Q4 2021 Cohu Inc Earnings Call
Speaker 1: Good day and thank you for standing by. Welcome to the CoHue Inc. Fourth Quarter and full year 2021 results conference call. At this time, all participants are in listen only mode. After the presentation.
Good day and thank you for standing by welcome to the <unk>, Inc. Fourth quarter and full year 2021 results conference call.
At this time, all participants are in listen only mode.
The presentation, there will be a question and answer session.
Speaker 1: To ask a question during the session, you'll need to press star, then 1 on your telephone keypad. Please be advised, today's conference will begin at 10 a.m.
I'll ask a question during the session you will need to press Star then one on your telephone keypad. Please.
Please be advised today's conference maybe recorded.
If you require operator assistance during the call. Please press Star then zero.
Speaker 1: If you require operator assistance during the call, please press star then zero.
Speaker 1: I'd now like to hand the conference over to Jeff Jones, Chief Financial Officer.
I'd now like to hand, the conference over to Jeff Jones, Chief Financial Officer.
Speaker 2: Good afternoon and welcome to our conference call to discuss COHU's fourth quarter 2021 results and first quarter 2022 outlook. I'm joined today by our president and CEO , Luis Mueller.
Good afternoon, and welcome to our conference call to discuss <unk> fourth quarter 2021 results and first quarter 2022 outlook.
And today by our President and CEO Luis Mueller.
Speaker 2: If you need a copy of our earnings release, you may access it from our website at cohew.com or by contacting Cohew Investor Relations. There is also a slide presentation in conjunction with today's call that may be accessed on Cohew's website in the Investor Relations section.
If you need a copy of our earnings release, you may access it from our website at <unk> dot com or by contacting <unk> Investor Relations.
A slide presentation in conjunction with today's call that may be accessed on <unk> web site.
Site in the Investor Relations section replays of this call will be available via the same page after the call concludes now.
Speaker 2: Replays of this call will be available via the same page after the call concludes.
Speaker 2: 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.
Now to the Safe Harbor.
During today's call, we will make forward looking statements, reflecting managements current expectations concerning <unk> future business.
Speaker 2: These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes.
These statements are based on current information that we have assessed but which by its nature is subject to rapid and even abrupt changes.
Speaker 2: We encourage you to review the forward-looking statement section of the slide presentation and the earnings release, as well as co-use filings with the SEC, including the most recently filed Form 10-K and Form 10-Q .
We encourage you to review the forward looking statements section of the slide presentation and the earnings release as well as <unk> filings with the SEC, including the most recently filed Form 10-K and Form 10-Q .
Speaker 2: Our comments speak only as of today, February 10, 2022, and COHEU assumes no obligation to update these statements for developments occurring after this call.
Our comments speak only as of today February 10, 2022, and <unk> assumes no obligation to update these statements for developments occurring after this call.
Speaker 2: 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.
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 Mueller co. He was president and CEO Luis.
Speaker 2: Now I'd like to turn the call over to Luis Mueller, Co-Hugh's President and CEO . Luis. Good afternoon everyone.
Good afternoon, everyone and thanks for joining us.
Speaker 3: Fourth quarter revenue was approximately $192 million, and non-GAF EPS was $0.72, both higher than the midpoint of our guide.
Fourth quarter revenue was approximately 192 million and non-GAAP EPS was <unk> 72.
Both higher than the midpoint of our guidance.
Speaker 3: Full year 2021 revenue of $887 million grew 39% year over year, capping a five-year revenue CAGR of 26%, one of the strongest in our industry.
Full year 2021 revenue of $887 million grew 39% year over year capping a five year revenue CAGR of 26% one of the strongest in our industry.
Full year non-GAAP EPS of $3 20.
Speaker 3: full year non-GAAP EPS of $3.20 was up 169% year over year, demonstrating the scalability of our business model.
Was up a 169% year over year, demonstrating the scalability of our business model.
Speaker 3: We also had several design wins that expanded our products into new customers.
We also had several design wins that expanded our products into new customers are.
Speaker 3: achieved year-over-year revenue growth of 130% in inspection and metrology and 25% in interface products business.
Achieved year over year revenue growth of 130% and inspection and metrology in 25% and interface products business.
Speaker 3: and supported a significant ramp in the automotive and industrial segments.
And supported a significant ramp in the automotive and industrial segments.
Coming back to Q4.
Speaker 3: Coming back to Q4, we had a multitude of customer design wins this past quarter.
We had a multitude of customer design wins this past quarter.
Speaker 3: Our tester business received volume orders for the Diamond X platform from a Japanese automotive semiconductor customer.
Our tester business received volume orders for the dime on X platform from a Japanese automotive semiconductor customer.
Qualified and secured initial volume order and shipment of Diamond next tester.
Speaker 3: qualified and secured initial volume order and shipment of Diamond X tester to a Korean-based display driver customer, delivering on the goal to expand their presence in this device.
<unk>, a Korean based display driver customer delivering on the goal to expand their presence in this device segment.
Speaker 3: capture an important RF front-end module design win from a leading Japanese semiconductor manufacturer.
Capture an important RF front end module design win from a leading Japanese semiconductor manufacturer.
Speaker 3: that is adopting CoHue's PACS tester with the Red Dragon instrumentation.
That is adopting <unk> Pax tester with the Red Dragon instrumentation suite.
Speaker 3: and got an initial PACS system order from a US-based RF semiconductor manufacturer.
And gone on initial pack system order from a U S based RF semiconductor manufacturing.
Speaker 3: for testing Wi-Fi 6E and Wi-Fi 7 devices, displacing this customer's internal rack and stack solution.
We're testing Wi Fi six E and Wi Fi seven devices displacing this customer's internal reconcile solution.
Speaker 3: in the interface business, we're gaining traction with a new line of power and precision analog contact.
In the interface business, we're gaining traction with our new line of power in precision analog contactor is used in testing semiconductors for automotive and industrial applications.
Speaker 3: used in testing semiconductors for automotive and industrial applications.
The handler business, followed with capturing RF sales at a Taiwanese customer.
Speaker 3: The handler business followed with capturing RF sales at a Taiwanese customer's office.
Speaker 3: being selected by a leading German customer, and receiving first order for testing automotive ADAS processors on our matrix handler equipped with T-Core active thermal conf-
Being selected by a leading German customer and receiving first order for testing out a motive <unk> processors on our matrix handler equipped boutique or active thermal control.
Speaker 3: receiving the first order for our eclipse with T-Core active thermal control for testing Tier 1 mobile processors at a leading Korean OSAT.
Receiving the first order for our eclipse with T core active thermal control for testing tier one mobile processors at a leading Korean Osage customer.
Speaker 3: and a few other design wins in the growing automotive and industrial semiconductor markets in China.
And a few other design wins in the growing automotive and industrial semiconductor markets in China.
Speaker 3: Our DI-Core data analytics capped the quarter with another win at a customer in Europe .
Our <unk> analytics cap the quarter, we've another win at a customer in Europe .
Speaker 3: In all, this was one of the longest lists of single quarter design wins that I can remember in my tenure at CoHU and gives me confidence that we are on path to meet our midterm revenue part.
In all this was one of the longest list of single quarter design wins that I can remember in my tenure at <unk> and gives me confidence that we are on path to meet our midterm revenue target.
We enter 2022 with an 87% estimated test sterilization strong backlog and increasing demand for our products.
Speaker 3: We answer 2022 with an 87% estimated test serialization, strong backlog, and increasing demand for our product.
Speaker 3: we remain cautious about the tight supply chain environment and potential impact of Omicron in the next few months.
We remain cautious about the tight supply chain environment and potential impact of omicron in the next few months.
Speaker 3: But we're also excited by the customer traction and the opportunity to broaden our semi-test applications with our Diamond X test.
But we're also excited by the customer traction and the opportunity to broaden our semi test applications, we've heard Diamond X faster.
Speaker 3: growing interest in our NEON inspection and metrology technology.
Growing interest in our neon inspection and metrology technology.
Speaker 3: expansion in test interface products, and many ongoing qualifications of our DI-Core data analytics software solutions.
Expansion in test interface products, and many ongoing qualifications or <unk> data analytics software solution.
Speaker 3: As a result, we recently increased Cohew's midterm financial targets to revenue of $1 billion in non-GAAP PPS of $4 per share.
As a result.
We recently increased co Hughes midterm financial targets to revenue of $1 billion in non-GAAP EPS of $4 per share. Additionally.
Speaker 3: Additionally, many of our customers have publicly announced the recent quarterly results and provided growth forecasts for 2022, which emboldens our view that this will be another good year for COHE.
Additionally, many of our customers have publicly announced a recent quarterly results and provide a growth forecast for 2020, Chew, which emboldens our view that this will be another good year for <unk>.
We don't typically have a single large customer that drives revenue in a year, but count on aligning our product strategy to segments of the market and customers that have outsized growth prospects.
Speaker 3: We don't typically have a single large customer that drives revenue in a year, but count on aligning our product strategy to segments of the market and customers that have outsized growth prospects.
Speaker 3: We forecast 2022 to be a strong year for semiconductor tester group, which is starting to benefit from the many recent customer design wins and expansion within and beyond the RF mobility segment.
We forecast 2022 to be a strong year for semiconductor tester group, which is starting to benefit from the many recent customer design wins and expansion within and beyond the RF mobility segment.
Speaker 3: continued gains in inspection and metrology, working to qualify NEON at several new customers in 2022, and deploying new vision solutions later in the year that further align our products to tighter quality requirements in advanced packaging.
Continue gains in inspection and metrology.
Working to qualify and E on at several new customers in 2022, and deploying new vision solutions later in the year that further align our products to tighter quality requirements in advanced packaging.
Speaker 3: We're also planning another growth year for the interface business, particularly in automotive and industrial power applications and high-performance RF mobility.
We're also planning another growth year for the interface business, particularly in automotive and industrial power applications and high performance RF mobility.
Speaker 3: DI core business is lifting off at many automotive and industrial semiconductor manufacturers.
<unk> core businesses lifting off at many automotive and industrial semiconductor manufacturers augmenting our product portfolio and delivering value via mining sensor data in our products to improve our customers' productivity.
Speaker 3: augmenting our product portfolio, and delivering value via mining sensor data in our products to improve our customers' productivity.
Speaker 3: Finally, we forecast handler demand to moderate in 2022, which we expect to drive sequential consolidated gross margin expansion this year.
Finally, we forecast a handler demand to moderate in 2022, which we expect to drive sequential consolidated gross margin expansion this year.
Speaker 3: Water forecast remains strong and the challenge continues to be to secure enough from the supply chain to satisfy demand. And as always, we will continue to assess opportunities and make investments based on high ROI and strong future cash flow potential.
Our forecast remains strong and the challenge continues to be to secure enough from the supply chain just satisfy demand.
And as always.
We will continue to assess opportunities and make investments based on high ROI and strong future cash flow potential.
Speaker 3: Let me now turn it over to Jeff to share fourth quarter results and provide specifics about our Q1 guidance.
Let me now turn it over to Jeff to share fourth quarter results and provide specifics about our Q1 guidance.
Jeff.
Speaker 2: Thanks, Luis. Before I walk through the Q4 results and Q1 guidance, please note that my comments that follow all refer to non-GAAP figures. Information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures, are included in the accompanying earnings release and investor presentation, which are located on the investor page of our website.
Thanks, Louise before I walk through the Q4 results and Q1 guidance. Please note that my comments that follow I'll refer to non-GAAP figures information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures are included in the accompanying earnings release and Investor presentation, which.
Located on the Investor page of our website.
Speaker 2: Now turning to the financial results. COYO delivered strong revenue and profitability in the quarter. Q4 revenue was $191.9 million and at the higher end of our guidance range.
Now turning to the financial results.
<unk> delivered strong revenue and profitability in the quarter Q4 revenue was $191 9 million and at the higher end of our guidance range.
Speaker 2: Total revenue for full year 2021 was $887 million, growing 39% over 2020 and setting a new CoHU record.
Total revenue for full year, 2021 was 887 million growing 39% over 2020 and setting a new <unk> record.
Speaker 2: During the fourth quarter, two automotive segment customers each accounted for more than 10% of sales.
During the fourth quarter, two automotive segment customers each accounted for more than 10% of sales.
Speaker 2: For full year 2021, one automotive segment customer accounted for approximately 14% of sales.
For full year 2021, one automotive segment customer accounted for approximately 14% of sales.
Speaker 2: In the fourth quarter, Co-U's gross margin was 44.1% and in line with our guidance.
In the fourth quarter co use gross margin was 44, 1% and in line with our guidance.
Speaker 2: Four-year 2021 gross margin was 43.6%.
Full year 2021 gross margin was 43, 6%.
Speaker 2: Operating expenses for Q4 were $50.7 million, also in line with guidance. Full year 2021 operating expenses were approximately 23% of revenue and lower than our midterm target by about 300 basis points, supplementing profitability as we expand gross margin.
Operating expenses for Q4 were $50 7 million also in line with guidance.
Full year 2021, operating expenses were approximately 23% of revenue and lower than our mid term target by about 300 basis points supplementing profitability as we expand gross margin.
Speaker 2: Fourth quarter non-GAAP operating income was 17.7% of revenue and adjusted EBITDA was 20%.
Fourth quarter non-GAAP operating income was 17, 7% of revenue and adjusted EBITDA was 20%.
Speaker 2: Full year operating income was 20.5% and adjusted EBITDA for 2021 was 22.2%.
Full year operating income was 25% and adjusted EBITDA for 2021 was 22, 2%.
Speaker 2: Return on invested capital in the fourth quarter was approximately 48 percent and full year ROIC was approximately 55 percent.
Return on invested capital in the fourth quarter was approximately 48% and full year ROIC was approximately 55%.
Speaker 2: COHEU generated a net tax benefit in Q4 due to the recognition of foreign tax credits applied to US federal taxes.
<unk> generated a net tax benefit in Q4 due to the recognition of foreign tax credits applied to U S federal taxes.
Speaker 2: The non-GAAP effective tax rate for full year 2021 was approximately 10%, benefiting mainly from U.S. NOLs, R&D credits, and the foreign tax credits recognized in Q4. non-GAAP EPS for the fourth quarter was 72 cents. The foreign tax credits recognized in Q4 contributed 15 cents to EPS.
The non-GAAP effective tax rate for full year 2021 was approximately 10% benefiting mainly from U S Nols and R&D credits and the foreign tax credits recognized in Q4.
non-GAAP EPS for the fourth quarter was 72.
Foreign tax credits recognized in Q4 contributed 15 cents to EPS.
Speaker 2: The full year 2021 EPS was $3.20, growing 169% year over year.
The full year 2021, EPS was $3 20.
Growing 169% year over year.
Speaker 2: record revenue growth and profitability in fiscal year 2021 coupled with strong customer demand, backlog of 293 million at the end of Q4 and increasing traction in key growth markets.
Record revenue growth and profitability in fiscal year 2021.
Coupled with strong customer demand backlog of $293 million at the end of Q4 and increasing traction in key growth markets.
Speaker 2: led to a recent expansion of our mid-term financial targets to revenue of $1 billion and non-GAAP EPS of $4. Moving to the balance sheet, the cash grew to $380.
Led to our recent expansion of our mid term financial targets to revenue of $1 billion and non-GAAP EPS of $4 moving to the balance sheet.
Cash grew to $380 million and.
