Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cohu Inc (COHU, Financial) achieved a non-GAAP gross margin of approximately 45%, in line with guidance, despite challenging market conditions.
- The company secured a significant customer benchmark award estimated at $100 million over five years for test automation and inspection systems.
- Cohu Inc (COHU) successfully placed its Diamondx Tester at two subcontractors in Taiwan, expanding its customer footprint.
- The company opened a new engineering design center in Penang to support growth in test instrumentation development.
- Cohu Inc (COHU) generated positive cash flow from operations in Q2, maintaining a strong balance sheet with $262 million in cash and investments.
Negative Points
- Revenue for Q2 was $104.7 million, reflecting continued weakness across end markets, particularly in automotive and industrial sectors.
- The company reported a non-GAAP EPS loss of $0.01 for the second quarter.
- Operating expenses were $46.9 million, although lower than guidance, indicating ongoing cost pressures.
- Test cell utilization remains below the historical threshold for customers to add more test capacity, impacting revenue growth.
- Cohu Inc (COHU) anticipates Q3 revenue to be in the range of $95 million, plus or minus $5 million, reflecting ongoing market challenges.
Q & A Highlights
Q: Can you provide a breakdown of the revenue outlook for Q3 by equipment versus recurring revenue and across key markets like mobility, industrial, and automotive?
A: In Q3, we expect recurring revenue to be about 68% and systems revenue to be 32%. The systems revenue distribution by markets shows stronger performance in mobile, followed by automotive at 9%, industrial at 7%, consumer at 5%, and computing at 4%. Looking forward, we anticipate strengthening demand in computing and mobile markets, with continued weakness in automotive.
Q: Do you anticipate test cell utilization trending higher into year-end, and are you seeing any uptick in test handler kit or spares revenue?
A: We don't forecast utilization, but sitting at 74%, and considering the end of the year is typically lower in demand, utilization might be flattish or up slightly. We are seeing some cannibalization of equipment at customers, impacting spare parts sales. We expect a surge in spares demand before equipment demand increases, but we haven't seen that yet in Q2.
Q: How much do you see the test handling market ex-memory down this year compared to ATEs, and what was the trend in the market the following year?
A: The test handling market is down in the teens, perhaps even 20% year-over-year in '24. Past cycles have shown revenue can increase 40% to 60% year-over-year after a prolonged downturn. While we don't have a specific prediction for 2025, discussions with customers are positive, especially in computing and mobile markets.
Q: Regarding the Krypton platform, are the two new customers separate from the previously mentioned qualification?
A: One of the two new customers is the same as mentioned in our previous press release, a major automotive customer in Europe. The second customer, also European, qualified Krypton for an aerospace application. So, we now have two customers qualified: one in automotive and one in aerospace.
Q: Can you elaborate on the silicon carbide probe card win and the opportunities in probe cards for power and silicon carbide?
A: The power probe card is a new product line for us, extending our power contactor business into a probe environment. The first customer has qualified the product and placed an initial order, with two more customers in qualification. This particular customer spends about $7 million annually, and we aim to capture a significant portion of that.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
