Ladies and gentlemen, thank you for standing by, and welcome to the Cohu Incorporated Third Quarter 2019 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this call is being recorded. I’d now like to turn the conference over to your host, Mr. Jeff Jones, Chief Financial Officer. Please go ahead..

Good morning and welcome to our conference call to discuss Cohu’s third quarter results and fourth quarter outlook. I’m joined today by our President and CEO, Luis Müller. Luis and I are calling from our operations in Germany and we appreciate you accommodating this early morning call.

If you need a copy of our earnings release, you may access it from our website cohu.com, or by contacting Cohu Investor Relations. There is also a slide presentation in conjunction with today’s call that may be accessed on Cohu’s website in the Investor Relations section.

Replay of this call will be available via the same page after the call concludes. Between now and our next earnings call, we’ll be participating in the 8th Annual New York City Summit on Tuesday, December 17, and the Needham Growth Conference also in New York City on January 14.

Please contact us if you would like to request a meeting with the company at these events. And now to the Safe Harbor. During today’s call, we will make forward-looking statements reflecting management’s current expectations concerning Cohu’s future business.

These statements are based on current information that we have assessed, but which by its nature, is subject to rapid and even abrupt changes.

We encourage you to review the Forward-Looking Statements section of the slide presentation and the earnings release as well as Cohu’s filings with the Securities and Exchange Commission, including the most recently filed Form 10-K and Form 10-Q.

Our comments speak only as of today, November 4, 2019, and Cohu assumes no obligation to update these statements for developments occurring after this call. Finally, during this call, we will discuss certain non-GAAP financial measures.

Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I’d like to turn the call over to Luis Müller, Cohu’s President and CEO.

Luis?.

Good morning. Today I'm going to touch on highlights for the third quarter, briefly describe a couple of opportunities for next year, and then pass it back to Jeff to comment on the financial results and fourth quarter guidance.

Cohu delivered stronger than expected non-GAAP profitability on sales of $143.5 million, despite continued softness in the automotive and industrial segments, which are historically our largest served markets. Lower analog IC demand is expected to remain a near-term headwind to handler sales, particularly Gravity Systems.

While automotive ADAS is forecasted to strengthen benefiting our Pick-and-Place business. As a reminder, most of our handler business are for automotive and industry applications where Cohu is the leader in Tri-Temperature testing, but for large installed base of equipment that provides long-term recurring revenues.

In mobility, 5G applications are driving an increase in utilization of RF testers and turret handlers, which is recently trending above the overall average of approximately 77%.

Third quarter orders were 44% system and 56% recurring validating our strategy to build a solid foundation of recurring business that helps offset capital equipment cyclicality. We also captured a key design win at a leading U.S.

mobile semiconductor manufacturer, adding an approximately $10 million a year customer and broadening our leadership in RF desk.

Third quarter orders continue to strengthen in mobility, cloud, data center, and AI where we have greater ATE exposure in growing contactor sales to RF and power management IC test and a large thermal handler installed base for microprocessors.

These segments are expected to gain momentum in 2020, with 5G power amplifiers, antenna tuners, switches, and filters tested on our equipment supporting the initial ramp of next-generation smartphones coming to market next year.

We believe that we're seeing the beginning of a new growth cycle driven by 5G communications enabling higher data rates and capacity with enhanced smart mobile broadband, massive machine type communications on narrowband Internet of Things, and mission critical applications on ultra-reliable low latency communications.

Our products are gaining traction in sub-six gigahertz 5G production and demonstrating differentiated value for Wi-Fi 6 and millimeter wave applications.

We estimate that the addressable market for our RF testers will grow from about $60 million to approximately $170 million in the next three years and we expect to remain the leader in this space supplying both U.S. and China based customers.

In fact, China was a growing region for our tester sales this last quarter, conferring some initial fears from the trade war. We're also optimistic about the prospects of selling complete solutions consisting of testers and handlers combined with contactors for semiconductor tasks across different applications.

We recently ramped a complete solution, supporting a global satellite communication project that is forecasted to grow next year. Adding to that, our opportunities in the approximately $200 million flat panel display driver IC Test segment where we continue to make inroads in Taiwan, China, and now also Korea.

It's too early to speak with certainty about next year, but we expect 5G to enter the next phase of expansion, with initial volume smartphone production and a return to some level normality in the automotive market, leading to semi-test growth year-on-year.

