- Sales of $281 million in the first nine
months of 2018, up 5% year-over-year
- GAAP gross margin of 39.9%; non-GAAP
gross margin of 40.8%
- GAAP earnings per share of $0.16;
non-GAAP adjusted earnings per share of $0.30
- Recently completed the acquisition of
Xcerra and already implemented $9.1 million annual run rate
cost synergies
Cohu, Inc. (NASDAQ: COHU), a leading supplier of semiconductor
equipment, today reported fiscal 2018 third quarter net sales of
$86.2 million and GAAP income of $4.8 million or
$0.16 per share. Net sales for the first nine months of 2018
were $281.1 million and GAAP income was $24.6 million or
$0.83 per share. (1)
Cohu also reported non-GAAP results, with third quarter 2018
income of $9.0 million or $0.30 per share and income of
$38.3 million or $1.29 per share for the first nine
months of 2018. (1)
GAAP Results (1) (in millions, except per
share amounts)
Q3 FY2018
Q2 FY2018
Q3 FY2017
9 Months2018
9 Months2017
Net sales $86.2 $99.8 $93.7 $281.1 $268.6 Income $4.8
$11.6 $8.8 $24.6 $26.2 Income per share $0.16 $0.39 $0.30 $0.83
$0.92
Non-GAAP Results (1) (in millions, except per share
amounts)
Q3 FY2018
Q2 FY2018
Q3 FY2017
9 Months2018
9 Months2017
Income $9.0 $18.8 $12.6 $38.3 $36.3 Income per share $0.30
$0.64 $0.43 $1.29 $1.27
(1) All amounts presented are from continuing operations and
exclude operating results from Xcerra acquired on October 1,
2018.
Total cash and investments at the end of third quarter 2018 were
$171.2 million.
Luis Müller, President and Chief Executive Officer of Cohu,
stated, “Cohu delivered solid 14.8% adjusted EBITDA on sales of
$86 million, demonstrating the resilience of our business
model despite further softening conditions in the mobility
market.”
Müller continued, “With the completion of the Xcerra
acquisition, Cohu is now a global leader in back-end semiconductor
equipment and services and printed circuit board test, with a
breadth of products that is unmatched in the industry serving an
approximate $5 billion addressable market. We’ve received
strong positive feedback from customers and are encouraged by the
cross-selling opportunities across our product portfolio. The
integration of the two companies is off to a good start and we have
already implemented $9.1 million in annual run rate cost
synergies. We expect to meet our initial cost synergy target of $20
million within the first two years and later achieve our goal of
$40 million within three to five years.”
Cohu expects fourth quarter 2018 sales, which include Xcerra, to
be between $168 million and $183 million. Cohu's Board of
Directors approved a quarterly cash dividend of $0.06 per share
payable on January 2, 2019 to shareholders of record on November
16, 2018.
Conference Call Information:
The company will host a live conference call and webcast with
slides to discuss third quarter 2018 results at 1:30 p.m. Pacific
Time/4:30 p.m. Eastern Time on November 5, 2018. Interested
investors and analysts are invited to dial into the conference call
by using 1-866-434-5330 (domestic) or +1-213-660-0873
(international) and entering the pass code 9996488. Webcast access
is available on the Investor Information section of the company’s
website at www.cohu.com.
The teleconference replay will be available through December 6,
2018. The replay dial-in number is 1-855-859-2056 (domestic) or
+1-404-537-3406 (international) using pass code 9996488. The
webcast replay will be available on the Company’s website through
November 5, 2019 at www.cohu.com.
About Cohu:
Cohu (NASDAQ: COHU) is a global leader in back-end semiconductor
equipment and services, delivering leading-edge solutions for the
manufacturing of semiconductors and printed circuit boards.
Additional information can be found at www.cohu.com.
