- Sales of $138.9 million were supply chain constrained
- Gross margin of 40.4%; non-GAAP gross margin of 41.7%
- Strong booking quarter; semi tester orders up 70%
year-over-year
Cohu, Inc. (NASDAQ: COHU), a global leader in back-end
semiconductor equipment and services, today reported fiscal 2020
first quarter net sales of $138.9 million and GAAP loss of $17.3
million or $0.42 per share. Cohu also reported first quarter 2020
non-GAAP income of $0.1 million or $0.00 per share.(1)
GAAP Results (1)
(in millions, except per share
amounts)
Q1 FY 2020
Q4 FY 2019
Q1 FY 2019
Net sales
$
138.9
$
142.0
$
147.8
Loss
$
(17.3
)
$
(16.3
)
$
(22.9
)
Loss per share
$
(0.42
)
$
(0.39
)
$
(0.56
)
Non-GAAP Results (1)
(in millions, except per share
amounts)
Q1 FY 2020
Q4 FY 2019
Q1 FY 2019
Income (loss)
$
0.1
$
(0.5
)
$
(1.4
)
Income (loss) share
$
0.00
$
(0.01
)
$
(0.03
)
(1)
All amounts presented are from continuing
operations.
Total cash and investments at the end of first quarter 2020 were
$172.4 million.
“We recorded strong bookings in the first quarter, mostly driven
by mobility customers accelerating the adoption of 5G test
solutions for RF Front-End devices. Shipments were constrained in
March by COVID-19 pandemic driven government restrictions in
countries where our products are manufactured. Despite Cohu
operations remaining largely open, we continue to expect some
supply chain uncertainty and operating constraints within our
factories in the second quarter,” said Cohu President and CEO Luis
Müller. “While we enter the second quarter with approximately $172
million in cash and a strong backlog, the continuing impact of the
COVID-19 pandemic on short-term semiconductor test and inspection
demand remains uncertain. As a result, we are proactively managing
cash flow and our Board of Directors has authorized suspending our
quarterly cash dividend. The dividend suspension will result in
approximately $10 million of annualized cash savings, which we
expect to utilize for deleveraging and strengthening our balance
sheet.”
Cohu expects second quarter 2020 sales to be between $130
million and $155 million.
Conference Call Information:
The company will host a live conference call and webcast with
slides to discuss first quarter 2020 results at 1:30 p.m. Pacific
Time/4:30 p.m. Eastern Time on May 5, 2020. 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 6874566. Webcast access will be available on
the Investor Information section of the company’s website 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 and accompanying materials
are non-GAAP financial measures, including non-GAAP Gross
Margin/Profit, Income and Income (adjusted earnings) per share,
Operating Income, Operating Expense and adjusted EBITDA that
supplement the Company’s Condensed Consolidated Statements of
Operations 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 purchased intangible assets including
favorable/unfavorable lease adjustments, restructuring costs,
manufacturing transition and severance costs, asset impairment
charges, acquisition-related costs and associated professional
fees, reduction of indemnification receivable, depreciation of
purchase accounting adjustments to property, plant and equipment
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 Operations. With respect to any forward
looking non-GAAP figures, we are unable to provide without
unreasonable efforts, at this time, a GAAP to non-GAAP
reconciliation of any forward-looking figures due to their inherent
uncertainty.