Speaker 2: and total debt was relatively unchanged quarter over quarter at $119 million.
And total debt was relatively unchanged quarter over quarter at $119 million.
However, we did make a voluntary debt repayment in early Q1 of 7 million to reduce the term loan b outstanding balance to approximately 95 million.
Speaker 2: However, we did make a voluntary debt repayment in early Q1 of $7 million to reduce the term loan be outstanding balance to approximately $95 million.
Speaker 2: The Q4 cash balance is net of $7.3 million used to repurchase approximately 207,000 shares of common stock during the fourth quarter.
The Q4 cash balances net of $7 3 million used to repurchase approximately 207000 shares of common stock during the fourth quarter.
Speaker 2: Cash flow from operations remains strong and capital additions, mainly to support expansion of our contactor manufacturing operations remains modest overall.
Cash flow from operations remained strong and capital additions mainly to support expansion of our contactor manufacturing operations remains modest overall <unk>.
Speaker 2: Colu's balance sheet is in a strong position to support debt reduction, the share repurchase program, and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy. Now moving to our Q1 outlook, we're guiding Q1 revenue to be between $188 million and $202 million. As I mentioned, customer demand remains strong and the midpoint of our Q1 revenue guidance reflects a small increase over Q4 revenue.
<unk> balance sheet is in a strong position to support debt reduction the share repurchase program and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy now.
Now moving to our Q1 outlook, we're guiding Q1 revenue to be between $188 million and $202 million as I mentioned customer demand remains strong and the midpoint of our Q1 revenue guidance reflects a small increase over Q4 revenue.
Speaker 2: Supply chain remains challenging for both CoHue and our customers, resulting in small but dynamic shifts in revenue, as some shipments were pulled into Q4 while others have been pushed beyond Q1 due to material shortages of wafers and lead frames among our customers and supply constraints on certain semiconductors used in our testers.
Supply chain remains challenging for both <unk> and our customers, resulting in small but dynamic shifts in revenue as some shipments were pulled into Q4, while others have been pushed beyond Q1 due to material shortages of wafers and lead frames, among our customers and supply constraints on certain semiconductors.
Used in our testers.
Speaker 2: Order backlog, customer demand, and test cell utilization remain strong and bodes well for sequential revenue growth in Q2. However, given the uncertainty with supply chain and semiconductor availability, we are hesitant to comment in further detail about future quarterly revenue at this time.
Order backlog customer demand and test cell utilization remained strong and bodes well for sequential revenue growth in Q2, however, given the uncertainty with supply chain and semiconductor availability were hesitant to comment in further detail about future quarterly revenue at this time.
Q1 gross margin is forecasted to be approximately 44, 5%, we're seeing a moderation of automotive test handlers and quarter over quarter growth in tester revenue improving product mix and having a positive impact on gross margin Q.
Speaker 2: Q1 gross margin is forecasted to be approximately 44.5%. We're seeing a moderation of automotive test handlers and quarter-over-quarter growth in tester revenue, improving product mix, and having a positive impact on gross margin.
Speaker 2: Q1 operating expenses are projected to be approximately $53 million.
Q1 operating expenses are projected to be approximately $53 million.
Speaker 2: And we're projecting Q1 interest expense to be approximately $1 million. Q1 debt repayment will be approximately $7 million, reflecting the payment already made at the end of January .
And we're projecting Q1 interest expense to be approximately $1 million.
Q1 debt repayment will be approximately $7 million, reflecting the payment already made at the end of January .
We expect Q1 adjusted EBITDA at the midpoint of guidance to be approximately 19%.
Speaker 2: We expect Q1 adjusted EBITDA at the midpoint of guidance to be approximately 19%.
Speaker 2: The Q1 forecast non-GAAP tax rate is approximately 16% at the midpoint of guidance, full year
The Q1 forecast non-GAAP tax rate is approximately 16% at the midpoint of guidance full year.
Speaker 2: 2022 non-GAAP tax rate is estimated to be approximately 18%.
2022, non-GAAP tax rate is estimated to be approximately 18%.
Speaker 2: The diluted share count for Q1 is expected to be approximately 49.5 million shares.
The diluted share count for Q1 is expected to be approximately 49 5 million shares.
Speaker 2: And that concludes our prepared remarks. Now we'll open the call to your question.
And that concludes our prepared remarks now we will open the call to your questions.
Speaker 1: As a reminder, if you'd like to ask a question at this time, please press the star then the number one key on your touch tone telephone. Our first question comes from...
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
Our first question comes from <unk> Hari with Goldman Sachs.
Speaker 4: Hi, good afternoon. Congrats on the strong results and thank you for taking my question. Luis, I was hoping you could talk a little bit about the supply environment. It looks like you're embedding some sort of impact from a supply perspective in your Q1 outlook, both directly impacting you guys but also impacting your customers. What are some of the primary causes and when do you expect some of these challenges to abate? And then we've got a quick follow-up.
Hi, good afternoon, congrats on the strong results and thank you for taking my question.
Luis I was hoping you could talk a little bit about the supply environment. It looks like you're embedding some sort of impact.
From a supply perspective in your in your Q1 outlook.
<unk>.
Directly impacting you guys, but also impacting our customers.
What are some of the primary causes and when do you expect some of these challenges to abate and then I've got a quick quick follow up.
Speaker 3: Hi, Toshiya. Yes, you're correct. We are modeling a continued challenge at our customers, both from sourcing wafers as well as sourcing substrates and lead frames perspective.
Hi for sure.
Yes, you are correct we are modeling.
She knew challenge at our customers both from a sourcing wafers as well as sourcing substrates and lead frames perspective.
Speaker 3: So it's hard to quantify, but we have some understanding and a few instances from our customers of the situation. And then on our own side...
So it's hard to quantify but we have some understanding.
In a few instances from our customers of the situation.
And then on our own side.
Speaker 3: As we had been mentioning now for several quarters, the supply chain remains pretty tight. And at this stage, even shifting a little bit to tightness in sourcing some discrete electronic components for motors, controllers, as well as sourcing semiconductor devices themselves.
As we had been mentioning now for several quarters the supply chain remains pretty tight.
At this stage.
Shifting a little bit <unk> tightness in.
Sourcing some discrete electronic components for motors controllers, as well as sourcing semiconductor devices themselves.
Speaker 2: And maybe, Tosha, I can add to that. For Q1, the semi-shortage, we're modeling or we've adjusted the forecast by $8 million to $10 million as a result of both semi-shortage through our supply chain, as well as some customer delays, as Luis explained. Got it. That's very helpful.
Yes, maybe I can add to that for Q1.
The semi shortage we're modeling.
We've adjusted that.
The forecast by $8 million to $10 million.
As a result of both.
Semi shortage through our supply chain as well as some customer delays as Luis explained.
Got it that's very helpful.
And then I guess as my follow up.
How are you guys thinking about 2022, the full year and in terms of.
Speaker 4: How are you guys thinking about 2022, the full year in terms of your different products? I think Luis in your prepared remarks you talked about.
Your your different products I think Luis in your prepared remarks, you talked about strong design wins in semiconductor test I think you had positive comments on your contactor interface business and you also talked about moderation and handlers. So curious how youre thinking about those three large buckets within.
Speaker 4: you know, strong design wins and semiconductor tests. I think you had positive comments on your contactor interface business, and you also talked about moderation and handlers. So, curious how you're thinking about those three large buckets within your business.
Your business.
Speaker 4: for Cohew specifically, but also how are you thinking about the SAM growth relative to 2021? Thank you.
For <unk>.
For <unk>, specifically, but also how are you thinking about the Sam growth relative to 2021. Thank you.
Speaker 3: Sure, why don't we start at the end here with the same portion and then work our way back to the company then. We're looking at the
Sure why don't we start at the end here with the sand portion and then work our way back to the company then.
We're looking at.
Speaker 3: overall TAM for tests to be largely the same year-over-year, 2021 to 2022. And from a SAM perspective, we've been saying this for a little while now, that we have about a $1.4 billion SAM on the tester market, and...
Overall Tam for test should be largely.
The same year over year 2021 to 2022.
And from a Sam perspective, we've been saying this for a little while now that we have about a $1 $4 billion Sam on the tester market.
Frankly that is not changing what's changing is our ability to penetrate into that Sam.
Speaker 3: Frankly, that is not changing. What's changing is our ability to penetrate into that SAM. We're fairly emboldened by
Fairly emboldened by design wins that we scored particularly in the second half of last year and what is still at play here going into 2022.
Speaker 3: design wins that we scored, particularly in the second half of last year, and what is still at play here going into 2022. So to a degree, very happy to see traction that we're getting in the DDIC market, display driver IC test market, with our tester business.
So to a degree very happy to see.
Traction that we're getting into DDA IC market display driver IC test market with our test business.
Speaker 3: Also, power management and mixed signal, particularly in the automotive side. We continue to get
Also power management and mixed signal.
Particularly in the automotive side.
We continue to get some.
Speaker 3: This opportunity is true in displacing in-house rack and stack solutions in the RFM as well. It doesn't really change the SAM, it more so changes our penetration into the SAM. That's the positive side. On the contactor business...
Yes.
Opportunities too in displacing in house rack and stack solutions in the RCM as well it doesn't really change the Sam and more so it changes our penetration into the Sam that's the positive side on the contactor business.
A little more little bit more difficult to forecast what the market is going to look like in 2022, we think it would be.
Speaker 3: A little bit more difficult to forecast what the market is going to look like in 2022. We think it would be somewhat flat to up 7% on the contactor side, but we are continuing to gain new customers and new penetrations, particularly for power management devices and precision analog semiconductor tasks.
Somewhat flat to up 7% on the hand on the contactor side, but we are.
<unk> to gain new customers and new penetrations, particularly for power management devices and precision analog.
Semiconductor test.
Speaker 3: On the handler side, we think a combination of things. One, the market itself will probably moderate down in conjunction with the automotive moderation that we've been talking about. And that should have a similar effect in our business, in our test handler automation business, since we have such a large share in the automotive test equipment.
On the handler side, we think combination of things one the.
The market itself will probably moderate down in conjunction with the automotive moderation that we've been talking about.
And that should.
That should have a similar effect on our business and our desk.
Test handler automation business since we have such a large share.
Automotive test test equipment.
Speaker 3: I hope that answers your question. Yeah, that's great. Thank you for all the details.
I hope that answers your question.
Yes.
Great. Thank you for all the detail.
Our next question comes from Brian Chin with Stifel.
Speaker 5: Hi there, good afternoon. Congratulations on the strong 4Q and thanks for letting us ask some questions. Maybe just a, at least first a follow up on that last question relative to the testing of the business.
Hi, there good afternoon, congratulations on the strong <unk> and thanks for letting us ask some questions.
Maybe just the.
First a follow up on that last question relative to the test handler business.
Speaker 5: Do you care to put any sort of brackets around magnitude, sort of duration in terms of the moderation you see in the business? Clearly, you still would have been up in terms of growth or not constrained in Q1 even more than you're hiding right now. And so it looks like you do have some offsets vis-à-vis the many order commentary and wins that you talked about earlier in the call. So just wondering if you could put any more brackets around sort of that moderation in the hand of the...
Do you care to put any sort of brackets around magnitude sort of duration in terms of.
The moderation you've seen the business clearly still would've been up in terms of growth or.
We're not constrained in Q1, even more than you are guiding right now.
And so it looks like you do have some offset to this vision.
Many order.
<unk> and wins that you talked about earlier in the call. So just wondering if you could put any more brackets around sort of that moderation in the handler business.
Sure Yeah, No I think Ken the way, we look at the handler business.
Speaker 3: Sure, yeah, no, I think I can. The way we look at the handler business.
Speaker 3: is that in 2021, last year, we had a combination of growth and also a rebound.
Is that in 2021 last year, we had a combination of growth and also a rebound.
Speaker 3: from the constrained environment, particularly in automotive in 2020.
From the constrained environment, particularly in automotive in 2020, and as we look to 2022, I think there's going to be a plus and a minus here the plus beam.
Speaker 3: And as we look to 2022, I think there's going to be a plus and a minus here. The plus being.
Speaker 3: electrification of drivetrain in automotive space continues to be very strong and progressing very well. I mean you can't today...
Electrification of drivetrain and automotive space continues to be very strong and progressing very well I mean, you can't today go out and buy vehicles because of lack of semiconductors. As you. All know at the same time I think I think that that rebound that happen in the predominantly in the first half of 'twenty one.
Speaker 3: go out and buy vehicles because of lack of semiconductors as you all know.
Speaker 3: At the same time, I think that rebound that happened in the, predominantly in the first half of 21, we size that netting of expected growth in 2022 should be about a 40 to $50 million.
We sized at <unk>.
<unk> of expected growth in 2022 to be about a 40% $40 million to $50 million.
Speaker 3: sort of net negative, if you will, or so-called the moderation that we're commenting here for the handle of business going into 2022.
Sort of net negative if you will were so called the moderation that we're commenting here for the for the handler business going into 2022.
Speaker 5: Got it. Okay, that's helpful. A question about the test contactors. I'm curious to what extent, I know, number one, you have some gross margin improvement initiatives that are expected to be pretty meaningful towards the end of the second half of the year. I'm wondering if those are still on track and two, what are the things that you're looking for in terms of the
Got it got it okay. That's helpful.
A question about the test contactor is im curious.
What extent.
Number one.
You have some gross margin improvement initiatives that are expected to be pretty meaningful towards the.
And to the second half of the year wondering if those are still on track into.
Speaker 5: From that standpoint as well as from a revenue shipment standpoint, I know there's been a lot of disruptions, discontinuities out in Southeast Asia where you have some manufacturing. Have you been impacted at all by that as well?
From that standpoint, as well as from a revenue shipment standpoint, I know, there's been a lot of disruption the discontinuities out in southeast Asia, where you have some manufacturing have you been impacted at all by that as well.
Hey, Brian .
Speaker 2: Hey, Brian . So with respect to the gross margin on contactors, we ended Q4, as we suspected, in a strong position, just a little bit above 40%. And yes, still anticipating significant.
So with respect to the gross margin on contact as we ended Q4 as we suspected in a strong position.
Just a little bit above, 40% and yes still anticipating.
Significant.
Speaker 2: increase there throughout the year. So the second half still anticipating mid 40% gross margin for the contact or business. Certainly with the workforce in Asia, Philippines primarily, it's been a challenge. So we're working through it. We haven't had any significant downtime as a result, but it just continues to be.
Increase there throughout the year, so second half still still anticipating mid 40.
Percent gross margin for the contactor business.
Certainly with the workforce.
In Asia.
Philippines, primarily its been a challenge and so we're working through it.
We haven't had any <unk>.
Significant downtime as a result, but it just continues to be a challenge.
Speaker 5: Okay, fair enough. I know you didn't want to make too much forward revenue commentary, but I will ask a question about seasonality. I know that taking on board some of the year-to-year effects you're talking about in terms of the various end products.
Okay.
Fair enough and I know you don't want them.
Make too much forward revenue commentary, but I will ask a question about seasonality and I know that taken onboard some of the year on year effects Youre talking about in terms of the various products.
Products.
Speaker 5: Yeah, usually 2Q and 3Q tend to be sort of stronger seasonal periods. Do you think the demand still speaks to that kind of rate, you know, the supply may speak to something different? And again, there's other overlays in terms of your business, but any way to think about sort of that seasonality in your business?
