Cohu, Inc.

Good day and thank you for standing by. Welcome to CoHUE's fourth quarter and full year 2022 financial results conference call. At this time, all participants are in a 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Jims, Chief Financial Officer.

Good afternoon and welcome to our conference call to discuss CoHUE's fourth quarter 2022 results and first quarter 2023 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 CoHUE's filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments speak only as of today, February 16, 2023, and 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 Louise Mueller, COHU's President and CEO.

Luis? Good afternoon, and thanks for joining us. I'll go straight to the key points and let you ask questions at the end. Q4 was an outstanding quarter in terms of financial metrics, albeit your typical seasonally slow revenue at year end. Revenue of $191.1 million was about flat year over year, with a strong non-GAAP EPS result. More importantly, we continued to make great progress managing costs growing Cohue's recurring business, and selling differentiated products. Fourth quarter non-gap gross margin of 48.8% is a Cohue record, reflects 470 basis points growth year over year, and it's better than our target financial model at this revenue level. Gross margin benefited from steady growth of Cohue's recurring revenue, where we achieved a three-year compound annual growth rate of 5.2% through Q4, and represented approximately 45% of fourth quarter revenue with 55% non-GAAP gross margin. In the last four quarters, recurring revenue was $338 million, delivering a very profitable and resilient revenue stream through industry cycles. Our recurring business is primarily made up of test interface hardware and device application kits that are IC design driven and benefit from the introduction of new semiconductor products by our customers. CoHue's test interface annual revenue grew over 9% year-over-year, demonstrating the value differentiation of our solutions when integrated with our testers and handlers. We also established a strategic collaboration agreement in the fourth quarter with CHPT in Taiwan to deliver advanced probe card interface to customers. Under this new collaboration, We plan to accelerate the proliferation of products addressing 5G and advanced node technologies with cost-efficient interface solutions, leveraging the strength of both companies. CHPT intends to contribute with PCB and MEMS probe technology, while Cohu intends to integrate core high-frequency RF and thermal management capabilities. The balance, or approximately 45% of our recurring revenue over the last 12 months, comes from service revenue generated from an install base that just further expanded with the acquisition of MCT to over 24,100 actively supported systems at customer sites. Part of our service offer includes a DI core data analytics platform. We recently announced that a European IDM customer selected and started deployment of CoHue's predictive maintenance software. This is our first software subscription sale and a major accomplishment for us. This is part of a suite of data analytics products sold under the DI Core brand to deliver improved productivity to our customers. DI Core is a key element of Kohu's midterm strategy to increase value services and grow software revenue to between 15 and 25 million in a few years. Tampering these positives is test cell utilization that we now estimate down three points quarter over quarter to about 79%, reflecting known ongoing softness in mobility, consumer, and competing end markets. Cohuse systems business was 55% of total fourth quarter revenue with 44% non-GAAP gross margin. System revenue distribution in the quarter was notably stronger in automotive and industrial end markets that we have been seeing remain more resilient through this down cycle. Turning to our semi-test business, annual revenue was about flat year over year, but with a significant diversification out of the mobility segment that was particularly weak in 2022. Our analog and fire management sales grew to about 32% of semi-test business, mostly serving automotive and industrial end markets. The display driver grew from a single-digit percent of revenue in 2021 to approximately 16% of the total semi-task revenue in 2022. We've had a remarkable year in pivoting revenue to new applications and customer design wins that help build a more sustainable path forward, predominantly with the DiamondX platform. On the handler business, we had five customer design wins in the fourth quarter with our thermal handler. three of which penetrated unserved production sites of existing customer names. We delivered two new systems for silicon carbide semiconductor tests and inspection in the fourth quarter. We've projected expansion into this customer's new back-end test operation and test subcontractor throughout 2023. Now turning to our recently announced MCT acquisition, we're integrating the business within our test handler unit. MCT brings critical technologies that will help accelerate a product development roadmap to address growing opportunities in advanced packaging panel tests. This acquisition also adds a couple of products to Cohue's portfolio and a small revenue stream with gross margins in line with our target financial model. It's a relatively simple business to integrate within Cohue, with neutral EPS impact projected for this year, and expect it to be accretive after realizing operating synergies. As demonstrated, we have made significant progress toward building a resilient business model that is well suited to weather the cyclicality of semiconductor capital equipment spending. We're very well positioned to continue delivering strong profitability and cash flows quarter over quarter. The main focus now is on growth. and ensuring our investments and product roadmaps are aligned to secular growth market opportunities. We're also driving hard to deliver wins on the DiamondX test platform, expand our inspection and metrology business, and continue expansion of our interface products and DI core software. Let me now turn this presentation over to Jeff for additional details on fourth quarter results and first quarter 2023 guidance. Jeff?