NASDAQ:COHU Cohu Q1 2024 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-$0.06Consensus EPS -$0.07Beat/MissBeat by +$0.01One Year Ago EPSN/ACohu Revenue ResultsActual Revenue$107.61 millionExpected Revenue$107.00 millionBeat/MissBeat by +$610.00 thousandYoY Revenue GrowthN/ACohu Announcement DetailsQuarterQ1 2024Date5/2/2024TimeN/AConference Call DateThursday, May 2, 2024Conference 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 2024 Earnings Call TranscriptProvided by QuartrMay 2, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to Cohu's First Quarter 2024 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 Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jeff Jones, Chief Financial Officer. Operator00:00:34Please go ahead. Speaker 100:00:37Good afternoon, and welcome to our conference call to discuss Cohu's Q1 2024 results and Q2 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.com or by contacting Cohu Investor Relations. There is also a slide presentation in conjunction with today's call that may be accessed on Cohu's website in the Investor Relations section. Replays of this call will be available via the same page after the call concludes. Speaker 100:01:10Now to the Safe Harbor. During today's call, we will make forward looking statements reflecting management's current expectations concerning Cohu's future business. These 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 the 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 2, 2024, and Cohu assumes no obligation to update these statements for developments occurring after this call. Speaker 100:01:53Finally, during this call, we will discuss certain non GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Mueller, Cohu's President and CEO. Luis? Speaker 200:02:11Good afternoon. 1st quarter results were in line or better than guidance with non GAAP gross margin of 46 percent and EPS of $0.01 as we navigate through the eye of the storm in this semiconductor cycle. We estimated test cell utilization at the end of Q1 up 1 point to 72%. We expect business conditions to remain more or less at this level for another quarter or 2 before we start seeing improvement. Fast cell utilization at IDMs was down 1 point to 74% with computing, industrial and automotive demand down sequentially. Speaker 200:02:53OSAT utilization improved slightly to 70%, although still well below the trigger threshold for capacity buys at approximately 80%. There were a couple of bright spots in the quarter. A leading U. S. Fabless semiconductor manufacturer has selected our Sense Plus system with MicroSense for testing their next generation high fidelity microphones. Speaker 200:03:20This MicroSense microphone tester is Cohu's latest product in our MEMS solution portfolio. And when combined with the Sense plus automation platform, delivers state of the art testing of up to 96 devices in parallel. According to industry analysts, the MEMS microphone sensor market is projected to grow 14.5% annually over the next 7 years, reaching an estimated revenue of $6,200,000,000 We estimate a buy rate of approximately 1% for integrated test and vision inspection systems, making this an attractive market opportunity over the midterm. In the optoelectronics market, we saw increased demand for our testers, handlers and interface products for automotive LED production from a European customer. A leading automotive ADAS customer has selected Cohu's high performance RF contactors for testing automotive radar sensors. Speaker 200:04:22Finally, we completed the qualification of Diamond X for final test of display driver ICs at a large customer in Korea, opening the door for the next stage of revenue growth in this important market that we started developing a few years ago. This has been a fundamental strategy for our tester business to add a market segment in which Cohu can differentiate and diversify revenue. As the industry moves through its cycle, it remains critical to Cohu's strategy to leverage our profitable recurring business, which provides for a more stable revenue stream of mostly consumable products. Recurring was approximately 66% of revenue in the Q1, serving an installed base of about 24,700 systems worldwide. Cohu's recurring business delivered revenue of $304,000,000 over the last 12 months with a 3 year compound growth rate of 2.7%. Speaker 200:05:24Finally, we published our 2023 sustainability report with improvements in many areas. Renewable source energy usage increased to 32%. We completed construction of a new modern facility in the Philippines with rainwater harvesting system and are investing solar energy installations at our factories in Malaysia and the Philippines. Cohu has also recently committed to engage with the Science Based Targets Initiative or SBTI with the goal to develop near term science based emissions reduction targets. As the industry grows through this cycle, we remain focused on managing cash flow while continuing to execute critical new product developments and customer design win initiatives to enable growth when customers resume test capacity buys. Speaker 200:06:16Let me now turn it over to Jeff to provide further details on Q1 results and Q2 2024 guidance. Jeff? Thanks, Luis. Before I Speaker 100:06:28walk through the Q1 results and Q2 guidance, please note that my comments that follow all refer to non GAAP figures. Information about the non GAAP financial measures, including the GAAP to 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 revenue and profitability above the midpoint of our guidance. Q1 revenue was $107,600,000 recurring revenue, which is largely consumable driven and more stable than systems revenue, represented 66% of total revenue in Q1. Speaker 100:07:11During the Q1, one customer in the automotive market accounted for more than 10% of sales. Q1 gross margin was 46%, about 100 basis points higher than guidance driven by better than forecasted margins on Cohu's resilient recurring business. Operating expenses for Q1 were lower than guidance at $50,200,000 driven by lower labor and labor related costs. 1st quarter non GAAP operating income was approximately breakeven and adjusted EBITDA was 2.6%. Interest income, net of interest expense, loss on extinguishment of debt and a foreign currency loss of approximately 500,000 was $1,600,000 Q1 pre tax income consists of foreign profits combined with a loss in the U. Speaker 100:08:01S. The Q1 tax provision reflects tax on foreign profits, but no tax benefit from the U. S. Loss due to our valuation allowance against deferred tax assets. Additionally, the non GAAP tax provision in Q1 of 300,000 dollars is net of a one time $2,700,000 credit for the reversal of reserves for uncertain tax positions in foreign jurisdictions. Speaker 100:08:27Non GAAP EPS for the Q1 was 0 point $64,000,000 during Q1 to $271,000,000 due to variable comp and payroll taxes totaling approximately 20,000,000 dollars plus $29,000,000 used to pay off the remaining Term Loan B balance and approximately $11,000,000 to repurchase 334,000 shares of Speaker 200:08:54of Cohu common stock. Speaker 100:08:55CapEx in Q1 was $3,300,000 with approximately $2,000,000 related to our factories in the Philippines and Malaysia, supporting operations for our interface and automation businesses. Overall, Cohu continues to maintain a strong balance sheet to support investment opportunities to expand our served markets and technology portfolio in line with our growth strategy and return capital to shareholders through our share repurchase program. Now moving to our Q2 outlook. We're guiding Q2 revenue to be in the range of $105,000,000 plus or minus $6,000,000 reflecting continued weakness across end markets and low test cell utilization at customers' production facilities. Q2 gross margin is forecasted to be approximately 45% better than the financial target model at this