Earnings Call: Cohu Reports Resilient Q3 with Strategic Market Expansions

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Earnings Call: Cohu Reports Resilient Q3 with Strategic Market Expansions

Leading provider of semiconductor test and inspection carriers, Cohu, Inc. (NASDAQ: COHU), reported stable financial performance in its Q3 2024 earnings call. The company announced a revenue of $95.3 million and a gross profit margin of approximately 47%. A significant portion of its revenue, 67%, came from recurring sources.

Despite challenging market conditions, Cohu made strategic advancements in high bandwidth memory (HBM) and silicon carbide markets, laying the groundwork for future growth.

Key Highlights:

  • Cohu's Q3 revenue reached $95.3 million with a gross profit margin of around 47%.
  • Recurring revenue constituted 67% of total revenue, showing resilience during market downturns.
  • The mobile segment grew by 13% year-over-year.
  • The company achieved significant design wins in the automotive sector.
  • Cohu entered the HBM and silicon carbide markets, anticipating benefits from projected growth in these sectors.
  • Revenue for Q4 is expected to remain stable at around $95 million, with a projected gross profit margin of 44%.
  • In Q3, non-GAAP earnings per share reported a loss of $0.08, but cash and investments rose to $269 million.
  • A 10% revenue increase is anticipated for Q1 2025.
  • Upcoming investor conferences include the Stifel Midwest Conference and the Needham Growth Conference.

Company Outlook: Cohu anticipates its Q4 revenue to remain around $95 million with a gross profit margin of approximately 44%. Due to rising labor costs, operating expenses are expected to increase to about $46 million. A 10% revenue increase is projected for Q1 2025, indicating a recovery from seasonality.

Negative Points:

  • Q3 ended with a non-GAAP earnings per share loss of $0.08.
  • Orders dropped in the consumer market segment.

Positive Points:

  • Cohu entered the HBM market, expected to reach $23 billion with a 22% CAGR over the next decade.
  • The silicon carbide market is projected to grow at a 25% CAGR by 2029.
  • Signs of recovery are evident in the automotive segment with rising orders and revenues.

Shortcomings:

  • Despite an overall positive outlook, the company reported a non-GAAP earnings per share loss in Q3.

Q&A Highlights: The company stated that it is focusing on stack die inspection metrology within the HBM market and is not competing with wafer-level inspection companies like Camtek. The chip-level burn-in market is expected to grow with a projected annual opportunity of around $50 million.

Cohu's strategic advancements in the semiconductor sector are highlighted by significant design wins in the automotive segment and entry into the HBM and silicon carbide markets. The company's resilience is reflected in stable revenues and a strong recurring revenue base, despite reporting a non-GAAP earnings per share loss in Q3.

With improvements in the automotive sector and the introduction of the Diamondx tester and VI-100 instrument, Cohu is prepared to capitalize on growing market opportunities. The company remains optimistic about its growth trajectory towards 2025, supported by diversified product offerings and strategic market expansions.

InvestingPro Forecasts: Cohu's recent financial performance and strategic market positioning align with several key forecasts from InvestingPro. Despite reported losses in Q3, InvestingPro data indicate that Cohu holds more cash than debt, providing financial flexibility amidst challenging market conditions. This strong liquidity position is supported by InvestingPro Insights, which indicate that Cohu's liquid assets exceed its short-term liabilities.

Focusing on high-growth areas like HBM and silicon carbide is particularly significant, especially as analysts expect a decline in sales this year, as noted by InvestingPro Insights. This strategic pivot can help balance the projected revenue contraction and position Cohu for future growth. Additionally, the company's entry into these markets aligns with investor expectations for future earnings potential, evidenced by a high EV/EBITDA valuation multiple.

According to InvestingPro Insights, Cohu's stock price movements are noted to be quite volatile. This volatility is reflected in the company's recent performance, with a 17.76% one-year total return and a 29.58% year-to-date return. However, both analysts and InvestingPro’s fair value estimates suggest potential upside with target prices of $30 and $28.26, respectively, compared to the previous closing price of $24.92.

For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional insights that provide a deeper understanding of Cohu's financial health and market positioning.