Using <unk> and <unk> tend to be sort of stronger seasonal periods. Do you think the demand is still speaks to that.
Kind of rate the supply may speak to something different.
Again theres other overlays in terms of your business, but any way to think about sort of that seasonality in your business.
Speaker 2: Yeah, I'll go, if you can handle it. So yeah, Brian , still seeing strong demand, still. We had a book to bill over one in Q4, and it's looking pretty strong in Q1 so far. So the demand is still there. The real wild card is the supply chain. Yeah, I think that covers it.
Yes.
I'll go.
So yes.
<unk> still seen seen strong demand still.
We had a book to bill over one in Q4, and it's looking pretty strong in Q1, so far.
So the demand is still there the real wildcard is the supply chain.
Yes, I think that covers it.
Got it okay. Thanks, guys.
Speaker 1: Our next question comes from Krish Sankar with Cowen & Company.
Our next question comes from Chris Shankar with Cowen <unk> Company.
Speaker 6: I think for taking the question, I have two of them. Louis or Jeff, thanks for the color on the SAM opportunity in FY22. So if I kind of roll it all together between the tester, handler and the contactor, it seems like your FY22 revenues could be maybe slatted up low single digits. Is that a decent proxy or any thoughts on that?
Yes, hi, thank for taking my question that drove them looser Geoff thanks for the color on the Sam opportunity in FY 'twenty, two so if I kind of lump it altogether between the tester handler and contactor.
It seems like you're slightly to revenues could be maybe flat to up low single digits.
A decent proxy on any thoughts on that.
Yes, Krish when you put it altogether. The reality is I think the market is about the same in 2022 is 2021, putting it altogether.
Speaker 3: Yeah, Chris, when you put it all together, the reality is, I think the market is about the same in 2022 as 2021. You know, putting it all together. What we do have is we have
What we do have is.
We have.
Speaker 3: A moderation on the handler side that already spoke to, to the tune of 40, 50 million dollars, is sort of that automotive bubble that we saw in 21.
A moderation in the handler side that already spoke to sort of $240 million to $50 million sorted that out emotive bubble that we signed 21 and then we do have the tailwind.
Speaker 3: And then we do have sort of the tailwind of customer gains that we have had here with the tester business in.
Of customer gains that we have had here with the tester business in <unk> mixed signal and even RF Pam as.
Speaker 3: DDIC, PMIC, Mixed Signal, and even RFM, as well as growth from customer gains as well in the contactor business that we expect to continue into 2022. So you put that all in the blender, right, and the reality is...
As well as growth from from customer gains as well in the in the contactor business that we expect to continue into 2022. So you put that all in the blender right and the reality is.
Speaker 2: You know, the SAM is about the same. It's more of a story of gaining market share in 2022. Yeah, that's true. I think one more thing to remember, Krish, is that we sold PCB test halfway through last year. They contributed $26 million to our $887 million for last year. So that's a gap that we're looking to make up.
The Sam is about the same it's more of a story of <unk>.
More of a story of gaining gaining market share in 2022, yes. That's true I think one more thing to remember Chris is that we sold PCB test halfway through last year, they contributed $26 million to our 887 for last year. So.
That's a gap that we're looking to make up.
Got it Super helpful. Thanks for that color and then just to follow along that theme.
Speaker 6: Got it, super helpful, thanks for that, Carlo. And then just to follow along the same path, given that the makeshift is more to a Tesla from Handler.
Given that the mix shifted more towards from handler.
Speaker 6: You know, that's a tailwind for gross margins, and then obviously you're going to be reducing or improving your gross margin for the contactors. So you know, it just optically makes sense that, you know, the gross margin should grow this year compared to last year. How should we think about OPEC given all the rising costs, and I'm trying to figure out the implications for earnings.
That's a tailwind for gross margins and then obviously you are going to be.
Reducing.
We are improving our gross margin for the contractors.
No.
Just optically makes sense that.
The gross margin should grow this year compared to last year.
How should we think about opex, given all the rising costs and I'm trying to.
We get out the implications for earnings.
Speaker 2: For OPEX, Krish, is that what you had mentioned? Yeah, A, number one, growth margin going up, does it make sense? And B, how to think about OPEX.
For Opex Krish is that what you had mentioned.
Question number one gross margin going up does it makes sense.
Think about Opex.
Okay.
Speaker 2: So we guided Q1 OpEx at about $53 million.
We guided Q1 opex at about $53 million I think we're going to have it we will have a tight range of opex for 2022. So.
Speaker 2: tight range of OpEx for 2022.
Speaker 2: uh... anywhere from probably a fifty two million accorded a fifty four million a quarter to sort of depending on not only revenue and some of the variable cost we have commissions travel things of that nature but uh... you know a quarterly basis we have some some items that don't necessarily you know more more
Anywhere from probably a $52 million accorded a $54 million a quarter, depending on not only revenue and some of the variable costs, we have commissions travel things of that nature, but.
On a quarterly basis, we have some some of the items that don't necessarily call. It seasonal if you will but that range is a range that we're modeling for the year of 52 to 54.
Speaker 2: call them seasonal, if you will. But that range is a range that we're modeling for the year 52 to...
And from a cost increase we have much like last year, we have been passing that through to customers.
Speaker 3: And from a cost increase we have, much like last year, we have been passing that through to customers.
Speaker 3: You know, there may be some delays like we had last year when we fasted through, but eventually we do catch up to those cost increases.
There may be some delays like we had last year when we pass it through but eventually we do catch up to those cost increases.
Okay. Thank you very much really appreciate it. Thank you. Thank you.
Speaker 1: Our next question comes from Craig Ellis with B Riley Securities.
Our next question comes from Craig Ellis with B Riley Securities.
Speaker 2: Yeah, thanks for taking the questions. I wanted to start just by clarifying a point. I think, Jeff, you indicated that the supply chain
Yes, thanks for taking the questions.
I wanted to start just by clarifying a point.
I think Jeff you.
You indicated that the supply chain.
Speaker 2: issues that you were seeing in the near term were worth about $8 to $10 million. So as we look at the 1.6% guide, and I think three months ago we were thinking that the business might grow 5 to 10%, is the difference between the 1.6 and the 5 to 10 that $8 to $10 million, or have there been some moving dynamics in terms of how you're looking at 1Q from where you were three months ago.
Issues that you were seeing in the near term were worst about $8 million to $10 million. So as we look at the one 6% guide.
And I think three months ago, we were thinking that the business might grow 5% to 10% is the difference between.
One six and 5% to 10 that $8 million to $10 million or have there been some.
Moving dynamics in terms of how youre looking at <unk> from where you were three months ago.
Craig So we had we had a little more rollback into into.
Speaker 2: Craig, so we had a little more roll back into Q4. So the revenue there was a little bit higher than our midpoint of guidance. And then, yeah, you're correct. I said $8 to $10 million as a Q1 impact related to supply chain.
Q4 so.
The revenue there was a little bit higher than our midpoint of guidance and then yes.
You are correct I said eight to 10 million as a Q1 impact related to supply chain.
Got it Okay, and then secondly, nice to see the $293 million in backlog can you just comment on.
Speaker 2: Got it. Okay. And then secondly, nice to see the $293 million backlog. Can you just comment on what you're seeing in terms of how that's distributed across the different products? And as you look at the backlog, how far out is that extending? Is that giving you visibility into the second half of the year, or is that really just through the second quarter? Any color on breadth and duration would be helpful.
What youre seeing in terms of how that is distributed across the different products and and as you look at the backlog how far out is that extending is that giving you visibility into the second half of the year or is that really just through the second quarter any color on breadth and duration would be helpful.
The duration is.
Speaker 2: The duration is really up to two quarters. There's some that goes beyond that, but it's not meaningful. So it's color on up to two quarters. In terms of the breakdown of the backlog, I think it's close to where we were on an annual basis.
Up to two quarters there is some that.
It goes beyond that but it's not meaningful so it's it's color on that.
Up to two quarters.
And in terms of the breakdown of the backlog.
I think it's close to where we were on an annual basis.
Speaker 2: from a revenue perspective. Now, over the last quarter or two, certainly testers have gotten stronger as automotive test handlers have moderated. But, you know, I would say from a total make-up is probably,
From a revenue perspective, now over the last quarter or two certainly testers have gotten stronger as automotive.
Test handlers have moderated, but I would say from a total makeup it's probably.
Speaker 2: 55 to 60 percent handlers and then close to 30 percent testers and the balance would be contactors
55% to 60% handlers, and then close to 30% testers and the balance would be contractors.
Got it.
Ben.
Speaker 2: Let's see, lastly for me, nice to see the company being active on the buyback program with the 7 million given where our valuation is versus tenure levels. Can you just help us understand how you're thinking about utilizing that buyback program as you look ahead at the first quarter of the year?
Let's see lastly for me nice to see that.
Company being active on the buyback program with the $7 million given by our valuation is versus 10 year levels can you just help us understand how you're thinking about.
Utilizing that buyback program as you look ahead at the first quarter are there.
Speaker 2: Yeah, I think the target in the first quarter is going to be really to offset dilution.
Okay. Thanks, Tom.
In the first quarter is going to be really to offset dilution.
<unk>.
Speaker 2: And I think it's going to be similar to what we did in Q4, Craig. So I would model somewhere close to 200,000 shares, something close to what our Q1 results were.
I think it's going to be similar to what we did in Q4, Craig So I would.
Model somewhere close to 200000 shares.
Something something close to what our Q1 results were.
Speaker 5: Got it. Thanks very much, guys. Hop back in the queue. Thanks, Greg.
Got it.
Thanks, very much guys hop back in the Kevin.
Thanks, Greg.
Our next question comes from Quinn Bolton with Needham.
Speaker 7: I just wanted to sort of ask, the picture about 2022, you know, I know you're not commenting beyond the second quarter, and you talked about seeing sequential growth.
Hey, guys, just wondering just sort of ask.
Sure about 2022.
No you are not commenting beyond the second quarter and you talked about seeing sequential growth continue into Q2, but.
Speaker 7: But, you know, kind of walking through the puts and takes for the year, it sounds like revenue for the business, XPCB test, is going to be roughly flattish in the eight.
Walking through the puts and takes for the year. It sounds like revenue for the business ex PCB test is going to be roughly flattish 50 to 860 range.
Speaker 7: Um, you know, I look at the first quarter guidance at 195.
Look at the first quarter guidance of 195.
Speaker 7: It sort of feels like, you know, either you have a really big June quarter or perhaps you're seeing some of the revenue that, you know, shifting out of Q1.
Sort of feels like either you have a really big June quarter, or perhaps you're seeing some of the revenue.
Shifting out of Q1, Q2, Q3, maybe even in Q4, so I guess.
Speaker 7: into either Q2, Q3, maybe even into Q4. So I guess, you know, to get to sort of a flat year, it seems to imply perhaps a stronger second half than you might normally see.
Get to sort of a flat year it seems to imply perhaps a stronger second half than you might normally see.
Speaker 7: And I'm just wondering if you guys agree with that, or do you just see a sort of whatever pushes out of March might be captured?
Just wondering if you guys agree with that or do you see sort of whatever pushes out of March might be captured in June .
Well, yes in terms of trying to recapture what pushes out of March into a particular quarter that that's hard to do based on the uncertainty so again.
Speaker 2: Well, yeah, in terms of trying to recapture what pushes out a march into a particular quarter, that's hard to do based on the uncertainty. So, you know, again, we're seeing a lot of strength in the business right now, a lot of good indicators and, you know, the projections for the market are, as Luis went through similar to what they were last year.
We're seeing a lot of strength in the business right now a lot of good indicators.
The projections for the marketer as Luis went through similar to what they were last year.
Speaker 2: But it's just this 1 of the reasons we're not giving any kind of indication of Q2 revenue is just there's just too much uncertainty. So whether that pushes to Q2 Q3. What comes out of Q2 Q3.
But it's just.
This one of the reasons, we're not giving any kind of indication of Q2 revenue is just there's just too much uncertainty so whether that pushes to Q2 Q3.
That comes out of Q2 Q3.
Speaker 2: is just too uncertain at the moment, yeah, right. And so we're really hesitant to, as you can tell, to put any kind of parameters around this. Yeah, realistically, Quinn, we're not in a position to talk about second half of the year yet. It's just too soon to have a good educated guess of what's going to happen that far out.
It's just.
Right and so we're really hesitant to.
As you can tell too.
Put any kind of parameters around this realistically Quinn.
We're not in a position to talk about the second half of the year, It's just too soon.
Have a good educated guess so what's going to happen.
That far out.
Speaker 7: Is it fair to say, though, that you're sort of more confident in your outlook that XPCB tests that the revenue would be roughly flat-ish, what's harder to call is just the timing of the revenue? Or do you think that there's risk to that 850, 860 kind of flat-ish year-on-year outlook?
Is it fair to say, though that youre sort of more confidence in your outlook.
PCB test that the revenue will be roughly flattish what's harder to call is just the timing of the revenue where do you think that there is risk to that that $8 58 to 60 kind of flattish year on year outlook.
Speaker 3: But I think we're saying we're confident in what we have been talking about for the last one to two quarters, which is we would see a moderation on the handler business due to the automotive snapback effect we talked about. We would see.
And I think I think we're saying we're confident in what we have been talking about for the last.
One to two quarters, which is we would see a moderation in the handler business.
The automotive snapback effect, we've talked about.
We would see.
Speaker 3: increased on the tester business going into the first half of this year.
The increase on the tester business go in each of the first half of this year.
Speaker 3: If I would say perhaps we're a little positively surprised by the strength of some of these design wins that we got recently in the sense of they're translating into volume orders already, that's exciting.
If I would say perhaps were a little.
Positively surprised by the strength of some of these design wins that we got recently in the sense of they are translating into volume orders already.
Exciting.
Speaker 3: We were confident on the improvements on the contractor business, both the revenue growth and the improvement in gross margin. So those are all playing out as we expected. I'm a little, say, disappointed on the continued tightness on the supply chain side. You know, I would have thought it would have start easing a little bit and it's not. That's remaining. So that creates a little bit more of aggravation here in the near term than we expected.
We were confident on the improvements on the contactor business, both the revenue growth and the improvement in gross margin. So those are all playing out as we expected.
I'm a little disappointed on the continued tightness in the supply chain side.
I would've thought it would've start easing a little bit and it's not that's remaining.
That creates a little bit more of aggravation here in the near term than we expected.
Speaker 3: Um, so, so, so far everything is playing out the way we expected, uh, except for, you know, supply chain remains a challenge.
So so far everything is playing out the way we expected except for supply chain remains a challenge.
Speaker 3: What you know for the second half of the year, it's too early to comment. So I don't know how to answer your question for the full year at this point. Understood.
What you know for the second half of the year, it's too early to comment so I don't know how to answer your question for the full year at this point.
Understood. Okay, guys. Thank you very much.
Our next question comes from Tom <unk> with D. A Davidson.
Speaker 1: Our next question comes from Tom Dibile with B.A. Davidson.
Speaker 8: Yes, good afternoon. Thank you. So very nice to hear about the mini design wins. I wanted to dig in just a little bit more on the RF test side in Japan. So Luis, how big is that market and is it currently being served with in-house solutions or other specific competitors?
Yes, good afternoon, and thank you.
So very nice to hear about the many design wins I wanted to dig in just a little bit more on the RF test side in Japan, So loose how big is that market is.
