NASDAQ:COHU Cohu Q2 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-$0.12Consensus EPS -$0.09Beat/MissMissed by -$0.03One Year Ago EPSN/ACohu Revenue ResultsActual Revenue$104.70 millionExpected Revenue$105.00 millionBeat/MissMissed by -$300.00 thousandYoY Revenue GrowthN/ACohu Announcement DetailsQuarterQ2 2024Date7/31/2024TimeN/AConference Call DateWednesday, July 31, 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 Q2 2024 Earnings Call TranscriptProvided by QuartrJuly 31, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00day and thank you for standing by. Welcome to Cohu's Second 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. Operator00:00:36Please go ahead. Speaker 100:00:39Good afternoon, and welcome to our conference call to discuss Cohu's Q2 2024 results and Q3 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's 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 100:01:15Now 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, July 31, 2024, and Cohu assumes no obligation to update these statements for developments occurring after this call. Speaker 100:01:58Finally, 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 200:02:17Good afternoon. 2nd quarter results were in line with guidance with non GAAP gross margin of approximately 45% as we continue to navigate the trough of this semiconductor cycle. Revenue of nearly $105,000,000 was split 66% recurring in the balanced systems. Systems revenue increased sequentially in consumer, optoelectronic and computing markets, although offset by declines in automotive, industrial and mobile. Despite soft market conditions, we continue to execute well on new product developments and deliver on design wins to expand customer and addressable markets. Speaker 200:03:00The most notable validation of our strategy was a recent customer benchmark award of an estimated $100,000,000 business over 5 years for test automation and inspection systems. This award includes application. Combined with Cohu's AI inspection, which is part of our DI Core software suite, Krypton is delivering higher yield and productivity while enabling our customers push for automating back end manufacturing. Putting this into perspective, Cohu's inspection metrology revenue was about $70,000,000 during the prior up cycle and primarily driven by mobile semiconductor inspection. We're targeting to grow this business to $100,000,000 over the midterm, expanding applications to other market segments where we can add value to our customers. Speaker 200:04:05We also had a good quarter in our tester business and placed our Diamond X tester at 2 subcontractors in Taiwan. We received the first order for a Diamond X mixed signal configuration from a leading test subcontractor in Chun Li, Taiwan and another Taiwanese OSAT selected Diamond X to test RFiOT devices from a leading IC fabless company. We're tracking to plan to expand the Diamond X customer footprint positioning the tester as a cost effective broad application platform that enables customers to efficiently test our roadmap products in the coming decade. In support of this growth strategy, we announced in June the opening of a new engineering design center in Penang for development of test instrumentation. While sub seasonal test utilization in the automotive market is impacting near term revenue for both systems and interface products, we are pleased to have landed a major silicon carbide customer for our new C Strider Power Probe Card. Speaker 200:05:15C Strider utilizes Cohu's horizontal MEMS technology to enable improved performance and durability for testing power semiconductors such as silicon carbide. The product enables high current carrying capacity and with a multi site pressure technology enables high voltage test at temperature. This is Cohu's newest offering in probe car technology designed to meet the expanding needs of power semiconductor testing. Our goal since the acquisition of Xcerra almost 6 years ago has been to drive interface revenue penetration to 50% or more of Cohu systems. Last quarter results placed us at a 2 year average penetration of 44% or about 9 points higher than when we started this journey. Speaker 200:06:09In this soft market environment, we're applying the same playbook of past cycles and have been diligent in lowering expenses effectively delivering a strong gross margin while preserving critical R and D investments. Estimated test serialization has improved now for the 2nd quarter in a row to 74%, a 2 point sequential increase over the 1st quarter. Although we expect broad capacity orders to be triggered around 80% test sterilization, it has been encouraging to see the quarter over quarter improvements, particularly in computing that is up 3 points sequentially to 70% and mobile that's up 2 points to 69% utilization. The positive news comes tampered by automotive utilization down 1 point quarter over quarter to 77% at the end of June. Our data indicates that Cohu's largest customers in the analog semiconductor market are starting to see improved TAS cell utilization, likely at a pace that will put the industry in a recovery mode in the first half of twenty twenty five. Speaker 200:07:21In the meantime, we're carefully managing expenses to optimize cash flows, but now more than