level of revenue due in large part to Cohu's differentiated products and our stable high margin recurring business, which adds resilience to profitability and provides consistent cash flow through industry cycles. Speaker 100:10:00We expect gross margin to increase again when our revenue recovers with a broader semiconductor device market recovery and with better absorption of our factories infrastructure costs. Operating expenses for Q2 are projected to decrease about $1,500,000 quarter over quarter to approximately $48,500,000 due primarily to a reduction in force and optimizations as we completed certain product developments. As I noted during our last earnings call, we have taken action to reduce operating expenses without sacrificing critical new product investments while navigating through the trough of this cycle. As a result, we're now modeling operating expenses to average approximately $48,000,000 per quarter in the second half of this year. We're projecting Q2 interest income net of interest expense and foreign currency impacts to be approximately $2,000,000 at current interest rates. Speaker 100:10:59We expect Q2 adjusted EBITDA to be approximately 2%. The Q2 non GAAP tax provision is expected to be approximately $1,600,000 because of tax on foreign profits without benefit from the U. S. Loss. Additionally, the $2,700,000 credit recorded in Q1 is not expected to repeat in Q2. Speaker 100:11:23Until the markets recover, we expect a similar tax provision profile as we navigate through this cycle. The basic share count for Q2 is expected to be approximately 47,000,000 shares. That concludes our prepared remarks. And now we'll open the call to questions. Operator00:12:03Our first question comes from the line of Brian Chin of Stifel. Speaker 300:12:09Hi there. Good afternoon. Thanks for letting us ask a few questions. Maybe to start with, Speaker 400:12:16I'd say that the recurring revenue Speaker 300:12:20was even maybe a little bit more even down less than I might have anticipated sequentially given that I think a lot of industrial automotive semi related companies seem to have curtailed production quite a bit, but again your revenue Q on Q actually did not decline by that much. Do you feel that now that maybe some of your customers' utilization rates are starting to stabilize, do you think that revenue has also stabilized in sort of Q1, Q2? What's sort of the trend you're seeing? And even if you don't have full visibility on the system business, do you have more confidence that the recurring revenue will improve in the second half? Speaker 200:13:01Hi, Brian. This is Luis. Yes. The way we see it right now with stabilizing utilization and recurring seems to be stable as well. And obviously, the expectation and what we've seen in the past is when utilization starts to increase, so does recurring, both from usage of the equipment and therefore increase of spares, typically customers end up cannibalizing, unutilized equipment for spares and then eventually there is a quick turnaround on that when the utilization picks up as well as device kits and contactors. Speaker 200:13:37So at this moment, utilization is stable, so it's recurring and would expect it to return to an increase, particularly when utilization starts to rise again. Speaker 300:13:51Got it. And I guess sort of branching out a bit in terms of going back to your comment about maybe revenues kind of stay at this level another quarter or 2. Is there something after this sort of retrenchment period here in first half in terms of system business, which sort of now is kind of across every end market, right, at this point. When you talk to your customers, what does give you more degrees of optimism in terms of some pickup at some point in second half? There Speaker 200:14:20are 2 things. 1 is we have not everybody turns at the same point, right? It's never been that way. But we are seeing some customers starting to claim a correction is over in the inventories and their inventory lines. So particularly in IoT, we've seen that happening and seen a little bit of traction, so much so that actually our mobile segment revenue was up sequentially from Q4 to Q1. Speaker 200:14:51We still have other customers that are improvement. So we is improvement. So we're starting to see sort of the turn of the tide a little bit. As I commented in my prepared remarks here, right at the beginning actually, I called it navigating through the eye of the storm. And I really mean it in the sense of we're now at that point of the headwinds have stopped and we see a few customers starting to see a little bit of tailwind. Speaker 200:15:27So we'd expect that in a couple of quarters, we'd be having more customers with tailwind, utilization starting to pick up and eventually capacity buys. Now obviously capacity buys require utilization of existing capacity installed to pick up to a level where you need to buy new equipment. Like I said, not all customers will be on the same phase and in the same quarter that probably will straddle over a couple quarters. But it gives us confidence that we're heading towards better wins ahead here. Don't know if it's a quarter or 2 quarters away from now when things start to pick up again. Speaker 300:16:07Okay. Maybe just one quick question, thanks Louise, for Jeff. Just obviously very high gross margins here at trough. I noticed you also raised the target model gross margin to 50%. Anything that goes into that in terms of composition of revenue mix at $1,000,000,000 or what considerations kind of go went into that increase? Speaker 100:16:27Historical results really went into that decision to increase. We've sort of maintaining the same mix of product at that $1,000,000,000 of revenue with roughly 40% automation and 30% test, 20%, interface 10% for inspection metrology. So that doesn't change. It's just we've seen better cost profiles, lower cost profiles, better margins. So that gave us the confidence based on what we've achieved here over the last, call it, 8 quarters to set the target to 50. Speaker 300:17:09Okay, great. Thank you. Operator00:17:13Thank you. Our next question will come from the line of Ross Cole with Needham. Speaker 500:17:20Hi. Thank you for taking my call. And I'll ask this question on behalf of Charles Shi. So first of all, can you provide some color on what you see on the mobile side of the end market, which drives your tester business? Are you more incrementally positive or cautious here? Speaker 200:17:37Hi, Ross. Yes, are incrementally more positive on mobile. I'm not calling this really a broad market recovery yet, but what we're seeing in particularly IoT devices, so talking about RF in the mobile space, we've seen a little bit of an improvement in orders in the 4th quarter, revenue in the Q1. As I mentioned before in the prior call the prior question, sorry, the mobile segment is the only segment of our market that we saw an increased revenue quarter over quarter. Now that's more particularly focused on the Android segment and some as we understand customer our customers' opportunity for sales in China and Korea, not yet a broad based recovery. Speaker 200:18:32So I think mobile will be incrementally better going forward. But realistically, I think a full blown recovery is more of a late this year to 2025 story. Speaker 500:18:47Great. Thank you. And if I can ask a second question a little more broadly on what are the ordering or quoting activities like right now, especially relative to 3 months ago? Are you starting to see some green shoots? Speaker 200:19:02The activity is still very much focused on new technologies, new applications, our customers win of a particular socket that drives some demand. No, I can't say that there is much of a broad based capacity addition at this point, Ross. It's we have qualifications, we have design wins. As a reference here on the call, we