Cohu Inc (COHU) 2011 Q2 法說會逐字稿

Greetings, and welcome to the Cohu Incorporated second quarter 2011 earnings call. At this time, all participants are in a listen only mode. A brief question and answer for session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. James Donahue, Chairman, President and CEO of Cohu Incorporated. Thank you, sir, you may begin.

Good afternoon, everyone. With me today is Jeff Jones, our Chief Financial Officer. I hope you have a copy of our earnings release, but if you need 1, you can obtain it from our website, cohu.com or by contacting Cohu Investor Relations at 858-848-8106. I will provide an overview and comments on Q2 2011 results, and then Jeff will take us through the financials. We will conclude with comments on the current business environment and then take your questions. But, before we go any further, Jeff has information concerning forward-looking statements, estimates and other matters that we will discuss during today's call.

Thanks, Jim. The Company's discussion this afternoon will include forward-looking statements reflecting management's current expectations concerning certain aspects of the Company's future business. These statements are based on current information that we have assessed that which by its nature is subject to rapid and even abrupt changes.

Forward-looking statements include our comments regarding the Company's expectations regarding industry conditions and future operations, and financial results and any comments we make about the Company's future in response to your questions. Our comments speak only as of today, July 20, 2011, and the Company assumes no obligation to update these comments.

Certain matters discussed on this conference call, including statements concerning Cohu's new products and expectations of business conditions, orders, sales and operating results, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected or forecasted.

Such risks and uncertainties include, but are not limited to, our ability to convert new products under development into production on a timely basis, support product development and meet customer delivery and acceptance requirements for next generation equipment, our reliance on third-party contract manufacturers, failure to obtain customer acceptance resulting in the inability to recognise revenue and accounts receivable collection problems.

Customer orders may be canceled or delayed, inventory, goodwill and other intangible asset write-downs, the concentration of our revenues from a limited number of customers, intense competition in the semiconductor test handler industry, our reliance on patents and intellectual property, compliance with US export regulations and the cyclical and unpredictable nature of capital expenditures by semiconductor manufacturers.

These and other risks and uncertainties are discussed more fully in Cohu's filings with the Securities and Exchange Commission, including the most recently filed Form 10-K and Form 10-Q. Cohu assumes no obligation to update the information in this release. Further, our comments and responses to any questions will not make reference to any specific customers, as we are precluded from disclosing such information by our non disclosure agreements.

Sales for the second quarter were $80.9 million, at the high end of our guidance. This is an 8% increase from last year's second quarter and a decrease of 10% from the first quarter of 2011. Non-GAAP income per share was $0.28 compared to $0.36 for both the first quarter of 2011 and the second quarter of 2010.

Cash and investments were $101 million, and Cohu's balance sheet remains free of bank debt. Orders increased to $80.6 million from $75.3 million for the first quarter. Semiconductor equipment orders increased 13% sequentially to $69.1 million and were at the highest level since the third quarter of 2010.

Quarter ending backlog was $84.9 million. The semiconductor group unit order distribution was high-speed handlers 78%, thermal handlers 19% and other systems 3%. During the quarter, we were selected by a major European IDM as the supplier of pick and place handling equipment integrated with our acoustic and pressure MEMS test units. We expect additional production orders in the third quarter.

Since the acquisition of Rasco, we have expanded our MEMS applications library and now provide MEMS solutions for our complete product line which includes gravity, test and strip and pick and place handlers.

Repeat orders were received for strip handlers, and we are in discussion with two new customers for evaluations during the second half of this year. A new customer ordered its first Rasco gravity handler, and we expect to win at least one additional new gravity handler customer in the third quarter.

Q2 pick and place handler orders were weighted towards our high-speed systems. However we expect an increase in Pyramid thermal handler orders from our lead microprocessor customer during the second half of 2011.

Additionally, we received a large order to upgrade Pyramid systems to buy 8 parallel test capability, and initial orders for our V-Core vision inspection module, which is designed to detect IC package defects such as marks, stains and micro cracks.

During the quarter, we received repeat orders for the Matrix high speed handler from 3 major IDMs and won an initial order from a third large IDM, following a runoff against a competitor. This customer will be using the Matrix to test micro controllers, up to 32 devices in parallel. We added a new customer, a Korean test subcontractor who until now has used a competitor's equipment, and we expect follow on orders by the end of this year.

Turning to our other businesses, at the electronics division, quote activity and interest in our new Helios IP cameras is high. Customers are excited about the capabilities of these new cameras, including the truly exceptional video quality from Cohu's high-definition models.

In the second quarter, we received and shipped a major order from a state Department of Transportation that is installing several hundred Cohu Helios cameras along their highways as part of an upgrade of their traffic incident management system.

Throughout the rest of this year, Cohu will release additional cameras in the Helios family, and we expect orders to increase as the new products roll out. Additionally this quarter, in the third quarter, we will field test our new Real Traffic Analytics package. This is software that enables customers to automatically measure and analyze traffic flows and patterns.

BMS continues to capitalize on its focus on the government surveillance, unmanned aerial vehicle and law enforcement markets. Business opportunities are expanding, particularly in the Mideast -- Middle East, where BMS is a recognized leader and has a sizable installed base of equipment. We expect BMS to have a strong third quarter. Now Jeff will provide details on Cohu's financial results for the second quarter.