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 uses non-GAAP
measures for a variety of reasons, including to make operational
decisions, to determine executive compensation in part, to forecast
future operational results, and for comparison to our annual
operating plan. 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 and accompanying
materials may be considered forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995, including statements regarding supply chain shipment
limitations into the second quarter, manufacturing facilities and
offices remaining open, estimated Asia factories’ manufacturing
output by month, measures to maintain liquidity and financial
flexibility and strengthen the balance sheet, market positions in
mobility, medical, computing & network semiconductor & PCB
test segments and leadership in automotive and industrial
applications, expected recovery in automotive an industrial in
2021, customers adopting our solution for 5G RF test, end-market
demand trends by segment in 2020 and 2021, future strength and
growth beyond the COVID-19 pandemic, any comments about third
quarter or second half 2020 projections, long-term benefiting from
manufacturing consolidation reducing cost structure, temporary cost
savings and expense reductions, business model for FY’20 and
mid-term target, % of incremental revenue expected to fall to
operating income, the company’s second quarter 2020 sales forecast,
guidance, sales mix, non-GAAP operating expenses, gross margin,
adjusted EBITDA and effective tax rate, and cash and shares
outstanding, estimated sales for break-even EBITDA, estimated
minimum cash levels to run business, 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: The ongoing global COVID-19 pandemic
has adversely affected, and is continuing to adversely affect, our
business, financial condition and results of operations including:
i) our workforce and operations, the operations of our customers,
and those of our respective vendors and suppliers, ii) our primary
manufacturing facilities in Malaysia and the Philippines have been
partially operating since March 2020 due to government-mandated
movement control orders, iii) we may face other government-mandated
facility shutdowns, iv) import/export, shipping and logistics
disruptions, and other supply chain and distribution constraints or
delays, v) continued rapid changes to business, political or
regulatory conditions affecting the semiconductor equipment
industry and the overall global economy, vi) availability of
employees and lost employee productivity, vii) remote working IT
and increased cybersecurity risks, viii) increased internal control
risks over financial reporting as key finance staff works remotely,
ix) delayed product development programs, x) customers’ canceling,
pushing out orders or refusal to accept product deliveries, and
delayed collection of receivables, xi) other actions of our
customers, suppliers and competitors which may be sudden and
inconsistent with our expectations, xii) additional credit rating
agency downgrades which would increase the company’s cost of
raising capital, and xiii) potential additional impairment of
goodwill or other intangible assets, and increased risk of
inventory write-downs due to lower product demand; Other
significant risks associated with the Xcerra acquisition,
integration and synergies including the failure to achieve the
expected benefits of the acquisition, and mandatory ongoing
impairment evaluation of goodwill and other intangibles whereby
Cohu could be required to write off some or all of this goodwill
and other intangibles; Continued availability of capital and
financing and additional rating agency downgrade actions, and
limited market access given our high debt levels; Our Credit
Agreement contains various representations and negative covenants
that limit our business flexibility; Changes to or replacement of
LIBOR may adversely affect interest rates; Adverse investor
reaction to the suspended cash dividend; Other 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; 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, trade wars and Huawei/HiSilicon export restrictions;
Retention of key staff; Other health epidemics or natural
disasters; ERP system implementation issues particularly as Cohu
recently launches a new ERP system in first quarter 2020; The
seasonal, volatile and unpredictable nature of capital expenditures
by semiconductor manufacturers particularly in light of weakened
demand in 2019 followed by the COVID-19 global pandemic in 2020;
and Rapid technological change.
These and other risks and uncertainties are discussed more fully
in Cohu’s filings with the SEC, including the most recently filed
Form 10-K and Form 10-Q, 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
OPERATIONS
(Unaudited)
(in thousands, except per share
amounts)
Three Months Ended
March 28,
March 30,
2020 (1)
2019 (1)
Net sales
$
138,921
$
147,809
Cost and expenses:
Cost of sales (excluding amortization)
82,837
93,394
Research and development
22,468
22,733
Selling, general and administrative
(2)
33,352
38,286
Amortization of purchased intangible
assets
9,538
10,019
Restructuring charges
403
1,361
Impairment charges (3)
3,949
-
152,547
165,793
Loss from operations
(13,626
)
(17,984
)
Other (expense) income:
Interest expense
(4,427
)
(5,507
)
Interest income
147
222
Foreign transaction gain (loss)
(404
)
218
Loss from continuing operations before
taxes
(18,310
)
(23,051
)
Income tax benefit
(992
)
(200
)
Loss from continuing operations
(17,318
)
(22,851
)
Discontinued operations: (4)
Income from discontinued operations before
taxes
46
189
Income tax provision
4
25
Income from discontinued operations
42
164
Net loss
(17,276
)
(22,687
)
Net loss attributable to noncontrolling
interest
-
(44
)
Net loss attributable to Cohu
$
(17,276
)
$
(22,643
)
Loss per share:
Basic:
Loss from continuing operations before
noncontrolling interest
$
(0.42
)
$
(0.56
)
Income from discontinued operations
0.00
0.01
Net loss attributable to noncontrolling
interest
-
(0.00
)
Net loss attributable to Cohu
$
(0.42
)
$
(0.55
)
Diluted:
Loss from continuing operations before
noncontrolling interest
$
(0.42
)
$
(0.56
)
Income from discontinued operations
0.00
0.01
Net loss attributable to noncontrolling
interest
-
(0.00
)
Net loss attributable to Cohu
$
(0.42
)
$
(0.55
)
Weighted average shares used in
computing loss per share: (5)
Basic
41,502
40,872
Diluted
41,502
40,872
(1)
The three- month periods ended March 28,
2020 and March 30, 2019 were both comprised of 13 weeks.
