Cohu, Inc. (NASDAQ: COHU), a global leader in back-end semiconductor equipment and services, today provided a business update and an upward revision to its fiscal third quarter 2020 guidance:
Cohu expects a net neutral to positive impact from the newly introduced U.S. export restrictions to Huawei and expanded list of affiliated companies, as market share and demand is expected to shift to other customers.
Order forecast has improved through third quarter with continued positive customer momentum in mobility and strong demand for Cohu’s RF testers.
Cohu now expects third quarter revenue at the high-end of guidance at approximately $146 million.
The company commenced reduction of the term loan B debt associated with the financing of the Xcerra acquisition in October 2018, recently reducing such debt by $17.3 million.
Luis Müller, President and Chief Executive Officer of Cohu, commented, "We are encouraged by our customers’ acceptance and ramp of our RF test solutions, and this drives our increased optimism about near-term business conditions.”
Cohu is a leading supplier of semiconductor test and inspection handlers, micro-electro mechanical system (MEMS) test modules, test contactors and thermal sub-systems used by global semiconductor manufacturers and test subcontractors.
Forward Looking Statements:
Certain statements contained in this release and accompanying materials may be considered forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding expected impact from the newly introduced U.S. export restrictions to Huawei and expanded list of affiliated companies, expected market share and demand shift, order forecast improvements and positive customer momentum in mobility and strong demand for Cohu’s RF testers, increased third quarter revenue forecast to the high-end of guidance at approximately $146 million, ramp of RF test solutions, increased optimism about near-term business conditions, and any other statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as "may,” "will,” "should,” "would,” "expect,” "anticipate,” "plan,” "likely,” "believe,” "estimate,” "project,” "intend,” and other similar expressions among others. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance.
Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our business, financial condition and results of operations, and COVID-19 could re-surge at any time and our business could be abruptly impacted again to an even greater extent; Other significant risks associated with the Xcerra acquisition, integration and synergies including the failure to achieve the expected benefits of the acquisition, and mandatory ongoing impairment evaluation of goodwill and other intangibles whereby Cohu could be required to write off some or all of this goodwill and other intangibles; Continued availability of capital and financing and additional rating agency downgrade actions, and limited market access given our high debt levels; Our Credit Agreement contains various representations and negative covenants that limit our business flexibility; Changes to or replacement of LIBOR may adversely affect interest rates; Adverse investor reaction to the recently suspended cash dividend; Other risks associated with acquisitions; inventory, goodwill and other asset write-downs; Our ability to convert new products into production on a timely basis and to support product development and meet customer delivery and acceptance requirements for new products; Lost productivity, project delays and internal control risks due to ongoing employee "work from home” programs; Our reliance on third-party contract manufacturers and suppliers; Failure to obtain customer acceptance resulting in the inability to recognize revenue and accounts receivable collection problems; Market demand and adoption of our new products; Customer orders may be canceled or delayed; Design-wins may or may not result in future orders or sales; The concentration of our revenues from a limited number of customers; Intense competition in the semiconductor equipment industry; Our reliance on patents and intellectual property; Compliance with U.S. export regulations; Impacts from the Tax Cuts and Jobs Act of 2017 and ongoing tax examinations; Geopolitical issues, trade wars and Huawei/HiSilicon export restrictions (including new restrictions effective in May and August 2020); Retention of key staff; Other health epidemics or natural disasters; ERP system implementation issues particularly as Cohu recently launched a new ERP system in first quarter 2020 and plans a broader rollout in 2020; The seasonal, volatile and unpredictable nature of capital expenditures by semiconductor manufacturers particularly in light of weakened demand in 2019 followed by the COVID-19 global pandemic in 2020; and Rapid technological change.
These and other risks and uncertainties are discussed more fully in Cohu’s filings with the SEC, including the most recently filed Form 10-K and Form 10-Q, and the other filings made by Cohu with the SEC from time to time, which are available via the SEC’s website at www.sec.gov. Except as required by applicable law, Cohu does not undertake any obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
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PICO Holdings, Inc. (NASDAQ:PICO) reported results for the second quarter ended June 30, 2020. Our reported shareholders’ equity was $172.3 million ($9.06 per share) at June 30, 2020, compared to $178.3 million ($9.01 per share) at December 31, 2019.
Second Quarter Results of Operations
Our second quarter results of operations were as follows (in thousands):
Three Months Ended June 30,
Total cost and expenses
Net income (loss) attributable to Pico Holdings, Inc.
Net income (loss) per share
Six Months Results of Operations
Our six months results of operations were as follows (in thousands):
Six Months Ended June 30,
Total cost and expenses
Net income attributable to PICO Holdings, Inc.
Net income per share
PICO’s Chief Executive Officer, Dorothy Timian-Palmer, commented:
"Our reported results of net income of $1.9 million for the second quarter ended June 30, 2020 reflects the sale of 470 acre-feet of groundwater rights in Dodge Flat, Nevada for sale proceeds of $3.1 million in May, 2020. We did not generate any other significant water resource asset sale transactions in the period or in the first quarter of 2020 and, as a result, our reported net income of $53,000 was virtually break-even for the six months ended June 30, 2020.