ever focused on design wins and execution of innovative product developments. Let me now turn it over to Jeff to provide further details on 2nd quarter results and Q3 guidance. Jeff? Speaker 100:07:42Thanks, Luis. Before I walk through the Q2 results and Q3 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 Q2 financial results. Cohu delivered revenue and profitability in line with our guidance. Speaker 100:08:13Q2 revenue was $104,700,000 recurring revenue, which is largely consumable driven and more stable than systems revenue, represented 66% of total revenue in Q2. During the Q2, no customer accounted for more than 10% of sales. Q2 gross margin was 45.1% in line with guidance and driven by Cohu's resilient recurring business. Operating expenses for Q2 were 46 $900,000 and lower than guidance by approximately $1,600,000 driven by lower labor and labor related costs. 2nd quarter non GAAP operating income was approximately breakeven and adjusted EBITDA was 3.8%. Speaker 100:09:03Interest income, net of interest expense and a foreign currency loss of approximately $400,000 was $1,800,000 Q2 pre tax income consists of foreign profits combined with a loss in the U. S. The Q2 tax provision of $2,700,000 reflects tax expense on foreign profits, but no tax benefit from the U. S. Loss due to our valuation allowance against deferred tax assets. Speaker 100:09:32Non GAAP EPS for the Q2 was a $0.01 loss. Now moving to the balance sheet. We generated positive cash flow from operations in Q2 of $1,100,000 despite trough revenues. Overall cash and investments decreased by $9,000,000 during Q2 to $262,000,000 due mainly to $8,000,000 used to repurchase 267,000 shares of Koyu common stock. CapEx in Q2 was $2,000,000 with approximately $1,000,000 related to our factories in the Philippines and Malaysia, supporting operations for our interface and automation businesses. Speaker 100:10:12Overall, Cohu's balance sheet remains strong 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 Q3 outlook. We're guiding Q3 revenue to be in the range of $95,000,000 plus or minus $5,000,000 reflecting continued weakness across end markets and although test utilization at customers production facilities increased quarter over quarter, it remains below the historical threshold for customers to add more test capacity. Q3 gross margin is forecasted to be approximately 45%, better than the financial target model at this level of revenue due in 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. We 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. Speaker 100:11:21Operating expenses for Q3 are projected to decrease about $1,000,000 quarter over quarter to approximately $46,000,000 due primarily to a reduction in labor and optimizations as we completed certain product developments. As I noted on prior earnings calls, 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 $46,000,000 per quarter in the second half of this year. We're projecting Q3 interest income net of interest expense and foreign currency impacts to be approximately $1,800,000 at current interest rates. We expect Q3 adjusted EBITDA to be approximately 1%. Speaker 100:12:12The Q3 non GAAP tax provision is expected to be approximately $1,800,000 because of tax on foreign profits without benefit from the U. S. Loss. Until markets recover, we expect a similar tax provision profile as we navigate through this cycle. The basic share count for Q3 is expected to be approximately 47,000,000 shares. Speaker 100:12:37That concludes our remarks. And now we'll open the call to questions. Operator00:13:03Our first question will come from the line of Brian Chin with Stifel. Speaker 300:13:09Hi there. Good afternoon. Thanks for letting us ask a few questions. I guess, can you first just provide a little color on the revenue outlook in 3Q by equipment versus recurring and also across key markets like mobility and industrial automotive? Speaker 100:13:27Hey, Brian. I'll provide the recurring versus system. So in Q3, we're expecting recurring to be about 68% of the revenue, 32% for systems. Speaker 200:13:42Yes. I think you can look at the presentation, Brian. We have the revenue the systems revenue distribution by markets where it came out stronger in the mobile as a percentage of total followed by at 9%, automotive 7%, industrial and consumer 5%, computing 4%. Speaker 300:14:07And do you expect like a similar composition in Q3 for those markets? Speaker 200:14:13No. When you look forward, we saw sort of strengthening demand in the computing and mobile markets and continued weakness in automotive. So I think what you see going forward is maybe computing will climb up the ladder and get closer to the mobile segment. Speaker 300:14:35Got it. Just a couple more for me. Do you anticipate test cell utilization trending higher into year end? And after operating at lower utilization for many quarters, if not years, I'd imagine there's been some retirement or maybe cannibalization of some of your installed base as a precursor to that maybe shipment pickup that you anticipate in first half of next year? Are you seeing test handler kit or spares revenue start to tick up? Speaker 300:15:03And do you have any visibility into sort of the 4Q revenue trend? Speaker 200:15:08Yes. So multiple questions