We will continue to carefully manage the P&L maximizing profitability but also ensuring the proper investments to drive mid-term growth particularly on testers and contactors that have much to gain from cross-selling with our larger handler business.

Lastly, it's been one year since the acquisition of Xcerra and I'm happy to report being on track for $40 million annual run rate cost synergies by the end of this quarter.

The main synergy objectives are being achieved ahead of schedule, having substantially restructured our German operations, closed a factory in Fontana, California in the third quarter, and on track to close our Penang, Malaysia factory by the end of this quarter.

More importantly, we're now integrated and actively pursuing cross-selling customer opportunities such as the RF satellite communications that have the potential to add differentiated value to our customers. Now I'd like to turn it over to Jeff to review our third quarter results and provide fourth quarter guidance..

Okay, thanks Luis. Today I'll start by reviewing third quarter results which delivered revenue in line with guidance, but with non-GAAP profitability higher than forecasted, due to higher gross margin and lower operating expense, including the realization of acquisition-related cost synergies.

I’ll also review our progress in accelerating our plan synergies from the acquisition of Xcerra and then I'll provide our fourth quarter guidance. Please note that my comments that follow all refer to non-GAAP figures or GAAP to non-GAAP reconciliations and disclosures, see the accompanying earnings release and investor presentation.

For Q3 the GAAP to non-GAAP adjustments include approximately $3.5 million of stock-based compensation expense, GAAP to non-GAAP adjustments primarily driven by the Xcerra acquisition include $10 million of purchased intangible amortization expense, $1.3 million of property, plant and equipment step-up costs, and $2.5 million of restructuring costs.

The Q3 2019 net cash impact of Xcerra acquisition-related restructuring was approximately $4 million related primarily to employee severance. Q3 revenue of $143.5 million was in line with our guidance, and no customer accounted for 10% or more of sales in the quarter.

On a year-to-date basis through September, one customer in data center cloud and AI represents approximately 11% of sales. In Q3, we generated gross margin of 42.3%, which is approximately 130 basis points higher than guidance, due to a better than expected contribution from recurring revenue and a favorable mix of handler and tester system sales.

Operating expenses came in lower than forecasted as a result of tight control on labor costs and discretionary spending and a $600,000 gain on sale of fixed assets. During the quarter, we realized approximately $7.2 million of acquisition cost synergies, which is in line with the forecast.

In the third quarter, we generated non-GAAP operating income of $11.2 million or approximately 8% of sales. After interest expense, a foreign currency gain of about $1.6 million, and the tax provision, Cohu generated non-GAAP EPS of $0.12. Adjusted EBITDA in the quarter was $16.1 million or 11.2% of sales.

And as I’ve stated on prior earnings calls, the effective tax rate is not meaningful at current pre-tax levels. As a reminder, most of Cohu’s operations and related profits are generated and taxed outside the U.S. Additionally, when the U.S.

operation generates a loss as it did in Q3, there's no tax benefits to offset the foreign tax expense because of our deferred tax asset valuation allowance. As a result in Q3, we recorded tax expense on foreign profits without any benefit from the U.S. loss. This resulted in the high effective tax rate of approximately 39%.

Now turning to cost synergies and our business model, as announced on prior earnings calls, we've taken actions that results in pulling forward approximately $20 million of cost synergies into 2019, that's ahead of the original target of three to five years.

The result is that by the end of this calendar year, we expect to deliver $40 million in annual run rate cost synergies that will favorably impact and are already included in the business model going forward. This annual cost synergy split is approximately $20 million in cost of goods sold and $20 million in operating expense savings.

Now after completion of our restructuring plans, including shutdown and consolidation of various facilities, the minimum cash required to run the operations has been reduced to approximately $90 million. Our long-term capital allocation strategy is to use excess cash to pay down the debt and de-lever the company.

However, in the near-term, we're making minimum debt payments until we have a better sense of the timing and extent of cash required to support anticipated business growth in 2020, driven mainly by 5G communications.

During Q3, Cohu generated approximately $8 million of cash from operations and our cash balance was approximately $146 million at the end of the quarter. Cohu’s Board of Directors approved a quarterly cash dividend of $0.06 per share payable on January 2, 2020, to shareholders of record on November 15, 2019.

For the fourth quarter 2019 guidance, we're expecting sales to be $134 million to $144 million. Revenue distribution is forecasted to be 94% semiconductor test and inspection and 6% PCB test.

