GAAP QX due concentration approximately non-GAAP higher operating and the adjusted XX.X%

summary, margin adjusted this In exceeding midterm EBITDA of targets were revenue. the and at QX level strong financial gross

we flow second of approximately the net investments from in balance million $XXX sheet. QX strong to million cash $X.X in repayment and the quarter. quarter Moving per was million, to QX share Cash grew end Debt with $X. cash operations at at $XX the totaled of and ended and the

of facility to growth related quarter CapEx Cohu’s our prospects shares repurchased interface support new and million was business. [ph] approximately to million the X.X in Philippines long-term construction QX the in with in $X.X $X totaled million

Cohu’s sheet Total served the $XX position and maintains new building, technology strong CapEx is expand debt with to opportunities strategy. a portfolio markets balance for support our to to XXXX, reduction, expected approximately investment share in growth our And including line overall repurchase the and million. at program remain

moving Now to our QX outlook.

$XXX end recent and We’re across revenue at markets cell utilization test million, our reflecting the to guiding lower QX approximately customers weakness be production facilities.

is which cycles. better our consistent of this provides margin and forecasted level be at stable Cohu’s in industry the adds products target to flow due cash financial recurring high model and than gross QX business, revenue margin through approximately to differentiated part resilience XX% profitability to

as cycle. Operating navigating while control to this over to expenses projected million through are for OpEx trough we approximately continue tight decrease of exercise QX the quarter-over-quarter to $XX

interest offset approximately income We’re $X expense interest projecting by of $X QX be million. to million approximately and

in third is expectation expected QX of be that projected trough QX we're sequentially diluted this is expect by year, order approximately QX the share We the we're And EBITDA grow not that guiding is for current XX%.The passing to is cycle approximately the quarter. non-GAAP count – XX.X and shares. industry approximately forecasted full to adjusted XX%, million the tax forecast rate to while be the

questions. and That open concludes the to call our prepared we'll remarks now

Operator

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

Brian Chin

you hear Hi, there. Can me?

Luis Muller

Yes.

Brian Chin

great. Okay,

got Sorry, what past which descriptive IBM kind there. I XX few morning. guess, guess, the days Good what Thanks – cut for ask questions. [indiscernible] off operating – I sort terms start on give to with levels. in by a like of of mainly what deliveries? and maybe lower can tied sort it's XX in letting to It changed more seems you days, be us were Luis, of of industrial off Maybe or at with driven mainly be, change, auto yield already in sounds towards I the

occur? you to the duration also trend can in what business And sequential be means of of that that be – you're maybe descriptive what order then because seen of the So sort And of to there? revenue expect you about you've counterintuitive terms seeing, guide with pause sort reconcile to kind sort sequential of positive guess seems I this of that the down. that that in kind relative

Luis Muller

see June Okay. ramp next in Well, part about to of on third lot got tend is industrial to the questions same testers remarks button at of generally end again, we us. noticed here in year, – down we of by there, of auto end it They the the to about year, about that that most with there now customers million those utilization pause right at we and was this months. just $XX latter out the to be the they in that, June. to But pushed with predominantly four Concurrently this know, a the that awaiting mean, handlers that's quarter. the sort – the as are of points what we commented about XX%, and, started for some year installed, through the actually restarting came later pushing in of with space, got Brian. handlers. the and of about hit we've orders I the be end beginning several June are that And level basically things saw of a I line and up as you down tune six down prepared and the did here, hundred

as in think, start getting testers installed the these handlers again. is climbing quarter likely I utilization third start that to receiving

believe starts the seeing passing of the us the we're concurrently up forecast So, quarter, trough order that picking also we're an third that cycle. leads which in that to basically

Brian Chin

maybe hone or I business above And the maybe on increase for that, Okay. you're entire in a seeing, if segment. and order the to one know specific a it's again, book-to-bill don't

also that a wireless – these So some about but in maybe been in of are segment markets industrial, you trend soft? have how on this seeing auto basis,

