Greetings and welcome to the Cohu Fourth Quarter and Full Year 2014 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff Jones, Chief Financial Officer for Cohu. Thank you, Mr. Jones. You may begin.

Thank you and good afternoon and welcome to our discussion of Cohu’s most recent financial results. I am joined today by our President and CEO, Luis Müller. Following our opening remarks, we will provide details of our performance for the fourth quarter and full year 2014 as well as our outlook for the first quarter of this year. If you need a copy of our press release, you may obtain one from our website, cohu.com, or by contacting Cohu Investor Relations. But before we get started, I must remind you that the company’s discussion this afternoon will include forward-looking statements reflecting management’s current expectations concerning certain aspects of the company’s future business. These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes. Forward-looking statements include our comments regarding the company’s expectations regarding industry conditions, future operations, financial results and any comments we make about the company’s future in response to your questions. Our comments speak only as of today, February 19, 2015 and the company assumes no obligation to update these comments. We encourage you to review the forward-looking statements section of the earnings release as well as Cohu’s filings with the Securities and Exchange Commission, including the most recently filed Form 10-K and Form 10-Q. Cohu assumes no obligation to update these statements as a result of developments occurring after this call. Further, our comments and responses to any questions will not make reference to any specific customers, as we are precluded from disclosing such information from our non-disclosure agreements. And now, I will turn it over to Luis. Luis Müller: Thanks, Jeff and good afternoon, everyone. This was another great quarter for Cohu. We have near record sales of $96.2 million above our initial…

Okay, thank you Luis. I will start with key highlights from 2014 and then go into the financial details of the fourth quarter and lastly provide the Q1 outlook. Sales in 2014 were $333.3 million driven by 48% growth year-over-year in our semiconductor equipment business, establishing a new record. Our growth was 100% organic and outpaced the test handler market as we continue to gain share with our new products and sales synergies from the Ismeca acquisition. Non-GAAP gross margin for 2014 was approximately 36% improving by 500 basis points year-over-year due to higher volume, product mix and the initial benefits of expanding our manufacturing in Asia. And despite the significant increase in shipments in customer activity, we reduced non-GAAP operating expenses sequentially by approximately 2% as foreign currency gains with the completion of key development programs and disciplined cost control. In 2014, we delivered non-GAAP EPS of $1.02 versus a loss of $0.78 in 2013. Orders for 2014 were also at record levels driven by strength in the automotive and mobility markets. We differentiate our products in these markets by delivering handlers capable of thermally conditioning ICs at cryogenic temperatures and providing our proprietary active thermal control technology for optimizing test yield of power dissipative ICs including advanced mobile processors. Now looking at Q4, our semiconductor equipment orders were $56 million, down 32% sequentially as customers digest the significant capacity additions from recent quarters and a large customer order that was delayed into early Q1. System orders were 42% and recurring 58% of the total. As we have discussed in the past we see a seasonal trend to the order demand for certain markets such as automotive and industrial ICs that slowdown during the winter months. Equipment utilization remains in the 80% range and orders started strong in 2015.…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brett Piira with B. Riley & Company. Please proceed with your questions.

Great, thanks for taking my question. Maybe I start out on the target model timing, when can we start thinking about gross margins getting more in line with that, is it when we get 100% of the systems from Asia or is it somewhere in between where we are with the 50% and fully on the way? Luis Müller: As you know, Brett that achieving the model is contingent on revenue levels. And in 2015, we do expect to achieve the profitability levels in our model, which reflects quarterly sales of $90 million plus and the margin profitability – margin to profitability in that model without completing the balance of the manufacturing transition.

Okay, that’s helpful. And then maybe you touched on it briefly on the new Jaguar strip testing you had a key design win, can you just kind of talk a little bit more in detail how you see that market evolving and what your expectations are? Luis Müller: Yes. We had I mentioned a key design win on automotive IDM with production facilities in Asia obviously. We expect to see continuation of growth opportunities for that product line. I can’t get into specific details of customers or volumes, but it’s – like I said, it’s – it was a key win we had in the second half of last year in additional shipments planned for it.

Alright, thanks.

Thank you. Our next question comes from the line of Jairam Nathan with Sidoti & Company. Please proceed with your question.

Hi, guys. Thanks for taking my question. Just a couple on the $18 million T-Core order, is that – when does that get into revenue – when is the delivery scheduled? Luis Müller: Hi, Jairam. We start shipping that product in the beginning of Q2.

Okay. And you also mentioned, I think Jeff mentioned it, there was one other order which was shifted from 4Q to 1Q, is that the – are we talking about a T-Core or was that some other product too? Luis Müller: Jairam, that was the same order, referring to the same order.

