NASDAQ:COHU Cohu Q1 2023 Earnings Report $16.81 -0.07 (-0.41%) Closing price 04/28/2025 04:00 PM EasternExtended Trading$16.81 0.00 (0.00%) As of 04:02 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Cohu EPS ResultsActual EPS$0.50Consensus EPS $0.48Beat/MissBeat by +$0.02One Year Ago EPSN/ACohu Revenue ResultsActual Revenue$179.37 millionExpected Revenue$180.70 millionBeat/MissMissed by -$1.33 millionYoY Revenue GrowthN/ACohu Announcement DetailsQuarterQ1 2023Date5/4/2023TimeN/AConference Call DateThursday, May 4, 2023Conference Call Time4:30PM ETUpcoming EarningsCohu's Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cohu Q1 2023 Earnings Call TranscriptProvided by QuartrMay 4, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to today's conference call to discuss Cohu's First Quarter Financial Results and Second Quarter Outlook. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host today, Jeff Jones, CFO. Operator00:00:37Please go ahead. Speaker 100:00:39Good afternoon, and welcome to our conference call to discuss Cohu's Q1 2023 results and Q2 2023 outlook. I'm joined today by our President and CEO, Luis Muller. If you need a copy of our earnings release, you may access it from our website at cohu. Now to the Safe Harbor. During today's call, we will make forward looking statements reflecting management's current expectations concerning Cohu's future business. Speaker 100:01:21These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes. We encourage you to review the forward looking statements section of the slide presentation and earnings release as well as Cohu's filings with the SEC, Including the most recently filed Form 10 ks and Form 10 Q. Our comments speak only as of today, May 4, 2023 and Cohu assumes no obligation to update these statements for developments occurring after this call. Finally, during this call, we will discuss certain non GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations Now I'd like to turn the call over to Luis Mueller, Cohu's President and CEO. Speaker 100:02:11Luis? Speaker 200:02:12Good afternoon and thanks for joining us. I'll first discuss some of our thoughts on growing Cohu's business, aligning investments to key global trends. Jeff will then review Q1 financial results and Q2 guidance before we open up for questions at the end. Speaker 300:02:29We are Speaker 200:02:30pleased with 1st quarter profitability that reflects our focus on continuing improvements in operational performance In the recurring business that delivered $334,000,000 revenue over the last 12 months, Cohu's recurring business provides stable revenue through industry cycles, allowing the company to deliver profitable results and cash flow to invest in new technologies and products to generate growth during market upturns. 1st quarter non GAAP gross margin of 48.2 percent increased 2 10 basis points year over year and it's better than our target financial model at this revenue level. Cohu's recurring business contributed 43% of 1st quarter revenue at approximately 53% gross margin and recurring revenue grew at a 3 year CAGR of 6.4% through Q1 2023. Service is a key component of Cohu's recurring, Creating a sticky business as demonstrated by our greater than 87% annual renewal rate on service contracts. Also part of recurring, Cohu's test interface business has landed a series of new opportunities in the Q1, Helping expand our contactor penetration across automotive and industrial semiconductor customers. Speaker 200:03:52We manufactured Approximately 81% of our contactors in Asia in the Q1 as we continue to transfer new designs into our Philippines factory and work to establish the local With this, we closed on the target to produce approximately 80% of contractors in Asia. And going forward, We're planning for long term growth of the Interface business and in support of those plans, we broke ground in January On the construction of a new 92,000 square foot facility in the Philippines adjacent to our current factory, The plan is to start production at this new site early next year and be fully operational by mid-twenty 24. We also continue working to expand the local supply chain to increase flexibility and quickly ramp production in support of customers' needs. Also part of recurring, our software business is developing additional analytic capabilities for predictive maintenance. We see a trend across many semiconductor customers to implement factory automation in our DI core software is Key to enabling higher productivity of Cohu's large installed base of handlers. Speaker 200:05:02Switching over to Cohu's systems business, It contributed 57% of 1st quarter revenue at approximately 45% gross margin, which 250 basis points improvement year over year as we continue to focus on selling differentiated products and work to offset cost pressures from inflation and supply chain constraints. Now Estimated test cell utilization was 77% at the end of Q1, down 2 points quarter over quarter. Commonly on this utilization across market segments. Automotive and Industrial was sequentially down a couple of points in Q1, but remained the strongest segments. Mobility increased a point, computing was up 2 points sequentially and consumer remained flat. Speaker 200:05:531st quarter systems revenue was notably stronger in automotive and industrial end markets that remain more resilient through this industry cycle. And Cohu continues to benefit from automotive market direction to electric drivetrains along with a technology shift to more autonomous vehicles. We are aligning our tester, handler and interface product investments to gain greater participation of our customers' future Capital expenditures in these markets. In the Q1, we received a multi unit $5,000,000 order for silicon carbide device test automation and Thank you. Cohu offers automation, test interface and vision inspection for these high powered devices, Ensuring non good die traceability from wafer to device in tape, supporting later integration in power modules. Speaker 200:06:44We are discussing applicability of this product, the NY32W with our Seagate interface As we continue to make inroads into new applications and also benefited from 2 months revenue from the recently acquired MCT business. Core to our strategy is the development of products that support test and inspection at wafer and die level that we expect to accelerate in the coming years In align to the expansion of AI and high performance computing as well as increasing MEMS sensor technology. Moving on, Cohu is committed to responsible business practices and we recently published our 2022 sustainability report, which you can read in detail in our website at www.cohu.com. We made progress on use of electricity derived from renewable sources that Increased to 26% last year. The increase in recycling, maintain our stellar safety and ethics record And continued progress on employee gender and ethnic diversity, along with details about scope 1 and 2 greenhouse gas emissions. Speaker 200:08:02Now discussing our view for the balance of this year. We expect demand for the second half of twenty twenty three to remain challenged by a weak economic outlook That continues to put pressure on a semiconductor market recovery. Despite these macroeconomic headwinds, We remain well positioned to deliver strong profitability and cash flows that allow for investments in new technologies and products. We're focused on aligning our resources to major trends in industrial automation, autonomous vehicles, increased processing and sensing power. The focus now is in growing the business and ensuring our