Luis Muller

It's Brian, same have that I here don't in mobility to is quarter. softness in continue that course changing auto see we about. talking necessarily we see the third space the and, been predominantly the

an So industrial the here seems order that perspective. segment – second to and at from softness pushed segment that's that quarter. corner the of a it's the turning end of be the that had same the in auto the orders more out that's the and third And in quarter around

Brian Chin

Okay. Got it. it. Got

think, I expansion, as in cetera, product market I gain, of sight remarks XXXX and the Lastly, prepared of recovery as of about well what line I terms SAM any a confidence et maybe some of comment calendar the are market on growth. of to in maybe that of heard in have share areas? in you guess, initiatives any components the terms

Luis Muller

Yes.

from is orders market given from there that tides actually a – planned of these – about we're that talking in of – for QX the starting a sizable of of above. some year indication coming fairly turn the turn least a in third an So the and standpoint at – couple deliveries the next a already are in

is specific internal the more in the one tester here One we main of half From final in space them have can that are industrial particular of standpoint, three and we second the what the control an we year. innings design game the other in of this on activities is wins – in in the automotive.

to the probably on to to of standpoint. convert year. I for, our equipment timing the devices going platform mean, getting those our but year, expect start tester getting aside system it's early and ramp of We from the we late this align their customers particular really what Diamondx next qualified orders we're that depend that's

Brian Chin

you. thank Great, Okay.

Operator

Our the line from Riley. B. Ellis question Craig next of with comes

Craig Ellis

maybe start Brian's picking ask thanks bit taking differently. on questions, some question. of a little the up Yes, I'll for Luis, but

very equipment at demand low. order commentary is more look on activity, to are How all normalize environment to order been we But Consumer would there scale the some and smartphone activity. positive has that mix improvement? levels the start expect more year? very given see would the is had customers as those was back I normal rates what on surprise, When utilization normal we order And weak year-to-date, to it's been would sales. if So pretty dynamics playing pressure hyper a be for early some moving and business next indicators slow. of this Cohu? is of Compute the out, no think, Mobility

Luis Muller

From said, Craig, to to QX, do necessarily quarter third is we abnormal year. picking normal don't automotive to as a frankly, at turning automotive I I'm going relative up, normalization Mobility, signs we next the think this mean, for improve not the going but quite up I industrial bookings and going right? Well, to already orders start expect on do to levels, improvement. of of I keep QX picking expect in to level I that's a start So, at say are quarter. know. waiting of We levels quarter

XX out that of seen our are put I've hours more the here bit customers couple think a little release last I earnings a XX, in encouraging.

demand fast, that yet haven't forecast. seen We ourselves really that

a Computing, first already XX% as basis, said, higher I on quarter. going So computing that. you my orders QX to to were mean, than I'm sequential forecast hold about

something – but data – segment hyper first just starting shipments, get business we it question in the sorry, but I foremost, I and hard then return computing both the to mobility, expect question think that recovers scaling which in to the this is year. early answer next smaller I a requires year, some know for the at and a to what of half a the normality that late – of honestly, to is first which mark. year, not nevertheless, numbers and but point orders, is at is next side. small quarter think, on mobility down, yet So don't to first pin – little momentum. a magnitude, center But this us, is And return

Craig Ellis

comments margin that meet turning Philippines made on Yes. on that you ability provide and quite ability levels a company's strong upside expansion and already business? live are year, next color more that the means go standpoint what That's that just and helpful, demand to the some standpoint you will And therefore for from then can thank gross to to you. cost mean that what facility's expansion a the in manufacturing from

Luis Muller

That in half give Yes, XX%. your I'll margin to first start interface and the increase Jeff is let to impact. new talk the an gross us output question to about of on facility business on step the opportunity about going by

of $XX about that incremental of opportunity million So revenue it factory. out adds

