- Sales of $147.8 million on higher
than anticipated recurring revenue
- Gross margin of 36.8%; non-GAAP gross
margin of 41.5%
- Business model to benefit from
accelerated integration synergies
Cohu, Inc. (NASDAQ: COHU), a global leader in back-end
semiconductor equipment and services, today reported fiscal 2019
first quarter net sales of $147.8 million and GAAP loss of
$22.9 million or $0.56 per share. Cohu also reported
first quarter 2019 non-GAAP loss of $1.4 million or
$0.03 per share. (1)
GAAP Results (1)
(in millions, except per share amounts)
Q1 FY 2019 Q4 FY
2018 Q1 FY 2018 Net sales $147.8 $170.6
$95.2 Income (loss) $(22.9) $(57.1) $8.1 Income (loss) per
share $(0.56) $(1.40) $0.28
Non-GAAP
Results (1) (in millions, except per share amounts)
Q1 FY 2019 Q4 FY 2018 Q1 FY 2018 Income
(loss) $(1.4) $10.0 $10.5 Income (loss) per share $(0.03) $0.24
$0.36
(1) All amounts presented are from continuing
operations.
Total cash and investments at the end of first quarter 2019 were
$160.1 million.
“First quarter sales and gross margin were above guidance due to
a ramp in recurring business,” said Cohu President and CEO Luis
Müller. “Market conditions appear to have stabilized and we are
forecasting some segments to start improving in the second quarter
and continuing into the second half of the year. We are
accelerating the integration of Xcerra, have begun to implement the
restructuring of our German operation, and now project annual
run-rate cost synergies of $40 million by the end of 2019,
significantly advancing the timeframe for when the full synergy
savings will positively impact the business.”
Cohu expects second quarter 2019 sales to be between
$150 million and $160 million. Cohu's Board of Directors
approved a quarterly cash dividend of $0.06 per share payable on
July 26, 2019 to shareholders of record on June 14, 2019.
Conference Call Information:
The company will host a live conference call and webcast with
slides to discuss first quarter 2019 results at 1:30 p.m. Pacific
Time/4:30 p.m. Eastern Time on May 6, 2019. 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.
The teleconference replay will be available through June 5,
2019. The replay dial-in number is 1-855-859-2056 (domestic) or
+1-404-537-3406 (international) using pass code 6874566. The
webcast replay will be available on the Company’s website through
May 6, 2020 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,
Income and Income (adjusted earnings) per share, Adjusted EBITDA,
and Operating Expense 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 acquired intangible assets
including favorable/unfavorable lease adjustments, restructuring
costs, manufacturing transition and severance costs,
acquisition-related costs and associated professional fees, fair
value adjustment to contingent consideration, 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.
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 believes
these non-GAAP measures allow investors to evaluate Cohu’s
financial performance using some of the same measures as
management. 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 integration and cost synergy
savings, timing and targets; design-wins; contactor sales growth;
5G opportunities; incremental sales opportunities; semiconductor
market conditions in 2019, expected improvements and mid-term
growth; Cohu’s second quarter 2019 sales forecast, guidance,
non-GAAP operating expenses, gross margin, adjusted EBITDA and
effective tax rate, and cash and shares outstanding; 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: 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; revenue recognition
impacts due to ASC 606; 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 and trade wars;
ERP system implementation issues; the seasonal, volatile and
unpredictable nature of capital expenditures by semiconductor
manufacturers and the late 2018 and early 2019 weakened demand in
this market; ongoing weakness in Greater China market; rapid
technological change; and significant risks associated with the
Xcerra acquisition including but not limited to (i) the ability of
Cohu and Xcerra to integrate their businesses successfully and to
achieve anticipated synergies and cost savings, (ii) the
possibility that other anticipated benefits of the acquisition will
not be realized, (iii) litigation relating to the acquisition that
still could be instituted against Cohu and/or Xcerra, (iv) the
possibility that restructuring charges will significantly exceed
estimates, (v) the ability of Cohu or Xcerra to retain, attract and
hire key personnel, (vi) potential adverse reactions or changes to
relationships with customers, employees, suppliers or other parties
resulting from the acquisition, (vii) potential disruptions,
expenses and lost revenue associated with the transition to direct
sales in China and Taiwan; (viii) the discovery of liabilities or
deficiencies associated with Xcerra that were not identified in
advance, (ix) potential failures to maintain adequate internal
controls over financial reporting given the significant increase in
size, number of employees, global operations and complexity of
Cohu’s business, (x) 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, (xi)
the adverse impact to Cohu’s operating results from interest
expense on the financing debt, rising interest rates, and any
restrictions on operations related to such debt, and (xii)
continued availability of capital and financing and rating agency
actions, and limited market access given our high debt levels.