Currently being served with in house solutions or other specific competitors there.
So the Japan.
Speaker 3: So the Japan customer win, I mean, they are one of the, or potentially one of the leaders in the RFM space. And I think as we mentioned a few quarters ago, we had a couple more large RF customers to win, or perhaps more than a couple, but a few more RF customers to win. This is a very important penetration win for us within.
Japan customer win I mean, they are one of the or potentially D or one of the leaders in the RF space.
And I think as we mentioned a few quarters ago, we had a couple more large RF customers to win perhaps more than a couple, but a few more RF customers to win.
This is this is a very important penetration win for us within <unk>.
Speaker 3: working at it for over a year and we finally got a beachhead entrance. So that's a very important.
Working on it for over a year and we finally got a beachhead entrants.
That's a very important.
Speaker 3: penetration there. We also had some design wins at a US-based RFM customer, where we're displacing in-house rack and stack solution for
Penetration there. We also had some design wins at a U S based RSM customer.
Where we're displacing in house reckoned stack solution for.
Speaker 3: a Wi-Fi 6E and Wi-Fi 7 application. Um, so yeah, I think
Our Wi Fi six Wi Fi seven application.
So, yes, I think I think thats it for for the moment on the RF.
Okay. Thank you.
Speaker 8: Okay, thank you. And then Jeff, moving to the target model, I'm curious, you know, as we bridge the gap from last year's results to the target model, on the margin expansion side, is that a combination just product mix and scale, or are there any other programs that you need to implement to get to the high end?
Jeff moving to the target model.
Curious as we bridge the gap from last year's results to the target model.
Margin expansion side is that a combination just product mix and scale are there any other programs that you need to implement to get to the higher margin.
Speaker 2: No, those would be the two key items. Mix in terms of...
No those would be the two key items mix in terms of.
Speaker 2: growth in testers and contactors moderation in the handlers.
Growth in testers and contactor is moderation in the in the handlers.
Speaker 2: And then the scale is really more about the contactors and the internal manufacturing there. So, yes, increasing the revenue and the product that flows through the Asia-based or Philippines-based, Japan-based factories.
And then.
And then the scale is is really more about the contractors and the internal manufacturing there so yes, increasing.
The revenue and the product that flows through.
The Asia based or Philippines, based Japan based.
Factories.
Speaker 8: Okay, that's helpful. And then just quickly focusing on the cash generation, you know, the roughly 10% free cash flow yield last year.
Okay. That's helpful. And then just quickly focusing on the cash generation, the roughly 10% free cash flow yields last year.
Speaker 8: very nice, but you're projecting 18% free cash flow on the target model and it seems like there's a bigger jump in free cash flow than there is for, you know, EPS or margins. I'm just curious, what is the incremental driver there on that?
Very nice, but youre projecting 18% and free cash flow on the target model and it seems like Theres, a big adjusted free cash flow than there is for EPS and margins. So im just curious what is the incremental driver there.
I kind of appreciate the GAAP basis.
Speaker 2: Yeah, and this year we saw, you know, a significant increase on the balance sheet and receivables and inventory. So I think we're going to get a better churn and be able to improve the DSOs and the inventory days there. So that's the target and those are the actions in front of us. Great. Well, thank you both. Yeah, thank you.
Yes. This year, we saw it.
Significant increase on the balance sheet and receivables and inventory. So I think we're going to get a better churn.
And be able to improve the dsos and the <unk>.
Inventory days there so.
That's the target and those are the actions in front of us.
Well thank you both.
Yes. Thank you.
Our next question comes from <unk> Malik with Citi.
Hi, Thanks for taking my question.
Speaker 6: Hi, thanks for taking my question. Louis, if I remember correctly, last year you guys were a little bit early in talking about...
Lewis.
I remember it correctly last year, you guys early in and talking about.
Speaker 6: test utilization coming down on the mobile side. And it seems to me like that has stabilized and started to improve. But curious on the moderation in the auto handlers, is this something that you're starting to hear from your customers? Or you just expect kind of cyclicality to play out? Are there any signs right now? Or are you just being conservative?
Test utilization coming down on the mobile side. It seems to me like that has stabilized and start to improve but but curious on the moderation in the auto handlers is this something that you're starting to hear from your customers or you just expect.
Kind of cyclicality should play out.
Are there any signs right now or you just.
Being conservative.
Speaker 3: Uh, no, I don't think it's, uh, I don't think it's any speculation. We, we have seen obviously a pretty, pretty tremendous ramp in the automotive demand for our test handlers in the first half of last year, 21. And, and, uh, the moderation has started already on the third quarter of last year. Um.
No I don't think its.
I don't think its any speculation we have seen.
Obviously, a pretty pretty tremendous ramp in the automotive demand for our test handlers in the first half of last year 'twenty one.
In moderation has started already on the third quarter of last year.
Speaker 3: and then back to the normal seasonality pattern that we expected here in the fourth quarter and the first quarter. So there's still a lot of unfulfilled demand in the automotive market. I just think that that snapback effect that we saw in the first half of last year ain't going to repeat itself. And the forecast, the order forecast, the backlog we have on hand pretty much supports that view already.
And then back to the normal seasonality pattern that we expected here in the fourth quarter and the first quarter.
So there.
There are still there's still a lot of unfulfilled demand in the automotive market I, just think that snapback effect that we saw in the first half of last year Ain't going to repeat itself.
And the forecast the order forecast the backlog we have on hand pretty much supports supports that view already.
Great and then if you could touch on.
Speaker 6: Great. And then if you can touch on Y566E, I understand the test demand is improving this year. But within that test demand, if you can rank order RF versus the state driver versus power management, if you can rank order, which end market is the strongest?
<unk> thousand 660.
I understand the test demand is improving this year.
But within that test demand if you can rank order.
RF versus display.
The state driver versus that.
Your power management to treating shrank holder.
Which end market is the strongest.
Well in part has to do with our penetration our share penetration in each one of these segments. So the RF segment will continue to be the strongest for our tester business in 2022, but thats simply due to the fact that that's the area we have our strongest.
Speaker 3: Well, it in part has to do with our penetration, our share penetration in each one of these segments. So the RF segment will continue to be the strongest for our tester business in 2022. But that's simply due to the fact that that's the area we have our strongest share at the moment.
Sure at the moment.
Speaker 3: and continue to gain some new customers as I've described here in prepared remarks, one in Japan, one in the U.S. and the RFM. Nevertheless, if I were to look at just pure growth year on year or as a percentage of revenue growth year on year, we are
<unk> continued to gain.
Some new customers as I've described here in the prepared remarks, one in Japan, one in the U S and Europe . Nevertheless, if it were to look at just pure growth year on year or as a percentage of revenue growth year on year, we are.
Speaker 3: really bullish on the DDIC market, the display driver market. We had a very, very important qualification win in Korea in the fourth quarter.
Really bullish on the <unk> market the display driver market.
We had a very very important qualification win in Korea in the fourth quarter.
Speaker 3: That's going to translate into volume business, probably starting this quarter and into the subsequent quarters this year.
That's going to translate into volume business.
Probably starting this quarter and into each of the subsequent quarters. This year, we have had some new.
Speaker 3: We have had some new devices qualified on the platform at existing customers in Taiwan, although Fabless customers are in reality testing at OSAP.
Devices qualify it on the platform at existing customer.
In Taiwan.
Although fabless customers when reality testing at <unk>.
Speaker 3: So really emboldened by the traction in the DIC and frankly even a bit surprised by how fast that traction is translating into volume business.
So really.
Really emboldened by by the traction in the GIC and frankly, even a bit surprised by how fast that traction is translating through into volume business.
Speaker 3: I am also very happy to see the PMIC and mixed signal win in Japan. I think there is a lot more that we can and need to do in the PMIC and mixed signal side. So I would expect that would be a...
Also very happy to see the <unk> and mixed signal win in Japan.
I think there is there is a lot more that we can and need to do in the <unk> and mixed signal side. So I would expect that will be.
More of a story that we'll be discussing perhaps towards the second half of the year.
Speaker 3: more of a story that we'll be discussing perhaps towards the second half of the year.
Great. Thank you.
Speaker 1: As a reminder, if you'd like to ask a question at this time, that is star, then one. Our next question comes from............
As a reminder, if you'd like to ask a question at this time that is star then one.
Our next question comes from David Duley with steelhead.
Speaker 8: Thanks. Thanks for taking my question. I apologize. I missed part of your prepared remarks.
Thanks, Thanks for taking my question I apologize I missed part of your prepared remarks.
Speaker 5: The I'm just curious what you kind of think for the size or the growth rate of the test market this year, you know, paradigm kind of mentioned it was flat, but they have a big headwind with their largest customer. So, I imagine they mentioned that there's pretty decent growth outside of the mobility and Apple business. So, I'm kind of wondering what your.
Just curious.
What your kind of sense for the size or the growth rate of the test market. This year.
Teradyne kind of mentioned it was flat, but they have a big headwind with their largest customer.
So I imagine they mentioned that there are some pretty decent growth outside of mobility and Apple business. So I'm kind of wondering what you are.
Speaker 9: guess is for what the growth rate of the test business market of the test business might be this year.
Yes as for what the growth rate of the test business market of the test business might be this year.
Speaker 3: You know, David, given our size in that market, we tend to focus more on our SAM and the growth opportunities in our SAM. I mean, I looked at both Terradine and Adventa, sort of bellwether what they're saying for the market size. Obviously, as you pointed out, Terradine claimed it to be flat.
David given our size in that market, we tend to focus more on our Sam and the growth opportunities in our Sam.
Looked at both Teradyne advantest sort of bellwether of what they are saying for the market size. Obviously as you pointed out teradyne claim it should be flat advantest claims I don't know I think a 10% to 12% growth year on year talking about the SLC market in particular.
Speaker 3: Advantis claims, I don't know, I think a 10-12% growth year on year, talking about the SOC market in particular.
Speaker 3: We, as I mentioned in the prior question here, we're seeing really interesting opportunities in the DAC and PMIC and mixed signal.
We as I mentioned in the prior question here, we're seeing really interesting opportunities in the GIC and <unk> and mixed signal so.
Speaker 3: You know, is it because those markets are growing, like Advantist says? Or realistically for us, they are also design wins, recent design wins. So we see growth opportunity for our tester business. We think our tester business is going to nicely grow in 2022. As far as the market grows, you know, I guess I'll take the bellwether comments and say it's somewhere between zero and 12% growth based on Teradon and Advantist. Thank you. Okay.
Is it because those markets are growing like advanced SaaS or realistically for us. They are also design wins recent design wins, so we see growth opportunity for our test business. We think our tester business is going to nicely grow in 2022 as far as the market grows.
I guess I'll take the bellwether comments and say somewhere between zero and 12% growth based on Tara then and advantest.
Okay.
Okay.
Okay.
Speaker 9: You mentioned, I think at one point or another, that you expected to gain share in 2022. Could you just elaborate in what parts of your business you expect to gain share?
You mentioned I think at one point or another.
Expected to gain share in 2022 could you just elaborate and what parts of your business you expect to gain share.
Speaker 3: Sure. It is predominantly on the tester and the contactor side.
Sure.
It is.
Predominantly on the tester and the the contactor side, we have.
Speaker 3: Once again, we have done a really good design win in the DDIC market in Korea in Q4, and we're seriously expanding our presence now in Taiwan. So DDIC is a tremendous opportunity for us. We're also expanding our presence in the mixed signal and power management IC space of our tester and some new instrumentation that were brought in, and some refresh that we've done in 2021.
Once again, we have done a really good design win in the <unk> market in Korea in Q4.
We are seriously expanding our presence now in Taiwan. So.
<unk> is a tremendous opportunity for us we're also.
Expanding our presence in the mixed signal and power management IC space of our tester and some new instrumentation that we've brought in and some refresh that we've done in 2021.
Speaker 3: There is a little bit more to do in the RFM, including these wins in Japan and in the US RFM customers. That's not the end of the road, by the way. We just broke in. I think we've got to capture the revenue still and design all the different applications.
There is a little bit more to do in the RF film, including these wins in Japan and in the U S. Our FM customers.
That's not the end of the road by the way I mean, we just we just broke and I think we've got to capture the revenue is still in design all the different applications.
Speaker 3: The contactor side, we had
The contactor side.
We had.
Speaker 3: some new products in power management and precision analog that are getting uh... very good orders very good order rate here in uh... in the fourth quarter and starting at the first quarter this year
Some new products in power management and precision analog that are getting very good orders very good order rate here in the fourth quarter and starting at the first quarter of this year.
Speaker 3: So we grew the contactor business 25% in 21 year over year. We do expect to grow it again in 22.
So we grew the contactor business, 25% and 21 year over year, we do expect to grow it again in 'twenty two.
Speaker 3: And then lastly the inspection and metrology, you know, we had we had a tremendous year in 21 we grew a hundred and thirty percent year-over-year in revenue a lot of it has to do with
And then lastly, the inspection and metrology, we had we had a tremendous year in 'twenty. One we grew 130% year over year in revenue a lot of it has to do with.
Speaker 3: this so-called neon platform with infrared imaging capability. Just a really, really good attachment to mobile device applications.
This so called neon platform with infrared imaging capability, just a really really good.
Attachment to mobile device applications.
Speaker 3: We have a list of customers that we're targeting to win in 22. And then later in the year, we do expect to bring in some new vision technology.
Have a list of customers that we're targeting to win in 'twenty. Two and then later in the year, we do expect to bring in some new vision technology.
Speaker 3: that continues to expand our penetration thereafter more into high-performance digital and particularly where there is a vertical stack, semiconductor stacking or 3D packaging into 2023. So those are the primary areas of growth for the business in 2022. Excellent. And then I'm sorry if you already addressed that.
That continue.
<unk> continues to expand our penetration thereafter more into high performance digital and particularly aware there is <unk>.
Vertical stack semiconductor stacking, our three D packaging into 2023. So those are the primary areas of growth for the business in 2010.
Excellent.
I'm sorry, if you already addressed this but Jeff it seems like.
Speaker 9: The earnings per share in the December quarter were a bit above where street expectations were. Could you just outline what the key reasons for that were?
<unk>.
The earnings per share in the December quarter, or a bit above where street expectations, where could you just.
Outlined what the key reasons for that were.
Speaker 2: Yeah, key reasons, a little more revenue, slightly better gross margin, and then we had foreign currency gain of about $700,000. So those are some small differences. But then on a tax provision, we realized a foreign tax credit in the quarter, which drove a $2 million tax benefit as a credit as opposed to a debit in the quarter. So that added $0.15 to.
Key reasons, a little more revenue.
Slightly better gross margin.
And then.
We had.
Foreign currency gain of about 700000. So those are some small differences, but then on the tax provision, we we realized a foreign tax credit in the quarter, which drove a $2 million tax benefit.
Credit as opposed to a debit in the course, so that added 15 two.
To EPS.
Got it thank you.
Speaker 10: Gotcha, thank you.
Uh huh.
Yes.
That concludes today's question and answer session I would like to turn the call back to Jeff Jones for some closing remarks.
Speaker 1: That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for some closing remarks.
Speaker 2: Alright, thank you everybody. I appreciate you joining the call and we'll talk to you soon. Thank you.
Alright. Thank you everybody I appreciate you joining the call and we'll talk to you soon thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.
Okay.
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Good day and thank you for standing by welcome to the <unk>, Inc. Fourth quarter and full year 2021 results conference call.
