Cohu, Inc.

Good day and thank you for standing by. Welcome to today's conference call to discuss CoHUE's first quarter financial results and second quarter outlook. At this time, all participants 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 1 1 on your telephone. You'll 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'd now like to hand the conference over to your host today, Jeff Jones, CFO. Please go ahead.

Good afternoon and welcome to our conference call to discuss Cohue's first quarter 2023 results and second 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 earnings release, as well as co-use filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments speak only as of today, May 4th, 2023, And CoHUE 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? Good afternoon, and thanks for joining us. I'll first discuss some of our thoughts on growing Cohuse business, aligning investments to key global trends. Jeff will then review first quarter financial results and second quarter guidance before we open up for questions at the end. We are pleased with first quarter profitability that reflects our focus on continuing improvements in operational performance in the recurring business that delivered $334 million revenue over the last 12 months. Cohue's recurring business provides stable revenue through industry cycles, allowing the company to deliver profitable results and cash flow to invest in new technologies and products to generate growth during market upturns. First quarter non-GAAP gross margin of 48.2% increased 210 basis points year over year, and it's better than our target financial model at this revenue level. Cohuse recurring business contributed 43% of first quarter revenue at approximately 53% gross margin. And recurring revenue grew at a three-year category of 6.4% through Q1 2023. Service is a key component of Cohuse recurring, creating a sticky business as demonstrated by our greater than 87% annual renewal rate on service contracts. Also part of recurring, Kohu's test interface business has landed a series of new opportunities in the first quarter, helping expand our contactor penetration across automotive and industrial semiconductor customers. We manufactured approximately 81% of our contactors in Asia in the first quarter, as we continue to transfer new designs into our Philippines factory and work to establish the local supply chain. With this, we've closed on the target to produce approximately 80% of contactors in Asia. And going forward, we're planning for long-term growth of the interface business. And in support of those plans, we broke ground in January on the construction of a new 92,000 square foot facility in the Philippines adjacent to our current factory. The plan is to start production at this new site early next year and be fully operational by mid-2024. We also continue working to expand the local supply chain to increase flexibility and quickly ramp production in support of customers' needs. Also part of recurring our software business is developing additional analytic capabilities for predictive maintenance. We see a trend across many semiconductor customers to implement factory automation, and our DI core software is key to enabling higher productivity of Cohus' large install base of handlers. Switching over to Cohus' systems business, It contributed 57% of first quarter revenue at approximately 45% gross margin, which is a 250 basis points improvement year over year as we continue to focus on selling differentiated products and work to offset cost pressures from inflation and supply chain constraints. Now, estimated test cell utilization was 77% at the end of Q1, down two points quarter over quarter. Commonly in this utilization across market segments, automotive and industrial was sequentially down a couple of points in Q1, but remained the strongest segments. Mobility increased a point, computing was up two points sequentially, and consumer remained flat. First quarter systems revenue was notably stronger in automotive and industrial and markets that remained more resilient through this industry cycle. And Cohu continues to benefit from automotive market direction to electric drivetrains, along with a technology shift to more autonomous vehicles. We are aligning our tester, handler, and interface product investments to gain greater participation of our customers' future capital expenditures in these markets. In the first quarter, we received a multi-unit $5 million order for silicon carbide device test automation and inspections. Cohue offers automation, test interface, and vision inspection for these high-power devices, ensuring non-good die traceability from wafer to device and tape, supporting later integration in power modules. We are discussing applicability of this product, the NY32W, with our C-Gator interface and other customers manufacturing wide bandgap power dies. Mobility revenue grew a few percentage points sequentially as we continued to make inroads into new applications and also benefited from two months' revenue from the recently acquired MCT business. Core to our strategy is the development of products that support test and inspection at wafer and dye level that we expect to accelerate in the coming years and align to the expansion of AI and high-performance computing, as well as increasing MEMS sensor technology. Moving on, Cohue is committed to responsible business practices, and we recently published our 2022 Sustainability Report, which you can read in detail in our website at www.cohue.com. We made progress on use of electricity derived from renewable sources that increased to 26% last year, increase in recycling, maintain our stellar safety and ethics records, and continued progress in employee gender and ethnic diversity, along with details about Scope 1 and 2 greenhouse gas emissions. Now discussing our view for the balance of this year, we expect demand for the second half of 2023 to remain challenged by a weak economic outlook that continues to put pressure on a semiconductor market recovery. Despite these macroeconomic headwinds, We remain well positioned to deliver strong profitability and cash flows that allow for investments in new technologies and products. We're focused on aligning our resources to major trends in industrial automation, autonomous vehicles, increased processing and sensing power. The focus now is on growing the business and ensuring our product roadmaps are aligned to these secular growth market opportunities. Let me now turn this presentation over to Jeff for further details on first quarter results and second quarter 2023 guidance. Jeff?