product roadmaps are aligned to these secular growth market opportunities. Speaker 200:08:45Let me now turn this presentation over to Jeff for further details on Q1 results and Q2 2023 guidance. Jeff? Speaker 100:08:55Thanks, Luis. Before I walk through the Q1 results and Q2 guidance, please note that my Comments that follow, I'll refer to non GAAP figures. Information about the non GAAP financial measures, including the GAAP Non GAAP reconciliations and other disclosures are included in the accompanying earnings release and investor presentation, which are located on the Investor page of our website. Now turning to the Q1 financial results. Cohu delivered strong profitability on revenue of $179,400,000 which is in line with the midpoint of our guidance range. Speaker 100:09:30During the Q1, 2 customers in the automotive market each accounted for more than 10% of sales. Q1 gross margin was strong at 48.2%, about 70 basis points higher than guidance driven by Cohu's resilient recurring business and differentiated products. Headwinds from cost increases for IC components used on our tester products had a minor impact on our Q1 gross margin of As we work through the remaining inventory purchased in prior quarters at higher than normal costs. Operating expenses for Q1 were in line with guidance $52,300,000 1st quarter non GAAP operating income was 19.1% of revenue and adjusted EBITDA was 21.1 percent. The non GAAP effective tax rate for Q1 was approximately 23% And higher than guidance due to projected concentration of annual pre tax income in higher tax rate jurisdictions. Speaker 100:10:37Non GAAP EPS for the Q1 was $0.56 In summary, Q1 gross margin and adjusted EBITDA were strong Exceeding the midterm financial targets at this level of revenue. Moving to the balance sheet. Cash and investments ended Q1 at $324,000,000 Debt repayment totaled $35,300,000 and we ended Q1 with a net Cash position of approximately $280,000,000 Cohu shares repurchased in Q1 totaled 3,500,000 The MCT acquisition for $27,000,000 in cash closed on January 30. CapEx in Q1 was $5,100,000 with approximately $2,000,000 related to construction of the new Philippines facility mentioned by Luis to support long term growth prospects in our Interface business. The Philippines building will drive another $7,000,000 of CapEx through the remainder of 2023. Speaker 100:11:38Total CapEx for 2023 including the new building is expected to remain at approximately 20,000,000 And cash flow from operations in Q1 was $17,000,000 Overall Cohu's balance sheet Maintains a strong position to support debt reduction, the share repurchase program and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy. Now moving to our Q2 outlook. We're guiding Q2 revenue to be between $161,000,000 173,000,000 Q2 gross margin is forecasted to be approximately 47% better than the financial target model at this level of revenue. With a 3 year compound annual growth rate of 6.4%, Cohu's high margin and stable recurring business As resilience to profitability and provides consistent cash flows through the industry cycles. Operating expenses for Q2 are projected to be approximately $52,000,000 essentially flat quarter over quarter. Speaker 100:12:49We're projecting Q2 interest expense to be approximately $1,000,000 and offset by interest income of approximately $2,000,000 We expect Q2 adjusted EBITDA at the midpoint of guidance to be approximately 18%. The Q2 forecasted non GAAP Tax rate is approximately 24% at the midpoint of guidance. The diluted share count for Q2 is expected to Operator00:13:31and wait for your name to be announced. Our first question comes from the line of Craig Ellis with B. Riley Securities. Speaker 400:13:53Craig Ellis. I was wondering if you could provide any additional color on the back half of the year and Specifically, as we're looking toward the September quarter, do you see sales coming down on seasonality or growing on a lower base? Thank you. Speaker 200:14:09Hi. It's a good question, but I don't think anything has changed in our view Since what we described about a quarter ago, so there's really no change for the second half of the year. It's still the same perspective we talked about 3 months ago. Speaker 400:14:28Okay. Thanks for that. Operator00:14:37Our next question comes from the line of David Duley with Steelhead Securities. Speaker 500:14:44Hello. Thanks for taking my question. I was wondering if you could elaborate a little bit more on this Silicon carbide opportunity that you talked or a win that you talked about. And I think you talked about a win on the previous conference call as well. Is This is a new customer or is it more business with the current customer? Speaker 200:15:06Hi, Dave. It is more with the current that we have described the quarter ago. Quarter ago, we talked about the design win, the qualification Might have been also the acceptance of the first couple of tools and now it's more of the description of An initial volume ramp on the business. Speaker 500:15:30Okay. And I think you mentioned it's inspection and handling and you're Basically trying to figure out which are the known could die. Is this an opportunity where You could expand your footprint of equipment to this customer with other solutions or would the opportunity here be to take this Solutions you sold to the initial customer to other customers? Speaker 200:16:03Yes, it's more of the latter. Dave, What we're selling here is a piece of equipment and does the electrical test. I mean, the auto I'm sorry, it does the automation for the electrical It provides the interface as well, the contactor for very high voltage and current test. And it does then the die inspection and sorting through so that you have non good dies on the output side. So we're pretty much providing all we can provide for this types of And the opportunity forward is taking the same to other customers in the market that do silicon carbide and looking to Improve the quality of their known good dies before doing the stacking into modules. Speaker 500:16:55Okay. And then switching topics, you mentioned how you're expanding capacity for test contactors In the Philippines, could you just elaborate a little bit more on where you've seen recent wins in that business? I think initially you had a lot of automotive wins. I'm just curious if you picked up customers in other markets or is it continued to be In that initial market and what's your success rate as far as attach rate goes at this point? Speaker 200:17:28Yes. So a couple of things going on. First of all, the automotive market continues to grow. Our automotive revenue is up year over year. I don't have it handy here specifically automotive for contractors, but Our automotive business at large is up like 43% year over year in Q1. Speaker 200:17:52And with that, we're obviously manufacturing more and more contractors in automotive where we get the greatest exposure. Additionally, we have we actually have won a series of probe head opportunities in the Q1, design wins for probe heads. 