Speaker 1: Good day, and thank you for standing by. Welcome to the CoHU, Inc. fourth quarter and full year 2021 results conference call. At this time, all participants are in listen-only mode. After the presentation.
At this time, all participants are in listen only mode.
After the presentation, there will be a question and answer session.
Speaker 1: To ask a question during this session, you'll need to press star, then 1 on your telephone keypad. Please be advised, today's conference...
To ask a question during the session you will need to press Star then one on your telephone keypad.
Please be advised today's conference maybe recorded.
Speaker 1: If you require operator assistance during the call, please press star then zero.
If you require operator assistance during the call. Please press Star then zero.
Speaker 1: I'd now like to hand the conference over to Jeff Jones, Chief Financial Officer.
I'd now like to hand, the conference over to Jeff Jones, Chief Financial Officer.
Good afternoon, and welcome to our conference call to discuss <unk> fourth quarter 2021 results and first quarter 2022 outlook I'm joined today by our President and CEO Luis Mueller.
Speaker 2: Good afternoon and welcome to our conference call to discuss COHU's fourth quarter 2021 results and first quarter 2022 outlook. I'm joined today by our president and CEO , Luis Mueller.
Speaker 2: If you need a copy of our earnings release, you may access it from our website at cohu.com or by contacting CoHU Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed on CoHU's website in the Investor Relations section.
If you need a copy of our earnings release, you may access it from our website at <unk> dot com or by contacting <unk> Investor Relations.
A slide presentation in conjunction with today's call that may be accessed on <unk> web site.
Site in the Investor Relations section replay.
Speaker 2: Replays of this call will be available via the same page after the call concludes.
Replays of this call will be available via the same page after the call concludes.
Speaker 2: Now to the safe harbor. During today's call, we will make forward looking statements reflecting management's current expectations concerning co use future business.
Now to the Safe Harbor.
During today's call, we will make forward looking statements, reflecting managements current expectations concerning <unk> future business.
Speaker 2: These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes.
These statements are based on current information that we have assessed but which by its nature is subject to rapid and even abrupt changes were.
Speaker 2: We encourage you to review the forward looking statement section of the slide presentation and the earnings release, as well as co-use filings with the SEC, including the most recently filed Form 10-K and Form 10-Q .
We encourage you to review the forward looking statements section of the slide presentation and the earnings release as well as <unk> filings with the SEC, including the most recently filed Form 10-K and Form 10-Q .
Speaker 2: Our comments speak only as of today, February 10, 2022, and COHEU assumes no obligation to update these statements for developments occurring after this call.
Our comments speak only as of today February 10, 2022, and <unk> assumes no obligation to update these statements for developments occurring after this call.
Speaker 2: 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.
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.
Speaker 2: Now I'd like to turn the call over to Luis Mueller, COHU's president and CEO . Luis? Good afternoon, everyone.
Now I'd like to turn the call over to Luis Mueller co. He was president and CEO Luis.
Good afternoon, everyone and thanks for joining us.
Fourth quarter revenue was approximately 192 million and non-GAAP EPS was <unk> 72.
Speaker 3: Fourth quarter revenue was approximately $192 million, and non-GAAP EPS was $0.72, both higher than the midpoint of our guidance.
Both higher than the midpoint of our guidance.
Speaker 3: Full year 2021 revenue of $887 million grew 39% year over year, capping a five-year revenue category of 26%, one of the strongest in our industry.
Full year 2021 revenue of $887 million grew 39% year over year capping a five year revenue CAGR of 26% one of the strongest in our industry.
Speaker 3: full-year non-GAAP EPS of $3.20 was up 169% year-over-year, demonstrating the scalability of our business model.
Full year non-GAAP EPS of $3 20.
It was up 169% year over year, demonstrating the scalability of our business model.
We also had several design wins that expanded our products into new customers.
Speaker 3: We also had several design wins that expanded our products into new customers.
Speaker 3: achieved year-over-year revenue growth of 130% in inspection and metrology and 25% in interface products business.
Achieved year over year revenue growth of 130% and inspection and metrology in 25% and interface products business.
Speaker 3: and supported a significant ramp in the automotive and industrial segment.
And supported a significant ramp in the automotive and industrial segments.
Speaker 3: Coming back to Q4, we had a multitude of customer design wins this past quarter.
Coming back to Q4.
We had a multitude of customer design wins this past quarter.
Speaker 3: Our tester business received volume orders for the Diamond X platform from a Japanese automotive semiconductor customer.
Our Tesla business received volume orders for the dime on X platform from a Japanese automotive semiconductor customer.
Qualified and secured initial volume order and shipment of Diamond next tester.
Speaker 3: qualified and secured initial volume order and shipment of Diamond X tester to a Korean-based display driver customer, delivering on the goal to expand their presence in this device segment.
<unk>, a Korean based display driver customer delivering on the goal to expand their presence in this device segment.
Speaker 3: Capture an important RF front-end module design win from a leading Japanese semiconductor manufacturer.
Capture an important RF front end module design win from a leading Japanese semiconductor manufacturer.
Speaker 3: that is adopting Cohu's PAX tester with the Red Dragon instrumentation software.
That is adopting <unk> Pax tester with the Red Dragon instrumentation suite.
Speaker 3: and got an initial PACS system order from a US-based RF semiconductor manufacturer.
<unk> got an initial pack system order from a U S based RF semiconductor manufacturing.
Speaker 3: for testing Wi-Fi 6E and Wi-Fi 7 devices, displacing this customer's internal rack and stack solution.
For testing Wi Fi six E and Wi Fi seven devices. This placing this customer's internal reconcile solution.
Speaker 3: in the interface business, we're gaining traction with a new line of power and precision analog contacts.
In the interface business, we're gaining traction with our new line of power in precision analog contractors used in testing semiconductors for automotive and industrial applications.
Speaker 3: used in testing semiconductors for automotive and industrial applications.
Speaker 3: The handler business followed with capturing RF sales at a Taiwanese customer's office.
The handler business, followed with capturing RF sales at a Taiwanese customer.
Speaker 3: being selected by a leading German customer, and receiving first order for testing automotive ADAS processors on our matrix handler equipped with T-Core active thermal control.
Being selected by a leading German customer and receiving first order for testing automotive Adas processors on our matrix handler equipped with T core active thermal control.
Speaker 3: Receiving the first order for our Eclipse with T-Core Active Thermal Control for testing Tier 1 mobile processors at a leading Korean OSAT
Receiving the first order for our eclipse with key core active thermal control for testing tier one mobile processors at a leading Korean Osage customer.
Speaker 3: and a few other design wins in the growing automotive and industrial semiconductor markets in China.
And a few other design wins in the growing automotive and industrial semiconductor markets in China.
Our <unk> data analytics cap the quarter, we've another win at a customer in Europe .
Speaker 3: Our DI Core Data Analytics capped the quarter with another win at a customer in Europe .
Speaker 3: In all, this was one of the longest lists of single-quarter design wins that I can remember in my tenure at CoHU and gives me confidence that we are on path to meet our mid-term revenue target.
All this was one of the longest list of single quarter design wins that I can remember in my tenure at <unk>.
And gives me confidence that we are on path to meet our mid term revenue target.
Speaker 3: We enter 2022 with an 87% estimated test sale utilization, strong backlog, and increasing demand for our product.
We enter 2022 with an 87% estimated test cell utilization.
Strong backlog and increasing demand for our products.
Speaker 3: we remain cautious about the tight supply chain environment and potential impact of Omicron in the next few months.
We remain cautious about the tight supply chain environment and potential impact of Ami crime in the next few months.
Speaker 3: But we're also excited by the customer traction and the opportunity to broaden our semi-test applications with our Diamond X test.
But we're also excited by the customer traction and the opportunity to broaden our semi test applications, we've heard Diamond X faster.
Speaker 3: growing interest in our NEON inspection and metrology technology.
Growing interest in our neon inspection and metrology technology.
Speaker 3: expansion and test interface products, and many ongoing qualifications of our DI core data analytics software solution.
Expansion in test interface products, and many ongoing qualifications or <unk> data analytics software solution.
Speaker 3: As a result, we recently increased Cohu's midterm financial targets to a revenue of $1 billion in non-GAAP EPS of $4 per share.
As a result.
We recently increased <unk> mid term financial targets to revenue of $1 billion in non-GAAP EPS of $4 per share. Additionally.
Speaker 3: Additionally, many of our customers have publicly announced the recent quarterly results and provided growth forecasts for 2022, which emboldens our view that this will be another good year for COHE.
Additionally, many of our customers have publicly announced our recent quarterly results and provide a growth forecast for 2022, which emboldens. Our view that this will be another good year for <unk>.
Speaker 3: We don't typically have a single large customer that drives revenue in a year, but count on aligning your product strategy to segments of the market and customers that have outsized growth prospects.
We don't typically have a single large customer that drives revenue in a year, but count on aligning our product strategy to segments of the market and customers that have outsized growth prospects.
Speaker 3: We forecast 2022 to be a strong year for semiconductor tester group, which is starting to benefit from the many recent customer design wins and expansion within and beyond the RF mobility segment.
We forecast 2022 to be a strong year for our semiconductor tester group, which is starting to benefit from the many recent customer design wins and expansion within and beyond the RF mobility segment.
Speaker 3: continue gains in inspection and metrology, working to qualify NEON at several new customers in 2022, and deploying new vision solutions later in the year that further align our products to tighter quality requirements in advanced packaging.
Continued gains in inspection and metrology working to qualify neon at several new customers in 2022, and deploying new vision solutions later in the year that further align our products to tighter quality requirements in advanced packaging.
We're also planning another growth year for the interface business, particularly in automotive and industrial power applications and high performance RF mobility.
Speaker 3: We're also planning another growth year for the interface business, particularly in automotive and industrial power applications and high-performance RF mobility.
Speaker 3: D.I. Corp. business is lifting off at many automotive and industrial semiconductor manufacturers.
<unk> core business is lifting off at many automotive and industrial semiconductor manufacturers augmenting our product portfolio and delivering value via mining sensor data in our products to improve our customers' productivity.
Speaker 3: augmenting our product portfolio, and delivering value via mining sensor data in our products to improve our customers' productivity.
Speaker 3: Finally, we forecast handler demand to moderate in 2022, which we expect to drive sequential consolidated gross margin expansion this year.
Finally, we forecast a handler demand to moderate in 2022, which we expect to drive sequential consolidated gross margin expansion this year.
Speaker 3: Water forecasts remain strong, and the challenge continues to be to secure enough from the supply chain to satisfy demand.
Order forecast remains strong and the challenge continues to be to secure enough from the supply chain to satisfy demand.
Speaker 3: And as always, we will continue to assess opportunities and make investments based on high ROI and strong future cash flow potential.
And as always.
We will continue to assess opportunities and make investments based on high ROI and strong future cash flow potential.
Speaker 3: Let me now turn it over to Jeff to share fourth quarter results and provide specifics about our Q1 guidance.
Let me now turn it over to Jeff to share fourth quarter results and provide specifics about our Q1 guidance.
Jeff.
Thanks, Louise before I walk through the Q4 results and Q1 guidance. Please note that my comments that follow I'll refer to non-GAAP figures information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures are included in the accompanying earnings release and Investor presentation, which.
Speaker 2: Thanks, Luis. Before I walk through the Q4 results and Q1 guidance, please note that my comments that follow all refer to non-GAAP figures. Information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures, are included in the accompanying earnings release and investor presentation, which are located on the investor page of our website.
Located on the Investor page of our website.
Speaker 2: Now turning to the financial results. COYO delivered strong revenue and profitability in the quarter. Q4 revenue was $191.9 million and at the higher end of our guidance range.
Now turning to the financial results.
You delivered strong revenue and profitability in the quarter Q4 revenue was $191 9 million and at the higher end of our guidance range.
Speaker 2: Total revenue for full year 2021 was $887 million, growing 39% over 2020 and setting a new CoHU record.
Total revenue for full year, 2021 was 887 million growing 39% over 2020 and setting a new <unk> record.
Speaker 2: During the fourth quarter, two automotive segment customers each accounted for more than 10% of sales.
During the fourth quarter, two automotive segment customers each accounted for more than 10% of sales.
Speaker 2: For full year 2021, one automotive segment customer accounted for approximately 14% of sales.
For full year 2021, one automotive segment customer accounted for approximately 14% of sales.
Speaker 2: In the fourth quarter, COU's gross margin was 44.1% and in line with our guidance.
In the fourth quarter <unk> gross margin was 44, 1% and in line with our guidance.
Speaker 2: Four-year 2021 gross margin was 43.6%.
Full year 2021 gross margin was 43, 6%.
Speaker 2: Operating expenses for Q4 were $50.7 million, also in line with guidance. Full year 2021 operating expenses were approximately 23% of revenue and lower than our midterm target by about 300 basis points, supplementing profitability as we expand gross margin.
Operating expenses for Q4 were $50 7 million also in line with guidance full year 2021, operating expenses were approximately 23% of revenue and lower than our mid term target by about 300 basis points supplementing profitability as we expand gross margin.
Fourth quarter non-GAAP operating income was 17, 7% of revenue and adjusted EBITDA was 20% full.
Speaker 2: Fourth quarter non-GAAP operating income was 17.7% of revenue and adjusted EBITDA was 20%.
Speaker 2: Full year operating income was 20.5% and adjusted EBITDA for 2021 was 22.2%.
Full year operating income was 25% and adjusted EBITDA for 2021 was 22, 2%.
Speaker 2: Return on invested capital in the fourth quarter was approximately 48 percent and full year ROIC was approximately 55 percent.
Return on invested capital in the fourth quarter was approximately 48% and full year ROIC was approximately 55%.
Speaker 2: COHU generated a net tax benefit in Q4 due to the recognition of foreign tax credits applied to U.S. federal taxes.
<unk> generated a net tax benefit in Q4 due to the recognition of foreign tax credits applied to U S federal taxes.
Speaker 2: The non-GAAP effective tax rate for full year 2021 was approximately 10%, benefiting mainly from US NOLs, R&D credits, and the foreign tax credits recognized in Q4. non-GAAP EPS for the fourth quarter was $0.72. The foreign tax credits recognized in Q4 contributed $0.15 to EPS.
The non-GAAP effective tax rate for full year 2021 was approximately 10% benefiting mainly from U S. Nols R&D credits and foreign tax credits recognized in Q4.
non-GAAP EPS for the fourth quarter was 72.
The foreign tax credits recognized in Q4 contributed <unk> 15 to EPS.
Speaker 2: The full year 2021 EPS was $3.20, growing 169% year over year.
The full year 2021, EPS was $3 20.
Growing 169% year over year.
Speaker 2: record revenue growth and profitability in fiscal year 2021 coupled with strong customer demand, backlog of 293 million at the end of Q4 and increasing traction in key growth markets.
Record revenue growth and profitability in fiscal year 2021, coupled with strong customer demand.
Backlog of $293 million at the end of Q4 and increasing traction in key growth markets led to a recent expansion of our mid term financial targets to revenue of $1 billion and non-GAAP EPS of $4 moving to the balance sheet.
Speaker 2: led to a recent expansion of our mid-term financial targets to revenue of $1 billion and non-GAAP EPS of $4. Moving to the balance sheet, the cash grew to $386.
The cash grew to $380 million.
Speaker 2: and total debt was relatively unchanged quarter over quarter at $119 million.