(2)
SG&A expense for the three-month
period ended March 30, 2019 includes Xcerra transaction costs
totaling $0.2 million. No transaction costs were incurred during
the three-month period ended March 28, 2020.
(3)
For the three-month period ended March 28,
2020 we recorded impairment charges to write certain of our
in-process research and development assets (“IPR&D”) obtained
as part of our acquisition of Xcerra down to current estimated fair
values.
(4)
On October 1, 2018, the Company made the
decision to sell the fixtures business acquired from Xcerra, and,
as a result, the operating results of the fixtures business have
been presented as discontinued operations. The sale of this
business was completed in February 2020.
(5)
For the three-month periods ended March
28, 2020 and March 30, 2019, potentially dilutive securities were
excluded from the per share computations due to their antidilutive
effect. 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
(Unaudited)
(in thousands)
March 28,
December 28,
2020
2019
Assets:
Current assets:
Cash and investments
$
172,375
$
156,098
Accounts receivable
111,456
127,921
Inventories
134,859
130,706
Other current assets
35,109
21,468
Current assets of discontinued operations
(1)
-
3,503
Total current assets
453,799
439,696
Property, plant & equipment, net
64,688
70,912
Goodwill
237,997
238,669
Intangible assets, net
261,316
275,019
Operating lease right of use assets
32,599
33,269
Other assets
21,756
20,030
Noncurrent assets of discontinued
operations (1)
-
115
Total assets
$
1,072,155
$
1,077,710
Liabilities & Stockholders’
Equity:
Current liabilities:
Short-term borrowings
$
3,244
$
3,195
Current installments of long-term debt
3,322
3,322
Deferred profit
9,313
7,645
Other current liabilities
147,838
134,124
Current liabilities of discontinued
operations (1)
-
599
Total current liabilities
163,717
148,885
Long-term debt
346,877
346,518
Non-current operating lease
liabilities
28,352
28,877
Other noncurrent liabilities
68,325
70,334
Noncurrent liabilities of discontinued
operations (1)
-
24
Cohu stockholders’ equity
464,884
483,072
Total liabilities & stockholders’
equity
$
1,072,155
$
1,077,710
(1)
On October 1, 2018, the Company made the
decision to sell the fixtures business acquired from Xcerra, and,
as a result, the fixtures business has been presented as
discontinued operations since that date. The sale of this business
was completed in February 2020.
COHU, INC.
Supplemental Reconciliation of GAAP
Results to Non-GAAP Financial Measures (Unaudited)
(in thousands, except per share
amounts)
Three Months Ended
March 28,
December 28,
March 30,
2020
2019
2019
Loss from operations - GAAP basis (a)
$
(13,626
)
$
(13,659
)
$
(17,984
)
Non-GAAP adjustments:
Share-based compensation included in
(b):
Cost of sales (COS)
212
191
125
Research and development (R&D)
833
760
638
Selling, general and administrative
(SG&A)
2,566
2,336
2,930
3,611
3,287
3,693
Amortization of purchased intangible
assets (c)
9,538
9,615
10,019
Restructuring charges related to inventory
adjustments in COS (d)
1,603
2,408
466
Restructuring charges (d)
403
2,764
1,361
Manufacturing and sales transition costs
included in (e):
COS
-
-
235
SG&A
63
117
526
63
117
761
Impairment charges (f)
3,949
-
-
Acquisition costs included in SG&A
(g)
-
28
224
Inventory step-up included in COS (h)
-
-
6,038
PP&E step-up included in SG&A
(i)
243
243
1,257
Reduction of indemnification receivable
included in SG&A (j)
-
1,202
-
Income from operations - non-GAAP basis
(k)
$
5,784
$
6,005
$
5,835
Loss from continuing operations - GAAP
basis
$
(17,318
)
$
(16,281
)
$
(22,851
)
Non-GAAP adjustments (as scheduled
above)
19,410
19,664
23,819
Tax effect of non-GAAP adjustments (l)
(1,960
)
(3,914
)
(2,358
)
Income (loss) from continuing operations -
non-GAAP basis
$
132
$
(531
)
$
(1,390
)
GAAP loss from continuing operations per
share - diluted
$
(0.42
)
$
(0.39
)
$
(0.56
)
Non-GAAP income (loss) from continuing
operations per share - diluted (m)
$
0.00
$
(0.01
)
$
(0.03
)
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 and impairment
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 light 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
and sales transition costs relate principally to expenses incurred
as a result of moving certain manufacturing activities to Asia and
incremental costs incurred related to the buildup of a direct sales
force for certain equipment sales in Asia. 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. Impairment charges have been
excluded as these amounts are infrequent and are unrelated to the
operational performance of Cohu. Acquisition costs and adjustments
for inventory and PP&E 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.