Use of Non-GAAP Financial Information:
Included within this press release are non-GAAP financial
measures, including non-GAAP Gross Margin, Income, Income (adjusted
earnings) per share and adjusted EBITDA percentage, that supplement
the Company’s Condensed Consolidated Statements of Income prepared
under generally accepted accounting principles (GAAP). These
non-GAAP financial measures adjust the Company’s actual results
prepared under GAAP to exclude charges and the related income tax
effect for share-based compensation, the amortization of acquired
intangible assets, restructuring costs, manufacturing transition
costs, acquisition related costs, fair value adjustment to
contingent consideration and purchase accounting inventory step-up
included in cost of sales. Reconciliations of GAAP to non-GAAP
amounts for the periods presented herein are provided in schedules
accompanying this release and should be considered together with
the Condensed Consolidated Statements of Income.
These non-GAAP measures are not meant as a substitute for GAAP,
but are included solely for informational and comparative purposes.
The Company’s management believes that this information can assist
investors in evaluating the Company’s operational trends, financial
performance, and cash generating capacity. Management believes
these non-GAAP measures allow investors to evaluate Cohu’s
financial performance using some of the same measures as
management. However, the non-GAAP financial measures should not be
regarded as a replacement for (or superior to) corresponding,
similarly captioned, GAAP measures.
Forward Looking Statements:
Certain statements contained in this release may be considered
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995, including statements
regarding the Xcerra acquisition, integration and cost synergy
savings, timing and targets; market conditions in the mobility
market; long-term cross-selling opportunities across our product
portfolio; breadth of our product portfolio; the addressable market
size; Cohu’s fourth quarter 2018 sales forecast, guidance and
effective tax rate; and any other statements that are predictive in
nature and depend upon or refer to future events or conditions, and
include words such as “may,” “will,” “should,” “would,” “expect,”
“anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,”
“intend,” and other similar expressions among others. Statements
that are not historical facts are forward-looking statements.
Forward-looking statements are based on current beliefs and
assumptions that are subject to risks and uncertainties and are not
guarantees of future performance. Actual results could differ
materially from those contained in any forward-looking statement as
a result of various factors, including, without limitation: risks
associated with acquisitions; inventory, goodwill and other asset
write-downs; our ability to convert new products into production on
a timely basis and to support product development and meet customer
delivery and acceptance requirements for new products; our reliance
on third-party contract manufacturers and suppliers; failure to
obtain customer acceptance resulting in the inability to recognize
revenue and accounts receivable collection problems; revenue
recognition impacts due to ASC 606; market demand and adoption of
our new products; customer orders may be canceled or delayed; the
concentration of our revenues from a limited number of customers;
intense competition in the semiconductor equipment industry; our
reliance on patents and intellectual property; compliance with U.S.
export regulations; impacts from the Tax Cuts and Jobs Act of 2017
and ongoing tax examinations; geopolitical issues and trade wars;
ERP system implementation issues; the seasonal, volatile and
unpredictable nature of capital expenditures by semiconductor
manufacturers; rapid technological change; and significant risks
associated with the Xcerra acquisition including but not limited to
(i) the ability of Cohu and Xcerra to integrate their businesses
successfully and to achieve anticipated synergies and cost savings,
(ii) the possibility that other anticipated benefits of the
transaction will not be realized, (iii) litigation relating to the
transaction that still could be instituted against Cohu and/or
Xcerra, (iv) possible disruptions from the transaction that could
harm Cohu’s and/or Xcerra’s respective businesses, (v) the ability
of Cohu or Xcerra to retain, attract and hire key personnel, (vi)
potential adverse reactions or changes to relationships with
customers, employees, suppliers or other parties resulting from the
completion of the acquisition, (vii) the adverse impact to Cohu’s
operating results from interest expense on the financing debt,
rising interest rates, and any restrictions on operations related
to such debt, and (viii) continued availability of capital and
financing and rating agency actions. 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, in the Registration Statement on
Form S-4 that was filed by Cohu with the SEC containing a
prospectus with respect to the Cohu common stock that was issued in
the transaction and the joint proxy statement of Cohu and Xcerra in
connection with the transaction that is contained therein, and the
other filings made by Cohu with the SEC from time to time, which
are available via the SEC’s website at www.sec.gov. Except as
required by applicable law, Cohu does not undertake any obligation
to revise or update any forward-looking statement, or to make any
other forward-looking statements, whether as a result of new
information, future events or otherwise.