there. As far as utilization go, we don't forecast utilization, Brian. We don't really have a model for that. But sitting at 74% and considering that end of the year is typically the seasonally lower quarter for demand, I would venture to say that utilization would be flattish to perhaps up a point or 2 by the end of the year. Speaker 200:15:34So that's where on the utilization front. It really depends on the puts and takes between improvements in mobile and computing and where automotive goes from here. I forgot what the other elements of your question were, but I think you talked about sort of how that impacts cannibalization of equipment. And we're certainly seeing that cannibalization happen right now at our customers, which has negatively impact sale of spare parts. Quite honestly, has even negatively impacted sale of interface products where certain customers are sub optimizing the utilization of the equipment that they have simply because they don't have that need in as much to run production and they are trying to conserve expenses. Speaker 200:16:25We expect that the first thing, the first real signs we'll see will be a surge in spares demand before we see a demand increase in equipment. We have not seen that in the Q2. Speaker 300:16:41Yes, got it. And I guess sort of maybe just to clarify that part of my multiple part question there. AP companies, they pointed to something like double digit declines in the auto, industrial and even the mobility test markets this year. How much do you see the test handler market ex memory down this year and in relation to ATE? And I ask that also because these equipment run rates look like maintenance or even really sub maintenance levels. Speaker 300:17:10And so I mean when was the last year that handle market maybe was this low, maybe 2018? And what was the trend in the market the following year? I imagine it was a pretty decent bounce back. Speaker 200:17:23Yes. I don't have specific year over year, maybe Jeff does, but I don't have it on my fingertips here for the handler market. But I think it is about this in a second. I think, yes, it's definitely a double digit sort of in the teens decline, perhaps even 20 percent decline year over year in 2024. It's actually lasting fairly long now if you think about the quarter over quarter sequence since kind of the middle of last year into where we are today. Speaker 200:17:57So if you look at past cycles, it's not uncommon to see revenue sort of go up 40%, 50%, even 60% on a year over year basis when you have a prolonged drought like we are having right now in the test and the test handle space. But with that said, don't have a prediction for you right now for 2025 other than the general discussion with customers is positive, particularly in computing and mobile in the near term, some indicators of industrial market recovery as well in the beginning of 2025. And then I think the wild card here is with the where's the turn of the corner on the automotive market. Speaker 300:18:46Okay. That's helpful. Thanks, Luis. Thanks, Jeff. Operator00:18:53Our next question will come from the line of Ross Cole with Needham and Company. Speaker 400:19:00Hi. Thank you for taking my question on behalf of Charles. So you had mentioned with Krypton, you have 2 new customers. And previously, I know you had mentioned that Krypton had been qualified. So are these the separate customers from the qualification you had previously mentioned? Speaker 400:19:17Or is it the same? Speaker 200:19:19Hi, Ross. We issued a press release here at the end of June about a qualification at a major customer automotive customer in Europe. Now we're talking about 2. 1 of these 2 is the one that was part of that press release, but we also had a second customer Qualify Criptan at the very end of June, also an European customer coincidentally, both European customers. So we have 2 customers qualified, 1 in the automotive space, 1 for an aerospace application for starters. Speaker 200:19:52And like I said, one of these were part of the press release we did in the middle of June. Speaker 100:19:58Great. Thank you for clarifying. Speaker 400:20:00And then if I can ask a second question as well. It sounds like you still expect auto and industrial weakness to continue a little longer. So you're seeing the mobile PC recovery first. And were you expecting that to start taking the recovery mode to start taking place around the first half twenty twenty five, it sounded like you said? Speaker 200:20:23Computing and mobile, we will see still we're going to see it turn this year already. I mean, we're seeing the demand and the revenue expectation here in the Q4. I think the unfortunate counter to that is the automotive continues to be weak. And so you kind of have to net out the weakness in automotive with the improving demand in mobile and computing for the Q4 of this year. Speaker 300:20:51All right, great. Thank you. Operator00:21:01Our next question will come from the line of David Duley with Steelhead Securities. Speaker 500:21:07Good afternoon. A couple of questions from me. I guess you talked about a silicon carbide probe card win, which I think is kind of a new piece of business. I was wondering if you might elaborate a little bit more on why you won the business and what the