Greetings, and welcome to the Cohu Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now to turn the conference over to your host, Mr. Jeff Jones, Chief Financial Officer. Thank you, Mr. Jones, you may begin.

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’ll provide details of our performance for third quarter of 2016 as well as our outlook for the fourth quarter of the year. If you need a copy of our earnings release, you may obtain one from our website cohu.com or by contacting Cohu Investor Relations. Before we begin, you should all be aware that during the course of this conference call, we will make forward-looking statements reflecting management's current expectations concerning 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 for industry conditions, future operations, financial results, market share gains, expansion into new markets, and any comments we make about the company’s future in response to your questions. Our comments speak only as of today, October 27, 2016 and the company assumes no obligation to update these comments. We encourage you to review the forward-looking statement section of our 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 by our non-disclosure agreements. Now I’ll turn it over to Luis. Luis Müller: Thanks, Jeff and good afternoon everyone. In the third quarter of 2016, Cohu delivered solid results from sales of $69.3 million and generated $12.6 million of cash…

Thanks Luis. Overall, the results for the quarter were in line or slightly better than forecasted and Q3 represents Cohu's 11th consecutive quarter of non-GAAP profitability. Cohu had strong cast generation from operations of $12.6 million. Our cash balance increased quarter-over-quarter by nearly $11 million and adjusted EBITDA for Q3 was $6 million or approximately 9% of sales. In Q3 the GAAP to non-GAAP adjustments include approximately $1.7 million of stock-based compensation expense, $1.8 million of purchased intangible amortization expense and $586,000 of restructuring costs. My comments are based on Cohu's non-GAAP results which exclude the impact of these items. A reconciliation of non-GAAP measures to equivalent GAAP measures can be found in our earnings release located on the Investor Information section of Cohu's website. Unless otherwise noted all amounts discussed on this call are from continuing operations. Sales for the quarter were $69.3 million and higher than guidance due to increasing demand for our turret handlers, particularly from customers in the mobility and communications market testing high-performance mixed-signal and RF devices. Three customers each represent 10% or more of sales during the quarter; two customers are in the automotive market and the third customer is in computing. Q3 gross margin was in line with our forecast at 35.7%. Operating expense was $19.6 million and also in line with our forecast of approximately $20 million. The Q3 effective tax rate on income from continuing operations was 25.6% and the year-to-date effective tax rate is 22.2% and tracking to our projected rate of 22% for 2016. Collections were strong in Q3, and accounts receivable decreased sequentially. DSO improved by four days to 77. The inventory balance also decreased sequentially. However, inventory days remain flat at 99. The overall cash conversion cycle improved by one day to 123. Fixed asset additions in Q3 were approximately $1 million and appreciation for the second quarter was approximately $900,000. Deferred profit at September was $5.7 million, down $1.2 million quarter-over-quarter. Related deferred revenue at the end of Q3 with $6.4 million, down $3.5 million sequentially. Cohu's Directors approved a quarterly cash dividend of $0.06 per share payable on January 2, 2017 to shareholders of record on November 18, 2016. And now moving to our guidance for Q4. Shipments for Q4 will be higher than in Q3, however due to revenue recognition rules we plan to defer nearly $5 million of revenue during the quarter, and we expect Q4 sales will be approximately $65 million. Gross margin in Q4 is forecasted to be approximately $34 million -- excuse me -- 34%. Operating expenses for the fourth quarter will be comparable to Q3 at approximately 20 million, including roughly $450,000 related to our global ERP alignment project. That concludes our prepared remarks, and now we'll take questions

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Dick Ryan of Dougherty & Company LLC. Pleased proceed with your question.

Thank you. Hey, Jeff, I may have missed it, but did you give cash flow from operations for the quarter?

I did. It was $12.6 million.

Okay. Okay. Luis, on the wafer level prober, is that just being evaluated one customer right now? Luis Müller: Yeah, we have one leading customer that we call it a development customer that we have been working with.