had a design win for a MEMS microphone application. It's a new product, customer selected. Speaker 200:19:40We already shipped a first system here going into their lab, and we have a production system shipping in the summertime. We had a design win, completed of a qualification of our tester with the new instrument for display driver IC final test, which we call P2, so the second insertion of test. This is the same customer that has selected us for P1 last year and drove a $20,000,000 of revenue in 2023. So we now got qualified for P2. So basically, new products, new opportunities more so than the general capacity. Speaker 200:20:21That is not happening so much at the moment. Operator00:20:32Our next question comes from the line of David Duley with Steelhead Securities. Speaker 600:20:40Yes. Thanks for taking my question. I was wondering when business does recover, which segments of your equipments do you think the handlers or testers will recover 1st? And perhaps maybe just handicap which end market you think will turn on first for Cohu? Speaker 200:21:01Hi, Dave. Luis again. So we've been thinking that and it's really a good question, but we've been thinking that the mobile segment and computing will start coming in 1st. With that said, with that comment said, the reality of utilization dynamics today, it is still higher in the automotive and industrial segment. We look at utilization by market and auto and industrial is hovering at about 78%. Speaker 200:21:37So it's pretty close to that capacity addition threshold that we call that is at 80%, while computing is much lower at 66% and mobile is at 67%. So it's a tale of 2 stories here because one, we believe that the mobile and computing should be the one coming on first. On the other hand, we're a lot closer to that threshold in the auto and industrial. I think that's another way of saying it could actually flip from what I have originally said. It could come back on the auto ahead of mobile. Speaker 600:22:16Okay. And with industrial and automotive utilization rates hanging in there, I guess that suggests for you and your customers that, that end market has stabilized and we're done I don't want to say done with the inventory correction, but we're done going down in the in your biggest segment of business? Speaker 200:22:40I think that's correct, Dave. I think we're done going down across segments right now. I mean mobile has been fairly depressed for the last three quarters and auto and industrial is also very depressed right now. It's what is encouraging about auto and industrial is our customers' ability to actually operate just below that 80% threshold. It hasn't really sunk. Speaker 200:23:07The utilization hasn't really sunk in as much. Nevertheless, customers have largely stopped buying capacities right now. They are buying specific technologies, but not general capacity. So yes, I'm encouraged by the auto and industrial guys. Speaker 600:23:26Okay. And then can you just remind us what your lead times are now? I imagine they're back to normalized levels, but I'm just kind of curious what normalized levels are now? Speaker 200:23:38They're largely unchanged from last quarter, Dave. It's a little tricky to talk about lead times when we're selling new technologies, right? So if you talk about our handlers, about 15 weeks is a fair number, testers about 12 weeks and contactors about 7 weeks. With that, I have to say, we're selling a lot of handler configurations that are brand new, a super high power dissipation, T core system for sort of for processor test. Well, that's a new head. Speaker 200:24:18It's a new thermal system and the lead time on that is a little longer. So we're selling new technology applications, the lead times are a little bit longer. I would expect if we get more capacity buys of standard products that despite having greater demand, we probably would see lead times go down a little bit first at first before they go up again. Speaker 600:24:42Okay. Now final question for me is, when you kind of look out over the server upgrade cycle that's pending for artificial intelligence and all of the associated components that are going to go into those new servers. There's going to be a lot more GPU and CPU content. Could you just talk about how that upgrade cycle might impact your product lines? Like I would think that maybe your thermal conditioning handlers would see an uptick from the server upgrade cycle. Speaker 600:25:13But so that's my question is like when we do hit the fat part of the AI upgrade cycle for servers, how will that impact your business? Speaker 200:25:23Yes. So the server upgrade cycle is going to be better for us than the actual data center cycle. The data center cycle is lower volume, very high ASP semiconductors, very low volumes. The data center, you changes the equation here, you get a bit more volume. So computing was, I think, 5% or 6 percent of our revenue last quarter sorry, in Q4. Speaker 200:25:53It came out at about 3% in Q1. I would expect to improve a little bit on the second half of the year, assuming that data center cycle is really going to pick up momentum as it's been said. Speaker 600:26:09And just so I understand, when you're saying the data center versus the server, what do you mean? Just help me understand which cycle you're referring to there? The traditional servers or AI servers? Speaker 200:26:20Yes. I'm sorry. I meant to say the server cycle. Speaker 600:26:23Okay. Thank you. Thanks. Operator00:26:31Our next question comes from the line of Krish Sankar with TD Cowen. Speaker 700:26:40Hi, this is Bob Maris. Thanks for taking my question. I know a bit of it's already been answered, but just in terms of the auto and industrial markets, how those have sort of shaped up over the compared to, I guess, 3 months ago. If I remember correctly, in the December quarter, sales were down, but the test utilization was actually on the higher side. And you mentioned you can continue to see a bit higher utilization in the March quarter despite sales down a bit. Speaker 700:27:10Just trying to think of how you are looking at that business or market, into the June quarter and second half of the year? Speaker 200:27:20Yes. So look, I'm going to start with Q1, right? The utilization, as I said, it's holding up pretty well, but revenue was down Q1 sequentially from Q4, both on the auto and the industrial side and pretty much the same at the same rate. Looking forward, we don't really go ahead to predict revenue by market segment for future quarters, but I'd be tempted to say just based on the order pattern that industrial will be weaker, automotive may hold up a little bit better than the industrial side. I think the industrial side continued to lose some ground relative to the other markets in the 1st quarter orders and therefore second quarter revenue. Speaker 700:28:20Great. Thank you. That's very helpful. Operator00:28:31Our next question comes from the line of Craig Ellis with B. Riley. Speaker 400:28:36Yes, thanks for taking the question. What I wanted to do Luis is just try a shorter term question and then a longer term question. And on the shorter term side, and this one goes back to some of the comments around downstream utilization and where the business is over the next couple of quarters. But assuming utilization is near current levels or maybe drifts up a little bit in a seasonally stronger second half, how do we think about the gives and takes with normal seasonality in the Q4, typically the business would be down much more in the system side than recurring. But typically that would be off much more significantly inflated levels. Speaker 400:29:22So can you just help us understand how we should think about some of the seasonal dynamics given the unusual year we've had thus far? Speaker 200:29:30Sure, Craig. As you know well, this industry has both seasonality and