opportunities are in probe cards and for power and silicon carbide for you guys? Speaker 200:21:32Hi, Dave. Yes, great question. And you're correct. This is a power probe card is a new completely new product line for us. We have been supplying power contactors for the industry and including silicon carbide actually. Speaker 200:21:51This has been a successful business for us, differentiated business and customers have asked us to basically bring what we're doing in known good die, singulated die test into a probe card environment, sort of a probe environment. So we've done exactly what the customers have asked. And the first customer has qualified the product, placed an initial PO, and we have 2 other customers right behind it in qualification mode. So we're pretty excited to bring a new solution here that we believe for customers' feedback that's quite differentiated because it allows you to do multi site testing of devices at a very high currents, very high voltages. Speaker 500:22:43And could you help us understand what the size of this opportunity is either in the market or what might be for you guys? Speaker 200:22:51Yes, yes, yes. I recall you asked that question too. Sorry about that. Yes. Now we're looking at this particular customer that we broke in, we see their spending being about $7,000,000 a year. Speaker 200:23:04So let's see how much of that we can get. Speaker 500:23:09Okay. And then changing topics to the Diamond X wins, I think you mentioned a mixed signal win and another win, in IoT, I guess. Yes. Help maybe help us understand, again, the same question is how big of opportunity you think these expansion of your Diamondx platform is in total either in the TAM or the opportunities for you guys? And I appreciate all the detail. Speaker 200:23:42Yes. This one I'm going to have to be a little bit more vague on the opportunity side. Frankly, it's not that we have that much precision in this one. But it is a there's a Diamond X mixed signal configuration at a sort of leading OSAT in Taiwan. The tester selection was largely driven by a fabulous company into that OSAT. Speaker 200:24:06We tend to target things that are sort of $5,000,000 chunks of business. Whether this will be that or not, it's a little difficult for us to pinpoint it at this time. And then the other one was an RF IoT device application also at an OSAT in Taiwan and driven by a Taiwanese fabless RF company. Also same story here. We target $5,000,000 chunks. Speaker 200:24:38As you know, the RF market is not in its best shape at this moment. So I think we're looking at that as an opportunity for a $5,000,000 buy into next year. Speaker 500:24:51Okay. Thank you very much. Speaker 300:24:55Welcome. Operator00:24:57Our next question will come from the line of Mayur Pappuri with B. Riley. Speaker 600:25:04Hi. I'm calling in for Craig from B. Riley. My question is just like how can we look at the kind of shape of the eventual recovery? And what are some leading indicators that we can take a look at to see when that recovery is starting to pick up? Speaker 200:25:21Yes. Hi. It's a good question. And realistically, you got to look at it market by market, right? Not every market goes in tandem. Speaker 200:25:31It's not one monolithic semiconductor or end market driver. So we're seeing the obviously have seen for several quarters now, just not that much of a benefit for Cohu, but we've seen the AI data center GPU market rise and concurrent with that the DRAM or HBM application that has been going on for a few quarters. Now reminder, Cohu doesn't participate in memory today. We're now starting to see sort of the computing server market started to show signs of recovery. Along with that, we're seeing some green shoots in the mobile market. Speaker 200:26:12As I said before, we'll see some of that revenue materialize in the Q4. What comes behind that is likely to be industrial based on conversations we're seeing with customers today and that is probably a Q1 2025 story. And I think the big question mark still for us included is at what point does automotive starts to recover. And that's very important for Cohu, because Cohu's largest market segment is automotive. So automotive was the last to come down in this cycle and will naturally be the last to come back up. Speaker 200:26:50Question mark, is it Q1, Q2 next year, exactly when that will happen is what we're trying to understand. So a recovery has started, but it's going to go through phases market segment by market segment probably over the next year. Speaker 600:27:11All right. Thank you so much. Operator00:27:15That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks. Speaker 100:27:22Thank you. And before we sign off, I'd like to mention that we'll be participating in some conferences over the next few months and they are the Needham Virtual Conference on August 21st, the Jefferies Conference in Chicago on August 27th, the Evercore Conference also in Chicago on August 28th, and the Citi Conference in New York City on September 6. So if you're interested in meeting with us at any of those conferences, please let me know or reach out to the respective research analysts to schedule a meeting. So thank you for joining today's call and we look forward to speaking with you soon. Operator00:28:07This 