Cohu(US:COHU)2024-02-16 00:53Financial Data and Key Metrics Changes - In Q4 2023, Cohu reported revenue of $137.2 million, exceeding the midpoint of guidance, with full year 2023 revenue at $636.3 million [32] - Non-GAAP gross margin for Q4 was 48.5%, approximately 250 basis points higher than guidance, while full year 2023 gross margin was 47.9%, a record high [11][33] - Non-GAAP EPS for Q4 was $0.23, and full year 2023 EPS was $1.62 [11][18] - Adjusted EBITDA for Q4 was 13% of revenue, while full year adjusted EBITDA was 17.9% [33] Business Line Data and Key Metrics Changes - Recurring revenue represented 54% of total revenue in Q4 and 49% for full year 2023, with a three-year compound growth rate of 5% [12][32] - Test cell utilization dropped to 71% at the end of Q4, with specific segments showing low utilization: computing at 68%, consumer at 69%, and mobile at 76% [5][13] Market Data and Key Metrics Changes - The automotive and industrial semiconductor markets are experiencing softer demand, impacting test and inspection systems [5] - Cohu's Diamondx inhalers were qualified for new customers in China, supporting local automotive and display driver IC manufacturing [6] Company Strategy and Development Direction - Cohu aims to expand its recurring business and has introduced new solutions under the DI-Core analytics platform, including AI inspection software [12] - The company is focusing on new product development and customer qualifications to position itself for recovery in semiconductor cycles [13] - Cohu is pursuing strategic alignment with computing customers, particularly hyperscalers expanding data center infrastructure [6] Management's Comments on Operating Environment and Future Outlook - Management expects a semiconductor recovery in the second half of 2024, with lead times returning to normal [15] - Despite near-term demand being subdued, the company is well-positioned to respond to customer needs as test cell utilization improves [15] - Management noted that utilization rates around 80% typically indicate capacity buys, and they are monitoring trends towards that threshold [52] Other Important Information - Cohu's total CapEx for 2023 was approximately $16 million, with $3.9 million in Q4, including $2 million for the new Philippines facility [19][34] - The company repaid a Term Loan B balance of $29.3 million, which will increase net interest income by approximately $200,000 per quarter [19] Q&A Session Summary Question: What are the expectations for the back half of the year regarding equipment spend and performance between systems and recurring revenue? - Management indicated reliance on customer information suggesting a recovery in the automotive and industrial sectors, with some signs of order patterns returning in the mobile device market [24] Question: Can you provide insights on utilization rates across segments? - Utilization rates were stable at 71% throughout Q4, with mobile at 76%, consumer at 69%, and automotive/industrial at 81% [26] Question: How do you see the mix of recurring and system revenue affecting margins in Q1? - The mix is expected to skew more towards recurring revenue in Q1, which supports margins despite some degradation in system revenue due to fixed costs [48]