2 of those are in automotive and a third one is, it's actually not, it's in the it's more in the communications Segment of the market. So we're basically now at a point that we need more manufacturing capacity. We need more space, we need more tools, we need more suppliers. Speaker 200:18:31And so we're Pushing to increase the output out of our Philippines operation, but also pushing to increase the output and capability of our suppliers in the region. That's what we need to go after now, so we can enable further wins and business ramps. Speaker 500:18:53Could you just remind us, I don't see the number in these slides, how big was the contractor business in Calendar 2022 and you've talked about how it's had a CAGR of about 6%. Even though this is a super difficult year, do you think That business grows for you in 2023? Speaker 100:19:14Hey, Dave. Last year that business Was about $130,000,000 for Cohu. And yes, we do anticipate that it Rose, this year and the target is ultimately to be 20% of the revenue target of 1,000,000,000 So up to $200,000,000 And so we anticipate that that business will still grow sort of So high single digit growth rate. And just as a follow on, Speaker 500:19:48I'm sorry, Does the capacity you're putting in place in the Philippines now, the new building and everything, does it cover does it get you to this $200,000,000 annual run rate? Speaker 200:19:58Yes. Between the internal capacity and the supply chain that we're trying to develop in the region, yes, it does. Speaker 300:20:06Thank you. Operator00:20:12Our next question comes from the line of Christian Schwab with Craig Hallum. Speaker 400:20:19Hey guys, this is Tyler on behalf of Christian. Thanks for letting us ask a couple of questions. So first, I guess, maybe gross margins Above model right now and I guess as we look into the back half of the year, I was wondering recurring revenue By definition, should kind of remain at these strong levels. And if the second half is the same view as before, we should see some directional improvement, although maybe modest. Should we expect gross margin should trend down a little bit from the 47% we guided in Q2 or how should I think about them in the back half? Speaker 100:20:54Yes. Hey, Tyler, it's Jeff. I think the Street's got us in a pretty good spot For not only the revenue piece of it in the back half, but also gross margin, somewhere in the high 46 To low 47 sites, call it maybe an average of 47. We're pretty comfortable in that range. Speaker 400:21:19All right. That's perfect. And then I guess second question, you talked about automotive and industrial strength continuing, but In the quarter, if I heard you right, your test utilization in auto and industrial was down a little bit, while the rest of the markets were up a little bit. Any color or comment there? Is that just Quarter to quarter fluctuations or anything to call out? Speaker 200:21:42Yes, it was not Tyler, it was not specific to automotive or industrial. We said the test cell utilization was down to 77%. We said auto and industrial combined was down a couple of points. But as you can see, even in our revenue profile, right, the Q1 revenue profile in industrial It's down 3 points relative to Q4 last year. Automotive is about the same. Speaker 200:22:08It's up a point. But I don't I think it's normal fluctuation at this moment. What we're liking more is to see computing, Computing being up a couple of points, mobility up a point, that it's not an indicative Of a market upturn on those segments, it's more of an indicative of stability, right? And hopefully here, A bit of an improvement as we get into the second half. Speaker 400:22:38Got it. That's perfect clarification. I appreciate that. That's all for us. Thanks guys. Operator00:22:45Our next question comes from Krish Sankar with Cowen. Speaker 600:22:51Hi, this is Bob Mertens on for Krish. Thanks for taking my questions. Maybe just coming back to automotive exposure that you have, If Speaker 100:23:00you could give just Speaker 600:23:01a little bit more color between the handler side and test products, how those are playing out in the market? And then also maybe if you just had a gauge on who some of the main competitors are or any sort of market share dynamics that are at play Within that business? Speaker 200:23:21Sure. We don't have exact numbers to break it down for you by Product, I can tell you, we do have, as you can see from the data set here, the highest Market exposure we have in our presentation for the Q1 results is in automotive. We have 22% Of market exposure into automotive. If you go down by products, I'm just going to tell you qualitatively, Our handlers are mostly our handlers and our contactors are exposed to automotive. We actually have a Significant leadership position in both handlers and contactors. Speaker 200:24:04On the tester side, it hovers now to between 25%, 30% To our tester business in automotive and industrial, we're working on it. But at this moment, we're further behind Atteradyne and Advantest in ATE Automotive market. Speaker 600:24:36Great. Thank you. That's helpful. And then just real quick, how are the current lead times, how they've Progress throughout the quarter. I think last quarter you had mentioned maybe handlers for around 24 weeks, testers maybe 12, half that. Speaker 600:24:54Is that sort of the same or as the lead times been brought in this quarter? Speaker 200:25:00No, lead times are Generally the same. Handlers are maybe a couple of weeks shorter, 2 weeks shorter than shorter lead times than we were a quarter ago. So we're talking On the order of about 22 weeks for handlers, but testers, contactors, all about the same. Well, we got a little faster in contactors as well. That improved. Speaker 200:25:21It's sort of the band narrowed down closer to a 6 weeks lead time. But no dramatic change quarter on quarter on the lead time. Speaker 600:25:32Great. Thank you. That's all I had. Operator00:25:43Our next question comes from the line of Quinn Bolton with Needham. Speaker 700:25:49Hey, guys. This is Trevor on for Quinn. Thanks for letting me ask some questions. So to start, When looking at the backlog for the second half, has there been any shifts or cancellations of that backlog within the quarter? And can you speak about your visibility into the second half? Speaker 700:26:08Thanks. Speaker 100:26:11Yes. To answer the first part of that, No, no cancellations, shifts in the backlog. Typically, our visibility out 6 months and further is It's not clear and it's the same situation now. So good visibility obviously into Q2 and decent to Q3, but beyond that, it's still foggy. Speaker 200:26:38Yes, it's no different than it was 1 quarter ago through July, and now maybe current Through September, same kind of view. We have a pretty decent backlog into Q3 already And orders booking now for Q3 shipments, like Jeff said, anything beyond that, it did obviously much less of a backlog so far into Q4 of the year. So that's going to become more of a reality as we approach the end of this quarter beginning of next quarter. Speaker 700:27:13All right. Thank you. And I believe you stated that mobility and PC was up in the quarter. Do you expect this trend to continue into the second half? And any insight on these inventory levels would be helpful. Speaker 200:27:29Yes, it's a fantastic question. I don't think necessarily a big improvement in mobility over the next quarter. I would expect Mobility to have more of a traction more traction, more market traction towards the end of the year. Computing, yes, I do think computing is going to be more of on a positive trend, particularly cloud on the second half of this year. Speaker 700:28:00Awesome. Good to hear. And one more, if I may. Are you having More conversations recently with silicon carbide customers than you may have expected 2 quarters ago when you first mentioned this opportunity. And are you able to quantify as a percentage of revenue what silicon carbide could be in 2023? Speaker 200:28:24Yes, to the first question and certainly yes on the second as well. But when we talk about silicon carbide revenue, we think this is Going to be something on the order of 2%, 3% of our