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 Q2 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.comCrypto’s crashing…but we’re still profitingMost traders are panicking right now. Bitcoin’s dropping. Altcoins are bleeding. The stock market’s a mess. The news is screaming fear. But while most traders watch their portfolios tank…April 29, 2025 | Crypto Swap Profits (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 7 speakers on the call. Operator00:00:00day and thank you for standing by. Welcome to Cohu's Second 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. Operator00:00:36Please go ahead. Speaker 100:00:39Good afternoon, and welcome to our conference call to discuss Cohu's Q2 2024 results and Q3 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's 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 100:01:15Now 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, July 31, 2024, and Cohu assumes no obligation to update these statements for developments occurring after this call. Speaker 100:01:58Finally, 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 200:02:17Good afternoon. 2nd quarter results were in line with guidance with non GAAP gross margin of approximately 45% as we continue to navigate the trough of this semiconductor cycle. Revenue of nearly $105,000,000 was split 66% recurring in the balanced systems. Systems revenue increased sequentially in consumer, optoelectronic and computing markets, although offset by declines in automotive, industrial and mobile. Despite soft market conditions, we continue to execute well on new product developments and deliver on design wins to expand customer and addressable markets. Speaker 200:03:00The most notable validation of our strategy was a recent customer benchmark award of an estimated $100,000,000 business over 5 years for test automation and inspection systems. This award includes application. Combined with Cohu's AI inspection, which is part of our DI Core software suite, Krypton is delivering higher yield and productivity while enabling our customers push for automating back end manufacturing. Putting this into perspective, Cohu's inspection metrology revenue was about $70,000,000 during the prior up cycle and primarily driven by mobile semiconductor inspection. We're targeting to grow this business to $100,000,000 over the midterm, expanding applications to other market segments where we can add value to our customers. Speaker 200:04:05We also had a good quarter in our tester business and placed our Diamond X tester at 2 subcontractors in Taiwan. We received the first order for a Diamond X mixed signal configuration from a leading test subcontractor in Chun Li, Taiwan and another Taiwanese OSAT selected Diamond X to test RFiOT devices from a leading IC fabless company. We're tracking to plan to expand the Diamond X customer footprint positioning the tester as a cost effective broad application platform that enables customers to efficiently test our roadmap products in the coming decade. In support of this growth strategy, we announced in June the opening of a new engineering design center in Penang for development of test instrumentation. While sub seasonal test utilization in the automotive market is impacting near term revenue for both systems and interface products, we are pleased to have landed a major silicon carbide customer for our new C Strider Power Probe Card. Speaker 200:05:15C Strider utilizes Cohu's horizontal MEMS technology to enable improved performance and durability for testing power semiconductors such as silicon carbide. The product enables high current carrying capacity and with a multi site pressure technology enables high voltage test at temperature. This is Cohu's newest offering in probe car technology designed to meet the expanding needs of power semiconductor testing. Our goal since the acquisition of Xcerra almost 6 years ago has been to drive interface revenue penetration to 50% or more of Cohu systems. Last quarter results placed us at a 2 year average penetration of 44% or about 9 points higher than when we started this journey. Speaker 200:06:09In this soft market environment, we're applying the same playbook of past cycles and have been diligent in lowering expenses effectively delivering a strong gross margin while preserving critical R and D investments. Estimated test serialization has improved now for the 2nd quarter in a row to 74%, a 2 point sequential increase over the 1st quarter. Although we expect broad capacity orders to be triggered around 80% test sterilization, it has been encouraging to see the quarter over quarter improvements, particularly in computing that is up 3 points sequentially to 70% and mobile that's up 2 points to 69% utilization. The positive news comes tampered by automotive utilization down 1 point quarter over quarter to 77% at the end of June. Our data indicates that Cohu's largest customers in the analog semiconductor market are starting to see improved TAS cell utilization, likely at a pace that will put the industry in a recovery mode in the first half of twenty twenty five. Speaker 200:07:21In the meantime, we're carefully managing expenses to optimize cash flows, but now more than ever focused on design wins and execution of innovative product