Management believes the reduction of an uncertain tax position
liability and related indemnification receivable is better
reflected within income tax expense rather than a charge to
SG&A and credit to the income tax provision. 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)
(9.8)%, (9.6)% and (12.2)% 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
related to the integration of Xcerra.
(e)
To eliminate manufacturing and sales
transition and severance costs.
(f)
To eliminate impairment charges recorded
to adjust IPR&D assets obtained in the acquisition of Xcerra to
current fair value.
(g)
To eliminate professional fees and other
direct incremental expenses incurred related to acquisition of
Xcerra.
(h)
To eliminate the inventory step-up costs
incurred related to the acquisition of Xcerra.
(i)
To eliminate the accelerated depreciation
from the property, plant & equipment step-up related to the
acquisition of Xcerra.
(j)
To eliminate the impact of the reduction
of an uncertain tax position liability and related indemnification
receivable.
(k)
4.2%, 4.2% and 3.9% of net sales,
respectively.
(l)
To adjust the provision for income taxes
related to the adjustments described above based on applicable tax
rates.
(m)
The three months ended March 28, 2020 was
computed using 42,428 shares outstanding as the effect of dilutive
securities was excluded from GAAP diluted common shares due to the
reported net loss under GAAP, but are included for non-GAAP diluted
common shares since the Company has non-GAAP net income. All other
periods presented were calculated utilizing the GAAP diluted shares
outstanding.
COHU, INC.
Supplemental Reconciliation of GAAP
Results to Non-GAAP Financial Measures (Unaudited)
(in thousands)
Three Months Ended
March 28,
December 28,
March 30,
2020
2019
2019
Gross Profit Reconciliation
Gross profit - GAAP basis (excluding
amortization) (1)
$
56,084
$
54,075
$
54,415
Non-GAAP adjustments to cost of sales (as
scheduled above)
1,815
2,599
6,864
Gross profit - Non-GAAP basis
$
57,899
$
56,674
$
61,279
As a percentage of net sales:
GAAP gross profit
40.4
%
38.1
%
36.8
%
Non-GAAP gross profit
41.7
%
39.9
%
41.5
%
Adjusted EBITDA Reconciliation
Net loss attributable to Cohu - GAAP
Basis
$
(17,276
)
$
(17,266
)
$
(22,643
)
(Income) loss from discontinued
operations
(42
)
1,039
(164
)
Income tax provision
(992
)
(3,243
)
(200
)
Interest expense
4,427
4,767
5,507
Interest income
(147
)
(161
)
(222
)
Amortization
9,538
9,615
10,019
Depreciation
3,416
3,893
5,020
Other non-GAAP adjustments (as scheduled
above)
9,629
9,806
12,406
Adjusted EBITDA
$
8,553
$
8,450
$
9,723
As a percentage of net sales:
Net loss attributable to Cohu - GAAP
Basis
(12.4
)%
(12.2
)%
(15.3
)%
Adjusted EBITDA
6.2
%
6.0
%
6.6
%
Operating Expense
Reconciliation
Operating Expense - GAAP basis
$
69,710
$
67,734
$
72,399
Non-GAAP adjustments to operating expenses
(as scheduled above)
(17,595
)
(17,065
)
(16,955
)
Operating Expenses - Non-GAAP basis
$
52,115
$
50,669
$
55,444
(1) Excludes amortization of $7,266,
$7,263 and $7,641 for the three months ending March 28, 2020,
December 28, 2019 and March 30, 2019, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200505005965/en/
Cohu, Inc. Jeffrey D. Jones - Investor Relations
858-848-8106
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