And total debt was relatively unchanged quarter over quarter at $119 million.
Speaker 2: However, we did make a voluntary debt repayment in early Q1 of $7 million to reduce the term loan be outstanding balance to approximately $95 million.
However, we did make a voluntary debt repayment in early Q1 of 7 million to reduce the term loan b outstanding balance to approximately $95 million the.
Speaker 2: The Q4 cash balance is net of $7.3 million used to repurchase approximately 207,000 shares of common stock during the fourth quarter.
Q4 cash balances net of $7 3 million used to repurchase approximately 207000 shares of common stock during the fourth quarter.
Speaker 2: Cash flow from operations remains strong, and capital additions, mainly to support expansion of our contactor manufacturing operations, remains modest overall.
Cash flow from operations remains strong and capital additions mainly to support expansion of our contactor manufacturing operations remains modest overall <unk>.
Speaker 2: CoU's balance sheet is in a strong position to support debt reduction, the share repurchase program, and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy.
<unk> balance sheet is in a strong position to support debt reduction the share repurchase program and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy now.
Speaker 2: Now moving to our Q1 outlook, we're guiding Q1 revenue to be between $188 million and $202 million. As I mentioned, customer demand remains strong and the midpoint of our Q1 revenue guidance reflects a small increase over Q4 revenue.
Now moving to our Q1 outlook, we're guiding Q1 revenue to be between $188 million and $202 million as I mentioned customer demand remains strong and the midpoint of our Q1 revenue guidance reflects a small increase over Q4 revenue.
Speaker 2: Supply chain remains challenging for both CoHue and our customers, resulting in small but dynamic shifts in revenue, as some shipments were pulled into Q4 while others have been pushed beyond Q1 due to material shortages of wafers and lead frames among our customers and supply constraints on certain semiconductors used in our testers.
Supply chain remains challenging for both <unk> and our customers, resulting in small but dynamic shifts in revenue as some shipments were pulled into Q4, while others have been pushed beyond Q1 due to material shortages of wafers and lead frames, among our customers and supply constraints on certain semiconductors.
Used in our testers.
Speaker 2: Order backlog, customer demand, and test cell utilization remain strong and bodes well for sequential revenue growth in Q2. However, given the uncertainty with supply chain and semiconductor availability, we're hesitant to comment in further detail about future quarterly revenue at this time.
Order backlog customer demand and test cell utilization remained strong and bodes well for sequential revenue growth in Q2, however, given the uncertainty with supply chain and semiconductor availability were hesitant to comment in further detail about future quarterly revenue at this time.
Speaker 2: Q1 gross margin is forecasted to be approximately 44.5%. We're seeing a moderation of automotive test handlers and quarter-over-quarter growth in tester revenue, improving product mix, and having a positive impact on gross margin.
Q1 gross margin is forecasted to be approximately 44, 5%, we're seeing a moderation of automotive test handlers and quarter over quarter growth in tester revenue improving product mix and having a positive impact on gross margin Q.
Speaker 2: Q1 operating expenses are projected to be approximately $53 million.
Q1 operating expenses are projected to be approximately $53 million.
Speaker 2: And we're projecting Q1 interest expense to be approximately $1 million. Q1 debt repayment will be approximately $7 million, reflecting the payment already made at the end of January .
And we are projecting Q1 interest expense to be approximately $1 million.
Q1 debt repayment will be approximately $7 million, reflecting the payment already made at the end of January .
Speaker 2: We expect Q1 adjusted EBITDA at the midpoint of guidance to be approximately 19%.
We expect Q1 adjusted EBITDA at the midpoint of guidance to be approximately 19%.
And the Q1 forecast non-GAAP tax rate is approximately 16% at the midpoint of guidance full year.
Speaker 2: The Q1 forecast non-GAAP tax rate is approximately 16% at the midpoint of guidance, full year
Speaker 2: 2022 non-GAAP tax rate is estimated to be approximately 18%.
2022, non-GAAP tax rate is estimated to be approximately 18%.
Speaker 2: The diluted share count for Q1 is expected to be approximately 49.5 million shares.
The diluted share count for Q1 is expected to be approximately $49 5 million shares.
Speaker 2: And that concludes our prepared remarks. Now we'll open the call to your questions.
And that concludes our prepared remarks now we will open the call to your questions.
Speaker 1: As a reminder, if you'd like to ask a question at this time, please press the star, then the number one key on your touchtone telephone. Our first question comes from...
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
Our first question comes from tissue <unk> Hari with Goldman Sachs.
Speaker 4: Hi, good afternoon. Congrats on the strong results and thank you for taking my question. Luis, I was hoping you could talk a little bit about the supply environment. It looks like you're embedding some sort of impact from a supply perspective in your Q1 outlook, both directly impacting you guys but also impacting your customers. What are some of the primary causes and when do you expect some of these challenges to abate? And then I've got a quick follow-up.
Hi, good afternoon, congrats on the strong results and thank you for taking my question.
Luis I was hoping you could talk a little bit about the supply environment. It looks like you're embedding some sort of impact.
From a supply perspective in your in your Q1 outlook both.
Directly impacting you guys, but also impacting our customers.
What are some of the primary causes and when do you expect some of these challenges to abate and then I've got a quick quick follow up.
Speaker 3: Hi, Toshiya. Yes, you're correct. We are modeling a continued challenge at our customers, both from sourcing wafers as well as sourcing substrates and lead frames perspective.
Sure.
Yes, Youre correct, we are modeling.
<unk> challenge that our customers both from a sourcing wafers as well as sourcing substrates and lead frames perspective.
Speaker 3: So it's hard to quantify, but we have some understanding and a few instances from our customers of the situation. And then on our own side...
So it's hard to quantify but we have some understanding.
In a few instances from our customers of the situation.
And then on our own side.
Speaker 3: As we had been mentioning now for several quarters, the supply chain remains pretty tight. And at this stage, even shifting a little bit to tightness in sourcing some discrete electronic components for motors, controllers, as well as sourcing semiconductor devices themselves.
As we had been mentioning now for several quarters the supply chain remains pretty tight.
At this stage.
Shifting a little bit <unk> tightness in.
Sourcing some discrete electronic components for motors controllers, as well as sourcing semiconductor devices themselves.
Yes, maybe I can add to that for Q1.
Speaker 2: And maybe, Toshi, I can add to that. For Q1, the semi-shortage, we're modeling or we've adjusted the forecast by $8 to $10 million as a result of both semi-shortage through our supply chain, as well as some customer delays, as Luis explained. Got it. That's very helpful.
The semi shortage we're modeling.
We have adjusted for.
<unk> forecast by $8 million to $10 million.
As a result of both.
Semi shortage through our supply chain as well as some customer delays as Luis explained.
Got it Thats very helpful.
And then I guess as my follow up.
How are you guys thinking about 2022, the full year in terms of.
Speaker 4: How are you guys thinking about 2022, the full year in terms of your different products? I think Luis in your prepared remarks you talked about
Your your different products I think Luis in your prepared remarks, you talked about strong design wins in semiconductor test I think you had positive comments on your contactor interface business and you also talked about moderation and handlers. So curious how youre thinking about those three large buckets within.
Speaker 4: you know, strong design wins and semiconductor tests. I think you had positive comments on your contactor interface business, and you also talked about moderation and handlers. So, curious how you're thinking about those three large buckets within your business.
Your business.
Speaker 4: for Cohese specifically, but also how are you thinking about the SAM growth relative to 2021. Thank you.
For for <unk>.
For <unk>, specifically, but also how are you thinking about the Sam growth relative to 2021. Thank you.
Sure why don't we start at the end here with the SaaS portion and then work our way back to the company then.
Speaker 3: Sure, why don't we start at the end here with the SAM portion and then work our way back to the company then.
We're looking at.
Speaker 3: overall TAM for tests should be largely the same year-over-year, 2021 to 2022. And from a SAM perspective, we've been saying this for a little while now, that we have about a $1.4 billion dollar SAM on the tester market.
Overall Tam for test should be largely.
The same year over year 2021 through 2022.
And from a Sam perspective, we've been saying this for a little while now that we have about a $1 $4 billion Sam on the tester market.
Speaker 3: Frankly, that is not changing. What's changing is our ability to penetrate into that SAM. We're fairly emboldened by
Frankly that is not changing what's changing is our ability to penetrate into that Sam.
Fairly emboldened by design.
Speaker 3: design wins that we scored, particularly in the second half of last year, and what is still at play here going into 2022. So, to a degree, very happy to see traction that we're getting in the DDI C market display driver, I see test market with our tester business.
The design wins that we scored particularly in the second half of last year and what is still at play here going into 2022.
So to a degree very happy to see.
Traction that we're getting into DDA IC market display driver IC test market with our test business.
Speaker 3: Also, power management and mixed signal, particularly in the automotive side.
Also power management and mixed signal.
Particularly in the automotive side.
We continue to get some.
Speaker 3: This opportunity is true in displacing in-house rack and stack solutions in the RFM as well. It doesn't really change the SAM, it more so changes our penetration into the SAM. That's the positive side. On the contactor business...
Yes.
Opportunities too in displacing in house rack and stack solutions in the RSM as well it doesn't really change the Sam and more so changes our penetration into the Sam that's the positive side on the contactor business.
Speaker 3: A little bit more difficult to forecast what the market is going to look like in 2022. We think it would be somewhat flat to up 7% on the contractor side, but we are continuing to gain new customers and new penetrations, particularly for power management devices and precision analog semiconductor tests.
A little more little bit more difficult to forecast what the market is going to look like in 2022, we think it would be.
Somewhat flat to up 7% on the handle on the contactor side, but we are.
Meaning to gain new customers and new penetrations, particularly for power management devices and precision analog.
Semiconductor test.
Speaker 3: On the handler side, we think a combination of things. One, the market itself will probably moderate down in conjunction with the automotive moderation that we've been talking about. And that should have a similar effect in our business, in our test handler automation business, since we have such a large share in the automotive test equipment.
On the handler side, we think combination of things one the.
The market itself will probably moderate down in conjunction with the automotive moderation that we've been talking about.
And that should.
That should have a similar effect on our business and our desk.
Test handler automation business since we have such a large share.
Automotive test test equipment.
I hope that answers your question.
Speaker 3: I hope that answers your question, Bashir. Yeah, that's great. Thank you for all the details.
Yes.
Great. Thank you for all the details.
Our next question comes from Brian Chin with Stifel.
Speaker 5: Hi there. Good afternoon. Congratulations on the strong 4Q, and thanks for letting us ask some questions. Maybe just, Luis, first a follow-up on that last question relative to the test payment of business.
Hi, there good afternoon, congratulations on the strong <unk> and thanks for letting us ask some questions.
Maybe just.
First a follow up on that last question relative to the test handler business.
Speaker 5: Do you care to put any sort of brackets around magnitudes or duration in terms of the moderation you see in the business? Clearly, you still would have been up in terms of growth or not constrained in Q1, even more than you're guiding right now. And so it looks like you do have some offsets vis-a-vis the many order commentary and wins that you talked about earlier in the call. So just wondering if you could put any more brackets around sort of that moderation in the hand of those.
Do you care to put any sort of brackets around magnitude sort of duration in terms of.
The moderation you've seen the business clearly still would've been up in terms of growth or.
We're not constrained in Q1, even more than you are guiding right now.
And so it looks like you do have some offset to this vision.
Many order.
Commentary and wins that you talked about earlier in the call. So just wondering if you could put a more brackets around sort of that moderation in the handler business.
Sure Yeah, no I think I can the way we look at the handler business.
Speaker 3: Sure. Yeah. No, I think I can. The way we look at the handler business.
Speaker 3: is that in 2021, last year, we had a combination of growth and also a rebound.
Is that in 2021 last year, we had a combination of growth and also a rebound.
Speaker 3: from the constrained environment, particularly in automotive in 2020.
From the constrained environment, particularly in automotive in 2020, and as we look to 2022, I think there's going to be a plus and a minus here the plus being <unk>.
Speaker 3: And as we look to 2022, I think there's going to be a plus and a minus here. The plus being...
Speaker 3: electrification of drivetrain in an automotive space continues to be very strong and progressing very well. I mean you can't today...
Electrification of drivetrain and automotive space continues to be very strong and progressing very well I mean, you can't today go out and buy vehicles because of lack of semiconductors. As you. All know at the same time I think I think that that rebound that happened in the predominantly in the first half of 'twenty one.
Speaker 3: go out and buy vehicles because of lack of semiconductors as you all know.
Speaker 3: At the same time, I think that rebound that happened predominantly in the first half of 2021, we sized that, netting up expected growth in 2022, to be about a $40 to $50 million reduction.
We size that.
Expected growth in 2022 to be about a 40 $40 million to $50 million.
Speaker 3: sort of net negative, if you will, or, you know, so-called the moderation that we're commenting here for the for the handler business going into 2020.
Sort of net negative if you will were so called the moderation that we're commenting here for the for the handler business going into 2022.
Yeah.
Speaker 5: Got it. Okay, that's helpful. Question about the test contactors, I'm curious to what extent, I know number one, you have some gross margin improvement initiatives that are expected to be pretty meaningful towards the end of the second half of the year. I'm wondering if those are still on track and two, you have some gross margin improvement initiatives that are expected to be
Got it got it okay. That's helpful.
A question about the test contactor is im curious.
To what extent.
Number one.
You have some gross margin improvement initiatives that are expected to be pretty meaningful towards the.
In the second half of the year wondering if those are still on track into.
Speaker 5: From that standpoint, as well as from a revenue shipment standpoint, I know there's been a lot of disruptions, discontinuities out in Southeast Asia where you have some manufacturing. Have you been impacted at all by that as well?
From that standpoint, as well as from a revenue shipment standpoint, I know there's been a lot of disruption in the discontinuities out in southeast Asia, where you have some manufacturing have you been impacted at all by that as well.
Speaker 2: Hey Brian . So with respect to the gross margin on contactors, we ended Q4 as we suspected in a strong position, just a little bit above 40%. And yes, still anticipating significant
Hey, Brian .
So with respect to the gross margin on contact as we ended Q4 as we suspected in a strong position.
Just a little bit above, 40% and yes still anticipating.
Significant.
Speaker 2: increase there throughout the year, so second half still anticipating mid 40% gross margin for the contactor business. Certainly with the workforce in Asia, Philippines primarily, it's been a challenge and so we're working through it. We haven't had any significant downtime as a result, but it just continues to be a challenge.
Increase there throughout the year, so second half still still anticipating mid 40.
Percent gross margin for the contactor business.
Certainly with the workforce.
In Asia.
Philippines, primarily its been a challenge and so we're working through it I don't.
We haven't had any.
Significant downtime as a result, but it just continues to be a challenge.
Okay.
Speaker 5: Fair enough. I know you didn't want to make too much forward revenue commentary, but I will ask a question about seasonality. And I know that taking on board some of the year-to-year effects you're talking about in terms of the various end products.
Fair enough and I know you don't want.
To make too much forward revenue commentary.
Ask a question about seasonality and I know that <unk> taken onboard some of the year on year effects Youre talking about in terms of the various.
And products.
Speaker 5: Yeah, usually 2Q and 3Q tend to be sort of stronger seasonal periods. Do you think the demand still speaks to that kind of rate, you know, the supply may speak to something different? And, again, there's other overlays in terms of your business, but any way to think about sort of that seasonality in your business?