Gross margin is expected to be 41% to 43% and operating expenses are projected to be approximately $50 million including cost synergies of approximately $9 million, or about $36 million on an annualized basis. In addition to the acquisition cost synergies, we're maintaining the cost reduction measures taken in Q3 of approximately $1 million.

We expect Q4 adjusted EBITDA at the mid-point of guidance to be approximately 8%. Similar to the last three quarters, the tax provision rate will be abnormally high and not meaningful. The tax provision -- full tax provision at the mid-point of guidance is expected to be similar to the Q1 and Q2 non-GAAP amounts.

For modeling purposes, we expect a normalized effective tax rate of approximately 22% on revenue of $170 million or more and profits in line with the business model. The diluted share count for Q4 is expected to be approximately 41.7 million shares and that concludes our prepared remarks. And now we'll take your questions..

[Operator Instructions]. Your first question comes from the line of Craig Ellis from B. Riley..

Yes, thanks for taking the question, gentlemen, and congratulations on the strong margin performance in the quarter and outlook. Luis, I wanted to follow-up on a couple of points that you made and just try and tie them together. So nice to see the new tester wins that you said was worth, I believe $10 million.

And then, secondly, constructive longer-term RF test outlook that I thought was framed as growing from $60 million to $100 million.

So if I put those two things together, just assuming a linear rate of growth in RF test, does that mean that there could be as much as $23 million of incremental RF test revenue next year if you get $10 million from a new customer and then industry growth of $10 million to $13 million as we see a rebound?.

Hi, Craig. Yes, so just to recap on those two points, right. The customer win in the RF space, we do expect that to generate about $10 million a year going forward in revenue. Obviously, there are some puts and takes, so on or above $10 million.

And then the RF market the addressable market for RF testers, we do expect over the course of the next three years as 5G deploys in greater volume in mobile to grow substantially. So, I don't have a number to give you for next year specifically. But indeed our RF tester sales should be growing meaningfully into 2020.

And I would expect, even over the next few years as 5G continues to roll out..

That's helpful. And then a follow-up just on some of the other dynamics within the end markets. It sounds like from what you're saying, that part of mobility looks like it has good durability.

Can you comment on the potential for data center to continue to be a stronger market? And then you noted that auto was really a tale of two things ADAS strong and I think other parts weaker, do you have any visibility as to when auto and industrial would start to inflict more positively?.

Okay. So to the first point, yes, we do expect the data center, cloud, AI, to remain strong going into next year, going into 2020. So that that business I think it's going to remain there.

On the automotive and I would say also the industrial market they have indeed weakened -- weakened through the year and as you can see, as a percentage of our systems business it has actually come down in the third quarter.

I think the bright spots in automotive are going to be ADAS going into 2020 and also battery management systems, BMS if you will, for electric and hybrid electric vehicles. Nevertheless, as you know, SARS have gone down this year. I think there is some expectation that it could be flat to single-digit up next year.

And I think the main story around automotive will be content growth and electrification of vehicles going into 2020, so would expect some recovery to normality. Now, only now it's hard to talk about timing for these things all combined.

And so I would expect, getting into 2020 more of the typical seasonality, something that we haven't seen much in 2019 with maybe Q1, starting to come back around after Chinese New Year, but in earnest, sort of a seasonality picking up in the second quarter of the year maybe Q1 will be more of a flat to up mid-single-digit quarter-on-quarter before the seasonality picking up in Q2 as I said..

Yes, that makes sense, given what we're seeing from analog companies. And then, hi, Jeff, not to leave you out, following up on some of your comments regarding synergies, clearly synergies capture is going quite well. I think you noted that in the fourth quarter, expected performance takes the business to $36 million.

But exiting the year on that $40 million run rate, does that mean that there's about $4 million of incremental synergies that comes into the business in the first quarter? And if so, can you give us any color on the extent which that’s either COGS or others?.

Yes, that would be right, Craig. So over the full-year, you'd have that $4 million impact. And that would be let's see, we're going to exit the year with COGS at about in Q4 at about $4 million. So, yes, most of that would be COGS driven, most of that incremental $4 million would be COGS driven..

Your next question comes from Christian Schwab from Craig-Hallum Capital..

Hey, good morning, guys. Thanks for doing the call, pre-market I do like that better.

As it relates to bigger picture I know you didn't want to talk about timing regarding your recovery scenario in different markets, but maybe you could walk us through please the puts and takes to return the business on a top-line perspective to where we were kind of a year-ago when we made the Xcerra acquisition, I think that was about roughly $780 million in revenue on a trailing 12-basis, can you walk us through what it would take to get us there?.

