Cohu, Inc.

Hello, and welcome to the CoHUE, Inc. Fourth Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Chief Financial Officer Jeff Jones.

Good afternoon and welcome to our conference call to discuss CoHUE's fourth quarter 2023 results and first quarter 2024 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 15, 2024, 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 Luis Muller, CoHUE's President and CEO. Luis?

Luis Muller Hi and good afternoon. Fourth quarter results were in line or better than guidance with non-GAAP gross margin of 48.5% and EPS of 23 cents. Fiscal 2023 non-GAAP gross margin set a new CoHUE record at approximately 48%. and adjusted EBITDA was approximately 18% of revenue. Despite softening market conditions, Kohio was able to deliver strong profitability and full-year non-GAAP EPS of $1.62 per share. On October 2nd, we announced the acquisition of Equipped Test Engineering, which we refer to as EQT, with the goal to expand our test interface products and recurring revenue that continues to deliver resilient profitability through industry cycles. Late last quarter, we completed construction and transferred all contactor manufacturing to a new 92,000 square foot facility in the Philippines. We held an opening event with customers on January 17th, and the facility is already ramping manufacturing of test contactors to make Q1 deliveries. The goal is to improve efficiency and quality, lower cost and lead time of interface products, positioning the company to quickly respond to demand and to capitalize on the next wave of growth. A significant aspect of our strategy continues to be to expand Cohue's recurring business, which delivered revenue of $310 million over the last 12 months with a three-year compound growth rate of 5%. Part of this is growing our software revenue. And at the end of last year, we introduced a new solution under Cohue's DI Core analytics platform, our AI inspection software. We are pleased to receive initial orders from two customers for this new AI vision capability that delivers higher first pass inspection yield. However, estimated test cell utilization dropped another two points to 71% at the end of fourth quarter. The sequential decline was entirely with IDM customers, while OSAT's utilization held flat quarter over quarter. Similar to recent announcements from our automotive and industrial semiconductor device customers, Cohue is experiencing softer demand for test and inspection systems in these markets. Utilization across other market segments also remained low at the end of Q4, with computing at 68%, consumer at 69%, and mobile at 76%. We know well the semiconductor cycles and the importance of staying focused on new product development and customer qualifications between upcycles to position the company for the recovery and ramp. We recently introduced MicroSense, which is a new MEMS tester for high signal to noise ratio microphones. In other words, precision microphones. And we received initial orders from a major US manufacturer for lab and production tests starting in the second half of this year. Our Diamond X tester inhalers We're also qualified for several new customers in China supporting local automotive and display driver IC manufacturing. We're also pursuing stronger strategic alignment with computing customers, particularly hyperscalers expanding data center infrastructure. Our proprietary thermal technology is key to testing future large data center processors, also ADAS and other intelligent devices as AI migrate to the edge applications. There is a clear trend to higher power dissipation during test, which lends itself well to co-use T-core thermal subsystems. Similarly, our DiamondX is a cost-effective versatile mixed signal tester that is being considered by several customers for the intelligent edge. DiamondX is an excellent solution for microcontrollers and digital devices at the edge node, offering low to mid-range digital device test capabilities at a very affordable cost. As AI grows in mobile devices, so will RF with the continuation of 5G deployment. We're very excited about the proliferation of new AI-capable products like next-generation smartphones, VR goggles, and other types of devices. These are an excellent fit for testing on DiamondX and for customers pursuing a broad portfolio of devices for agile applications. Although near-term demand is likely to remain subdued, our major customers have been forecasting a semiconductor recovery for the second half of 2024. With lead times now back to normal, Kohu is well-positioned to quickly respond to customers' needs as test cell utilization improves through the second half of this year and into 2025. We will continue executing our strategy to grow recurring business, broaden the use of Diamond Axe into automotive and industrial and data center customers, and to our inspection and metrology portfolio, and increase subscriptions to our emerging software business. We're pretty excited about what lays ahead with market forecasts indicating secular growth in semiconductors for automotive, industrial, and mobile applications, and the new opportunities being created for AI at the edge node. Let me now turn it over to Jeff to provide further details on fourth quarter results and first quarter 24 guidance. Jeff?