Semiconductor equipment related revenues for Q2 were approximately 76% international and 24% domestic. International sales were distributed 88% Asia Pacific, 7% the Americas and 5% other. We recorded approximately $900,000 of stock -based compensation expense and approximately $1.1 million of purchased intangible amortization expense in Q2.

The comments I make today include the impact of these items. Gross margin was 32.8% in Q2 and in line with our projection. Despite projected lower sales volume the third quarter, we expect gross margin in Q3 to be about the same as Q2. Operating expense in Q2 was $20.7 million and in line with our projection. We expect operating expense in Q3 to be approximately the same as Q2.

The Q2 effective tax rate was 15.1%. This is our expected 2011 effective tax rate as the expense on our US earnings is partially offset by the partial reversal of the deferred tax asset and valuation allowance recorded in 2009 and our foreign earnings which are taxed at substantially lower rates, lower than the federal US rate.

Excluding the impact of the deferred tax asset valuation allowance, our 2011 effective tax rate would be approximately 30%. Q2 EPS on a GAAP basis was $0.21. Non-GAAP EPS, which excludes that after-tax impact of share-based compensation and amortization of intangibles was $0.28 for the quarter.

Moving to the balance sheet, cash and investments were approximately $101.4 million in June, decreasing $5.3 million from March, primarily due to a $7 million German income tax payment in Q2, as noted during our Q1 earnings call in April. Cash used in operations in Q2 was $4.7 million.

Net accounts receivable were $53.3 million in June, decreasing $4.4 million in March. DSO at June was 65, decreasing from 67 at March. Inventory was $76.7 million at June, increasing primarily due to purchases made in connection with production requirements to meet forecasted thermal handler orders with shipments expected to ramp in Q4.

Additions to property plant equipment for Q2 were approximately $200,000, and depreciation was approximately $1.3 million. Deferred profit at June was $7.7 million compared to $9.3 million at March. The related deferred revenue at the end of Q2 was $19.5 million compared to 26 -- excuse me, $25.6 million at March and consists primarily of revenue deferrals on shipments of test handlers.

Thanks, Jeff. Based on the most recent VLSI research data, we have grown our position as the number one supplier of IC test handlers. We estimate that we gained 8 points to a 32% market share in the 2010 ICM handler market. Last year, we ramped productions of 2 new pick and place handlers and introduced new MEMS test units that have enabled us to capture increased share across all market segments.

Moreover, the cross selling opportunities and synergies that we expected from the Rasco acquisition are being realized as customers clearly see the benefits of working with a financially sound single supplier with a broad product line, extensive product development and engineering resources and the largest field service organization in the industry.

In addition to our core handler business, we continue to invest in key technologies such as the T-Core vision system that I mentioned earlier that provide critical capabilities for our handlers, but also have the potential to for subsystem sales.

At Semicon West last week, we announced our new T-Core thermal control product line for use in testing power dissipative ICs, such as microprocessors and graphics chips. This system utilizes the same thermal engine that is installed in our industry leading Pyramid handler and provides customers with a single thermal control solution from product development to volume production.

T-Core's modularity and small form factor enable cost-effective seamless integration into our pick and place handlers and also into third-party test platforms. During the second quarter, a major fabless graphics chips company qualified T-Core, and we expect production orders this quarter.

This customer selected T-core because it optimizes test yield with tight temperature control where traditional thermal electric solutions struggle. At Semicon, we also introduced 2 new advanced MEMS products, the pressure test unit and the acoustic test unit. The modular design of these products provides quick and easy integration on gravity feed, test and strip or pick and place handlers for testing MEMS ICs up to 32 devices in parallel.

Takeaways from last week's Semicon West exhibition depended on your time perspective. Enthusiasm for the long-term prospects of the industry and for semi-conductor equipment industry seem to be at an all-time high, driven by expanding applications and growing IC content in consumer, industrial and in automotive products. But at the same time, the tone concerning near-term business conditions was somewhat downbeat.

A few companies that issued earnings last week generally guided to lower Q3 results. Semi, our trade organization, released it's mid-year forecast update and lowered its estimate of 2011 ATE sales to down 5% -- 5.5% from last year.

But at the same time, Semi predicted that 2012 ATE sales would increase 3.6%. Test and assembly equipment bookings as just reported by this Semi declined 10% in June after increasing in each of the previous 6 months. We monitor handler utilization on customer test floors, and the trend there has been downward in 2011 and is now in the 80% range.

Some of our customers tell us they plan to delay capacity additions until they have better visibility on end market demand. Additionally, there's a high degree of uncertainty in the macro economic development related to the debt crisis of the US and European countries that affect business and consumer confidence in spending.

So, as a result, we expect most purchases in the near term will be capability driven. Still though, we are benefiting from the continued ramp of the Pyramid thermal handler at a major microprocessor IDM and from our wide customer base. For the third quarter, we expect sales to be approximately $70 million.

Cohu's board of directors approved a quarterly cash dividend of $0.06 per share payable on October 28, 2011 to shareholders of record on September 2, 2011. Cohu has paid consecutive quarterly cash dividends for over 34 years. And that concludes our prepared remarks, and we will now take questions.

Thank you. (Operator Instructions) Gentlemen, it appears there are no questions at this time.

Well, in that event, I would like to thank everyone for joining us today, and we look forward to speaking to you when we report Cohu's third-quarter results. Thank you, and good day.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.