These and other risks and uncertainties are discussed more fully in
Cohu’s filings with the Securities and Exchange Commission,
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 30, March 31,
2019 1
2018 Net sales
$ 147,809 $
95,150 Cost and expenses: Cost of sales (excludes amortization
shown below) (2)
93,394 54,923 Research and development
22,733 11,775 Selling, general and administrative (3)
38,286 15,786 Amortization of purchased intangible assets
10,019 1,074 Restructuring charges
1,361
-
165,793 83,558
Income (loss) from operations
(17,984 ) 11,592
Other (expense) income: Interest expense
(5,507 ) (11
) Interest income
222 247 Foreign transaction gain (loss)
and other
218 (1,579 ) Income (loss)
from continuing operations before taxes
(23,051 )
10,249 Income tax provision (benefit)
(200 )
2,127 Income (loss) from continuing operations
(22,851 ) 8,122 Discontinued
operations: (4) Income from discontinued operations before taxes
189 - Income tax provision
25 -
Income from discontinued operations
164 - Net income
(loss)
(22,687 ) 8,122 Net
income (loss) attributable to noncontrolling interest
(44 ) - Net income (loss) attributable
to Cohu
$ (22,643 ) $
8,122
Income (loss) per share: Basic: Income (loss) from
continuing operations before non-controlling interest
$
(0.56 ) $ 0.28 Income from discontinued operations
0.01 - Net income (loss) attributable to noncontrolling
interest
0.00 - Net income
(loss) attributable to Cohu
$ (0.55 ) $ 0.28
Diluted: Income (loss) from continuing operations
before non-controlling interest
$ (0.56 ) $
0.28 Income from discontinued operations
0.01 - Net income
(loss) attributable to noncontrolling interest
0.00
- Net income (loss) attributable to Cohu
$ (0.55 ) $ 0.28 Weighted
average shares used in computing income (loss) per share: (5) Basic
40,872 28,602 Diluted
40,872 29,531 (1)
The three- month periods ended March 30, 2019 and March 31, 2018
were both comprised of 13 weeks. The Company’s results for the
three months ended March 30, 2019, include the results of Xcerra
which was acquired on October 1, 2018. (2) In conjunction with the
acquisition of Xcerra the Company assessed the need to realign its
historical financial statement presentation and certain statement
of operations classifications were reclassified to conform to
current period presentation. The changes made were as follows:
-- Prior to the fourth quarter of 2018,
amortization of intangibles previously were presented in cost of
sales and SG&A. These amounts are now presented as a separate
line item “Amortization of purchased intangible assets” within
operating expenses. Amounts associated with purchased intangible
assets that previously would have been included in cost of sales
are $7.6 million for three-month period ended March 30, 2019.
Amounts previously presented in cost of sales that have been
reclassified to conform with the Company’s revised presentation for
the three-month period ended March 31, 2018 are $0.7 million.
-- Historically, gains and losses associated with foreign currency
translation and remeasurement were included within SG&A which
resulted in fluctuations in expenses as foreign exchange rates
change. These amounts are now being presented within foreign
transaction gain (loss) and other as it will provide investors more
insight into the Company’s operating expenses. (3) SG&A expense
for the three-month periods ended March 30, 2019 and March 31, 2018
include Xcerra transaction costs totaling $0.2 million and $0.3
million, respectively. (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. (5) For the three-month
period ended 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 (in thousands) (Unaudited)
March 30, December 29,
2019 2018
Assets: Current assets: Cash and investments
$
160,086 $ 165,020 Accounts receivable
131,133 149,276
Inventories
130,744 139,314 Other current assets
18,761 27,888 Current assets of discontinued operations
4,122 3,741 Total current assets
444,846 485,239 Property, plant & equipment, net
71,792 74,332 Goodwill
239,270 242,127 Intangible
assets, net
305,306 318,961 Other assets
(1)
44,889 13,264 Noncurrent assets of discontinued operations
94 79 Total assets
$
1,106,197 $ 1,134,002
Liabilities
& Stockholders’ Equity: Current liabilities: Short-term
borrowings
$ 3,160 $ 3,115 Current installments of
long-term debt
3,422 3,672 Deferred profit
8,268
6,896 Other current liabilities
122,643 146,388 Current
liabilities of discontinued operations
596
518 Other current liabilities
138,089 160,589
Long-term debt
342,632 346,041
Other noncurrent liabilities (1)
97,162 81,428 Cohu stockholders’ equity
528,670
546,243 Noncontrolling Interest
(356 )
(299 ) Total liabilities & stockholders’ equity
$
1,106,197 $ 1,134,002 (1)
Cohu adopted ASU 2016-02, Leases (Topic
842), as of December 30, 2018. Adoption of the new standard
resulted in the recording of additional net lease assets and lease
liabilities of approximately $30.7 million and $29.9 million,
respectively, as of December 30, 2018. We had previously recorded a
sale and operating leaseback transaction in accordance with Topic
840 and as a result of the adoption of the new standard, recognized
$10.2 million of deferred gain as an adjustment to retained
earnings. In addition, we had previously recognized assets and
liabilities related to a build-to-suit designation under Topic 840
and as a result of the adoption of the new standard, derecognized
assets and liabilities of $0.5 million and $0.6 million,
respectively, with the difference recorded as an adjustment to
retained earnings. The difference between the additional lease
assets and lease liabilities, net of the deferred tax impact, was
recorded as an adjustment to retained earnings.
