Cohu(COHU) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full year 2024 revenue was approximately $402 million, with a non-GAAP gross margin of 45% [8][21] - Q4 revenue was$ 94.1 million, within guidance, but gross margin was impacted by a $2.1 million inventory reserve charge, resulting in a gross margin of 41.8% [9][21] - Operating expenses for Q4 were lower than guidance at$ 45.3 million, leading to a non-GAAP operating loss of approximately $6 million [22] Business Line Data and Key Metrics Changes - Recurring revenue represented 62% of total revenue in Q4 and 65% for the full year 2024, indicating a stable revenue stream [20] - Systems revenue increased sequentially in computing, industrial, and consumer segments, but declined in automotive and mobile due to inventory corrections [10] - The company entered the memory and silicon carbide power semiconductor markets, expecting to generate$ 7 million in revenue from HBM inspection systems in 2025 [11][12] Market Data and Key Metrics Changes - Estimated test cell utilization at the end of December increased to 73%, with OSATs at 76% and IDMs at 70% [10] - Automotive and industrial markets are experiencing significant inventory corrections, with expectations of recovery in the second half of 2025 [56][68] Company Strategy and Development Direction - The company is focusing on aligning new products with compute applications, particularly in the data center market and AI at the EDGE [12][16] - Cohu aims to establish itself as a key player in AI-driven semiconductor manufacturing, with a projected annual growth rate of 50% or more for software revenue over the next three years [16] - The acquisition of Tignis is expected to enhance Cohu's software capabilities and expand its market reach [16][96] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by ongoing inventory corrections in the automotive and industrial sectors, predicting another two quarters of adjustment [56][57] - The company is optimistic about growth opportunities in data centers and AI applications, despite the current market conditions [55][56] - Q1 2025 revenue is guided to be approximately $97 million, impacted by customer requests to delay shipments [26] Other Important Information - Cash and investments decreased by$ 7 million during Q4, with a total of $262 million remaining on the balance sheet [24][25] - The company had no share repurchase activity in Q4, having repurchased approximately 915,000 shares for$ 27 million through the end of Q3 2024 [25] Q&A Session Summary Question: Revenue impact of new businesses - Management expects HBM to contribute about $7 million, silicon carbide about$ 5 million, and software around $1 million in 2025, totaling$ 25 million to $30 million from new drivers [38][39] Question: Utilization levels in automotive and industrial - Automotive and industrial markets are still digesting inventory, with expectations of recovery in the second half of 2025 [46][56] Question: Diamondx win details - The key parameter for winning the Diamondx business was cost of test, addressing various semiconductor applications [51] Question: Recovery in revenue line - Management is focusing on expanding penetration in high-growth segments like data centers, with a cautious outlook on market recovery [54][56] Question: Segment revenue projections for 2025 - Automotive and industrial are expected to recover first, followed by mobile, with specific revenue projections not yet available for 2025 [68] Question: Stability of recurring revenue - Recurring revenue is expected to remain stable, with historical data showing it has about one-third the volatility of systems revenue [84]