Cohu(US:COHU)2023-11-02 16:00Part I Financial Information Financial Statements Presents Cohu, Inc.'s unaudited condensed consolidated financial statements for Q3 2023, covering key financial positions and performance Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Data (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $718,567 | $764,851 | | Total Assets | $1,167,518 | $1,227,414 | | Total Current Liabilities | $128,444 | $160,872 | | Total Liabilities | $221,282 | $298,573 | | Total Stockholders' Equity | $946,236 | $928,841 | | Total Liabilities and Stockholders' Equity | $1,167,518 | $1,227,414 | Condensed Consolidated Statements of Income Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $150,804 | $206,687 | $499,096 | $621,670 | | Income from Operations | $7,402 | $33,707 | $42,938 | $98,314 | | Net Income | $3,915 | $24,882 | $30,184 | $75,219 | | Diluted EPS | $0.08 | $0.51 | $0.63 | $1.53 | Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive Income (Loss) (in thousands) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $3,915 | $24,882 | $30,184 | $75,219 | | Other Comprehensive Loss, net of tax | $(10,406) | $(23,021) | $(6,953) | $(45,144) | | Comprehensive Income (Loss) | $(6,491) | $1,861 | $23,231 | $30,075 | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $928.8 million at December 31, 2022, to $946.2 million at September 30, 2023. The increase was primarily driven by net income of $30.2 million, partially offset by common stock repurchases of $10.9 million and an increase in accumulated other comprehensive loss of $7.0 million5816 Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended (in thousands) | Cash Flow Activity | Sep 30, 2023 | Sep 24, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $98,769 | $85,295 | | Net cash provided by (used in) investing activities | $12,255 | $(58,325) | | Net cash used in financing activities | $(56,007) | $(78,685) | | Effect of exchange rate changes on cash | $(3,972) | $(6,088) | | Net increase (decrease) in cash | $51,045 | $(57,803) | | Cash and cash equivalents at end of period | $293,386 | $232,398 | Notes to Unaudited Condensed Consolidated Financial Statements - On January 30, 2023, the company completed the acquisition of MCT Worldwide, LLC for a purchase price of $26.8 million. The acquisition was accounted for as a business combination, and MCT's results have been included since the acquisition date115 - During the first nine months of 2023, the company prepaid $34.1 million of its Term Loan Credit Facility, resulting in a loss on debt extinguishment of $0.4 million. The outstanding principal as of September 30, 2023, was approximately $30.2 million149 - The company initiated a restructuring program related to the MCT acquisition, incurring $2.0 million in charges during the first nine months of 2023. This program includes consolidating manufacturing operations in Malaysia155130 - Subsequent to the quarter end, on October 2, 2023, Cohu completed the acquisition of Equiptest Engineering Pte Ltd. (EQT) for a cash payment of 66.0 million Singapore dollars234 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, noting significant net sales decline in Q3 and YTD 2023 due to macroeconomic factors and reduced demand Results of Operations Q3 2023 vs Q3 2022 Performance (in millions) | Metric | Q3 2023 | Q3 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $150.8 | $206.7 | -27.0% | | Gross Margin % | 47.0% | 47.4% | -0.4 p.p. | | Net Income | $3.9 | $24.9 | -84.3% | Nine Months 2023 vs Nine Months 2022 Performance (in millions) | Metric | Nine Months 2023 | Nine Months 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $499.1 | $621.7 | -19.7% | | Gross Margin % | 47.5% | 46.7% | +0.8 p.p. | | Net Income | $30.2 | $75.2 | -59.8% | - The decrease in net sales was primarily driven by lower demand for automotive, industrial, mobility (including 5G-related products), and computing applications due to the current macroeconomic environment282212 Liquidity and Capital Resources - As of September 30, 2023, the company had cash, cash equivalents, and short-term investments of $387.6 million, a slight increase from $385.6 million at the end of 2022295 - Net cash provided by operating activities for the first nine months of 2023 was $98.8 million, up from $85.3 million in the same period of 202222318 - During the first nine months of 2023, the company repurchased 309,985 shares of its common stock for $10.9 million. As of September 30, 2023, $71.1 million remained available under the share repurchase program299173 - Total indebtedness was reduced to $41.4 million at September 30, 2023, primarily through a $34.1 million prepayment of the Term Loan Credit Facility during the first nine months of the year204352 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk from variable-rate debt and investments, and foreign currency exchange risk from its international operations - The company is exposed to interest rate risk on its $30.2 million Term Loan Credit Facility, which has a variable interest rate based on SOFR plus a margin. The effective rate was 8.9% at September 30, 2023331 - A hypothetical 10% devaluation of the U.S. Dollar against the functional currencies of its foreign operations would result in an approximate $37.0 million positive translation adjustment to stockholders' equity333 Controls and Procedures Management, including CEO and CFO, concluded disclosure controls and procedures were effective as of September 30, 2023, with no material internal control changes - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period334361 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls335 Part II Other Information Legal Proceedings The company is involved in ordinary course legal proceedings, which management does not expect to materially affect financial position or results - The company states that it is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition231336 Risk Factors Updates 2022 Form 10-K risk factors, covering financial institution instability, semiconductor market downturn, AI use, and geopolitical instability - The company identifies risks related to the instability of financial institutions, highlighting the potential for loss of cash deposits exceeding FDIC limits363337 - A significant downturn in the semiconductor mobility market, with sales declining 56.7% in the last twelve months, and recent weakening in automotive and industrial segments are cited as having an adverse impact on sales365339 - Risks associated with the use of Artificial Intelligence (AI) are disclosed, including potential for incorrect data, regulatory actions, and diminished human oversight340342 - Geopolitical instability, particularly in Asia (Taiwan Strait), the conflict in Ukraine, and conflict in the Middle East, are noted as risks that could disrupt manufacturing, supply chains, and sales343368 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered equity sales and detailed common stock repurchases, including 133,100 shares for $4.7 million in Q3 2023 Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Weighted-Average Price Paid per Share | Total Cost (in thousands) | | :--- | :--- | :--- | :--- | | Jul 2 - Jul 29, 2023 | 0 | N/A | $0 | | Jul 30 - Aug 26, 2023 | 43,000 | $35.72 | $1,540 | | Aug 27 - Sep 30, 2023 | 90,000 | $34.80 | $3,134 | | Total | 133,000 | $35.10 | $4,674 | - As of September 30, 2023, approximately $71.1 million remained available for future repurchases under the company's share repurchase program345 Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities370347 Exhibits This section lists Form 10-Q exhibits, including CEO and CFO certifications under Sarbanes-Oxley Act and Inline XBRL documents - The report includes certifications from the Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002350