total revenue on an annual basis. Speaker 700:28:41Awesome. Thanks guys. Operator00:28:511, 1. Our next question comes from Brian Chin with Stifel. Speaker 300:29:00Hi, there. Thanks for letting us ask a question. Maybe, Luis, just to provide a little bit more contouring, I know there's been some questions here about sort of sustainability or visibility into the second half. I know the pattern typically in a steady state here might be something like higher revenues toward the mid part of the year 2Q, 3Q and then usually seasonally softer sort of at the beginning and end of the year, something like that. In terms of as you try to read your order book and sort of other indications on the end markets, Particularly for Q4, are you what's sort of the main ingredient here? Speaker 300:29:43Is it sustainability Of auto and industrial, because I know you had earlier last call talked about moderation at parts of this year and that or is it Maybe looking to see if there'll be some pickup in businesses that have been pretty depressed, right, coming into the year, which includes mobility, consumer. Kind of how else would you maybe sort of characterize how you're thinking about second half? Speaker 200:30:09So Brian, I would feel a lot more comfortable talking about Q4 to quarter from now as you can appreciate because we just based on our equipment lead time, right, We have very good visibility at quarter out, fairly decent 2 quarters out and then it drops off from there. But my best guess right now is that the end of the year Would be running about flat to potentially up sequentially from Q3. And why do I say that? I think the automotive and industrial already moderated. At what point computing and mobility starts recovering? Speaker 200:30:53As I mentioned a second ago, I think computing, particularly cloud, Comes in first. Mobility becomes the real big question. Mobility is extremely depressed right now. It's sort of at the bottom of the barrel, But that is generally an indicative that a quarter or 2 from now it will be picking up some steam. Now does that mean Q4? Speaker 200:31:17Does that mean Q1 next year? That's a little difficult to answer right now. I would appreciate 1 more quarter to have More clarity on the answer to that. So I think this year we may not see your typical seasonal pattern. It may be one of those atypical years again in where, like I said, we usually see or you said, usually we see Q4 4 in Q1 is a seasonally low. Speaker 200:31:45On this cycle, we're probably going to see one of those two quarters as a seasonally high And then going up from there, which one of them exactly, I don't know at the moment. Okay. Speaker 300:31:57No, it's interesting. This could be wrong, you can correct me. But in the past, I sometimes thought of ATE sometimes leading Test handlers by say a quarter or maybe a little bit more. And obviously one of your peers is seeing pretty Strong auto industrial AT business into their Q3 of this year at least. And so do you think that relationship is playing a part in this a little bit? Speaker 200:32:23Yes. Yes, I think it's yes, absolutely, it is. And that's playing a part into all of that we're doing right now, Being able to run a business that's very healthily profitable and delivering the cash We need to invest on new products. The question becomes is, some of these markets that are pretty depressed, when will they start turning up, right? And I think we're going to start seeing movement in the second half of the year. Speaker 200:32:52The question is what's the magnitude of it. So we could very well exit the year accelerating It's question mark. Revenue or orders, right? Speaker 300:33:03Yes. Okay. And maybe one last question sort of Thank you for both Jeff and you, Luis. But going back to sort of the statements on expanding capacity, strategic expansion capacity in the Philippines, I guess, one, you made good gross margin improvements in that business. I think it's probably towards the mid to upper 40s at this point. Speaker 300:33:28How should that continue to trend as you start to that's Next year at some point, but as you start to build that footprint and then eventually produce out of it, how should gross margins in that segment trend? And also Yes, going back to the comments you made about some wins that you're seeing in that business. Is that sort of early indications of the type of filling that you'll be able to do out of that facility, once it's ready? Speaker 100:33:59So I guess I'll take the first part of it on the gross margin and you're right that business is operating right around mid-40s And we've modeled them to be in the high 40s. And so adding another 200, 300 basis points from where they currently are today, we think we can do that Through, I mean, obviously expanding the operation and increasing productivity and cost efficiencies. Speaker 200:34:26And to the second part of your question, right. What I mentioned earlier, I think it was Dave's question, Is the design wins that we had in Q1 in that business, they were actually all probe heads. And at this moment, probe heads are not something we're doing in the Philippines. So we're transferring all of our contact The bulk of our contact are manufacturing to the Philippines. In fact, we already did. Speaker 200:34:57We're over 80% manufacturing there now. These probe heads are essentially products that are designed and still manufactured in the U. S. Or in Europe, depending if it's a power application or more of a high signal speed or RF application. We will need to find A path to get those to the Philippines as well, but that's not where we are. Speaker 200:35:23So the design wins at the moment are U. S.-European based product manufacturing. Speaker 300:35:31Okay, great. Thank you. Operator00:35:37That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks. Speaker 100:35:43Thank you, Liz. And before we sign off, I'd like to mention I will be attending a number of investor conferences in person during the Q2. I'm going to list them here. It's B. Riley Conference in Los Angeles on Thursday, May 25 TD Cowen Conference in New York City on Wednesday, May 31 Stifel Conference in Boston on Tuesday, June 6 Baird Conference in New York City on Tuesday, June 8 And the CEO Summit in San Francisco on Wednesday, July 12. Speaker 100:36:17So if you plan to attend 1 or more of these conferences, we'd I'd like to meet with you, and so please reach out to your respective analyst or conference contact to schedule a meeting. Again, thank you for joining today's call and look forward to speaking with you soon. Operator00:36:38This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCohu Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Cohu Earnings HeadlinesB. Riley Estimates Cohu's Q2 Earnings (NASDAQ:COHU)April 25, 2025 | americanbankingnews.comEquities Analysts Offer Predictions for Cohu Q2 EarningsApril 24, 2025 | americanbankingnews.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 29, 2025 | Porter & Company (Ad)Cohu price target lowered to $23 from $30 at B. RileyApril 22, 2025 | markets.businessinsider.comJefferies Sticks to Its Buy Rating for Hasbro (HAS)April 18, 2025 | markets.businessinsider.comCohu To Announce First Quarter 2025 Results on May 1April 17, 2025 | gurufocus.comSee More Cohu Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cohu? