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 |
||
|
— 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, |
|
| 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. |
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