cyclicality, with seasonality essentially being the obviously the 12 month cycle, right, or the 12 month pattern of the wave and the cyclicality being more of a multi year, I think you call it as a 4 year, give or take 4 year period. When you overlay the 2, you may have one obscuring the other. And I think this is a classical year where you're not going to see in as much the seasonality because we're coming off of a trough where we are at the moment. And all the indications is the market starts to improve on the second half of the year and going into a 2025 recovery. Speaker 200:30:19In other words, I don't think you will see your typical seasonality this year. That's just not possible when the cycle is dominating what's happening in the market. It's very, very likely, and I've seen this happen in prior cycles, that you exit the year with a strong order momentum going into the next year when otherwise you should have seen a pretty weak seasonal period in the Q4. And I think that's going to be the case again this year. Again, I think cyclicality just overshadows seasonality in this environment. Speaker 400:30:57That's really helpful, Luis. And the second question is related to the target model. So great to see the business raise the gross margin target by 100 basis points to 50%. You guys have had really strong trailing 2 to 3 year gross margin execution. So can see that. Speaker 400:31:18My question was more on the line above that revenue. So from Q3 levels, we annualized a little north of $400,000,000 And so the target is about 2.5 times that. And what I wanted to do is give you the opportunity just to talk about the path that you see for the business to go from annualizing at $400,000,000 back to $1,000,000,000 What are some of the things that are going to be the biggest drivers to that growth, whether it's on the product side or other things that you and the team are working on that will in a much better demand environment deliver revenues that are out on your target? Thank you. Speaker 200:32:05Well, I can talk a little bit about the business dynamic heading to that target, Craig. We you can't necessarily pick the trough of the cycle and then try to explain it that $1,000,000,000 target. I think you got to look at more of a through cycle, what is the number at the through cycle level, which tends to be somewhere in the $750,000,000 to low $800,000,000 what we typically call a normalized or through cycle revenue level. How do we grow from there? It's a combination of design wins on the tester side, which we have been scoring, by the way, they just don't translate into volume at the moment. Speaker 200:32:51Optimization and wins on the interface side, which is holding pretty well considering the overall low utilization levels in the industry right now. And expansion of our inspection and metrology business, right. Those are the primary focus areas. We are from a market perspective, we're putting a tremendous amount of effort right now to align more to computing applications. We're a very strong believer on the long prospect long term prospects for computing. Speaker 200:33:26And I don't mean necessarily just AI data centers, which are low volume. But I think the wave that comes after that, which is computing at the edge or AI at the edge, if you will. When those get proliferated into cell phones, into cars with higher level of autonomous driving when you get more robotic systems and automated manufacturing tools. So basically AI at the edge should be a significant driver of sensors, communication and ultimately computing processing power. So one of the key areas of investments for us today is on the thermal subsystems and the implementation of those thermal systems into our equipment to enable capturing of share and supplying, supporting our customers when they start proliferating AI at the edge, so to speak, or more computing processing at consumer level products. Speaker 200:34:26So those are the primary drivers as we see our target to get up to $1,000,000,000 Speaker 400:34:34Great. Thank you. Operator00:34:39Our next question comes from the line of Toshiya Hari with Goldman Sachs. Speaker 800:34:46Hi, thank you so much for taking the question. Louise, you've given quite a bit of color in terms of what you're seeing from an end demand or end market perspective. I was hoping you could share what you're seeing by device type. I know you have exposure to various device types, but any specific areas of relative strength or relative weakness, MCUs, analog RF, etcetera, that would be helpful. Thank you. Speaker 200:35:14Okay. Toshiya, I don't have the data exactly in front of me by device type. I can qualitatively tell you the analog the general analog semiconductor space is weakest at the moment. Not significant strength also in microcontrollers. We see is some interesting dynamics in the processor space. Speaker 200:35:43As I said earlier, more of it is on the high ASP low quantities, but that is said to be migrating more to servers and therefore a little bit better improvement on the quantity side. We've also seen recently some improvement on RFIC manufacturing and demand for test and handling equipment. I would say battery management systems, which is it's part of analog at the end of the day, but BMS is becoming a bit of a mixed signal type device today. Battery management systems are weak, but maybe coming to a threshold of demand again. So hopefully that gives you a bit of color from a device segment size. Speaker 200:36:38And we don't participate today in memory, right? So I didn't comment on memory, but Cohu today does not participate in the memory space. Speaker 800:36:45Sure. Yes, that's really helpful. And then as a quick follow-up, you talked a little bit about your win in display drivers. I think you've talked about that in the past as well. But I think that market is currently dominated by one of your peers. Speaker 800:37:04So I'm sure your Korean customer is very happy that you guys are delivering product and technology. But I guess my question is, how big is that TAM today? I think it's a couple of 100,000,000, but if you can confirm that, that would be super helpful. And then how should we think about your ability to grow share over time? I know it takes time, but since you have one of the bigger customers secured, it must be a promising opportunity for you. Speaker 800:37:31So just curious how you're thinking about that business. Thank you. Speaker 200:37:35Yes. Toshiya, you're right about the couple of $100,000,000 We do tag that TAM at $200,000,000 The only problem is you said what is it now. The now part of it is the problem. So on average, it is a $200,000,000 TAM. We are now supplying to customers that make up about 50% of that TAM. Speaker 200:38:00So we view it as a basically a $100,000,000 opportunity. That doesn't mean we're going to get 100% of it. I think we will share it with our competitor. We have had worked very closely with and supplying to the Taiwanese manufacturer. And now we have been engaged with the Korea manufacturer, where the last year we captured their first insertion into probe, represent about 40% of their capital spending and it generated $20,000,000 of revenue for us last year. Speaker 200:38:40We now got qualified for their 2nd insertion, which is final test. We're yet to see how much of the remaining here, which could be about a $30,000,000 opportunity, how much of that we're going to get when business conditions normalize again. So all in all, you're correct about a $200,000,000 TAM, this year is depressed. Out of that $200,000,000 I think we can now serve $100,000,000 Speaker 800:39:07That's very helpful. Thank you. Operator00:39:13That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks. Speaker 100:39:20So I'd just like to close with saying thank you for joining our call today and we look forward seeing you soon. Operator00:39:28This 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 202400:00 / 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 Treasure April 19Thanks to President Trump… A $900 investment across5 specific cryptos… Could gain 12,000% so quickly that, just 12 months later…April 29, 2025 | Paradigm Press (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. 