Yes, sure. So, Christian, I’m going to talk about the different markets here and sort of maybe just put the whole picture together. So if you look at mobility, what we're seeing here is the 5G wave driving the growth of RF devices or at least as it impacts us RF devices.

And that's happening already, although, honestly, earnest is expected to ramp in real volume starting sort of Q2 -- starting Q2 of next year. And this is what we're going to start seeing our larger volume of next-generation smartphones with higher RF 5G content in them.

But now this is, what is that going to do, that's going to benefit both the sale of our RF configured testers as well as turret handlers into some degree even the Pick-and-Place handlers into the mobility market.

On the automotive side, and as I mentioned before, what we do see today, if you look at IHS Market Research, there's some expectation that global lightweight vehicle sales will be up low-single-digit percent next year.

More importantly, I think semi contents going up for ADAS as I mentioned before, which benefits radar sensors, other sensors in general, high-end microcontrollers. Also RF devices in cars, right? In industrials, sort of stabilizing. The data, as I mentioned before, to data center cloud AI is expected to remain strong.

And so I can't give you an exact number for next year. But I do expect that typical seasonality coming back for 2020, where we would have again weaker first quarters and fourth quarters, in fact, we kept looking at a sort of a first quarter should be similar levels to fourth quarters and then going into much stronger second and third quarter.

Now is the amplitude, where is exactly the amplitude. We don't have an answer to that question today. But I think the business is going to start coming back to the formal profile, at least the formal seasonal profile..

Your next question comes from the line of Tom Diffely from D.A. Davidson..

Yes. Good morning or good evening. So maybe Jeff following up on the costs over the last couple of quarters.

So in the just reported quarter, trying to figure out what the impact of the mix was in relationship to the cost retention, and also the one-time costs programs that you have going on right now?.

Yes, so in the forecast, we have -- we had baked in the cost synergies of a little over $7 million. And so we in fact, hit that number it’s about $7.2 million acquisition-related costs synergies. And then, during the quarter, as I mentioned, we had about $4.5 million more recurring revenue.

And then as well as sort of a blend of systems from handlers and testers we’re a little more profitable than what was forecasted..

Okay, is there any way to quantify the contribution that you got from the better mix?.

Well, from the better mix, it really accounted for just about all of 130 basis points..

Okay. Okay, great..

On the OpEx, Tom, that spending was lower as well. And so we've gone beyond the acquisition costs. And we've done things, as I mentioned before about lowering labor costs in terms of not hiring or replacing positions at the moment that we would in the future when business returns.

So it's sort of delaying certain labor costs and other spending, we reduced discretionary significantly in terms of travel and other costs. And so those are the additional costs, we've taken cost actions; we've taken in addition to the synergies that we're achieving. And so we'll continue those as long as business remains somewhat down..

Okay.

So there's a potential to have a nice second quarter next year, we get a couple million dollars of cost coming back on just from those short-term programs?.

Yes, I would say as revenue returns, then I would start to look back at that business model again to model the operating expenses..

Okay, great. And then question on China, China was actually okay for you in the quarter.

And I'm wondering if you're seeing any impact of your move to a direct sales team there?.

Yes. The China was actually a growing -- growing region for us in the third quarter and we continue to forecast actually China and the rest of the world actually not just China to be as strong -- a strong region for -- particularly for mobility and as we grow the RF 5G business next year.

So in the end, not much of an impact from the trade in the third quarter, we had had a disruption as you may recall on the second quarter, when things got moved around a little bit. But on a go-forward basis now, we're not foreseeing any negative impact from them..

Okay, great.

And then, finally, when you look at the differences between the handler business and the tester business in general, is there a stronger utilization rates from one half of your business versus the other? Which one do you think has the better near-term recovery or the closer near-term recovery?.

I think the near-term recovery is going to come more on the tester business and that's simply because our tester business has a greater exposure to mobility in consumer applications. While our handler business although serving across all markets, as you know, historically, we've been much stronger in the automotive and industrial markets.

At some point in the past, prior to Xcerra, automotive and industrial represented 40%, 45% of our handler sales. So as I mentioned before here, the mobility market particularly RF, 5G is going to be the -- the main driver as we see it for 2020 right now.

And so with that, we would expect the tester business to come back sooner than the handler business..

Okay, thanks.