For press releases and other information of interest to
investors, please visit Cohu’s website at www.cohu.com.
COHU, INC. CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (in thousands, except per share amounts)
Three Months Ended (1)
Nine Months Ended (1)
September 29, September 30,
September 29, September 30,
2018 2017
2018 2017 Net sales
$ 86,164 $
93,651
$ 281,131 $ 268,614 Cost and expenses: Cost of
sales
51,786 56,742
165,701 162,319 Research and
development
11,088 9,609
33,914 28,851 Selling,
general and administrative (2)
16,511 16,882
50,926 47,362
79,385
83,233
250,541 238,532 Income
from operations
6,779 10,418
30,590 30,082 Interest
and other, net
326 174
880
417 Income from continuing operations before taxes
7,105 10,592
31,470 30,499 Income tax provision
2,302 1,837
6,897 4,273
Income from continuing operations
4,803
8,755
24,573 26,226 Discontinued
operations: Loss from discontinued operations before taxes (3)
- -
- (278 ) Income tax provision
-
-
- - Loss from discontinued
operations
- -
- (278 )
Net income
$ 4,803 $ 8,755
$ 24,573 $
25,948 Income per share: Basic: Income from
continuing operations
$ 0.17 $ 0.31
$
0.85 $ 0.95 Loss from discontinued operations
- -
- (0.01 )
$
0.17 $ 0.31
$ 0.85 $ 0.94
Diluted: Income from continuing operations
$ 0.16 $
0.30
$ 0.83 $ 0.92 Loss from discontinued operations
- -
- (0.01 )
$
0.16 $ 0.30
$ 0.83 $ 0.91
Weighted average shares used in computing income per share: (4)
Basic
28,948 28,155
28,814
27,614 Diluted
29,770 29,105
29,650 28,640
(1)
The three- and nine-month periods ended September 29, 2018 were
comprised of 13 weeks and 39 weeks, respectively. The three- and
nine-month periods ended September 30, 2017 were comprised of 14
weeks and 39 weeks, respectively. Excludes operating results from
Xcerra acquired on October 1, 2018.
(2)
SG&A expense for the three- and nine-month periods ended
September 29, 2018 include Xcerra transaction costs totaling $1.0
million and $5.2 million, respectively.
(3)
All amounts presented result from an adjustment to the fair value
of a contingent consideration receivable recorded in conjunction
with the sale of BMS in 2015.
(4)
The Company has utilized the "control number" concept in the
computation of diluted earnings per share to determine whether a
potential common stock instrument is dilutive. The control number
used is income from continuing operations. The control number
concept requires that the same number of potentially dilutive
securities applied in computing diluted earnings per share from
continuing operations be applied to all other categories of income
or loss, regardless of their anti-dilutive effect on such
categories.
COHU, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (1) (in thousands) (Unaudited)
September
29, December 30,
2018 2017
Assets: Current
assets: Cash and investments
$ 171,244 $ 155,615
Accounts receivable
78,575 71,125 Inventories
63,824
62,085 Other current assets
8,643 8,613 Total
current assets
322,286 297,438 Property, plant &
equipment, net
32,922 34,172 Goodwill
64,579 65,613
Intangible assets, net
13,512 16,748 Other assets
9,707 6,486 Total assets
$ 443,006 $
420,457
Liabilities & Stockholders’ Equity:
Current liabilities: Deferred profit
$ 1,894 $ 6,608
Other current liabilities
88,031 78,659 Total
current liabilities
89,925 85,267 Other noncurrent
liabilities
44,074 46,099 Stockholders’ equity
309,007 289,091 Total liabilities & stockholders’
equity
$ 443,006 $ 420,457
(1) Excludes impact of Xcerra acquisition that closed on October
1, 2018
COHU, INC.
