Cohu, Inc.

Good day and thank you for standing by. Welcome to the CoHUE incorporated third quarter 2021 financial results conference call. At this time, all participant lines are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star then one on your telephone keypad. Please be advised that today's conference may be recorded. If you require operator assistance during the call, please press star then zero. I'd now like to hand the conference over to Jeff Jones, CFO.

Thank you, and good afternoon, and welcome to our conference call to discuss Cohue's third quarter 2021 results and fourth quarter 2021 outlook. I'm joined today by our president and CEO, Luis Mueller. If you need a copy of our earnings release, you may access it from our website at cohue.com or by contacting Cohue Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed on CoHUE's website in the investor relations section. Replays of this call will be available via the same page after the call concludes. Now to the safe harbor. During today's call, we will make forward-looking statements reflecting management's current expectations concerning CoHUE's future business. These statements are based on current information that we have assessed but which by its nature is subject to rapid and even abrupt changes. We encourage you to review the forward-looking statement section of the slide presentation and the earnings release, as well as COHU's filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments speak only as of today, October 28, 2021. COHU assumes no obligation to update these statements for developments occurring after this call. Finally, during this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Mueller, CoHUE's president and CEO. Luis?

Thank you, Jeff. Good afternoon, everyone, and thanks for joining us. Third quarter revenue was approximately $225 million, and that was up 49% year over year. on strong demand for test and inspection systems. Earnings per share were in line of expectation at 70 cents, and adjusted EBITDA, 21.8%, was up over 850 basis points year over year, underscoring the significant growth in both revenue and profitability. GoYear remains on track for a record year, with revenue forecast up approximately 40% in 2021. We continue deployment of our DI Core data analytics software with follow-on orders from Key Automotive Customer Design Win in the second quarter, as well as expansion to several new automotive segment customers in the third quarter. As a reminder, Cohuse Data Intelligence, or DI Core for short, is a suite of software solutions that provide real-time equipment monitoring and process control to improve overall equipment efficiency, or OEE, and productivity. Customers can monitor critical equipment parameters, such as yield, OEE, throughput, and other equipment states to ensure optimal test cell performance. The I-Corps software also interfaces with customers' manufacturing execution systems for remote equipment control, recipe, and lot management. As the need for data analytics grows, We plan to continue expanding DI-Core offerings to help improve quality and yield and to continue to increase value-add differentiation of our systems. We're essentially enabling our customers to upgrade the large install bays of Cohu equipment to improve efficiency and productivity. We estimate the market for test data analytics to be around $170 million. With high customer interest, particularly in the automotive semiconductor segment, to increase and optimize productivity. DI Core is a software solution, and thus a 90% plus gross margin product expansion for Cohue. Now, on the tester business, we are encouraged by the growth of our DiamondX universal platform into power management, display driver, and RF applications. Cohue offers today a unique solution for test and inspection of high-performance RF devices deployed in satellites and ground-based transceivers. Our testers deliver advanced microwave RF measurement performance with integrated solutions for device under test, ensuring accurate signal integrity and temperature control. The global small satellite market is projected to grow at 20% CAGR through 2025, And CoHUE is at the forefront of supporting well-known customers on their endeavor to deploy low-orbit satellites to create a global broadband communication network. We've estimated test cell utilization of 87% at the end of September. We're encouraged by the momentum and customers' forecast for our test, inspection, and metrology equipment and interface products entering 2022. Mobility customers are forecasting and starting to drive demand for another wave of equipment for high-frequency RF tests, encompassing capabilities for 5G sub-6 gigahertz, Wi-Fi 7, and even millimeter wave applications in the first half of 2022. There is a global shortage of power management devices that are limiting electronics manufacturing, and Cohue is positioned to help customers address this growing demand and also support the expansion of high-performance computing applications. Our vision systems, particularly the new NEON platform, continue to capture new customers and expand applicability beyond our original expectations, driving Cohue's inspection and metrology revenue to a projected $70 million in 2021. The automotive market seems to have passed the initial recovery cycle post-pandemic in 2020 and now reaching a new normal demand level that is largely supporting growth in battery management systems for electric vehicles and ADAS processors and sensors. Cohue is well positioned in automotive with a broad portfolio of thermal handlers and interface contactors to address a variety of test requirements. from automotive processors to high-power management ICs. We have also made significant progress in operations, increasing insourcing and productivity at our Philippines contactor manufacturing facility, yielding a significant 410 basis points gross margin improvement from Q2 to Q3 in our contactor business. As the contactor business grows and gains momentum in 2022, This is expected to be a significant contributor to our margin expansion toward the mid-term target of 48 percent. Additionally, we completed the implementation of price increases to our handler product lines that largely offset gross margin erosion seen in the second and third quarters. Consequently, we're guiding fourth quarter margins up to 44 percent, despite continuous trend in mixed favoring handlers. We expect MIX to shift in first half of 2022 to our last handlers and more testers with concurrent growth of our contactor business in line with plans toward COHU's midterm targets. Switching topics, the supply chain continues to be extremely tight in material shortages and logistic issues dominating the headlines. COHU has taken steps to get ahead on inventory and make sure we can continue supporting customers' capacity expansion plans and the introduction of new device technologies. Our business model is working. Kohu is delivering solid profitability and projecting a strong baseline EPS and cash flow during the typical seasonally low fourth quarter. Equipment lead times remained largely unchanged from a quarter ago, with handlers averaging 18 weeks and testers about nine weeks, contactors and spares about six weeks. Looking ahead, we are encouraged by our design wins and product traction in key growing segments, and we're equally optimistic about our gross margin improvements in order to forecast in the fourth quarter. With so much investment going into wafer fab equipment, we're enthused about the mid-term growth for the semiconductor test and the need for greater inspection and metrology in support of new advanced packaging technologies. Let me turn it over to Jeff to share third quarter results, provide specifics about our fourth quarter guidance, and describe our board's authorization for a share repurchase program. Jeff? Thanks, Luis.