And then final question, Jeff, when you look at the mix going into the fourth quarter, any meaningful difference from what you saw in the third quarter from a mix point of view?.

I would say that the recurring business in Q3 was about 55%, 56% of the revenue. I expect that to be similar for Q4.

And then with respect to the systems, the handlers and the testers, what we're forecasting at the moment is a little less, a little lower margin on the systems for testers and handlers, which brings us to that 42% versus the 43% we achieved in Q3..

[Operator Instructions]. Your next question comes from David Duley from Steelhead Securities..

Thanks for taking my question. I was wondering if you could give some flavor or some additional color on the contactor business during the quarter and what you expect it to do during the fourth quarter..

Hi Dave. Yes, so the contactor business right now is growing in the RF space and power management IC space and that's going in tandem with where we see the market being stronger.

We’re making inroads in the automotive market and industrial market nevertheless with lower utilizations in the auto and industrial markets right now, in aggregate it does way negatively. So we would have to wait for utilizations to pick up again to see higher growth in that space.

So I would just say in aggregate contactor sales are making inroads but predominantly, like I said in mobility, RF, power management ICs. We also have increased the sale of our Kita pins in our contactors that is an ongoing trend. So the team in Japan remains very, very busy and utilized supplying into contactors that Cohu provides to customers..

Okay.

And then could you talk a little bit about what's going on in the flat panel display market? I know you have a good position there in the tester of the ICs and I think that there's been some life in that segment of the business; could you just provide some additional color or flavor of what you are seeing there?.

Sure. Just to remember, we are still a small number two supplier in that market right. And our pitch here is that we have a general purpose SOC tester instead of a just a dedicated tester and what we do is we dedicate instruments that populate the tester for flat panel display.

So it becomes a very desirable proposition for the OSATs, which are supporting manufacturing for predominantly these fabulous companies in the flat panel display. So we have captured some TTDI opportunities as well as some drivers for large displays, although it's predominantly TDDI up to this point. We have sold mostly in Taiwan and China to-date.

Like I said, these are OSATs and have gained some traction in Korea. We expect the next big opportunity in flat panel display to come from OLEDs and this is mainly as the Chinese smartphone manufacturers’ start transitioning over to OLEDs and we are well aligning that supply chain.

So expect this to be the predominant driver for 2020 into 2021 would be the OLED wave. OLEDs generally require longer-test times. We have our tester already qualified for all test insertions in OLED from pro to final tests. So we continue to see this as an exciting opportunity to grow our ATE business..

Okay, final question from me, I guess it was similar to previous question.

But regarding getting back to levels of prior to the acquisition on revenue, is there any structural reasons in the market, customers combining or market share loss or anything that would make us think that you can't get back to let's say whatever that peak revenue was on a quarterly basis and I think it was like $225 million or so.

Are there any hurdles on getting back to that level of revenue?.

There are no structural reasons to that. Obviously, notwithstanding share gains, it would really require the automotive and industrial markets to bounce back and I say that because much of our handler sales is aligned with automotive and industrial markets.

So you would have to say industrial automotive is back in a healthy stage for us to be -- to be at those levels again or our growth in some of these target segments, like I said, flat panel display, RF, 5G growing contactor business, offsetting a lagging automotive and industrial market, if you will.

There hasn't really been any market share loss to speak to. So structurally speaking nothing to obstruct it, it's more a matter of timing now..

Okay. And the weakness that you have seen in the auto and industrial space I guess you mentioned China was strong. So I'm assuming the weakness you're referring to is more U.S. and European oriented.

Or maybe just give us a couple, a little bit more incremental flavor there about the weakness in auto?.

Well, our semiconductor customers in the auto space are predominantly U.S. and European customers, they supply then to auto manufacturers in Japan, China, Europe, U.S. and you name it right. So if I am to look at the end market itself, this year, I've seen weakness both in China, Europe, and the U.S.

So I think it really has impacted our customers quite broadly, as SARs went down.

So I would say now we're looking at more of a stabilization to a small recovery on the SAR units and then compounded by semi content growth, which pivoted now to more ADAS and battery management systems going into 2020, those would be the main drivers that will pull automotive back to some normality..

Your next question comes from the line of Brian Chin from Stifel..

Good afternoon.

Can you hear me?.

Yes, we can, Brian..

We can..