Supplemental Reconciliation of GAAP Results to Non-GAAP
Financial Measures (Unaudited) * (in thousands, except per
share amounts) Three Months Ended September 29, June 30, September
30, 2018 2018 2017 Income from operations - GAAP basis (a) $ 6,779
$ 13,798 $ 10,418 Non-GAAP adjustments: Share-based compensation
included in (b): Cost of sales 125 162 123 Research and development
354 395 278 Selling, general and administrative (SG&A)
1,401 1,391 1,459 1,880 1,948
1,860 Amortization of intangible assets included in (c): Cost of
sales 644 639 677 SG&A 380 380
403 1,024 1,019 1,080 Restructuring costs included in
(d): Research and development 273 - - SG&A 107
- - 380 - - Manufacturing
transition and severance costs included in SG&A (e) 23 100 7
Adjustment to contingent consideration included in SG&A
(f) 227 577 668 Acquisition costs included in SG&A (g)
1,034 3,848 85 Inventory step-up included in cost of sales
(h) - - 592 Income from operations - non-GAAP
basis (i) $ 11,347 $ 21,290 $ 14,710
Income from continuing operations - GAAP basis $ 4,803 $ 11,648 $
8,755 Non-GAAP adjustments (as scheduled above) 4,568 7,492 4,292
Tax effect of non-GAAP adjustments (j) (373 ) (305 )
(452 ) Income from continuing operations - non-GAAP basis $
8,998 $ 18,835 $ 12,595 GAAP income
from continuing operations per share - diluted $ 0.16 $ 0.39 $ 0.30
Non-GAAP income from continuing operations per share -
diluted (k) $ 0.30 $ 0.64 $ 0.43
Gross Profit
Reconciliation Gross profit - GAAP basis $ 34,378 $ 41,501 $
36,909 Non-GAAP adjustments to cost of sales (as scheduled above)
769 801 1,392 Gross
profit - Non-GAAP basis $ 35,147 $ 42,302 $ 38,301
Non-GAAP gross profit as a percentage of net sales 40.8 %
42.4 % 40.9 %
Adjusted EBITDA Reconciliation Net
income - GAAP basis $ 4,803 $ 11,648 $ 8,755 Income tax provision
2,302 2,468 1,837 Interest and other, net (326 ) (318 ) (174 )
Amortizaton 1,024 1,019 1,080 Depreciation 1,378 1,398 1,312 Other
non-GAAP adjustments (as scheduled above) 3,544
6,473 3,212 Adjusted EBITDA $ 12,725
$ 22,688 $ 16,022 Adjusted EBITDA as a
percentage of net sales 14.8 % 22.7 % 17.1 %
Operating
Expense Reconciliation Operating Expense - GAAP basis $ 27,599
$ 27,703 $ 26,491 Non-GAAP adjustments to R&D and SG&A (as
scheduled above) (3,799 ) (6,691 ) (2,900 )
Operating Expenses - Non-GAAP basis $ 23,800 $ 21,012
$ 23,591
* Excludes operating results from Xcerra
acquired on October 1, 2018
Management believes the presentation of these non-GAAP financial
measures, when taken together with the corresponding GAAP financial
measures, provides meaningful supplemental information regarding
the Company's operating performance. Our management uses these
non-GAAP financial measures in assessing the Company's operating
results, as well as when planning, forecasting and analyzing future
periods and these non-GAAP measures allow investors to evaluate the
Company’s financial performance using some of the same measures as
management. Management views share-based compensation as an expense
that is unrelated to the Company’s operational performance as it
does not require cash payments and can vary in amount from period
to period and the elimination of amortization charges provides
better comparability of pre and post-acquisition operating results
and to results of businesses utilizing internally developed
intangible assets. Management initiated certain restructuring
activities including employee headcount reductions and other
organizational changes to align our business strategies in
anticipation of the completion of the merger with Xcerra.