Using <unk> and <unk> tend to be sort of stronger seasonal periods. Do you think the demand is still speaks to that.
Kind of rate the supply may speak to something different.
And again Theres other overlays in terms of your business, but any way to think about sort of that seasonality in your business.
Speaker 2: Yeah, I'll go. You can add a little bit. So yeah, Brian , still seeing strong demand. Still, you know, we had a book to bill over one in Q4 and it's looking pretty strong in Q1 so far. So the demand is still there. The real wild card is the supply chain. Yeah, I think that covers
Yes.
You can add a little bit so yes.
Brian still seen seen strong demand still.
We had a book to bill over one in Q4, and it's looking pretty strong in Q1, so far.
So the demand is still there the real wildcard is the supply chain.
Yes, I think that covers it.
Got it okay. Thanks, guys.
Speaker 1: Our next question comes from Krish Sankar with Cowen & Company.
Our next question comes from Chris Shankar with Cowen <unk> Company.
Yeah, Hi, Thanks for taking my question I feel them looser Geoff thanks for the color on the Sam opportunity in FY 'twenty, two so if I kind of roll it altogether between the tester handler and contactor. It seems like you're slightly to revenues could be maybe flat to up low single digits.
Speaker 6: Yeah, hi, thanks for taking my question. I have two of them. Louis or Jeff, thanks for the color on the SAM opportunity in FY22. So if I kind of roll it all together between the tester, handler, and the contactor, it seems like your FY22 revenues could be maybe flat to up-low single digits. Is that a decent proxy or any thoughts on that?
A decent proxy on any thoughts on that.
Speaker 3: Yeah, Chris, when you put it all together, the reality is, I think the market is about the same in 2022 as 2021, you know, putting it all together. What we do have is we have
Yes, Krish when you put it altogether. The reality is I think the market is about the same in 2022 is 2021, putting it altogether.
What we do have is.
We have.
Speaker 3: A moderation on the handler side that I already spoke to, so it's in the $40-50 million, sort of that automotive bubble that we saw in 21.
A moderation in the handler side that already spoke to so the tune of $40 million to $50 million is that sort of that automotive bubble that we signed 21 and then we do have sort of a tailwind.
Speaker 3: And then we do have sort of the tailwind of customer gains that we have had here with the tester business in.
Of customer gains that we have had here with the tester business in DDC <unk> mixed signal and even our FM as well as growth from from customer gains as well in the in the contactor business that we expect to continue into 2022. So you put that all in the blend.
Speaker 3: DDIC, PMIC, Mixed Signal, and even RFM, as well as growth from customer gains as well in the contactor business that we expect to continue into 2022. So you put that all in the blender, right, and the reality is...
Right and the reality is.
Speaker 2: You know, the SAM is about the same. It's more of a story of, it's more of a story of gaining market share in 2022. Yeah, that's true. I think one more thing to remember, Krish, is that we sold PCB test halfway through last year. They contributed 26 million to our 887 for last year. So, you know, that's a gap that we're looking to make up.
The Sam is about the same it's more of a story of some more of a story of gaining gaining market share in 2022.
That's true I think one more thing to remember Chris is that we sold PCB test halfway through last year, they contributed $26 million to our 887 for last year. So.
It's a gap that we're looking to make up.
Got it Super helpful. Thanks for that color and then just to follow along the same but given that the mix shifted more towards Tesla from handler.
Speaker 6: Got it, super helpful, thanks for that, Carlo. And then just to follow along the same path, given that the makeshift is more to a Tesla from Handler.
Speaker 6: You know, that's a tailwind for gross margins, and then obviously you're going to be reducing or improving your gross margin for the contactors. So you know, it just optically makes sense that, you know, the gross margin should grow this year compared to last year. How should we think about optics given all the rising costs, and I'm trying to figure out the implications for earnings.
That's a tailwind for gross margins and then obviously youre going to be.
Using.
Our improving our gross margin for the contractors.
<unk>.
Just optically makes sense that.
The gross margin should grow this year compared to last year.
How should we think about opex given all the rising costs.
Get out the implications for earnings.
Speaker 9: For OPEX, Krish, is that what you had mentioned? Yeah, A, number one. Gross margin going up, does it make sense? A, B, how to think about OPEX.
For Opex pressures that you had mentioned.
Number one gross margin going up does it makes sense and B, how do you think about opex.
Okay.
Speaker 2: So, we guided Q1 OpEx at about 53 million. I think we're going to have it, but we will have it.
So we guided Q1 opex at about $53 million I think we're going to have it we will have a tight range of opex for 2022. So.
Speaker 2: tight range of OPEX for 2022, so.
Speaker 2: Anywhere from probably a $52 million a quarter to $54 million a quarter, just sort of depending on not only revenue and some of the variable costs we have, commissions, travel, things of that nature, but on a quarterly basis, we have some items that don't necessarily – you know, more –
Anywhere from probably a $52 million accorded a $54 million a quarter, depending on not only revenue and some of the variable costs, we have commissions travel things of that nature, but.
On a quarterly basis, we have some some of the items that don't necessarily call. It seasonal if you will but that range is a range that we're modeling for the year of 52 to 54.
Speaker 2: call them seasonal, if you will. But that range is a range that we're modeling for the year 52 to...
And from a cost increase we have much like last year, we have been passing that through to customers.
Speaker 3: And from a cost increase, we have, much like last year, we have been passing that through to customers.
Speaker 3: You know, there may be some delays like we had last year when we passed it through, but eventually we do catch up to those cost increases.
There may be some delays like we had last year, when we fasten through but eventually we do catch up to those cost increases.
Okay. Thank you very much really appreciate it. Thank you. Thank you.
Our next question comes from Craig Ellis with B Riley Securities.
Speaker 1: Our next question comes from Craig Ellis with B Riley Securities.
Yes, thanks for taking the questions.
Speaker 5: Yeah, thanks for taking the questions. I wanted to start just by clarifying a point. I think, Jeff, you indicated that the supply chain
I wanted to start just by clarifying a point.
I think Jeff you.
You indicated that the supply chain.
Speaker 2: issues that you were seeing in the near term were worth about $8 to $10 million. So as we look at the 1.6% guide, and I think three months ago we were thinking that the business might grow 5% to 10%. Is the difference between the 1.6% and the 5% to 10% that $8 to $10 million, or have there been some moving dynamics in terms of how you're looking at 1Q from where you were three months ago?
Issues that you were seeing in the near term were worst about $8 million to $10 million. So as we look at the one 6% guide.
And I think three months ago, we were thinking that the business might grow 5% to 10% is the difference between.
One six.
Five to 10 that $8 million to $10 million or have there been some moving dynamics in terms of how youre looking at <unk> from where you were three months ago.
Speaker 2: Craig, so we had a little more roll back into Q4. So the revenue there was a little bit higher than our midpoint of guidance. And then, yeah, you're correct. I said $8 to $10 million as a Q1 impact related to supply chain.
Craig So we had we had a little more rollback into into Q4 so.
The revenue there was a little bit higher than our midpoint of guidance and then yes.
Youre correct, I said eight to 10 million as a Q1 impact related to supply chain.
Got it Okay, and then secondly, nice to see the $293 million in backlog can you just comment on.
Speaker 2: Got it. Okay. And then secondly, nice to see the $293 million backlog. Can you just comment on what you're seeing in terms of how that's distributed across the different products? And as you look at the backlog, how far out is that extending? Is that giving you visibility into the second half of the year, or is that really just through the second quarter? Any color on breadth and duration would be helpful.
What youre seeing in terms of how that is distributed across the different products and and as you look at the backlog how far out is that extending is that giving you visibility into the second half of the year or is that really just through the second quarter any color on breadth and duration would be helpful.
Speaker 2: The duration is really up to two quarters. There's some that goes beyond that, but it's not meaningful. So it's color on up to two quarters. In terms of the breakdown of the backlog, I think it's close to where we were on an annual basis.
The duration is is really.
Up to two quarters there is some that.
It goes beyond that but it's not meaningful so it's it's color on that.
Up to two quarters.
And in terms of the breakdown of the backlog.
I think it's close to where we were on an annual basis.
From a revenue perspective, now over the last quarter or two certainly testers have gotten stronger as automotive.
Speaker 2: from a revenue perspective. Now, over the last quarter or two, certainly testers have gotten stronger as automotive test handlers have moderated. But, you know, I would say from a total makeup, it's probably.
Test handlers have moderated.
I would say from a total makeup it's probably.
Speaker 2: 55-60% handlers and then close to 30% testers and the balance would be contactors.
55% to 60% handlers, and then close to 30% testers and the balance would be contact us.
Got it.
And then.
Speaker 5: Let's see, lastly for me, nice to see the company being active on the buyback program with the 7 million given where valuation is versus tenure levels. Can you just help us understand how you're thinking about utilizing that buyback program as you look ahead at the first quarter of the year?
Let's see lastly for me nice to see that.
Company being active on the buyback program with the $7 million given by our valuation is versus a 10 year level can you just help us understand how you're thinking about.
Utilizing that buyback program as you look ahead at the first quarter are there.
Speaker 2: Yeah, I think the target in the first quarter is going to be really to offset dilution.
I think the target in the first quarter is going to be really to offset dilution.
Sure.
Speaker 2: And I think it's going to be similar to what we did in Q4, Craig, so I would model somewhere close to 200,000 shares, something close to what our Q1 results were.
I think it's going to be similar to what we did in Q4, Craig So I would <unk>.
Model somewhere close to 200000 shares.
<unk>.
Something close to what our Q1 results were.
Got it.
Speaker 5: Got it. Thanks very much, guys. Hop back in the queue. Thanks, Greg.
Thanks, very much guys hop back in the Kevin.
Thanks, Craig.
Our next question comes from Quinn Bolton with Needham.
Hey, guys just wanted to just sort of ask.
Speaker 7: I just wanted to sort of ask, the picture about 2022, you know, I know you're not commenting beyond the second quarter, and you talked about seeing sequential growth.
Sure about 2022.
No you are not commenting beyond the second quarter and you talked about seeing sequential growth continue into Q2, but kind.
Speaker 7: but you know kind of walking through the puts and takes for the year it sounds like revenue for the business XPCB test is going to be roughly flattish in the eight
Walking through the puts and takes for the year. It sounds like revenue for the business ex PCB test is going to be roughly flattish on the $8 50 to 860 range.
Speaker 7: Um, you know, I look at the first quarter guidance at 195.
I look at the first quarter guidance of 195.
Speaker 7: It sort of feels like, you know, either you have a really big June quarter or perhaps you're seeing some of the revenue that, you know, shifting out of Q1.
Sort of feels like either you have a really big June quarter, or perhaps you're seeing some of the revenue.
Shifting out of Q1 into either Q2 Q3, maybe even into Q4, so I guess.
Speaker 7: into either Q2, Q3, maybe even into Q4. So I guess, you know, to get to sort of a flat year, it seems to imply perhaps a stronger second half than you might normally see.
Get to sort of a flat year it seems to imply perhaps a stronger second half than you might normally see.
Speaker 7: And I'm just wondering if you guys agree with that, or do you just see a sort of whatever pushes out of March might be captured?
Just wondering if you guys agree with that or do you just see sort of whatever pushes out of March might be captured in June .
Well, yes in terms of trying to recapture what pushes out of March into a particular quarter that that's hard to do based on the uncertainty so again.
Speaker 2: Well, yeah, in terms of trying to recapture what pushes out of March into a particular quarter, that's hard to do based on the uncertainty. So, you know, again, we're seeing a lot of strength in the business right now, a lot of good indicators and, you know, the projections for the marketer as Luis went through similar to what they were last year.
We're seeing a lot of strength in the business right now a lot of good indicators.
The projections for the marketer as Luis went through similar to what they were last year.
But it's just.
Speaker 2: But it's just this one of the reasons we're not giving any kind of indication of Q2 revenue is just there's just too much uncertainty. So whether that pushes to Q2, Q3, what comes out of Q2, Q3, it's
One of the reasons, we're not giving any kind of indication of Q2 revenue is just there's just too much uncertainty so whether that pushes to Q2 Q3.
That comes out of Q2 Q3 its.
It's just.
Speaker 3: is just too uncertain at the moment. Yeah, right. And so we're really hesitant to, as you can tell, to put any kind of parameters around this. Yeah, realistically, Quinn, we're not in a position to talk about second half of the year yet. It's just too soon to have a good educated guess of what's going to happen that far out.
So just to answer.
Right. So we're really hesitant to.
As you can tell too.
Put any kind of parameters around this yeah realistically Quinn.
Not in a position to talk about second half of the year, It's just too soon.
Have a good educated guess so what's going to happen.
That far out.
Is it fair to say, though that you are sort of more confidence in your outlook.
Speaker 7: Is it fair to say though that you're sort of more confident in your outlook that the XPCB test, that the revenue would be roughly flat-ish, what's harder to call is just the timing of the revenue? Do you think that there's risk to that 850, 860 kind of flat-ish year on year out?
PCB test the revenue will be roughly flattish what's harder to call is just the timing of the revenue where do you think that there is risk to that that 850, 860 kind of flattish year on year outlook.
And I think I think we're saying we're confident in what we have been talking about for the last.
Speaker 3: Quinn, I think we're saying we're confident in what we have been talking about for the last one to two quarters, which is, we would see a moderation on the handler business due to the automotive snapback effect we talked about. We would see.
One to two quarters, which is we would see a moderation in the handler business.
Due to the automotive snapback in fact, we've talked about.
We would see.
Speaker 3: a increase on the tester business going into the first half of this year.
The increase on the tester business go in each of the first half of this year.
Speaker 3: If I would say, perhaps we're a little, you know, positively surprised by the strength of some of these design wins that we got recently in the sense of they're translating into volume orders already, that's exciting.
If I would say perhaps were a little.
Positively surprised by the strength of some of these design wins that we got recently in the sense of they are translating into volume orders already.
Exciting.
Speaker 3: We were confident on the improvements on the contractor business, both the revenue growth and the improvement in gross margin. So those are all playing out as we expected. I'm a little, say, disappointed on the continued tightness on the supply chain side. You know, I would have thought it would have start easing a little bit, and it's not, that that's remaining. So that creates a little bit more of aggravation here in the near term than we expected.
We were confident on the improvements on the contactor business, both the revenue growth and the improvement in gross margin. So those are all playing out as we expected.
I'm a little disappointed on the continued tightness on the supply chain side.
I would've thought it would've start easing a little bit and it's not that's remaining.
That creates a little bit more of aggravation here in the near term than we expected.
Speaker 3: So, so far everything is playing out the way we expected except for supply chain remains a challenge.
So so far everything is playing out the way we expected except for supply chain remains a challenge.
Speaker 3: What you know for the second half of the year, it's too early to comment. So I don't know how to answer your question for the full year at this point. Understood.
What you know for the second half of the year, it's too early to comment so I don't know how to answer your question for the full year at this point.
Understood. Okay, guys. Thank you very much.
Our next question comes from Tom <unk> with D. A Davidson.
Speaker 1: Our next question comes from Tom Dibley with BA-Davidson.
Yes, good afternoon, and thank you.
Speaker 8: Yes, good afternoon. Thank you. So, very nice to hear about the mini design wins. I wanted to dig in just a little bit more on the RF test side in Japan. So, Luis, how big is that market and is it currently being served with in-house solutions or other specific competitors?