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There are 9 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to Cohu's First Quarter 2024 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 Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jeff Jones, Chief Financial Officer. Operator00:00:34Please go ahead. Speaker 100:00:37Good afternoon, and welcome to our conference call to discuss Cohu's Q1 2024 results and Q2 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.com or by contacting Cohu Investor Relations. There is also a slide presentation in conjunction with today's call that may be accessed on Cohu's website in the Investor Relations section. Replays of this call will be available via the same page after the call concludes. Speaker 100:01:10Now to the Safe Harbor. During today's call, we will make forward looking statements reflecting management's current expectations concerning Cohu's future business. These 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 the 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 2, 2024, and Cohu assumes no obligation to update these statements for developments occurring after this call. Speaker 100:01:53Finally, during this call, we will discuss certain non GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Mueller, Cohu's President and CEO. Luis? Speaker 200:02:11Good afternoon. 1st quarter results were in line or better than guidance with non GAAP gross margin of 46 percent and EPS of $0.01 as we navigate through the eye of the storm in this semiconductor cycle. We estimated test cell utilization at the end of Q1 up 1 point to 72%. We expect business conditions to remain more or less at this level for another quarter or 2 before we start seeing improvement. Fast cell utilization at IDMs was down 1 point to 74% with computing, industrial and automotive demand down sequentially. Speaker 200:02:53OSAT utilization improved slightly to 70%, although still well below the trigger threshold for capacity buys at approximately 80%. There were a couple of bright spots in the quarter. A leading U. S. Fabless semiconductor manufacturer has selected our Sense Plus system with MicroSense for testing their next generation high fidelity microphones. Speaker 200:03:20This MicroSense microphone tester is Cohu's latest product in our MEMS solution portfolio. And when combined with the Sense plus automation platform, delivers state of the art testing of up to 96 devices in parallel. According to industry analysts, the MEMS microphone sensor market is projected to grow 14.5% annually over the next 7 years, reaching an estimated revenue of $6,200,000,000 We estimate a buy rate of approximately 1% for integrated test and vision inspection systems, making this an attractive market opportunity over the midterm. In the optoelectronics market, we saw increased demand for our testers, handlers and interface products for automotive LED production from a European customer. A leading automotive ADAS customer has selected Cohu's high performance RF contactors for testing automotive radar sensors. Speaker 200:04:22Finally, we completed the qualification of Diamond X for final test of display driver ICs at a large customer in Korea, opening the door for the next stage of revenue growth in this important market that we started developing a few years ago. This has been a fundamental strategy for our tester business to add a market segment in which Cohu can differentiate and diversify revenue. As the industry moves through its cycle, it remains critical to Cohu's strategy to leverage our profitable recurring business, which provides for a more stable revenue stream of mostly consumable products. Recurring was approximately 66% of revenue in the Q1, serving an installed base of about 24,700 systems worldwide. Cohu's recurring business delivered revenue of $304,000,000 over the last 12 months with a 3 year compound growth rate of 2.7%. Speaker 200:05:24Finally, we published our 2023 sustainability report with improvements in many areas. Renewable source energy usage increased to 32%. We completed construction of a new modern facility in the Philippines with rainwater harvesting system and are investing solar energy installations at our factories in Malaysia and the Philippines. Cohu has also recently committed to engage with the Science Based Targets Initiative or SBTI with the goal to develop near term science based emissions reduction targets. As the industry grows through this cycle, we remain focused on managing cash flow while continuing to execute critical new product developments and customer design win initiatives to enable growth when customers resume test capacity buys. Speaker 200:06:16Let me now turn it over to Jeff to provide further details on Q1 results and Q2 2024 guidance. Jeff? Thanks, Luis. Before I Speaker 100:06:28walk through the Q1 results and Q2 guidance, please note that my comments that follow all refer to non GAAP figures. Information about the non GAAP financial measures, including the GAAP to 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 revenue and profitability above the midpoint of our guidance. Q1 revenue was $107,600,000 recurring revenue, which is largely consumable driven and more stable than systems revenue, represented 66% of total revenue in Q1. Speaker 100:07:11During the Q1, one customer in the automotive market accounted for more than 10% of sales. Q1 gross margin was 46%, about 100 basis points higher than guidance driven by better than forecasted margins on Cohu's resilient recurring business. Operating expenses for Q1 were lower than guidance at $50,200,000 driven by lower labor and labor related costs. 1st quarter non GAAP operating income was approximately breakeven and adjusted EBITDA was 2.6%. Interest income, net of interest expense, loss on extinguishment of debt and a foreign currency loss of approximately 500,000 was $1,600,000 Q1 pre tax income consists of foreign profits combined with a loss in the U. Speaker 100:08:01S. The Q1 tax provision reflects tax on foreign profits, but no tax benefit from the U. S. Loss due to our valuation allowance against deferred tax assets. Additionally, the non GAAP tax provision in Q1 of 300,000 dollars is net of a one time $2,700,000 credit for the reversal of reserves for uncertain tax positions in foreign jurisdictions. Speaker 100:08:27Non GAAP EPS for the Q1 was 0 point $64,000,000 during Q1 to $271,000,000 due to variable comp and payroll taxes totaling approximately 20,000,000 dollars plus $29,000,000 used to pay off the remaining Term Loan B balance and approximately $11,000,000 to repurchase 334,000 shares of Speaker 200:08:54of Cohu common stock. Speaker 100:08:55CapEx in Q1 was $3,300,000 with approximately $2,000,000 related to our factories in the Philippines and Malaysia, supporting operations for our interface and automation businesses. Overall, Cohu continues to maintain a strong balance sheet to support investment opportunities to expand our served markets and technology portfolio in line with our growth strategy and return capital to shareholders through our share repurchase program. Now moving to our Q2 outlook. We're guiding Q2 revenue to be in the range of $105,000,000 plus or minus $6,000,000 reflecting continued weakness across end markets and low test cell utilization at customers' production facilities. Q2 gross margin is forecasted to be approximately 45% better than the financial target model at this level of revenue due in large part to Cohu's differentiated products