Okay, great. Yes, thanks for getting me on the Q&A and nice job on the execution in the quarter. Maybe first question is kind of delve back on the RF test discussion. I guess you kind of, Luis; you just kind of calibrate what the timing could be in terms of Q2 next year maybe kind of more of a bigger pickup in the business.

I'm kind of curious, can you remind us sort of roughly, based on the existing TAM, what your share is, number one kind of that you think you'll gain incrementally in terms of as that TAM increases? And also is it fair to think that as millimeter wave is ushered in that there's maybe a little bit more of a hockey stick in terms of how in terms of the growth on that TAM in kind of a year, or two years beyond?.

Okay. So let me see if I can cover all these pieces here, Brian. We look at -- today we look at the TAM for us addressable market being essentially RFPAs about $60 million TAM for testers on an annual basis. We have give or take 60%, 70% share of that.

On a go-forward basis, we think the RFPA market is going to be growing 40%, 50% over the next three years as greater content of RF devices, RFPAs goes into phones. Nevertheless, in conjunction with that we are broadening what we serve in the RF market; we were going after a small -- a larger section of that RF signal chain.

And so we believe we can actually tap into $170 million over the next three years annual market -- addressable market. So that's the perspective here is from one side, the TAM is growing from another side we're growing -- we're forecasting a bit of a wider net in the RF space. Sorry, Brian, I have to go back here, maybe a little bit of jet lag.

What was the other piece of your question again?.

No, I think you basically addressed it in terms of your answer. I appreciate that. The -- I guess the second question may be just to kind of continuing to frame the auto business clearly; you have the worst visibility relative to the mobility side of the business.

Can you just calibrate maybe some of the sort of the broader signals? But even, yes, I think last time you updated us that auto business was already tracking down maybe 30%, at least from a revenue perspective this year and obviously kind of very strong order intake from a system standpoint in the quarter.

And so either you usually get book-to-bills by segment. I mean, it sounds like that the order level must be sort of at a maintenance or even sub-maintenance level at this point. I must give you some confidence, I imagine in terms of just can't get a lot of worse at this point..

Yes, I mean, at this point I would say, I think we're running at approximately a book-to-bill of 1 going from Q3, yes, exiting Q3.

And like I said, if you look at a normal seasonality pattern, which we will expect to be returning to next year, we will be running Q4 laterally to maybe mid-single-digit up into Q1 and then the seasonality comes back into the second quarter.

Now it's easier to talk about the seasonality when we see the 5G demand coming up next year, it's a little harder to speak to the automotive market at this point. It's a little early for us.

We can gauge it more by looking at many of our customers earnings release here over the last couple of weeks and how they have gauged their business sort of gives us a little bit more increasing confidence that automotive will return to normality next year, but it's yet hard for us to predict sort of the shape of that recovery curve on the automotive side..

Sure, that's fair. Maybe last question for Jeff. You’re kind of sequencing of the recovery relative to what you've stated here. Test, you certainly have a little more visibility in terms of the test business right now.

Your recurring business tend to lead capacity as is relative to what that margin mix looks like, could you be operating on a gross margin standpoint, maybe slightly ahead of the model than kind of as we sort of move into recovery in the business?.

Yes, you're right, Brian, with a quicker recovery on the tester side of the business, the margin would be stronger in the -- whatever timeframe that is, that's Q2 of next year, then you're right, we would have stronger margins at that point..

Yes, if I may just add remember that's talking about testers but then there's possibility that will be some of our handlers going along with that as well. In this being mobility, more at the Indian only, Indian test handlers, we are more margin pressured on those handlers than we are on the -- more differentiated handlers.

So I don't know how it all plays out together..

Yes, that would be a partial offset; I don't think it would be a full offset..

Yes, I have to look at the mix when it comes out, right..

That's a good point..

Okay. Actually maybe if I could sneak one more.

Given that you -- it sounds like chart maybe is one to the extent that handlers maybe have some kind of pull-through relative to 5G and chart maybe as part of that, is the -- is there well some good inspection attachment as well, some of that business?.

Yes, we would expect so because a lot of our inspection sales today is in the mobility type devices, RF ICs and power management ICs. A lot of it has to do with inspecting wafer level chip scale package that are used in mobile products. So yes, yes, I would expect it to drive a full in the inspection platform..

And I show no further questions at this time. Gentlemen are there any closing remarks or you may proceed with your presentation..

Yes. So I just like to say thank you for joining us today and we look forward to speaking to you in the near future. Goodbye and have a nice day..

Bye-bye..

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day and you may all disconnect..