Cohu, Inc. (COHU) Earnings Call Transcript & Summary

Welcome to Cohu's 2021 Annual Meeting of Stockholders. I would like to introduce the first presenter, James A. Donahue, Chairperson of the Board for Cohu.

Thank you, and good afternoon to all attending. I'm Jim Donahue, Chairperson of the Board of Cohu. And it's a pleasure to welcome you to our Virtual 2021 Annual Meeting of Stockholders. We appreciate your flexibility and cooperation with this virtual meeting format during these challenging times, which have, unfortunately, again, impacted our annual meeting. I will act as Chair of this annual meeting and will now call the meeting to order. This meeting is being held pursuant to the Notice of Annual Meeting sent to Cohu's stockholders on or around March 24, 2021. As is our practice, we will conduct the business portion of the meeting first and answer pertinent questions at the end of the meeting. [Operator Instructions] Tom Kampfer, Cohu's Corporate Secretary, has been appointed secretary of this meeting and also appointed inspector of elections in order to determine the number of shares represented at this meeting and to tabulate the vote on the matters coming before this meeting. At this time, I would like to introduce Cohu's other directors. William Bendush, Steven Bilodeau, Andrew Caggia, Lynne Camp, Nina Richardson, Jorge Titinger and Luis Müller, who is also Cohu's President and CEO. Jorge Titinger is not standing for reelection, and I want to thank Jorge for his service to Cohu, and we wish him all the best. Also present at the meeting are Mike Howard from Ernst & Young and Larry Nishnick of the law firm DLA Piper. Mr. Kampfer informs me that notice of this meeting was duly given in accordance with the bylaws of the company. Mr. Kampfer, will you please report on the number of shares entitled to vote at this meeting and the number of shares represented at this meeting?

Mr. Donahue, as of March 16, 2021, the record date for this meeting, 48,116,839 shares are entitled to vote, and 42,729,160 shares or 89% are represented in person or by proxy, thereby constituting a quorum. Separately, I want to confirm that the list of stockholders of record of the company as of the record date are available for inspection through the virtual meeting portal by any stockholder represented in person or by proxy.

Since a quorum is present, this meeting may proceed to transact business. We have 3 items on the agenda for the formal portion of the meeting: first, to elect 2 Class II directors for a term of 3 years each; second, an advisory vote to approve named executive officer compensation; and finally, to ratify the appointment of Ernst & Young LLP as Cohu's independent registered public accounting firm for 2021. Each of these items is described in more detail in the proxy statement sent to stockholders with the Notice of Annual Meeting. We will now open the polls. At this time, if anyone present holds proxies that they intend to vote, please submit your proxy via the virtual meeting portal. Please let me remind you that if you have already sent in a proxy, there is no need for you to cast a ballot unless you wish to change the vote you put on the proxy. Also, if your shares are held by a broker, bank or other nominee, in order to vote at the meeting, you must have provided in advance a letter from your broker, bank or other nominee confirming your beneficial ownership of the shares. The nominees for Class II director listed in our proxy statement are Andrew M. Caggia and Luis A. Müller. In order to provide stockholders with the opportunity to consider all nominees, Article 1, Section 2 of our bylaws requires advance notice of stockholder nominations for director. Mr. Kampfer, did you receive any such notice?

Mr. Donahue, the company did not receive notice of any stockholder nominations for director.

While the inspector of elections completes the tabulation of the votes, Luis Müller will now present a brief business update, including a question-and-answer session at the end of his remarks.

Thank you, Jim. I'm joined today by Jeff Jones, our Chief Financial Officer, who will be available to answer questions with me after my presentation. I also want to point out that we released our first quarter 2021 financial results on April 29. I don't plan to repeat that information here, but the earnings release and accompanying materials are available for review on our website. Cohu is a fast-growing company in semiconductor test and inspection, an industry estimated at $6.5 billion. Fiscal 2020 revenue was $636 million, capping a 5-year compound annual growth rate of about 19%, which far exceeds the industry average of approximately 7%. With an active installed base of over 28,000 systems across many blue-chips customers where we have built strong partnerships, Cohu's revenue composition is unique with about 45% coming from a more stable base of recurring business, which includes spares, certain kits, services and our interface products. Cohu delivers leading-edge solutions that enable semiconductor manufacturing. We're focused on maximizing yield and productivity in wafer and final test and inspection of semiconductor devices. Our products and services cover a broad spectrum of end market applications. We are the enablers to the automotive revolution and much more, and we're proud to be part of the critical supply chain supporting test of semiconductors used by medical companies on the fight against COVID-19. We're focusing on select end markets that are making semiconductors more ubiquitous to our everyday lives. We believe that the industry is at the beginning of a multiyear growth period driven by vehicle electrification and automated driver assist, expansion in edge computing and cloud capabilities and deployment of 5G technologies. 5G is a disruptive new technology that will connect everyone and everything, delivering orders of magnitude faster data exchange. RF content in smartphones is forecasted to grow by 50% in the next 3 years. And this will open the gates to new applications, not only in mobility but also in industrial and medical, automotive and computing. In automotive, where Cohu has a leading position with thermal handlers, digitalization with ADAS processors, sensors, telematics in the electrification of the drivetrain will transform the way we move around. We will focus on these secular and multiyear trends to achieve above-industry revenue growth, delivering differentiation in a $2.5 billion serviceable market. Cohu's one-stop-shop solution enables our customers to achieve faster production yields and optimize equipment productivity with best-in-class RF test instrumentation, the most responsive active thermal control solution in the market, utilizing artificial intelligence to maximize inspection yield and data analytics to optimize productivity. Cohu is well positioned to capitalize on these secular multiyear trends to create shareholder value, improving time to yield and greater productivity to our customers, targeting 14% annual revenue growth, 2x the industry rate and 23% non-GAAP operating income, accelerating share gains with leading-edge solutions in test and inspection. Switching topics. Cohu recently published our second annual sustainability report. We're pleased to highlight that in 2020, revenue grew 9% year-over-year, while we reduced direct energy usage by 15% from 2019. We at Cohu are committed and proud to reduce direct energy consumption and further improve our corporate ESG programs. The highlights from this presentation are available in greater detail in our sustainability report available at cohu.com corporate sustainability page. That concludes today's presentation, and I would like to open now for questions.

Mr. Müller, I'd like to confirm that the question portal has been live and open throughout the meeting, and we have no questions at this time.

Thank you, Mr. Kampfer. That concludes the business update and Q&A. I'll now turn the call back to Jim.

Thank you, Luis. The polls are now closed, and I will ask Mr. Kampfer to provide us with the preliminary voting results on the proposals.

Thank you. The preliminary voting results, as tabulated by our transfer agent and certified by me as inspector of elections, are as follows. Proposal number one, Mr. Caggia and Mr. Müller have been elected as Class II directors. Proposal number two, the advisory vote on named executive officer compensation has been approved. Proposal number three, Ernst & Young has been ratified as Cohu's independent registered public accounting firm for 2021. The final vote will be included in the records of the meeting and in a Form 8-K to be filed within 4 business days.

Thank you, Mr. Kampfer. That completes the business scheduled for today, and our meeting is now concluded. Thank you for joining us today, and we look forward to seeing you in 2022. Good day.

Cohu's annual meeting is now adjourned. For further information, please visit Cohu's website. Thank you for attending. You may now disconnect.