and our stable high margin recurring business, which adds resilience to profitability and provides consistent cash flow through industry cycles. Speaker 100:10:00We expect gross margin to increase again when our revenue recovers with a broader semiconductor device market recovery and with better absorption of our factories infrastructure costs. Operating expenses for Q2 are projected to decrease about $1,500,000 quarter over quarter to approximately $48,500,000 due primarily to a reduction in force and optimizations as we completed certain product developments. As I noted during our last earnings call, we have taken action to reduce operating expenses without sacrificing critical new product investments while navigating through the trough of this cycle. As a result, we're now modeling operating expenses to average approximately $48,000,000 per quarter in the second half of this year. We're projecting Q2 interest income net of interest expense and foreign currency impacts to be approximately $2,000,000 at current interest rates. Speaker 100:10:59We expect Q2 adjusted EBITDA to be approximately 2%. The Q2 non GAAP tax provision is expected to be approximately $1,600,000 because of tax on foreign profits without benefit from the U. S. Loss. Additionally, the $2,700,000 credit recorded in Q1 is not expected to repeat in Q2. Speaker 100:11:23Until the markets recover, we expect a similar tax provision profile as we navigate through this cycle. The basic share count for Q2 is expected to be approximately 47,000,000 shares. That concludes our prepared remarks. And now we'll open the call to questions. Operator00:12:03Our first question comes from the line of Brian Chin of Stifel. Speaker 300:12:09Hi there. Good afternoon. Thanks for letting us ask a few questions. Maybe to start with, Speaker 400:12:16I'd say that the recurring revenue Speaker 300:12:20was even maybe a little bit more even down less than I might have anticipated sequentially given that I think a lot of industrial automotive semi related companies seem to have curtailed production quite a bit, but again your revenue Q on Q actually did not decline by that much. Do you feel that now that maybe some of your customers' utilization rates are starting to stabilize, do you think that revenue has also stabilized in sort of Q1, Q2? What's sort of the trend you're seeing? And even if you don't have full visibility on the system business, do you have more confidence that the recurring revenue will improve in the second half? Speaker 200:13:01Hi, Brian. This is Luis. Yes. The way we see it right now with stabilizing utilization and recurring seems to be stable as well. And obviously, the expectation and what we've seen in the past is when utilization starts to increase, so does recurring, both from usage of the equipment and therefore increase of spares, typically customers end up cannibalizing, unutilized equipment for spares and then eventually there is a quick turnaround on that when the utilization picks up as well as device kits and contactors. Speaker 200:13:37So at this moment, utilization is stable, so it's recurring and would expect it to return to an increase, particularly when utilization starts to rise again. Speaker 300:13:51Got it. And I guess sort of branching out a bit in terms of going back to your comment about maybe revenues kind of stay at this level another quarter or 2. Is there something after this sort of retrenchment period here in first half in terms of system business, which sort of now is kind of across every end market, right, at this point. When you talk to your customers, what does give you more degrees of optimism in terms of some pickup at some point in second half? There Speaker 200:14:20are 2 things. 1 is we have not everybody turns at the same point, right? It's never been that way. But we are seeing some customers starting to claim a correction is over in the inventories and their inventory lines. So particularly in IoT, we've seen that happening and seen a little bit of traction, so much so that actually our mobile segment revenue was up sequentially from Q4 to Q1. Speaker 200:14:51We still have other customers that are improvement. So we is improvement. So we're starting to see sort of the turn of the tide a little bit. As I commented in my prepared remarks here, right at the beginning actually, I called it navigating through the eye of the storm. And I really mean it in the sense of we're now at that point of the headwinds have stopped and we see a few customers starting to see a little bit of tailwind. Speaker 200:15:27So we'd expect that in a couple of quarters, we'd be having more customers with tailwind, utilization starting to pick up and eventually capacity buys. Now obviously capacity buys require utilization of existing capacity installed to pick up to a level where you need to buy new equipment. Like I said, not all customers will be on the same phase and in the same quarter that probably will straddle over a couple quarters. But it gives us confidence that we're heading towards better wins ahead here. Don't know if it's a quarter or 2 quarters away from now when things start to pick up again. Speaker 300:16:07Okay. Maybe just one quick question, thanks Louise, for Jeff. Just obviously very high gross margins here at trough. I noticed you also raised the target model gross margin to 50%. Anything that goes into that in terms of composition of revenue mix at $1,000,000,000 or what considerations kind of go went into that increase? Speaker 100:16:27Historical results really went into that decision to increase. We've sort of maintaining the same mix of product at that $1,000,000,000 of revenue with roughly 40% automation and 30% test, 20%, interface 10% for inspection metrology. So that doesn't change. It's just we've seen better cost profiles, lower cost profiles, better margins. So that gave us the confidence based on what we've achieved here over the last, call it, 8 quarters to set the target to 50. Speaker 300:17:09Okay, great. Thank you. Operator00:17:13Thank you. Our next question will come from the line of Ross Cole with Needham. Speaker 500:17:20Hi. Thank you for taking my call. And I'll ask this question on behalf of Charles Shi. So first of all, can you provide some color on what you see on the mobile side of the end market, which drives your tester business? Are you more incrementally positive or cautious here? Speaker 200:17:37Hi, Ross. Yes, are incrementally more positive on mobile. I'm not calling this really a broad market recovery yet, but what we're seeing in particularly IoT devices, so talking about RF in the mobile space, we've seen a little bit of an improvement in orders in the 4th quarter, revenue in the Q1. As I mentioned before in the prior call the prior question, sorry, the mobile segment is the only segment of our market that we saw an increased revenue quarter over quarter. Now that's more particularly focused on the Android segment and some as we understand customer our customers' opportunity for sales in China and Korea, not yet a broad based recovery. Speaker 200:18:32So I think mobile will be incrementally better going forward. But realistically, I think a full blown recovery is more of a late this year to 2025 story. Speaker 500:18:47Great. Thank you. And if I can ask a second question a little more broadly on what are the ordering or quoting activities like right now, especially relative to 3 months ago? Are you starting to see some green shoots? Speaker 200:19:02The activity is still very much focused on new technologies, new applications, our customers win of a particular socket that drives some demand. No, I can't say that there is much of a broad based capacity addition at this point, Ross. It's we have qualifications, we have design wins. As a reference here on the call, we had a design win for a MEMS microphone application. It's a new