Jeff Jones

in model. some to to manufacturing so with gross respect have. help the in that moment at That business margin, in volume running we better And fixed gross XX% increase that us the of the roughly leverage costs is XX% the margin

which achievable We and have and here add capacity to XX% those to all them costs. closer XX%, leverage as put together pieces continue we is the

Craig Ellis

since in you dealing into sneak a back That's that Jeff helpful. business, above just order the the I I could gross one back growth visible levels rates. then the is maybe and the at got the if focusing in guys. of revenue also queue, We’ve target just And that before growing going but current was activity. for performing mentioned hoping Luis, more question term margin this target. Luis, that longer we've is on seeds mid-term with you heard

to just the see? So the back the can you that in to targets, you in and order address your getting dynamics the you’re in gross starting billion to confidence guys midterm business see given you. revenues margin $X XX%, up and that getting Thank

Luis Muller

I now. in that’s honestly, hit its mean, you speed cycle, The this pretty where know we been industry in for the some Yes. to confidence we that enough order know, good, as through – and is long bumps are Craig, goes do

cycle. and subsequent business a that another growth recovers, by going it of We’re trough up unheard the that. XX%, year that XX% following not when it’s could followed XX%, XX% of sort And be of of

growing market of pretty a to I and rate. it five first have call doubling rate. we our and are it’s at is their actually at an had them in test of our thermal growing a So from, that years, opportunity customers happen visit handlers. much this industrial space, solid and Asia in part – all and footprint a for be week, with market semiconductor test. double-digit a The position assembly pretty the time industry the to automotive the in It’s in in double-digit of

got and see factories are you saw, opinion the I first of built into second coming half some actually to next that customer And production year. The being the up think pick. of on

AI ramp the And the few is markets happening probably market. capable center the I opportunity industrial of just event and and So we year. come The think data in that for see the foreseeable processors. computing as years ADAS vehicles more and to electric space automotive next AI-driven is

We smaller number long benefit And but over communication that of different ramp. of They’ll market of bit a computing drive chips edge significant than that the for in haul that is a are a automotive little industrial. it’s to a the and dynamic be also business, seeing different, and a in – going us. sort will the

of that the with So particularly put interface market. if solid similarly, at growth you business handler because the is all The market, together our pretty look business ahead. and of automotive solid industrial

applications. working interface At tasks to high the customers we’re the into power earlier business an on penetration Again, earlier penetration mentioned working more sort ATE tasks. pretty our our of to hard the performance industrial I the the are analog These call. more – to these digital that semiconductor towards really leverage of same are hard automotive broaden computing. of We’re time, basically broaden business

beyond. sort XXXX the of and that is second in line of going demand customer’s then to enjoy – sight the some have year the We for be and half business of wins

growth revenue better or than margin that the because model we’re Obviously, gross aspect. moment. at confident on aspect on there the confident fairly I’m really basically So we’re

of delivering in market side, interface and cycle the through industry for side is we’re it way and with which of I on trough the the So see quarter and focusing $X.XX on. that passing looking what ahead the the second we’re the growing EPS tester headwinds is

Craig Ellis

Thanks guys.

Operator

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

Krish Sankar

have for my question. I Thanks Hi. getting of Yes. them. two

just and the you strong. September that said auto mentioned still this your one, your there, specific quarter First then market tied equipment auto what’s to Jeff your is I test is update is customer weakness handler handlers I’m of exposure is pretty you share peers, follow-up? to some a industrial, or an curious, on auto the I can give had for you happening on for auto

Jeff Jones

in me customer for let or It’s industrial auto step to. that, pick on maybe hard So selling to we’re an Krish. handlers you customer not that

So an that’s on if that ago. specific. can’t a picked observation, be one know answer I gave you – But interesting I that up it don’t minute

about waiting have that to are We deliveries a tester on XXX handlers get installed.