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cohu and other key companies, straight to your email. Email Address About CohuCohu (NASDAQ:COHU), through its subsidiaries, provides semiconductor test equipment and services in China, the United States, Taiwan, Malaysia, the Philippines, and internationally. The company supplies semiconductor test and inspection handlers, micro-electromechanical system (MEMS) test modules, test contactors, thermal sub-systems, and semiconductor automated test equipment for semiconductor manufacturers and test subcontractors. It also provides semiconductor automated test equipment for wafer level and device package testing; various test handlers, including pick-and-place, turret, gravity, strip, and MEMS and thermal sub-systems; interface products comprising test contactors, and probe heads and pins; spares and kits; various parts and labor warranties on test and handling systems, and instruments; and training on the maintenance and operation of its systems, as well as application, data management software, and consulting services on its products. In addition, the company offers data analytics product that includes DI-Core, a software suite used to optimize Cohu equipment performance, which provides real-time online performance monitoring and process control. It markets its products through direct sales force and independent sales representatives. The company was formerly known as Cohu Electronics, Inc. and changed its name to Cohu, Inc. in 1972. The company was incorporated in 1947 and is headquartered in Poway, California.View Cohu ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings QUALCOMM (4/30/2025)Automatic Data Processing (4/30/2025)Microsoft (4/30/2025)Meta Platforms (4/30/2025)KLA (4/30/2025)Equinix (4/30/2025)Lloyds Banking Group (4/30/2025)Itaú Unibanco (4/30/2025)Banco Santander (4/30/2025)Equinor ASA (4/30/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 8 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to today's conference call to discuss Cohu's First Quarter Financial Results and Second Quarter Outlook. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host today, Jeff Jones, CFO. Operator00:00:37Please go ahead. Speaker 100:00:39Good afternoon, and welcome to our conference call to discuss Cohu's Q1 2023 results and Q2 2023 outlook. I'm joined today by our President and CEO, Luis Muller. If you need a copy of our earnings release, you may access it from our website at cohu. Now to the Safe Harbor. During today's call, we will make forward looking statements reflecting management's current expectations concerning Cohu's future business. Speaker 100:01:21These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes. We encourage you to review the forward looking statements section of the slide presentation and earnings release as well as Cohu's filings with the SEC, Including the most recently filed Form 10 ks and Form 10 Q. Our comments speak only as of today, May 4, 2023 and Cohu assumes no obligation to update these statements for developments occurring after this call. Finally, during this call, we will discuss certain non GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations Now I'd like to turn the call over to Luis Mueller, Cohu's President and CEO. Speaker 100:02:11Luis? Speaker 200:02:12Good afternoon and thanks for joining us. I'll first discuss some of our thoughts on growing Cohu's business, aligning investments to key global trends. Jeff will then review Q1 financial results and Q2 guidance before we open up for questions at the end. Speaker 300:02:29We are Speaker 200:02:30pleased with 1st quarter profitability that reflects our focus on continuing improvements in operational performance In the recurring business that delivered $334,000,000 revenue over the last 12 months, Cohu's recurring business provides stable revenue through industry cycles, allowing the company to deliver profitable results and cash flow to invest in new technologies and products to generate growth during market upturns. 1st quarter non GAAP gross margin of 48.2 percent increased 2 10 basis points year over year and it's better than our target financial model at this revenue level. Cohu's recurring business contributed 43% of 1st quarter revenue at approximately 53% gross margin and recurring revenue grew at a 3 year CAGR of 6.4% through Q1 2023. Service is a key component of Cohu's recurring, Creating a sticky business as demonstrated by our greater than 87% annual renewal rate on service contracts. Also part of recurring, Cohu's test interface business has landed a series of new opportunities in the Q1, Helping expand our contactor penetration across automotive and industrial semiconductor customers. Speaker 200:03:52We manufactured Approximately 81% of our contactors in Asia in the Q1 as we continue to transfer new designs into our Philippines factory and work to establish the local With this, we closed on the target to produce approximately 80% of contractors in Asia. And going forward, We're planning for long term growth of the Interface business and in support of those plans, we broke ground in January On the construction of a new 92,000 square foot facility in the Philippines adjacent to our current factory, The plan is to start production at this new site early next year and be fully operational by mid-twenty 24. We also continue working to expand the local supply chain to increase flexibility and quickly ramp production in support of customers' needs. Also part of recurring, our software business is developing additional analytic capabilities for predictive maintenance. We see a trend across many semiconductor customers to implement factory automation in our DI core software is Key to enabling higher productivity of Cohu's large installed base of handlers. Speaker 200:05:02Switching over to Cohu's systems business, It contributed 57% of 1st quarter revenue at approximately 45% gross margin, which 250 basis points improvement year over year as we continue to focus on selling differentiated products and work to offset cost pressures from inflation and supply chain constraints. Now Estimated test cell utilization was 77% at the end of Q1, down 2 points quarter over quarter. Commonly on this utilization across market segments. Automotive and Industrial was sequentially down a couple of points in Q1, but remained the strongest segments. Mobility increased a point, computing was up 2 points sequentially and consumer remained flat. Speaker 200:05:531st quarter systems revenue was notably stronger in automotive and industrial end markets that remain more resilient through this industry cycle. And Cohu continues to benefit from automotive market direction to electric drivetrains along with a technology shift to more autonomous vehicles. We are aligning our tester, handler and interface product investments to gain greater participation of our customers' future Capital expenditures in these markets. In the Q1, we received a multi unit $5,000,000 order for silicon carbide device test automation and Thank you. Cohu offers automation, test interface and vision inspection for these high powered devices, Ensuring non good die traceability from wafer to device in tape, supporting later integration in power modules. Speaker 200:06:44We are discussing applicability of this product, the NY32W with our Seagate interface As we continue to make inroads into new applications and also benefited from 2 months revenue from the recently acquired MCT business. Core to our strategy is the development of products that support test and inspection at wafer and die level that we expect to accelerate in the coming years In align to the expansion of AI and high performance computing as well as increasing MEMS sensor technology. Moving on, Cohu is committed to responsible business practices and we recently published our 2022 sustainability report, which you can