Cohu, Inc. (NASDAQ:COHU) Q2 2019 Earnings Conference Call - Final Transcript

Aug 05, 2019 • 04:30 pm ET


Cohu, Inc. (NASDAQ:COHU) Q2 2019 Earnings Conference Call - Final Transcript


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Good afternoon, ladies and gentlemen, and welcome to the Cohu, Inc. Second Quarter 2019 Financial Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Jeff Jones, Chief Financial Officer. You may begin.

Jeffrey D. Jones

Thank you, and good afternoon, and welcome to our conference call to discuss Cohu's second quarter results and third quarter outlook. I'm joined today by our President and CEO, Luis Muller. If you need a copy of our earnings release, you may access it from our website, or by contacting Cohu Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed through the webcast link on Cohu's website and is also posted as a PDF in the Investor Relations section. Replays of this call will be available via the same page after the call concludes.

Between now and our next earnings call, we'll be participating in the Jefferies Semiconductor Hardware Summit in Chicago on Tuesday, August 27. Please contact us if you would like to request a meeting with the company at this event. Now to the safe harbor.

During today's call, we will make forward-looking statements reflecting management's current expectations concerning Cohu'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 statements section of the slide presentation and the earnings release as well as Cohu's filings with the Securities and Exchange Commission, including the most recently filed Form 10-K and Form 10-Q. Our comments speak only as of today, August 5, 2019. 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, Cohu's President and CEO.

Luis A. Muller

Good afternoon. Today, I plan on discussing second quarter dynamics at Cohu and sharing our perspective on the current business environment. Jeff will then cover detailed financial results and Q3 guidance.

Our internal measure of test cell utilization, which started improving in late first quarter, supporting an initial recovery in the mobility market, dropped 3 points in May and June to 77% at the end of the quarter. Second quarter orders were 42% systems and 58% recurring, with the mix continuing to indicate soft business conditions in the near term.

Second quarter sales of $150 million were at the low end of guidance due to the impact of export restrictions to Huawei on our customers and continued softness in mobility. Although our direct business with HiSilicon, a Huawei-affiliated company, is less than 2% of annual sales, some of our U.S. customers that are part of the Huawei supply chain abruptly lowered their forecasts after mid-May when the export restrictions were imposed. In parallel, Huawei announced a sharp reduction