product, customer selected. Speaker 200:19:40We already shipped a first system here going into their lab, and we have a production system shipping in the summertime. We had a design win, completed of a qualification of our tester with the new instrument for display driver IC final test, which we call P2, so the second insertion of test. This is the same customer that has selected us for P1 last year and drove a $20,000,000 of revenue in 2023. So we now got qualified for P2. So basically, new products, new opportunities more so than the general capacity. Speaker 200:20:21That is not happening so much at the moment. Operator00:20:32Our next question comes from the line of David Duley with Steelhead Securities. Speaker 600:20:40Yes. Thanks for taking my question. I was wondering when business does recover, which segments of your equipments do you think the handlers or testers will recover 1st? And perhaps maybe just handicap which end market you think will turn on first for Cohu? Speaker 200:21:01Hi, Dave. Luis again. So we've been thinking that and it's really a good question, but we've been thinking that the mobile segment and computing will start coming in 1st. With that said, with that comment said, the reality of utilization dynamics today, it is still higher in the automotive and industrial segment. We look at utilization by market and auto and industrial is hovering at about 78%. Speaker 200:21:37So it's pretty close to that capacity addition threshold that we call that is at 80%, while computing is much lower at 66% and mobile is at 67%. So it's a tale of 2 stories here because one, we believe that the mobile and computing should be the one coming on first. On the other hand, we're a lot closer to that threshold in the auto and industrial. I think that's another way of saying it could actually flip from what I have originally said. It could come back on the auto ahead of mobile. Speaker 600:22:16Okay. And with industrial and automotive utilization rates hanging in there, I guess that suggests for you and your customers that, that end market has stabilized and we're done I don't want to say done with the inventory correction, but we're done going down in the in your biggest segment of business? Speaker 200:22:40I think that's correct, Dave. I think we're done going down across segments right now. I mean mobile has been fairly depressed for the last three quarters and auto and industrial is also very depressed right now. It's what is encouraging about auto and industrial is our customers' ability to actually operate just below that 80% threshold. It hasn't really sunk. Speaker 200:23:07The utilization hasn't really sunk in as much. Nevertheless, customers have largely stopped buying capacities right now. They are buying specific technologies, but not general capacity. So yes, I'm encouraged by the auto and industrial guys. Speaker 600:23:26Okay. And then can you just remind us what your lead times are now? I imagine they're back to normalized levels, but I'm just kind of curious what normalized levels are now? Speaker 200:23:38They're largely unchanged from last quarter, Dave. It's a little tricky to talk about lead times when we're selling new technologies, right? So if you talk about our handlers, about 15 weeks is a fair number, testers about 12 weeks and contactors about 7 weeks. With that, I have to say, we're selling a lot of handler configurations that are brand new, a super high power dissipation, T core system for sort of for processor test. Well, that's a new head. Speaker 200:24:18It's a new thermal system and the lead time on that is a little longer. So we're selling new technology applications, the lead times are a little bit longer. I would expect if we get more capacity buys of standard products that despite having greater demand, we probably would see lead times go down a little bit first at first before they go up again. Speaker 600:24:42Okay. Now final question for me is, when you kind of look out over the server upgrade cycle that's pending for artificial intelligence and all of the associated components that are going to go into those new servers. There's going to be a lot more GPU and CPU content. Could you just talk about how that upgrade cycle might impact your product lines? Like I would think that maybe your thermal conditioning handlers would see an uptick from the server upgrade cycle. Speaker 600:25:13But so that's my question is like when we do hit the fat part of the AI upgrade cycle for servers, how will that impact your business? Speaker 200:25:23Yes. So the server upgrade cycle is going to be better for us than the actual data center cycle. The data center cycle is lower volume, very high ASP semiconductors, very low volumes. The data center, you changes the equation here, you get a bit more volume. So computing was, I think, 5% or 6 percent of our revenue last quarter sorry, in Q4. Speaker 200:25:53It came out at about 3% in Q1. I would expect to improve a little bit on the second half of the year, assuming that data center cycle is really going to pick up momentum as it's been said. Speaker 600:26:09And just so I understand, when you're saying the data center versus the server, what do you mean? Just help me understand which cycle you're referring to there? The traditional servers or AI servers? Speaker 200:26:20Yes. I'm sorry. I meant to say the server cycle. Speaker 600:26:23Okay. Thank you. Thanks. Operator00:26:31Our next question comes from the line of Krish Sankar with TD Cowen. Speaker 700:26:40Hi, this is Bob Maris. Thanks for taking my question. I know a bit of it's already been answered, but just in terms of the auto and industrial markets, how those have sort of shaped up over the compared to, I guess, 3 months ago. If I remember correctly, in the December quarter, sales were down, but the test utilization was actually on the higher side. And you mentioned you can continue to see a bit higher utilization in the March quarter despite sales down a bit. Speaker 700:27:10Just trying to think of how you are looking at that business or market, into the June quarter and second half of the year? Speaker 200:27:20Yes. So look, I'm going to start with Q1, right? The utilization, as I said, it's holding up pretty well, but revenue was down Q1 sequentially from Q4, both on the auto and the industrial side and pretty much the same at the same rate. Looking forward, we don't really go ahead to predict revenue by market segment for future quarters, but I'd be tempted to say just based on the order pattern that industrial will be weaker, automotive may hold up a little bit better than the industrial side. I think the industrial side continued to lose some ground relative to the other markets in the 1st quarter orders and therefore second quarter revenue. Speaker 700:28:20Great. Thank you. That's very helpful. Operator00:28:31Our next question comes from the line of Craig Ellis with B. Riley. Speaker 400:28:36Yes, thanks for taking the question. What I wanted to do Luis is just try a shorter term question and then a longer term question. And on the shorter term side, and this one goes back to some of the comments around downstream utilization and where the business is over the next couple of quarters. But assuming utilization is near current levels or maybe drifts up a little bit in a seasonally stronger second half, how do we think about the gives and takes with normal seasonality in the Q4, typically the business would be down much more in the system side than recurring. But typically that would be off much more significantly inflated levels. Speaker 400:29:22So can you just help us understand how we should think about some of the seasonal dynamics given the unusual year we've had thus far? Speaker 200:29:30Sure, Craig. As you know well, this industry has both seasonality and cyclicality, with seasonality essentially being the obviously the 12 