Cohu(US:COHU)2022-07-29 02:01Financial Data and Key Metrics Changes - Cohu reported a revenue increase of 9.8% quarter-over-quarter to $217.2 million, with non-GAAP EPS at $0.81, exceeding guidance [5][24]. - Gross margin improved to 46.5%, benefiting from growth in the semiconductor test business and increased in-sourcing of contactor manufacturing [6][24]. - Operating expenses were lower than guidance at $51.9 million, with non-GAAP operating income at 22.6% of revenue and adjusted EBITDA at 24.9% [27][28]. Business Line Data and Key Metrics Changes - The semiconductor test business saw increased utilization, although it decreased by three points to about 84% due to softness in mobility and consumer markets [6]. - The Interface business benefited from demand in xEV and industrial power applications, capturing multiple system orders for silicon carbide power devices [10]. - The Inspection and Metrology segment qualified the Neon platform at two new customers and launched six new evaluations [13]. Market Data and Key Metrics Changes - Demand in automotive and industrial markets remains robust, while consumer and mobility demand has softened [19][20]. - Cohu anticipates strong performance in automotive, industrial, and data center markets, with expectations of a ramp in high-end smartphone demand and growth in automotive ADAS and xEV [21][22]. Company Strategy and Development Direction - Cohu aims to achieve a $1 billion revenue target and a 49% non-GAAP gross margin by expanding the use of Diamondx, vision inspection systems, interface products, and data analytics [22]. - The company is focused on increasing in-sourcing of contactor manufacturing to reach 80% by the end of the year, with a target gross margin of high 40% for the contactor business by mid-2023 [26]. Management's Comments on Operating Environment and Future Outlook - Management noted concerns about rising interest rates and persistent inflation in the U.S., but remains optimistic about converting new customer evaluations into wins [19][20]. - The company is not forecasting 2023 yet but expects a ramp in business driven by high-end smartphone demand and continued growth in automotive and industrial sectors [21][22]. Other Important Information - Cohu's cash flow from operations was strong at $44 million, with cash and investments growing to $368 million [28]. - The company is facing supply chain constraints, particularly with IC components, which negatively impacted gross margin by approximately 130 basis points in Q2 [25][70]. Q&A Session Summary Question: Market share wins and application gains - Management indicated that with delivery pressures relaxing, it is a better time to drive application wins and share gains, with several new evaluations expected over the next few quarters [31][32]. Question: Strategic sourcing and shipment confidence - Management confirmed that locking up supply on critical chips is tied to both backlog and market availability, providing a positive outlook for faster deliveries [34][35]. Question: Impact of automotive and industrial markets on gross margins - Management expects steady gross margins in the second half of the year, guided at 46.5%, with less impact from market mix due to structural improvements [36]. Question: Progress in silicon carbide products - Management elaborated on significant business captured in Japan for testing power management devices and ongoing business in silicon carbide automation and inspection [40][41]. Question: Lead times for different products - Lead times for test automation systems range from 14 to 24 weeks, while inspection systems are 20 to 24 weeks, and ATE platforms are 16 to 20 weeks [81]. Question: Exposure to Intel and implications - Management confirmed that Intel is not a 10% customer but does have business with them, particularly in automation systems and recurring business for data center applications [84].