Cohu(US:COHU)2023-08-03 17:55Financial Data and Key Metrics Changes - Cohu reported Q2 revenue of $168.9 million, slightly above the midpoint of guidance, with a non-GAAP gross margin of 47.8%, an increase of 130 basis points year-over-year [66][64] - Non-GAAP operating income for Q2 was 17.7% of revenue, and adjusted EBITDA was 19.7% [7] - Cash flow from operations in Q2 was strong at $53 million, with cash and investments growing to $372 million at the end of the quarter [20] Business Line Data and Key Metrics Changes - The systems business contributed 52% of Q2 revenue with approximately 41% gross margin, while the recurring business accounted for 48% of revenue at about 55% gross margin [70][64] - Operating expenses for Q2 were approximately $50.8 million, which was $1 million lower than guidance [7] - Q3 operating expenses are projected to decrease to approximately $50 million as the company exercises tight control over expenses [21] Market Data and Key Metrics Changes - The automotive and industrial segments combined accounted for 31% of Q2 total revenue, while mobility remained particularly weak [70] - Estimated test cell utilization was down 4 points quarter-over-quarter, ending Q2 at approximately 73% [18] - The company expects a sequential increase in orders in Q3 compared to Q2, indicating a potential recovery in the automotive and industrial markets [37][34] Company Strategy and Development Direction - Cohu is focused on expanding its recurring business, broadening the use of its Diamondx platform into automotive and industrial customers, and increasing subscriptions to its emerging software business [65] - The company is expanding its infrastructure in the Philippines to support growth in its interface business, with a new facility expected to become operational in the first half of 2024 [64] - Cohu aims to leverage its differentiated products and stable high-margin recurring business to enhance profitability and cash flow through industry cycles [10][8] Management's Comments on Operating Environment and Future Outlook - Management noted that the current order forecast is projected to grow sequentially in Q3, indicating a potential recovery from the current cycle trough [21][39] - The company expressed confidence in achieving mid-term targets of $1 billion in revenues and gross margins of 49%, driven by growth in the automotive and industrial markets [41][33] - Management highlighted that the automotive and industrial markets are expected to grow at a double-digit rate, with significant opportunities in high-performance computing and power semiconductor applications [39][40] Other Important Information - Cohu's balance sheet remains strong, supporting debt reduction, share repurchase programs, and investment opportunities [8] - The company repurchased 2.7 million shares in Q2, with total CapEx for 2023 expected to remain at approximately $20 million [73][8] Q&A Session Summary Question: What changed in terms of deliveries in the past 60 days? - Management noted that orders in the auto and industrial space were paused in June, with approximately $30 million pushed down the line by about six months [13][18] Question: Are orders growing in September, and what does that mean for December revenue? - Management indicated that they expect a sequential increase in orders in Q3, which should translate into a sequential increase in revenue, although it is early to pin down specific numbers [56][9] Question: What is the current visibility into test utilization trends? - Management stated that test utilization came down to 73% in Q2, but with the delivery of testers expected in Q3, utilization is likely to climb again [57][59] Question: Can you provide more color on the design win with a hyperscaler? - Management clarified that the design win was for a thermal handler, not a tester, and emphasized the importance of this win for expanding their market presence [46][45]