developments. Let me now turn it over to Jeff to provide further details on 2nd quarter results and Q3 guidance. Jeff? Speaker 100:07:42Thanks, Luis. Before I walk through the Q2 results and Q3 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 Q2 financial results. Cohu delivered revenue and profitability in line with our guidance. Speaker 100:08:13Q2 revenue was $104,700,000 recurring revenue, which is largely consumable driven and more stable than systems revenue, represented 66% of total revenue in Q2. During the Q2, no customer accounted for more than 10% of sales. Q2 gross margin was 45.1% in line with guidance and driven by Cohu's resilient recurring business. Operating expenses for Q2 were 46 $900,000 and lower than guidance by approximately $1,600,000 driven by lower labor and labor related costs. 2nd quarter non GAAP operating income was approximately breakeven and adjusted EBITDA was 3.8%. Speaker 100:09:03Interest income, net of interest expense and a foreign currency loss of approximately $400,000 was $1,800,000 Q2 pre tax income consists of foreign profits combined with a loss in the U. S. The Q2 tax provision of $2,700,000 reflects tax expense on foreign profits, but no tax benefit from the U. S. Loss due to our valuation allowance against deferred tax assets. Speaker 100:09:32Non GAAP EPS for the Q2 was a $0.01 loss. Now moving to the balance sheet. We generated positive cash flow from operations in Q2 of $1,100,000 despite trough revenues. Overall cash and investments decreased by $9,000,000 during Q2 to $262,000,000 due mainly to $8,000,000 used to repurchase 267,000 shares of Koyu common stock. CapEx in Q2 was $2,000,000 with approximately $1,000,000 related to our factories in the Philippines and Malaysia, supporting operations for our interface and automation businesses. Speaker 100:10:12Overall, Cohu's balance sheet remains strong 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 Q3 outlook. We're guiding Q3 revenue to be in the range of $95,000,000 plus or minus $5,000,000 reflecting continued weakness across end markets and although test utilization at customers production facilities increased quarter over quarter, it remains below the historical threshold for customers to add more test capacity. Q3 gross margin is forecasted to be approximately 45%, better than the financial target model at this level of revenue due in 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. We 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. Speaker 100:11:21Operating expenses for Q3 are projected to decrease about $1,000,000 quarter over quarter to approximately $46,000,000 due primarily to a reduction in labor and optimizations as we completed certain product developments. As I noted on prior earnings calls, 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 $46,000,000 per quarter in the second half of this year. We're projecting Q3 interest income net of interest expense and foreign currency impacts to be approximately $1,800,000 at current interest rates. We expect Q3 adjusted EBITDA to be approximately 1%. Speaker 100:12:12The Q3 non GAAP tax provision is expected to be approximately $1,800,000 because of tax on foreign profits without benefit from the U. S. Loss. Until markets recover, we expect a similar tax provision profile as we navigate through this cycle. The basic share count for Q3 is expected to be approximately 47,000,000 shares. Speaker 100:12:37That concludes our remarks. And now we'll open the call to questions. Operator00:13:03Our first question will come from the line of Brian Chin with Stifel. Speaker 300:13:09Hi there. Good afternoon. Thanks for letting us ask a few questions. I guess, can you first just provide a little color on the revenue outlook in 3Q by equipment versus recurring and also across key markets like mobility and industrial automotive? Speaker 100:13:27Hey, Brian. I'll provide the recurring versus system. So in Q3, we're expecting recurring to be about 68% of the revenue, 32% for systems. Speaker 200:13:42Yes. I think you can look at the presentation, Brian. We have the revenue the systems revenue distribution by markets where it came out stronger in the mobile as a percentage of total followed by at 9%, automotive 7%, industrial and consumer 5%, computing 4%. Speaker 300:14:07And do you expect like a similar composition in Q3 for those markets? Speaker 200:14:13No. When you look forward, we saw sort of strengthening demand in the computing and mobile markets and continued weakness in automotive. So I think what you see going forward is maybe computing will climb up the ladder and get closer to the mobile segment. Speaker 300:14:35Got it. Just a couple more for me. Do you anticipate test cell utilization trending higher into year end? And after operating at lower utilization for many quarters, if not years, I'd imagine there's been some retirement or maybe cannibalization of some of your installed base as a precursor to that maybe shipment pickup that you anticipate in first half of next year? Are you seeing test handler kit or spares revenue start to tick up? Speaker 300:15:03And do you have any visibility into sort of the 4Q revenue trend? Speaker 200:15:08Yes. So multiple questions there. As far as utilization go, we don't forecast utilization, Brian. We