Restructuring costs have been excluded because such expense is not
used by Management to assess the core profitability of Cohu’s
business operations. Manufacturing transition costs relate
principally to employee severance expenses incurred as a result of
moving certain manufacturing activities to Asia as part of our
ongoing cost reduction efforts and employee severance are costs
incurred in conjunction with the termination of certain employees
to streamline our operations and reduce costs. Management has
excluded these costs primarily because they are not reflective of
the ongoing operating results and they are not used to assess
ongoing operational performance. Acquisition costs, fair value
adjustment to contingent consideration and inventory step-up costs
have been excluded by management as they are unrelated to the core
operating activities of the Company and the frequency and
variability in the nature of the charges can vary significantly
from period to period. Excluding this data provides investors with
a basis to compare Cohu’s performance against the performance of
other companies without this variability. However, the non-GAAP
financial measures should not be regarded as a replacement for (or
superior to) corresponding, similarly captioned, GAAP measures. The
presentation of non-GAAP financial measures above may not be
comparable to similarly titled measures reported by other companies
and investors should be careful when comparing our non-GAAP
financial measures to those of other companies.
(a) 7.9%, 13.8% and 11.1% of net sales,
respectively. (b) To eliminate compensation expense for employee
stock options, stock units and our employee stock purchase plan.
(c) To eliminate the amortization of acquired intangible assets.
(d) To eliminate restructuring costs incurred during third quarter
of 2018 in anticipation of the closing of the Xcerra acquisition.
(e) To eliminate manufacturing transition costs. (f) To eliminate
fair value adjustment to contingent consideration related to the
acquisition of Kita. (g) To eliminate professional fees and other
direct incremental expenses incurred related to acquisitions. (h)
To eliminate the inventory step-up costs incurred related to the
acquisition of Kita. (i) 13.2%, 21.3% and 15.7% of net sales,
respectively. (j) To adjust the provision for income taxes related
to the adjustments described above based on applicable tax rates.
(k) All periods presented were computed using the number of GAAP
diluted shares outstanding.
COHU, INC. Supplemental Reconciliation of GAAP
Results to Non-GAAP Financial Measures (Unaudited) * (in
thousands, except per share amounts) Nine Months Ended September
29, September 30, 2018 2017 Income from operations - GAAP basis (a)
$ 30,590 $ 30,082 Non-GAAP adjustments: Share-based compensation
included in (b): Cost of sales 408 327 Research and development
1,098 856 SG&A 3,991 4,153 5,497
5,336 Amortization of intangible assets included in (c): Cost of
sales 1,959 2,015 SG&A 1,158 1,149
3,117 3,164 Restructuring costs included in (d): Research and
development 273 - SG&A 107 - 380 -
Manufacturing transition and severance
costs included in SG&A (e)
110 452 Adjustment to contingent consideration included in
SG&A (f) 657 668 Acquisition costs included in SG&A
(g) 5,178 328 Inventory step-up included in cost of sales
(h) - 1,404 Income from
operations - non-GAAP basis (i) $ 45,529 $ 41,434
Income from continuing operations - GAAP basis $ 24,573 $
26,226 Non-GAAP adjustments (as scheduled above) 14,939 11,352 Tax
effect of non-GAAP adjustments (j) (1,179 ) (1,316 )
Income from continuing operations - non-GAAP basis $ 38,333
$ 36,262 GAAP income per share - diluted $ 0.83 $
0.92 Non-GAAP income per share - diluted (k) $ 1.29 $ 1.27
Gross Profit Reconciliation Gross profit - GAAP basis
$ 115,430 $ 106,295 Non-GAAP adjustments to cost of sales (as
scheduled above) 2,367 3,746 Gross
profit - Non-GAAP basis $ 117,797 $ 110,041 Non-GAAP
gross profit as a percentage of net sales 41.9 % 41.0 %
Adjusted EBITDA Reconciliation Net income - GAAP basis $
24,573 $ 25,948 Loss from discontinued operations - 278 Income tax
provision 6,897 4,273 Interest and other, net (880 ) (417 )
Amortizaton 3,117 3,164 Depreciation 4,159 3,567 Other non-GAAP