read in detail in our website at www.cohu.com. We made progress on use of electricity derived from renewable sources that Increased to 26% last year. The increase in recycling, maintain our stellar safety and ethics record And continued progress on employee gender and ethnic diversity, along with details about scope 1 and 2 greenhouse gas emissions. Speaker 200:08:02Now discussing our view for the balance of this year. We expect demand for the second half of twenty twenty three to remain challenged by a weak economic outlook That continues to put pressure on a semiconductor market recovery. Despite these macroeconomic headwinds, We remain well positioned to deliver strong profitability and cash flows that allow for investments in new technologies and products. We're focused on aligning our resources to major trends in industrial automation, autonomous vehicles, increased processing and sensing power. The focus now is in growing the business and ensuring our product roadmaps are aligned to these secular growth market opportunities. Speaker 200:08:45Let me now turn this presentation over to Jeff for further details on Q1 results and Q2 2023 guidance. Jeff? Speaker 100:08:55Thanks, Luis. Before I walk through the Q1 results and Q2 guidance, please note that my Comments that follow, I'll refer to non GAAP figures. Information about the non GAAP financial measures, including the GAAP Non GAAP reconciliations and other disclosures are included in the accompanying earnings release and investor presentation, which are located on the Investor page of our website. Now turning to the Q1 financial results. Cohu delivered strong profitability on revenue of $179,400,000 which is in line with the midpoint of our guidance range. Speaker 100:09:30During the Q1, 2 customers in the automotive market each accounted for more than 10% of sales. Q1 gross margin was strong at 48.2%, about 70 basis points higher than guidance driven by Cohu's resilient recurring business and differentiated products. Headwinds from cost increases for IC components used on our tester products had a minor impact on our Q1 gross margin of As we work through the remaining inventory purchased in prior quarters at higher than normal costs. Operating expenses for Q1 were in line with guidance $52,300,000 1st quarter non GAAP operating income was 19.1% of revenue and adjusted EBITDA was 21.1 percent. The non GAAP effective tax rate for Q1 was approximately 23% And higher than guidance due to projected concentration of annual pre tax income in higher tax rate jurisdictions. Speaker 100:10:37Non GAAP EPS for the Q1 was $0.56 In summary, Q1 gross margin and adjusted EBITDA were strong Exceeding the midterm financial targets at this level of revenue. Moving to the balance sheet. Cash and investments ended Q1 at $324,000,000 Debt repayment totaled $35,300,000 and we ended Q1 with a net Cash position of approximately $280,000,000 Cohu shares repurchased in Q1 totaled 3,500,000 The MCT acquisition for $27,000,000 in cash closed on January 30. CapEx in Q1 was $5,100,000 with approximately $2,000,000 related to construction of the new Philippines facility mentioned by Luis to support long term growth prospects in our Interface business. The Philippines building will drive another $7,000,000 of CapEx through the remainder of 2023. Speaker 100:11:38Total CapEx for 2023 including the new building is expected to remain at approximately 20,000,000 And cash flow from operations in Q1 was $17,000,000 Overall Cohu's balance sheet Maintains a strong position to support debt reduction, the share repurchase program and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy. Now moving to our Q2 outlook. We're guiding Q2 revenue to be between $161,000,000 173,000,000 Q2 gross margin is forecasted to be approximately 47% better than the financial target model at this level of revenue. With a 3 year compound annual growth rate of 6.4%, Cohu's high margin and stable recurring business As resilience to profitability and provides consistent cash flows through the industry cycles. Operating expenses for Q2 are projected to be approximately $52,000,000 essentially flat quarter over quarter. Speaker 100:12:49We're projecting Q2 interest expense to be approximately $1,000,000 and offset by interest income of approximately $2,000,000 We expect Q2 adjusted EBITDA at the midpoint of guidance to be approximately 18%. The Q2 forecasted non GAAP Tax rate is approximately 24% at the midpoint of guidance. The diluted share count for Q2 is expected to Operator00:13:31and wait for your name to be announced. Our first question comes from the line of Craig Ellis with B. Riley Securities. Speaker 400:13:53Craig Ellis. I was wondering if you could provide any additional color on the back half of the year and Specifically, as we're looking toward the September quarter, do you see sales coming down on seasonality or growing on a lower base? Thank you. Speaker 200:14:09Hi. It's a good question, but I don't think anything has changed in our view Since what we described about a quarter ago, so there's really no change for the second half of the year. It's still the same perspective we talked about 3 months ago. Speaker 400:14:28Okay. Thanks for that. Operator00:14:37Our next question comes from the line of David Duley with Steelhead Securities. Speaker 500:14:44Hello. Thanks for taking my question. I was wondering if you could elaborate a little bit more on this Silicon carbide opportunity that you talked or a win that you talked about. And I think you talked about a win on the previous conference call as well. Is This is a new customer or is it more business with the current customer? Speaker 200:15:06Hi, Dave. It is more with the current that we have described the quarter ago. Quarter ago, we talked about the design win, the qualification Might have been also the acceptance of the first couple of tools and now it's more of the description of An initial volume ramp on the business. Speaker 500:15:30Okay. And I think you mentioned it's inspection and handling and you're Basically trying to figure out which are the known could die. Is this an opportunity where You could expand your footprint of equipment to this customer with other solutions or would the opportunity here be to take this Solutions you sold to the initial customer to other customers? Speaker 200:16:03Yes, it's more of the latter. Dave, What we're selling here is a piece of equipment and does the electrical test. I mean, the auto I'm sorry, it does the automation for the electrical It provides the interface as well, the contactor for very high voltage and current test. And it does then the die inspection and sorting through so that you have non good dies on the output side. So we're pretty much providing all we can provide for this types of And the opportunity forward is taking the same to other customers in the market that do silicon carbide and looking to Improve the quality of their known good dies before doing the stacking into modules. Speaker 500:16:55Okay. And then switching topics, you mentioned how you're expanding capacity for test contactors In the Philippines, could you just elaborate a little bit more on where you've seen recent wins in that business? I think initially you had a lot of automotive wins. I'm just curious if you picked up customers in other markets or is it continued to be In that initial market and what's your success rate as far as attach rate goes at this point? Speaker 200:17:28Yes. So a couple of things going on. First of all, the automotive market continues to grow. Our automotive revenue is up year over year. I don't have it handy here specifically automotive for contractors, but Our automotive business at large is up like 43% year over year in Q1. Speaker 200:17:52And with that, we're obviously manufacturing more and more contractors in automotive where we get the greatest exposure. Additionally, we have we actually have won a series of probe head opportunities in the Q1, design wins for probe heads. 