And how is the pipeline for potentially new customers looking? Luis Müller: We're working with other customers in the necessary change in processes that would entail for production run of the system. As I mentioned during the prepared remarks here some people that have need to have one of these systems on the ground, on the floor -- the production floor to cast test material returns, so there are opportunities for one here today. But by and large production volume is slightly different than just testing material return. So there's -- ongoing work with other customers to evaluate process changes required to do them.

Okay. Could you give an update on your system level test solution? Luis Müller: As I mentioned -- I think it was a quarter or two quarters ago, if we saw an opportunity to get into system level test as we see more processor, memory, RF, power management IC is being integrated in system and package. We are in development of the product. We obviously haven't announced anything yet, but, you know, it's an ongoing project at the moment. We expect to hit it -- to hit it or launch the product next year.

Okay. Great. Thank you. Luis Müller: Sure.

[Operator Instructions] Our next question comes from the line of Edwin Mok of Needham & Company, LLC. Please proceed with your question.

Hi, everyone. This is Arthur on for Edwin. Thanks for taking the question. First question is just on some pure commentary side, one of your peers reported earlier today about improve mobile SoC ATE demand, just trying to see if that's potentially uplift for Cohu in near term? Luis Müller: Well, we notice in the past year Ryan is that the ATE guys tend to see the beginning of the SoC or the -- for the logic mobile orders ahead of us the handler guys. Nevertheless, we do have some initial indication from one customer that there will be an increase in demand our capacity requirement in Q1 of next year for their products. That hasn't translated yet [indiscernible] a firm order or even an exact forecast. But we do see some activity and was actually pleased to hear the ATE guys commenting about it.

Great. Thanks for that. And then next question just on automotive space. It seems like automotive has a big driver for you guys this quarter comprising, but the auto industry comprising 66% of the orders. Do you see this trend that something sustainable going forward over the next couple of quarters? I know you're excited that you had strong position at several auto customers, but just trying to get a sense on what we should expect in terms of mix and revenue? Luis Müller: Yeah, it’s a little too early to be forecasting a couple quarters out or even sort of first half couple quarters out would be first half of 2017. But in general terms we did hear some positive estimates from a couple of our large automotive customers. And as I said earlier to sort of a good indication on the mobile processor side as well. But nevertheless, it's a little too early to say that. I do expect and as I said in the prepared remarks the automotive market to continue to see a fast growth rate amongst the semiconductor -- the various semiconductor markets. So it is a space that I think will be pretty strong for us for the next, you know, for the next year or even years.

Great. Thanks. And the last question just on the contactor space I know you previously highlighted that contactor was an area that potentially drive growth for -- encounter 2017. I am just trying to get a sense that you feel this is more of organic driven growth or is there any interest in potentially consolidating and pursuing some M&A? Luis Müller: We hold the same strategy we have for the last few quarters which is now given the right opportunity we will seriously consider some M&A where we can bring in technology or manufacturing technology that closes some of the gaps that we have. In the meantime, we are executing growth organically. We are building our manufacturing infrastructure in the Philippines. As I mentioned a lot of our traction this year has been on sort of testing power semiconductors power management ICs. This is a competency we have in-house both for design and manufacturing of the spring or contact elements. And it's something we have been investing to grow internally. But, yes, we will consider M&A as part of the strategy.

Great. Thanks. That's all I had. Luis Müller: Thank you.

At the time there are no further questions in the audio portion of the conference. I would like to take this time to turn the conference back over the management for closing remarks.

Okay. Thank you for joining us on today's call. We look forward to speaking with you at the upcoming the Midtown Cap Summit Investor Conference in New York City on December 8 or when we report our fourth quarter and full year 2016 results. Have a good day. Luis Müller: Thank you.

This concludes today's conference. Thank you for your participation. You may disconnect your lines at the time, and have a wonderful rest of your day.