month cycle, right, or the 12 month pattern of the wave and the cyclicality being more of a multi year, I think you call it as a 4 year, give or take 4 year period. When you overlay the 2, you may have one obscuring the other. And I think this is a classical year where you're not going to see in as much the seasonality because we're coming off of a trough where we are at the moment. And all the indications is the market starts to improve on the second half of the year and going into a 2025 recovery. Speaker 200:30:19In other words, I don't think you will see your typical seasonality this year. That's just not possible when the cycle is dominating what's happening in the market. It's very, very likely, and I've seen this happen in prior cycles, that you exit the year with a strong order momentum going into the next year when otherwise you should have seen a pretty weak seasonal period in the Q4. And I think that's going to be the case again this year. Again, I think cyclicality just overshadows seasonality in this environment. Speaker 400:30:57That's really helpful, Luis. And the second question is related to the target model. So great to see the business raise the gross margin target by 100 basis points to 50%. You guys have had really strong trailing 2 to 3 year gross margin execution. So can see that. Speaker 400:31:18My question was more on the line above that revenue. So from Q3 levels, we annualized a little north of $400,000,000 And so the target is about 2.5 times that. And what I wanted to do is give you the opportunity just to talk about the path that you see for the business to go from annualizing at $400,000,000 back to $1,000,000,000 What are some of the things that are going to be the biggest drivers to that growth, whether it's on the product side or other things that you and the team are working on that will in a much better demand environment deliver revenues that are out on your target? Thank you. Speaker 200:32:05Well, I can talk a little bit about the business dynamic heading to that target, Craig. We you can't necessarily pick the trough of the cycle and then try to explain it that $1,000,000,000 target. I think you got to look at more of a through cycle, what is the number at the through cycle level, which tends to be somewhere in the $750,000,000 to low $800,000,000 what we typically call a normalized or through cycle revenue level. How do we grow from there? It's a combination of design wins on the tester side, which we have been scoring, by the way, they just don't translate into volume at the moment. Speaker 200:32:51Optimization and wins on the interface side, which is holding pretty well considering the overall low utilization levels in the industry right now. And expansion of our inspection and metrology business, right. Those are the primary focus areas. We are from a market perspective, we're putting a tremendous amount of effort right now to align more to computing applications. We're a very strong believer on the long prospect long term prospects for computing. Speaker 200:33:26And I don't mean necessarily just AI data centers, which are low volume. But I think the wave that comes after that, which is computing at the edge or AI at the edge, if you will. When those get proliferated into cell phones, into cars with higher level of autonomous driving when you get more robotic systems and automated manufacturing tools. So basically AI at the edge should be a significant driver of sensors, communication and ultimately computing processing power. So one of the key areas of investments for us today is on the thermal subsystems and the implementation of those thermal systems into our equipment to enable capturing of share and supplying, supporting our customers when they start proliferating AI at the edge, so to speak, or more computing processing at consumer level products. Speaker 200:34:26So those are the primary drivers as we see our target to get up to $1,000,000,000 Speaker 400:34:34Great. Thank you. Operator00:34:39Our next question comes from the line of Toshiya Hari with Goldman Sachs. Speaker 800:34:46Hi, thank you so much for taking the question. Louise, you've given quite a bit of color in terms of what you're seeing from an end demand or end market perspective. I was hoping you could share what you're seeing by device type. I know you have exposure to various device types, but any specific areas of relative strength or relative weakness, MCUs, analog RF, etcetera, that would be helpful. Thank you. Speaker 200:35:14Okay. Toshiya, I don't have the data exactly in front of me by device type. I can qualitatively tell you the analog the general analog semiconductor space is weakest at the moment. Not significant strength also in microcontrollers. We see is some interesting dynamics in the processor space. Speaker 200:35:43As I said earlier, more of it is on the high ASP low quantities, but that is said to be migrating more to servers and therefore a little bit better improvement on the quantity side. We've also seen recently some improvement on RFIC manufacturing and demand for test and handling equipment. I would say battery management systems, which is it's part of analog at the end of the day, but BMS is becoming a bit of a mixed signal type device today. Battery management systems are weak, but maybe coming to a threshold of demand again. So hopefully that gives you a bit of color from a device segment size. Speaker 200:36:38And we don't participate today in memory, right? So I didn't comment on memory, but Cohu today does not participate in the memory space. Speaker 800:36:45Sure. Yes, that's really helpful. And then as a quick follow-up, you talked a little bit about your win in display drivers. I think you've talked about that in the past as well. But I think that market is currently dominated by one of your peers. Speaker 800:37:04So I'm sure your Korean customer is very happy that you guys are delivering product and technology. But I guess my question is, how big is that TAM today? I think it's a couple of 100,000,000, but if you can confirm that, that would be super helpful. And then how should we think about your ability to grow share over time? I know it takes time, but since you have one of the bigger customers secured, it must be a promising opportunity for you. Speaker 800:37:31So just curious how you're thinking about that business. Thank you. Speaker 200:37:35Yes. Toshiya, you're right about the couple of $100,000,000 We do tag that TAM at $200,000,000 The only problem is you said what is it now. The now part of it is the problem. So on average, it is a $200,000,000 TAM. We are now supplying to customers that make up about 50% of that TAM. Speaker 200:38:00So we view it as a basically a $100,000,000 opportunity. That doesn't mean we're going to get 100% of it. I think we will share it with our competitor. We have had worked very closely with and supplying to the Taiwanese manufacturer. And now we have been engaged with the Korea manufacturer, where the last year we captured their first insertion into probe, represent about 40% of their capital spending and it generated $20,000,000 of revenue for us last year. Speaker 200:38:40We now got qualified for their 2nd insertion, which is final test. We're yet to see how much of the remaining here, which could be about a $30,000,000 opportunity, how much of that we're going to get when business conditions normalize again. So all in all, you're correct about a $200,000,000 TAM, this year is depressed. Out of that $200,000,000 I think we can now serve $100,000,000 Speaker 800:39:07That's very helpful. Thank you. Operator00:39:13That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks. Speaker 100:39:20So I'd just like to close with saying thank you for joining our call today and we look forward seeing you soon. Operator00:39:28This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by