2 of those are in automotive and a third one is, it's actually not, it's in the it's more in the communications Segment of the market. So we're basically now at a point that we need more manufacturing capacity. We need more space, we need more tools, we need more suppliers. Speaker 200:18:31And so we're Pushing to increase the output out of our Philippines operation, but also pushing to increase the output and capability of our suppliers in the region. That's what we need to go after now, so we can enable further wins and business ramps. Speaker 500:18:53Could you just remind us, I don't see the number in these slides, how big was the contractor business in Calendar 2022 and you've talked about how it's had a CAGR of about 6%. Even though this is a super difficult year, do you think That business grows for you in 2023? Speaker 100:19:14Hey, Dave. Last year that business Was about $130,000,000 for Cohu. And yes, we do anticipate that it Rose, this year and the target is ultimately to be 20% of the revenue target of 1,000,000,000 So up to $200,000,000 And so we anticipate that that business will still grow sort of So high single digit growth rate. And just as a follow on, Speaker 500:19:48I'm sorry, Does the capacity you're putting in place in the Philippines now, the new building and everything, does it cover does it get you to this $200,000,000 annual run rate? Speaker 200:19:58Yes. Between the internal capacity and the supply chain that we're trying to develop in the region, yes, it does. Speaker 300:20:06Thank you. Operator00:20:12Our next question comes from the line of Christian Schwab with Craig Hallum. Speaker 400:20:19Hey guys, this is Tyler on behalf of Christian. Thanks for letting us ask a couple of questions. So first, I guess, maybe gross margins Above model right now and I guess as we look into the back half of the year, I was wondering recurring revenue By definition, should kind of remain at these strong levels. And if the second half is the same view as before, we should see some directional improvement, although maybe modest. Should we expect gross margin should trend down a little bit from the 47% we guided in Q2 or how should I think about them in the back half? Speaker 100:20:54Yes. Hey, Tyler, it's Jeff. I think the Street's got us in a pretty good spot For not only the revenue piece of it in the back half, but also gross margin, somewhere in the high 46 To low 47 sites, call it maybe an average of 47. We're pretty comfortable in that range. Speaker 400:21:19All right. That's perfect. And then I guess second question, you talked about automotive and industrial strength continuing, but In the quarter, if I heard you right, your test utilization in auto and industrial was down a little bit, while the rest of the markets were up a little bit. Any color or comment there? Is that just Quarter to quarter fluctuations or anything to call out? Speaker 200:21:42Yes, it was not Tyler, it was not specific to automotive or industrial. We said the test cell utilization was down to 77%. We said auto and industrial combined was down a couple of points. But as you can see, even in our revenue profile, right, the Q1 revenue profile in industrial It's down 3 points relative to Q4 last year. Automotive is about the same. Speaker 200:22:08It's up a point. But I don't I think it's normal fluctuation at this moment. What we're liking more is to see computing, Computing being up a couple of points, mobility up a point, that it's not an indicative Of a market upturn on those segments, it's more of an indicative of stability, right? And hopefully here, A bit of an improvement as we get into the second half. Speaker 400:22:38Got it. That's perfect clarification. I appreciate that. That's all for us. Thanks guys. Operator00:22:45Our next question comes from Krish Sankar with Cowen. Speaker 600:22:51Hi, this is Bob Mertens on for Krish. Thanks for taking my questions. Maybe just coming back to automotive exposure that you have, If Speaker 100:23:00you could give just Speaker 600:23:01a little bit more color between the handler side and test products, how those are playing out in the market? And then also maybe if you just had a gauge on who some of the main competitors are or any sort of market share dynamics that are at play Within that business? Speaker 200:23:21Sure. We don't have exact numbers to break it down for you by Product, I can tell you, we do have, as you can see from the data set here, the highest Market exposure we have in our presentation for the Q1 results is in automotive. We have 22% Of market exposure into automotive. If you go down by products, I'm just going to tell you qualitatively, Our handlers are mostly our handlers and our contactors are exposed to automotive. We actually have a Significant leadership position in both handlers and contactors. Speaker 200:24:04On the tester side, it hovers now to between 25%, 30% To our tester business in automotive and industrial, we're working on it. But at this moment, we're further behind Atteradyne and Advantest in ATE Automotive market. Speaker 600:24:36Great. Thank you. That's helpful. And then just real quick, how are the current lead times, how they've Progress throughout the quarter. I think last quarter you had mentioned maybe handlers for around 24 weeks, testers maybe 12, half that. Speaker 600:24:54Is that sort of the same or as the lead times been brought in this quarter? Speaker 200:25:00No, lead times are Generally the same. Handlers are maybe a couple of weeks shorter, 2 weeks shorter than shorter lead times than we were a quarter ago. So we're talking On the order of about 22 weeks for handlers, but testers, contactors, all about the same. Well, we got a little faster in contactors as well. That improved. Speaker 200:25:21It's sort of the band narrowed down closer to a 6 weeks lead time. But no dramatic change quarter on quarter on the lead time. Speaker 600:25:32Great. Thank you. That's all I had. Operator00:25:43Our next question comes from the line of Quinn Bolton with Needham. Speaker 700:25:49Hey, guys. This is Trevor on for Quinn. Thanks for letting me ask some questions. So to start, When looking at the backlog for the second half, has there been any shifts or cancellations of that backlog within the quarter? And can you speak about your visibility into the second half? Speaker 700:26:08Thanks. Speaker 100:26:11Yes. To answer the first part of that, No, no cancellations, shifts in the backlog. Typically, our visibility out 6 months and further is It's not clear and it's the same situation now. So good visibility obviously into Q2 and decent to Q3, but beyond that, it's still foggy. Speaker 200:26:38Yes, it's no different than it was 1 quarter ago through July, and now maybe current Through September, same kind of view. We have a pretty decent backlog into Q3 already And orders booking now for Q3 shipments, like Jeff said, anything beyond that, it did obviously much less of a backlog so far into Q4 of the year. So that's going to become more of a reality as we approach the end of this quarter beginning of next quarter. Speaker 700:27:13All right. Thank you. And I believe you stated that mobility and PC was up in the quarter. Do you expect this trend to continue into