So very nice to hear about the many design wins I wanted to dig in just a little bit more on the RF test side in Japan.
How big is that market and is currently being served with in house solutions or other specific competitors there.
Speaker 3: So the Japan customer win, I mean, they are one of the, or potentially the, or one of the leaders in the RFM space. And I think as we mentioned a few quarters ago, we had a couple more large RF customers to win, or perhaps more than a couple, but a few more RF customers to win. This is a very important penetration win for us. We've been.
So the Japan.
Japan customer win I mean, they are one of the or potentially D or one of the leaders in the RF space.
And I think as we mentioned a few quarters ago, we had a couple more large RF customers to win perhaps more than a couple, but a few more RF customers to win.
This is this is a very important penetration win for us within <unk>.
Speaker 3: working on it for over a year and we finally got a beachhead entrance. So that's a very important.
Working on it for over a year and we finally got a beachhead entrants. So that's a very important.
Speaker 3: penetration there. We also had some design wins at a U.S.-based RFM customer where we're displacing in-house rack and stack solution for
Penetration there. We also had some design wins at a U S based RSM customer.
Where we're displacing in house reckon stack solution for Wi Fi six Wi Fi seven application.
Speaker 3: a Wi-Fi 6E and Wi-Fi 7 application.
So, yes, I think I think thats it for for the moment on the RF.
Speaker 8: Okay, thank you. And then Jeff, moving to the target model, I'm curious, you know, as we bridge the gap from last year's results to the target model, on the margin expansion side, is that a combination just product mix and scale, or are there any other programs that you need to implement to get to the high end?
Okay. Thank you.
Just moving to the target model.
Curious as we bridge the gap from last year's results to the target model.
Margin expansion side is that a combination of just product mix and scale are there any other programs that you need to implement to get to the higher margin.
No those would be the two key items mix in terms of.
Speaker 2: No, those would be the two key items, mix in terms of.
Speaker 2: growth in testers and contactors moderation in the handlers.
Growth in testers and contactor is moderation in the in the handlers.
Speaker 2: And then the scale is really more about the contactors and the internal manufacturing there. So yes, increasing the revenue and the product that flows through the Asia-based or Philippines-based, Japan-based factor.
And then.
And then the scale is is really more about the contactor and the internal manufacturing there so yes, increasing.
The revenue and the product that flows through.
The Asia based or Philippines, based Japan based.
Factories.
Okay. That's helpful. And then just quickly focusing on the cash generation, the roughly 10% free cash flow yields last year.
Speaker 8: Okay, that's helpful. And then just quickly focusing on the cash generation, you know, the roughly 10% free cash flow yield last year.
Speaker 8: That's very nice, but you're projecting 18% free cash flow on the target model and it seems like there's a bigger jump in free cash flow than there is for EPS or margins. I'm just curious, what is the incremental driver there?
Very nice, but youre projecting 18% and free cash flow on the target model and it seems like there's a big adjusted free cash flow than there is for EPS and margins I'm just curious what is the incremental driver there.
Kind of a bridge to GAAP basis.
Yes. This year we saw.
Speaker 2: Yeah, and this year we saw, you know, a significant increase on the balance sheet and receivables and inventory. So I think we're going to get a better turn and be able to improve the DSOs and the inventory days there. So that's the target and those are the actions in front of us. Great. Well, thank you both. Yeah, thank you.
Significant increase on the balance sheet and receivables and inventory. So I think we're going to get a better churn.
And be able to improve the dsos and the.
The inventory days there so.
That's that's.
That's the target and those are the actions in front of us.
Great well thank you both.
Yes. Thank you.
Our next question comes from Arctic Malik with Citi.
Speaker 6: Hi, thanks for taking my question. Lewis, if I remember correctly, last year you guys were a little bit early in talking about...
Hi, Thanks for taking my question.
Lewis.
Remember it correctly last year, you guys were a little bit early in and talking about.
Test utilization coming down on the mobile side. It seems to me like that has stabilized and started to improve but but curious on the moderation in the auto handlers is this something that you're starting to hear from your customers or you just expect.
Speaker 6: test utilization coming down on the mobile side. And it seems to me like that has stabilized and started to improve. But curious on the moderation in the auto handlers. Is this something that you're starting to hear from your customers? Or you just expect kind of cyclicality to play out? Are there any signs right now? Or are you just being conservative?
Kind of cyclicality should play out.
Are there any signs right now or you just.
We are being conservative.
Speaker 3: Uh, no, I don't think it's, uh, I don't think it's any speculation. We, we have seen obviously a pretty, pretty tremendous ramp in the automotive demand for our test handlers in the first half of last year, 21. And, and, uh, the moderation has started already on the third quarter of last year. Um.
No I don't think its.
I don't think its any speculation we have seen.
Obviously, a pretty pretty tremendous ramp in the automotive.
<unk> for our test handlers in the first half of last year 'twenty one.
And the moderation has started already on the third quarter of last year.
Speaker 3: And then back to the normal seasonality pattern that we expected here in the fourth quarter and the first quarter. So,
And then back to the normal seasonality pattern that we expected here in the fourth quarter and the first quarter.
So there.
Speaker 3: There's still a lot of unfulfilled demand in the automotive market. I just think that that snapback effect that we saw in the first half of last year ain't going to repeat itself. And the forecast, the order forecast, the backlog we have on hand pretty much supports that view already.
There are still there's still a lot of unfulfilled demand in the automotive market I, just think that snapback effect that we saw in the first half of last year Ain't going to repeat itself.
And the forecast the order forecast the backlog we have on hand pretty much supports supports that view already.
Speaker 12: Great. And then if you can touch on Wi-Fi 6.6e, I understand that test demand is improving this year, but within that test demand, if you can rank order RF versus the state driver versus power management, if you can just rank order, which end market is the strongest?
Great and then if you could touch on that.
<unk> thousand 660.
I understand the test demand is improving this year.
Within that test demand if you can rank order.
RF versus display driver versus that.
Power management to treating shrank holder.
Which end market is the strongest.
Speaker 3: Well, it in part has to do with our penetration, our share penetration in each one of these segments. So the RF segment will continue to be the strongest for our tester business in 2022. But that's simply due to the fact that that's the area we have our strongest share at the moment.
Well.
In part has to do with our penetration our share penetration in each one of these segments. So.
The RF segment will continue to be the strongest for our test business in 2022, but thats simply due to the fact that that's the area we have our strongest.
Sure at the moment.
Speaker 3: and continue to gain some new customers as I've described here in prepared remarks, one in Japan, one in the U.S. and the RFM. Nevertheless, if I were to look at just pure growth year on year or as a percentage of revenue growth year on year, we are
And continue to gain some new customers as I described here in the prepared remarks, one in Japan, one in the U S and the RF Tam. Nevertheless, if a virtual look at just pure growth year on year.
As a percentage of revenue growth year on year.
Really bullish on the <unk> market the display driver market.
Speaker 3: really bullish on the DDIC market, the display driver market. We had a very, very important qualification win in Korea in the fourth quarter.
We had a very very important qualification win in Korea in the fourth quarter.
Speaker 3: That's going to translate into volume business, probably starting this quarter and into the subsequent quarters this year.
That's going to translate into volume business.
Probably starting this quarter and into each of the subsequent quarters. This year, we have had some new.
Speaker 3: We have had some new devices qualified on the platform at an existing customer in Taiwan, although Fabless customers are in reality testing at OSAP.
Devices qualify it on the platform at existing customer.
In Taiwan.
Although fabless customers when reality testing at all SaaS.
Speaker 3: So, really emboldened by the traction in the DIC, and frankly, even a bit surprised by how fast that traction is translating into volume business.
So really.
Really emboldened by by the traction in the GIC and frankly, even a bit surprised by how fast that traction is translating through into volume business.
Speaker 3: I'm also very happy to see the PMIC and mixed-signal win in Japan. I think there's a lot more that we can and need to do in the PMIC and mixed-signal side, so I'll expect that will be a...
Also very happy to see the <unk> and mixed signal win in Japan.
I think there is there is a lot more that we can and need to do in the <unk> and mixed signal side. So I would expect that will be.
More of a story that we'll be discussing perhaps towards the second half of the year.
Speaker 3: you know, more of a story that we'll be discussing perhaps towards the second half of the year.
Great. Thank you.
As a reminder, if you'd like to ask a question at this time that is star then one.
Speaker 1: As a reminder, if you'd like to ask a question at this time, that is star, then 1. Our next question comes from...
Our next question comes from David Duley with steelhead.
Speaker 9: Thanks. Thanks for taking my question. I apologize. I missed part of your prepared remarks. The I'm just curious what you kind of think for the size or the growth rate of the test market this year. You know, Teradyne kind of mentioned it was flat, but they have a big headwind with their largest customer. So I imagine they mentioned that there's pretty decent growth outside of mobility and Apple business. So I'm kind of wondering what you're, you know.
Thanks, Thanks for taking my question I apologize I missed part of your prepared remarks.
Just curious.
What your kind of sense for the size or the growth rate of the test market. This year.
Teradyne kind of mentioned it was flat, but they have a big headwind with our largest customer.
So I imagine they mentioned that there was a pretty decent growth outside of mobility and Apple business. So I'm kind of wondering what you are.
Yes as for what the growth rate of the test business market of the test business slightly this year.
Speaker 9: guesses for what the growth rate of the test business market of the test business might be this year.
Speaker 3: You know, David, given our size in that market, we tend to focus more on our SAM and the growth opportunities in our SAM. I mean, I looked at both Teradyne and Advanta, sort of bellwether what they're saying for the market size. Obviously, as you pointed out, Teradyne claim it should be flat.
David given our size in that market, we tend to focus more on our Sam and the growth opportunities in our Sam.
Looked at both Teradyne advantest sort of bellwether, what they are saying for the market size. Obviously as you pointed out teradyne claim it should be flat advantest claims I don't know I think a 10% to 12% growth year on year talking about the Soc market in particular.
Speaker 3: Adventist claims, I don't know, I think a 10-12% growth year-on-year, talking about the SOC market in particular.
Speaker 3: We, as I mentioned in the prior question here, we're seeing really interesting opportunities in the DAC and PNIC and mixed signal.
We as I mentioned in the prior question here, we're seeing really interesting opportunities in the GIC and <unk> and mixed signal so.
Speaker 3: You know, is it because those markets are growing, like Advantist says, or realistically for us, they are also design wins, recent design wins? So we see growth opportunity for our tester business. We think our tester business is going to nicely grow in 2022. As far as the market goes, you know, I guess I'll take the bellwether comments and say it's somewhere between 0% and 12% growth based on Teradon and Advantist. Okay.
Is it because those markets are growing like advanced SaaS or realistically for us. They are also design wins recent design wins, so we see growth opportunity for our test business. We think our tester business is going to nicely grow in 2022 as far as the market grows.
I guess I'll take the bellwether comments and say somewhere between zero and 12% growth based on Tara then and advantest.
Okay.
Okay.
Okay.
You mentioned I think at one point or another.
Speaker 9: You mentioned, I think at one point or another, that you expected to gain share in 2022. Could you just elaborate in what parts of your business you expect to gain share?
Expected to gain share in 2022 could you just elaborate and what parts of your business you expect to gain share.
Sure.
Speaker 3: Sure. It is, you know, predominantly on the tester and the contactor side. We have...
It is.
Predominantly on the tester and the the contactor side, we have.
Once again, we have done a really good design win in the <unk> market in Korea in Q4.
Speaker 3: Once again, we have done a really good design win in the DDIC market in Korea in Q4, and we're seriously expanding our presence now in Taiwan. So DDIC is a tremendous opportunity for us. We're also expanding our presence in the mixed signal and power management IC space of our tester and some new instrumentation that we brought in and some refresh that we've done in 2021.
And we are seriously expanding our presence now in Taiwan. So.
<unk> is a tremendous opportunity for us we're also.
Expanding our presence in the mixed signal and power management IC space of our tester and some new instrumentation that we've brought in and some refresh that we've done in 2021.
Speaker 3: There is a little bit more to do in the RFM, including these wins in Japan and in the U.S. RFM customers. That's not the end of the road, by the way. I mean, we just broke in. I think we've got to capture the revenue still and design all the different applications.
There is a little bit more to do in the RF film, including these wins in Japan and in the U S. Our FM customers.
That's not the end of the road by the way I mean, we just we just broke and I think we've got to capture the revenue still in design all the different applications.
Speaker 3: The contactor side, we had
The contactor side.
We had.
Speaker 3: some new products in power management and precision analog that are getting uh... very good orders very good order rate here in uh... in the fourth quarter and starting at the first quarter this year
Some new products in power management and precision analog that are getting very good orders very good order rate here in the fourth quarter and starting at the first quarter. This year. So we grew the contactor business, 25% and 21 year over year, we do expect to grow it again in 'twenty two.
Speaker 3: So we grew the contactor business 25% in 21 year over year. We do expect to grow it again in 22.
Speaker 3: And then lastly the inspection and metrology, you know, we had we had a tremendous year in 21 we grew a hundred and thirty percent year-over-year in revenue a lot of it has to do with
And then lastly, the inspection and metrology, we had we had a tremendous year in 'twenty. One we grew 130% year over year in revenue a lot of it has to do with.
Speaker 3: this so-called NEON platform with infrared imaging capability. Just a really, really good attachment to mobile device applications.
This so called neon platform with infrared imaging capability, just a really really good at.
Attachment to mobile device applications, we have a list of customers that we're targeting to win in 'twenty. Two and then later in the year, we do expect to bring in some new vision technology.
Speaker 3: We have a list of customers that we're targeting to win in 22. And then later in the year, we do expect to bring in some new vision technology.
Speaker 3: that continues to expand our penetration thereafter more into high-performance digital and particularly where there is a vertical stack, semiconductor stacking or 3D packaging into 2023. So those are the primary areas of growth for the business in 2022. Excellent. And I'm sorry if you already addressed that.
<unk>.
<unk> continues to expand our penetration thereafter more into high performance digital and particularly aware there is.
Vertical stack semiconductor stacking, our three D packaging into 2023. So those are the primary areas of growth for the business in 2010.
Excellent.
I'm sorry, if you already addressed this but Jeff it seems like.
Speaker 9: The earnings per share in the December quarter were a bit above where street expectations were. Could you just outline what the key reasons for that were?
The.
The earnings per share in the December quarter, or a bit above where street expectations, where could you just.
Outline what the key reasons for that were.
Speaker 2: Yeah, key reasons, a little more revenue, slightly better gross margin.
Key reasons, a little more revenue.
Slightly better gross margin.
Speaker 2: And then we had foreign currency gain of about $700,000. So those are some small differences. But then on a tax provision, we realized a foreign tax credit in the quarter, which drove a $2 million tax benefit as a credit as opposed to a debit in the quarter. So that added $0.15 to EPS.
And then.
We had.
Foreign currency gain of about 700000. So those are some small differences, but then on the tax provision.
We realized a foreign tax credit in the quarter, which drove a $2 million tax benefit.
Credit as opposed to a debit and of course, so that added 15.
<unk> to EPS.
Got you. Thank you.
No.
Speaker 1: That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for some closing remarks.
That concludes today's question and answer session I would like to turn the call back to Jeff Jones for some closing remarks.
Alright. Thank you everybody I appreciate you joining the call and we'll talk to you soon thank you.
Speaker 2: Alright, thank you everybody. I appreciate you joining the call and we'll talk to you soon. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.