adjustments (as scheduled above) 11,822 8,188
Adjusted EBITDA $ 49,688 $ 45,001 Adjusted
EBITDA as a percentage of net sales 17.7 % 16.8 %
Operating Expense Reconciliation Operating Expense - GAAP
basis $ 84,840 $ 76,213 Non-GAAP adjustments to R&D and
SG&A (as scheduled above) (12,572 ) (7,606 )
Operating Expenses - Non-GAAP basis $ 72,268 $ 68,607
* Excludes
operating results from Xcerra acquired on October 1, 2018
Management believes the presentation of these non-GAAP financial
measures, when taken together with the corresponding GAAP financial
measures, provides meaningful supplemental information regarding
the Company's operating performance. Our management uses these
non-GAAP financial measures in assessing the Company's operating
results, as well as when planning, forecasting and analyzing future
periods and these non-GAAP measures allow investors to evaluate the
Company’s financial performance using some of the same measures as
management. Management views share-based compensation as an expense
that is unrelated to the Company’s operational performance as it
does not require cash payments and can vary in amount from period
to period and the elimination of amortization charges provides
better comparability of pre and post-acquisition operating results
and to results of businesses utilizing internally developed
intangible assets. Management has initiated certain restructuring
activities including employee headcount reductions and other
organizational changes to align our business strategies in
anticipation of the completion of the merger with Xcerra.
Restructuring costs have been excluded because such expense is not
used by Management to assess the core profitability of Cohu’s
business operations. Manufacturing transition costs relate
principally to employee severance expenses incurred as a result of
moving certain manufacturing activities to Asia as part of
our cost reduction efforts and employee severance are costs
incurred in conjunction with the termination of certain employees
to streamline our operations and reduce costs. Management has
excluded these costs primarily because they are not reflective of
the ongoing operating results and they are not used to assess
ongoing operational performance. Acquisition costs, fair value
adjustment to contingent consideration and inventory step-up costs
have been excluded by management as they are unrelated to the core
operating activities of the Company and the frequency and
variability in the nature of the charges can vary significantly
from period to period. Excluding this data provides investors with
a basis to compare Cohu’s performance against the performance of
other companies without this variability. However, the non-GAAP
financial measures should not be regarded as a replacement for (or
superior to) corresponding, similarly captioned, GAAP measures. The
presentation of non-GAAP financial measures above may not be
comparable to similarly titled measures reported by other companies
and investors should be careful when comparing our non-GAAP
financial measures to those of other companies.
(a) 10.9% and 11.2% of net sales,
respectively. (b) To eliminate compensation expense for employee
stock options, stock units and our employee stock purchase plan.
(c) To eliminate the amortization of acquired intangible assets.
(d) To eliminate restructuring costs incurred during third quarter
of 2018 in anticipation of the closing of the Xcerra acquisition.
(e) To eliminate manufacturing transition costs. (f) To eliminate
fair value adjustment to contingent consideration related to the
acquisition of Kita. (g) To eliminate professional fees and other
direct incremental expenses incurred related to the acquisitions.
(h) To eliminate the inventory step-up costs incurred related to
acquisitions. (i) 16.2% and 15.4% of net sales, respectively. (j)
To adjust the provision for income taxes related to the adjustments
described above based on applicable tax rates. (k) All periods
presented were computed using the number of GAAP diluted shares
outstanding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181105005909/en/
Cohu, Inc.Richard Yerganian, 781-467-5063Vice President,
Investor Relationsrich.yerganian@cohu.com
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