Okay. And as well as gross margins, I know it did come a little below your own expectations for the fourth quarter and still what’s behind that? Luis Müller: No, Jairam, actually we expected Q4 margins to be approximately 34%. That was our estimate on our last call. And it was due to the shipments of the new pick-and-place handler that had the initial higher cost due to the production startup that I mentioned.

Okay. And lastly, you mentioned 14%, Luis – you mentioned 14% of the apps closes are currently tested using T-Core. So, is it a way to kind of quantify the test yield difference between the chipsets around your system and otherwise? Luis Müller: Yes, there is definitely a measurable advantage by testing using the T-Core technology so that you optimize yield and also speed grading of the processors. That information as you can imagine is highly proprietary to our customers and not something that we are pretty to share anything.

Okay, that’s all I had. I will get back in queue.

Thank you. Our next question comes from the line of David Duley with Steelhead Securities. Please proceed with your question.

Yes, thanks for taking my questions. You mentioned some things about unit volume growth, I think you mentioned 8% this year and 11% in 2015. If the units grow at 11% in 2015, is that a fair guess to estimate what the handler market will do? Luis Müller: Yes, that’s a great question. As you know, we personally have very limited visibility and information on the handler market ahead of one quarter. We typically built up our bottoms-up forecast. We do that every quarter. And we have these referenced data points from external market forecast firms. I think you can reach their conclusion. I mean, honestly, we do like I said build up our quarter-by-quarter on a bottoms-up basis. Nevertheless, I do have to say fairly confident going into next year with end-markets being healthy as I mentioned here in my remarks.

But generally, there is a high correlation between unit volume growth and handler purchases, so I am not asking you to make a forecast, I understand. If the market does go anywhere in that range, is that a good guess what the handler market will be? Luis Müller: Yes, you are correct. There is a very good correlation between IC unit volume growth and handler market growth. That is correct.

And could you talk about, you mentioned the size of the market could you talk about your market share and perhaps into the main pieces in 2014? Luis Müller: Yes. So, I did mention the market ended the year at approximately $850 million according to our estimates. That’s an all-inclusive market. As you know, we keep participating in the non-memory portion of the market and review our market share at about 40% on the non-memory portion of the handler markets. I don’t have data handy here to break that further down into the different sub-segments.

Okay. And you mentioned something about some revenue being pulled in from the first quarter into the fourth quarter and I guess that implication of that segment is Q4 was better than you would have expected and Q1 will be a little bit worse than you would have expected to cover that event. With the normal seasonality between Q4 and Q1 for Cohu on average is what approximately?

Yes, Dave, this is Jeff. So, just looking back over history here, we do see a decline generally from Q4 into Q1. I don’t see a real I guess pattern as to a consistent percentage, but there is definitely a trend of lower sales volume in Q1 as opposed to Q4. Luis Müller: If you take 2011 onwards, the market has become substantially more driven by mobile, mobility products, automotive products and then you start seeing that trend that Jeff just described.

Okay, thank you very much.

Thank you. [Operator Instructions] Our next question comes from the line of Dick Ryan with Dougherty & Company. Please proceed with your question.

Great, thanks. Luis, you are talking in the past about the split of business CapEx versus recurring, and I think you briefly mentioned one of the areas in the consumables part, the contactors. Can you give us a little more color on what you are thinking as far as that split did much you can do to maybe gain share into the consumable side? Luis Müller: Sure. Our contactor business is actually fairly small today, but with the – the theory here is with the 40% share in our non-memory handler market and the fact is every handler we ship shift with contactors for testing semiconductor devices that we do have an opportunity and more so in certain applications than others actually to differentiate and capture a portion of that revenue and essentially grow our business penetrating some into the contactor revenue stream. And that – Dick, that contactor market is sizable, I think we have somewhere $600 million to $700 million. So, we think there is good opportunity there for us.

Okay, thank you. And Jeff, the fall in the Q4, if you excluded that where would you have landed in your guidance $80 million to $85 million, I mean, would you then kind of split the goalpost there at the higher end or lower end? Luis Müller: At the higher end, Dick.

And did you say you would be able to hit your target margin at the 90% target model this year without increasing the components coming out of Asia to 100%? Luis Müller: That’s correct.

Okay. Great, thank you.

There appear to be no further questions at this time. I would like to turn the floor back over to management for closing comments. Luis Müller: Okay. Thank you for joining us on this call today. We look forward to speaking to you next time when we report our first quarter 2015 results. Thank you and good day.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.