COHU, INC. Supplemental
Reconciliation of GAAP Results to Non-GAAP Financial Measures
(Unaudited) (in thousands, except per share amounts)
Three Months Ended March 30, December 29, March 31,
2019 (1)
2018 (1)
2018 Income (loss) from operations - GAAP basis (a) $
(17,984 ) $ (59,151 ) $ 11,592 Non-GAAP adjustments: Share-based
compensation included in (b): Cost of sales (COS) 125 138 121
Research and development (R&D) 638 619 349 Selling, general and
administrative (SG&A) 2,930 3,799
1,199 3,693 4,556 1,669 Amortization of purchased
intangible assets (c) 10,019 14,080 1,074 Restructuring charges
related to inventory adjustments in COS (d) 466 19,053 -
Restructuring charges (d): 1,361 18,704 - Manufacturing and
sales transition costs included in (e): Cost of sales (COS) 235 - -
Research and development - 280 - Selling, general and
administrative 526 205 (13 ) 761
485 (13 ) Adjustment to contingent consideration included in
SG&A (f) - - (147 ) Acquisition costs included in SG&A (g)
224 4,633 296 Inventory step-up included in COS (h) 6,038 14,782 -
PP&E step-up included in SG&A (i) 1,257 1,257 - Reduction
of indemnification receivable included in SG&A (j) -
879 - Income from operations -
non-GAAP basis (k) $ 5,835 $ 19,278 $ 14,471
Income (loss) from continuing operations - GAAP basis $
(22,851 ) $ (57,116 ) $ 8,122 Non-GAAP adjustments (as scheduled
above) 23,819 78,429 2,879 Tax effect of non-GAAP adjustments (l)
(2,358 ) (11,302 ) (501 ) Income (loss) from
continuing operations - non-GAAP basis $ (1,390 ) $ 10,011 $
10,500 GAAP income (loss) from continuing operations
per share - diluted $ (0.56 ) $ (1.40 ) $ 0.28 Non-GAAP
income (loss) from continuing operations per share - diluted (m) $
(0.03 ) $ 0.24 $ 0.36
(1) Includes
operating results from Xcerra acquired on October 1, 2018
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 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. Acquisition costs, fair value
adjustment to contingent consideration, adjustments for inventory
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) (12.2)%,
(34.7)% 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 fair value adjustment to contingent consideration related
to the acquisition of Kita. (g) To eliminate professional fees and
other direct incremental expenses incurred related to acquisitions.
(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) 3.9%, 11.3% and 15.2% 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 December 29, 2018 was computed using
41,241 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 computed using number of GAAP diluted shares
outstanding for each period.
COHU, INC.
Supplemental Reconciliation of GAAP Results to Non-GAAP
Financial Measures (Unaudited) (in thousands)
Three Months Ended March 30, December 29, March 31,
2019 (1)
2018 (1)
2018
Gross Profit Reconciliation Gross profit - GAAP
basis (excluding amortization)(2) $ 54,415 $ 41,919 $ 40,227
Non-GAAP adjustments to cost of sales (as scheduled above)
6,864 33,973 121 Gross profit -
Non-GAAP basis $ 61,279 $ 75,892 $ 40,348
Non-GAAP gross profit as a percentage of net sales 41.5 % 44.5 %
42.4 %
Adjusted EBITDA Reconciliation Net income
(loss) attributable to Cohu - GAAP Basis $ (22,643 ) $ (56,754 ) $
8,122 Income from discontinued operations (164 ) (119 ) - Income
tax provision (200 ) (6,266 ) 2,127 Interest expense 5,507 4,944 11
Interest income (222 ) (274 ) (247 ) Amortization 10,019 14,080
1,074 Depreciation 5,020 4,691 1,383 Other non-GAAP adjustments (as
scheduled above) 12,406 63,092
1,805 Adjusted EBITDA $ 9,723 $ 23,394 $
14,275 Adjusted EBITDA as a percentage of net sales 6.6 %
13.7 % 15.0 %
Operating Expense Reconciliation
Operating Expense - GAAP basis $ 72,399 $ 101,070 $ 28,635 Non-GAAP
adjustments to operating expenses (as scheduled above)
(16,955 ) (44,456 ) (2,758 ) Operating Expenses -
Non-GAAP basis $ 55,444 $ 56,614 $ 25,877
(1)
Includes operating results from Xcerra acquired on October 1, 2018
(2)
Excludes amortization of $7,641 for the three months ending March
30, 2019, $11,626 for the three months ending December 29, 2018 and
$676 for the three months ended March 31, 2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190506005734/en/
Cohu, Inc.Richard Yerganian, 781-467-5063Vice President,
Investor Relationsrich.yerganian@cohu.com
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