don't really have a model for that. But sitting at 74% and considering that end of the year is typically the seasonally lower quarter for demand, I would venture to say that utilization would be flattish to perhaps up a point or 2 by the end of the year. Speaker 200:15:34So that's where on the utilization front. It really depends on the puts and takes between improvements in mobile and computing and where automotive goes from here. I forgot what the other elements of your question were, but I think you talked about sort of how that impacts cannibalization of equipment. And we're certainly seeing that cannibalization happen right now at our customers, which has negatively impact sale of spare parts. Quite honestly, has even negatively impacted sale of interface products where certain customers are sub optimizing the utilization of the equipment that they have simply because they don't have that need in as much to run production and they are trying to conserve expenses. Speaker 200:16:25We expect that the first thing, the first real signs we'll see will be a surge in spares demand before we see a demand increase in equipment. We have not seen that in the Q2. Speaker 300:16:41Yes, got it. And I guess sort of maybe just to clarify that part of my multiple part question there. AP companies, they pointed to something like double digit declines in the auto, industrial and even the mobility test markets this year. How much do you see the test handler market ex memory down this year and in relation to ATE? And I ask that also because these equipment run rates look like maintenance or even really sub maintenance levels. Speaker 300:17:10And so I mean when was the last year that handle market maybe was this low, maybe 2018? And what was the trend in the market the following year? I imagine it was a pretty decent bounce back. Speaker 200:17:23Yes. I don't have specific year over year, maybe Jeff does, but I don't have it on my fingertips here for the handler market. But I think it is about this in a second. I think, yes, it's definitely a double digit sort of in the teens decline, perhaps even 20 percent decline year over year in 2024. It's actually lasting fairly long now if you think about the quarter over quarter sequence since kind of the middle of last year into where we are today. Speaker 200:17:57So if you look at past cycles, it's not uncommon to see revenue sort of go up 40%, 50%, even 60% on a year over year basis when you have a prolonged drought like we are having right now in the test and the test handle space. But with that said, don't have a prediction for you right now for 2025 other than the general discussion with customers is positive, particularly in computing and mobile in the near term, some indicators of industrial market recovery as well in the beginning of 2025. And then I think the wild card here is with the where's the turn of the corner on the automotive market. Speaker 300:18:46Okay. That's helpful. Thanks, Luis. Thanks, Jeff. Operator00:18:53Our next question will come from the line of Ross Cole with Needham and Company. Speaker 400:19:00Hi. Thank you for taking my question on behalf of Charles. So you had mentioned with Krypton, you have 2 new customers. And previously, I know you had mentioned that Krypton had been qualified. So are these the separate customers from the qualification you had previously mentioned? Speaker 400:19:17Or is it the same? Speaker 200:19:19Hi, Ross. We issued a press release here at the end of June about a qualification at a major customer automotive customer in Europe. Now we're talking about 2. 1 of these 2 is the one that was part of that press release, but we also had a second customer Qualify Criptan at the very end of June, also an European customer coincidentally, both European customers. So we have 2 customers qualified, 1 in the automotive space, 1 for an aerospace application for starters. Speaker 200:19:52And like I said, one of these were part of the press release we did in the middle of June. Speaker 100:19:58Great. Thank you for clarifying. Speaker 400:20:00And then if I can ask a second question as well. It sounds like you still expect auto and industrial weakness to continue a little longer. So you're seeing the mobile PC recovery first. And were you expecting that to start taking the recovery mode to start taking place around the first half twenty twenty five, it sounded like you said? Speaker 200:20:23Computing and mobile, we will see still we're going to see it turn this year already. I mean, we're seeing the demand and the revenue expectation here in the Q4. I think the unfortunate counter to that is the automotive continues to be weak. And so you kind of have to net out the weakness in automotive with the improving demand in mobile and computing for the Q4 of this year. Speaker 300:20:51All right, great. Thank you. Operator00:21:01Our next question will come from the line of David Duley with Steelhead Securities. Speaker 500:21:07Good afternoon. A couple of questions from me. I guess you talked about a silicon carbide probe card win, which I think is kind of a new piece of business. I was wondering if you might elaborate a little bit more on why you won the business and what the opportunities are in probe cards and for power and silicon