some think get of got our these that’s floor. bump of the from We are speed testers, production competitors the hit one I to case this which element tester in here. to it’s not from actually Cohu So

has caused these because get these they can these order of I customers testers. we pause into until the Frankly, take can the one handlers production. delivery elements put handlers of more So think that can’t been that

Krish Sankar

Got it. Got it, helpful. Luis. That’s very

So pretty the auto still right? handler share is market robust,

Luis Muller

robust. solid. it’s It’s Yes, very absolutely

Krish Sankar

year, fair for margins if than then revenue here? or Is like, gross September? the main margins auto the along other And your are still as have equipment variance that’s December look on than the path, that into growing same better takes better Is September. Is you fact the it it orders work just handlers? as gross the are question. to mobility more at and it. Got in that sequentially test simple puts you next if be should And another assume just

Jeff Jones

a ATE That the we yes, more does mix business The improves have bit. have, an influence, Krish?

definitely that benefit. is So a

the expand the margins four our gross well. mix But would nicely growth have definitely before, over talked improves expanded yes, margin overall we’ve handler yes, to business and quarters. six tester with a the in As last quite business, the as

Krish Sankar

order to revenue? on say, just growing too December Is a then or revenues. comfort in on was And book the clarification it September you early gives December

Jeff Jones

revenue, down think that way said versus QX us see sequential into Luis incremental, We But again, it it it not pin to incremental this is orders difficult is substantial had the Well, a QX, for a it it’s but an a as we increase. at point we sequential but think number. that early think down now, in increase translates in we increase increase, would number. to pin a –

Krish Sankar

Jeff, your Thanks, for help. Got it.

Operator

Instructions] Our Charles comes next & with Needham question Shi Company. [Operator from

Charles Shi

into letting question. you today? utilization, QX ask, QX, the the one into visibility current given into your Test Thank trend, Hi. the for what just into say me visibility maybe is – and let’s

Luis Muller

we utilization. Charles, forecast to cell don’t try

And So it a IDMs more But at It’s part It to XXX when mirror that did, understand, we just tester XX%. handlers the a handlers come and is there’s dug that view down both we like quarter I to come close deliveries. measure. said, always it in the down did of recognize did actually we up metric. rear down what a having we in little OSATs. it’s reasons were second bit or for end on XX waiting to sitting, the

a of really are be systems becomes we question actually count of more testers metric. do of get installed delivered. And if utilization the part to as here that those waiting So

climb we utilization. market, test again But those try the to do expect if happening quarter, in else utilization not like in and withstanding quarter. typically to we don’t I I the test third forecast third delivered on would So anything testers get said,

Charles Shi

towards you your a but intensive digital hyperscaler geared little Thank you. probably provide Luis, intensive my are bit with applications, color your to analog win application. testers foundry the it I design more the is hyperscaler, can on assumptions thought a because a

any of you one? kind you. feel Yes. a have but an the [indiscernible] wrong on thoughts provide more bit did said color things market, of Can almost the you I and that any like design have this little So would this of Thank win. – correct been this

Luis Muller

but a actually win, thermal a was you everything design tester the our win, tester very correct, you correct, us. said design goes everything But with And except said handler it’s – really This handler from not a is not that Charles, including Yes, beginning. is handler. a tester. else the

Charles Shi

Thank you.

Operator

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

Jeff Jones

And before conference to attending Jefferies the I’d Global Tech just three in conferences and on New Conference York the September sign Thank Tuesday, the August Tuesday, quarter, Virtual investor in we’ll XX, Citi’s on on third during like Needham off, XX, you. Chicago they Conference be Friday, are August we X. and mention that

if a So your you with or for meet attend conferences, you conference to Have analyst you plan look meeting. one these schedule to nice us. with forward reach like to and day. would Thank contact we speaking more Please out soon. to respective a of or joining today’s call, to

Operator

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

disconnect. You now may

Cohu (COHU) 3 Aug 232023 Q2 Earnings call transcript