the second half? And any insight on these inventory levels would be helpful. Speaker 200:27:29Yes, it's a fantastic question. I don't think necessarily a big improvement in mobility over the next quarter. I would expect Mobility to have more of a traction more traction, more market traction towards the end of the year. Computing, yes, I do think computing is going to be more of on a positive trend, particularly cloud on the second half of this year. Speaker 700:28:00Awesome. Good to hear. And one more, if I may. Are you having More conversations recently with silicon carbide customers than you may have expected 2 quarters ago when you first mentioned this opportunity. And are you able to quantify as a percentage of revenue what silicon carbide could be in 2023? Speaker 200:28:24Yes, to the first question and certainly yes on the second as well. But when we talk about silicon carbide revenue, we think this is Going to be something on the order of 2%, 3% of our total revenue on an annual basis. Speaker 700:28:41Awesome. Thanks guys. Operator00:28:511, 1. Our next question comes from Brian Chin with Stifel. Speaker 300:29:00Hi, there. Thanks for letting us ask a question. Maybe, Luis, just to provide a little bit more contouring, I know there's been some questions here about sort of sustainability or visibility into the second half. I know the pattern typically in a steady state here might be something like higher revenues toward the mid part of the year 2Q, 3Q and then usually seasonally softer sort of at the beginning and end of the year, something like that. In terms of as you try to read your order book and sort of other indications on the end markets, Particularly for Q4, are you what's sort of the main ingredient here? Speaker 300:29:43Is it sustainability Of auto and industrial, because I know you had earlier last call talked about moderation at parts of this year and that or is it Maybe looking to see if there'll be some pickup in businesses that have been pretty depressed, right, coming into the year, which includes mobility, consumer. Kind of how else would you maybe sort of characterize how you're thinking about second half? Speaker 200:30:09So Brian, I would feel a lot more comfortable talking about Q4 to quarter from now as you can appreciate because we just based on our equipment lead time, right, We have very good visibility at quarter out, fairly decent 2 quarters out and then it drops off from there. But my best guess right now is that the end of the year Would be running about flat to potentially up sequentially from Q3. And why do I say that? I think the automotive and industrial already moderated. At what point computing and mobility starts recovering? Speaker 200:30:53As I mentioned a second ago, I think computing, particularly cloud, Comes in first. Mobility becomes the real big question. Mobility is extremely depressed right now. It's sort of at the bottom of the barrel, But that is generally an indicative that a quarter or 2 from now it will be picking up some steam. Now does that mean Q4? Speaker 200:31:17Does that mean Q1 next year? That's a little difficult to answer right now. I would appreciate 1 more quarter to have More clarity on the answer to that. So I think this year we may not see your typical seasonal pattern. It may be one of those atypical years again in where, like I said, we usually see or you said, usually we see Q4 4 in Q1 is a seasonally low. Speaker 200:31:45On this cycle, we're probably going to see one of those two quarters as a seasonally high And then going up from there, which one of them exactly, I don't know at the moment. Okay. Speaker 300:31:57No, it's interesting. This could be wrong, you can correct me. But in the past, I sometimes thought of ATE sometimes leading Test handlers by say a quarter or maybe a little bit more. And obviously one of your peers is seeing pretty Strong auto industrial AT business into their Q3 of this year at least. And so do you think that relationship is playing a part in this a little bit? Speaker 200:32:23Yes. Yes, I think it's yes, absolutely, it is. And that's playing a part into all of that we're doing right now, Being able to run a business that's very healthily profitable and delivering the cash We need to invest on new products. The question becomes is, some of these markets that are pretty depressed, when will they start turning up, right? And I think we're going to start seeing movement in the second half of the year. Speaker 200:32:52The question is what's the magnitude of it. So we could very well exit the year accelerating It's question mark. Revenue or orders, right? Speaker 300:33:03Yes. Okay. And maybe one last question sort of Thank you for both Jeff and you, Luis. But going back to sort of the statements on expanding capacity, strategic expansion capacity in the Philippines, I guess, one, you made good gross margin improvements in that business. I think it's probably towards the mid to upper 40s at this point. Speaker 300:33:28How should that continue to trend as you start to that's Next year at some point, but as you start to build that footprint and then eventually produce out of it, how should gross margins in that segment trend? And also Yes, going back to the comments you made about some wins that you're seeing in that business. Is that sort of early indications of the type of filling that you'll be able to do out of that facility, once it's ready? Speaker 100:33:59So I guess I'll take the first part of it on the gross margin and you're right that business is operating right around mid-40s And we've modeled them to be in the high 40s. And so adding another 200, 300 basis points from where they currently are today, we think we can do that Through, I mean, obviously expanding the operation and increasing productivity and cost efficiencies. Speaker 200:34:26And to the second part of your question, right. What I mentioned earlier, I think it was Dave's question, Is the design wins that we had in Q1 in that business, they were actually all probe heads. And at this moment, probe heads are not something we're doing in the Philippines. So we're transferring all of our contact The bulk of our contact are manufacturing to the Philippines. In fact, we already did. Speaker 200:34:57We're over 80% manufacturing there now. These probe heads are essentially products that are designed and still manufactured in the U. S. Or in Europe, depending if it's a power application or more of a high signal speed or RF application. We will need to find A path to get those to the Philippines as well, but that's not where we are. Speaker 200:35:23So the design wins at the moment are U. S.-European based product manufacturing. Speaker 300:35:31Okay, great. Thank you. Operator00:35:37That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks. Speaker 100:35:43Thank you, Liz. And before we sign off, I'd like to mention I will be attending a number of investor conferences in person during the Q2. I'm going to list them here. It's B. Riley Conference in Los Angeles on Thursday, May 25 TD Cowen Conference in New York City on Wednesday, May 31 Stifel Conference in Boston on Tuesday, June 6 Baird Conference in New York City on Tuesday, June 8 And the CEO Summit in San Francisco on Wednesday, July 12. Speaker 100:36:17So if you plan to attend 1 or more of these conferences, we'd I'd like to meet with you, and so please reach out to your respective analyst or conference contact to schedule a meeting. Again, thank you for joining today's call and look forward to speaking with you soon. Operator00:36:38This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by