carbide for you guys? Speaker 200:21:32Hi, Dave. Yes, great question. And you're correct. This is a power probe card is a new completely new product line for us. We have been supplying power contactors for the industry and including silicon carbide actually. Speaker 200:21:51This has been a successful business for us, differentiated business and customers have asked us to basically bring what we're doing in known good die, singulated die test into a probe card environment, sort of a probe environment. So we've done exactly what the customers have asked. And the first customer has qualified the product, placed an initial PO, and we have 2 other customers right behind it in qualification mode. So we're pretty excited to bring a new solution here that we believe for customers' feedback that's quite differentiated because it allows you to do multi site testing of devices at a very high currents, very high voltages. Speaker 500:22:43And could you help us understand what the size of this opportunity is either in the market or what might be for you guys? Speaker 200:22:51Yes, yes, yes. I recall you asked that question too. Sorry about that. Yes. Now we're looking at this particular customer that we broke in, we see their spending being about $7,000,000 a year. Speaker 200:23:04So let's see how much of that we can get. Speaker 500:23:09Okay. And then changing topics to the Diamond X wins, I think you mentioned a mixed signal win and another win, in IoT, I guess. Yes. Help maybe help us understand, again, the same question is how big of opportunity you think these expansion of your Diamondx platform is in total either in the TAM or the opportunities for you guys? And I appreciate all the detail. Speaker 200:23:42Yes. This one I'm going to have to be a little bit more vague on the opportunity side. Frankly, it's not that we have that much precision in this one. But it is a there's a Diamond X mixed signal configuration at a sort of leading OSAT in Taiwan. The tester selection was largely driven by a fabulous company into that OSAT. Speaker 200:24:06We tend to target things that are sort of $5,000,000 chunks of business. Whether this will be that or not, it's a little difficult for us to pinpoint it at this time. And then the other one was an RF IoT device application also at an OSAT in Taiwan and driven by a Taiwanese fabless RF company. Also same story here. We target $5,000,000 chunks. Speaker 200:24:38As you know, the RF market is not in its best shape at this moment. So I think we're looking at that as an opportunity for a $5,000,000 buy into next year. Speaker 500:24:51Okay. Thank you very much. Speaker 300:24:55Welcome. Operator00:24:57Our next question will come from the line of Mayur Pappuri with B. Riley. Speaker 600:25:04Hi. I'm calling in for Craig from B. Riley. My question is just like how can we look at the kind of shape of the eventual recovery? And what are some leading indicators that we can take a look at to see when that recovery is starting to pick up? Speaker 200:25:21Yes. Hi. It's a good question. And realistically, you got to look at it market by market, right? Not every market goes in tandem. Speaker 200:25:31It's not one monolithic semiconductor or end market driver. So we're seeing the obviously have seen for several quarters now, just not that much of a benefit for Cohu, but we've seen the AI data center GPU market rise and concurrent with that the DRAM or HBM application that has been going on for a few quarters. Now reminder, Cohu doesn't participate in memory today. We're now starting to see sort of the computing server market started to show signs of recovery. Along with that, we're seeing some green shoots in the mobile market. Speaker 200:26:12As I said before, we'll see some of that revenue materialize in the Q4. What comes behind that is likely to be industrial based on conversations we're seeing with customers today and that is probably a Q1 2025 story. And I think the big question mark still for us included is at what point does automotive starts to recover. And that's very important for Cohu, because Cohu's largest market segment is automotive. So automotive was the last to come down in this cycle and will naturally be the last to come back up. Speaker 200:26:50Question mark, is it Q1, Q2 next year, exactly when that will happen is what we're trying to understand. So a recovery has started, but it's going to go through phases market segment by market segment probably over the next year. Speaker 600:27:11All right. Thank you so much. Operator00:27:15That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks. Speaker 100:27:22Thank you. And before we sign off, I'd like to mention that we'll be participating in some conferences over the next few months and they are the Needham Virtual Conference on August 21st, the Jefferies Conference in Chicago on August 27th, the Evercore Conference also in Chicago on August 28th, and the Citi Conference in New York City on September 6. So if you're interested in meeting with us at any of those conferences, please let me know or reach out to the respective research analysts to schedule a meeting. So thank you for joining today's call and we look forward to speaking with you soon. Operator00:28:07This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by