"Effective July 24, 2020, the Board adopted a new tax benefits preservation plan (the ‘Plan’) designed to preserve the Company’s ability to utilize its net operating losses (‘NOLs’). As of December 31, 2019, the Company had approximately $156.5 million (pre-tax) federal NOLs. Information with respect to these NOLs is contained in our Annual Report on Form 10-K for the year ended December 31, 2019 that we filed with the Securities and Exchange Commission. We believe these NOLs are a valuable asset to the Company and our shareholders, as they may potentially shelter all or part of any future taxable gains arising as we monetize our assets. The Company will seek shareholder ratification of the Plan at PICO’s 2021 Annual Meeting. The Plan is similar to the Company's previous tax benefits preservation plan, which expired on July 24, 2020.
"We continue to carefully monitor our liquidity and working capital requirements during these uncertain times. We believe our cash resources of $11.3 million as of June 30, 2020, provides us sufficient liquidity for our ongoing operations and share repurchase program. The Board continues to believe that at current and recent market prices, our stock is undervalued from our estimate of its intrinsic value, and we continued to repurchase our common stock through open market purchases throughout the second quarter of 2020 and year to date. In 2020, we have to date repurchased a total of approximately 838,000 shares for approximately $7.2 million. We will continue to monitor our liquidity and forecast cash generation very carefully; depending on the price of our shares, our cash position, and our cash flow outlook, we will continue to evaluate our capital allocation with respect to our share repurchase plan.”
About PICO Holdings, Inc.
As of June 30, 2020, our primary holding was Vidler Water Company, Inc. ("Vidler”), a water resource and water storage business, with assets and operations primarily in the Southwestern U.S.
Currently, we believe the highest potential return to shareholders is from a return of capital. As we monetize assets, rather than reinvest the proceeds, we intend to return capital to shareholders through a stock repurchase program or by other means such as special dividends. Nonetheless, we may, from time to time, reinvest a portion of proceeds from asset monetizations in further development of existing assets, if we believe the returns on such reinvestment outweigh the benefits of a return of capital.
At June 30, 2020, we had a market capitalization of $160.4 million, and 19,027,285 shares outstanding.
We remind all of our stockholders that questions regarding our operations may be submitted to email@example.com, and, if appropriate, we will post on our website responses to these questions.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains statements that may constitute forward-looking statements, which are based on information currently available, usually identified by words such as "anticipates," "believes," "estimates," "plans,'' "projects," "expects," "hopes," "intends," "strategy," ''focus," "outlook," "will," "could," "should," "may," "continue," or similar expressions, which speak only as of the date the statement was made. Such statements are forward-looking statements and are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation statements regarding our business objectives, our ability to monetize our water resources, the future demand for our water resources, our ability to reduce net operating cash use, our ability to preserve and utilize NOLs to offset taxable income and reduce our federal income liability, and our ability to monetize assets and return capital to shareholders through stock repurchases or through other means. The forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties.
A number of other factors may cause actual results to differ materially from our expectations, such as: any slow down or downturn in the housing or in the real estate markets in which Vidler operates; fluctuations in the prices of water and water rights; physical, governmental and legal restrictions on water and water rights; a downturn in some sectors of the stock market; general economic conditions; the impacts of the COVID-19 global pandemic on the demand for real estate, real estate development, and demand for water resources to support residential and commercial real estate development; prolonged weakness in the overall U.S. and global economies; the performance of the businesses in which Vidler operates; the continued service and availability of key management personnel; and potential capital requirements and financing alternatives.
For further information regarding risks and uncertainties associated with our business, please refer to the "Management’s Discussion and Analysis of Financial Condition and Results of Operations” and "Risk Factors” sections of our SEC filings, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, copies of which may be obtained by contacting us at (775) 885-5000 x200 or at https://picoholdings.com.
We undertake no obligation to (and we expressly disclaim any obligation to) update our forward-looking statements, whether as a result of new information, subsequent events, or otherwise, in order to reflect any event or circumstance which may arise after the date of this press release, except as may otherwise be required by law. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
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The fantasy sports website FanDuel is shown on October 16, 2015 in Chicago, Illinois
Scott Olson/Getty ImagesPaul Martino, co-founder of San Francisco venture capital firm, BullPen Capital, first invested in FanDuel when the company had 7 employees and was generating $1 million in revenue.
Martino expects legalization will be the growth engine driving the industry, he believes 40 states will be legalized over the next decade.
"I just think we're gonna go through a tremendous decade from 2018, when it was legalized, to 2028," Martino told Business Insider in an interview.
Here is how Martino believes retail investors can get in on the action without paying above the odds.
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Not many investment strategies are inspired by a singular company. But for Paul Martino, co-founder of San Francisco venture capital firm, BullPen Capital, his approach to investing was inspired by one of his first investments, the sports betting and fantasy sports firm, FanDuel.
Martino calls his firm's investing approach, off by one. He is looking for interesting investments in firms that have traditionally been off by one, which could mean the company is based in geography no one is paying attention to or situated in a category that everyone else in the industry hates.
"We really got this philosophy around doing deals that everybody else's scared of," Martino told Business Insider in an exclusive interview.
FanDuel was off by three, Martino said. It was a business model focused on US fantasy sports but located in Edinburgh, Scotland, and founded by a husband and wife team. These components were off putting to many investors but for Martino it was the easiest deal he ever made.
Paul Martino, co-founder and general partner at BullPen Capital
"This is what you wait for your entire year when you see a deal that nobody else can seem that nobody else understands, go do the deal," said Matt Ocko, founder of the firm Data Collective, to Martino at the time of investment.
When Martino invested in the Series B round, FanDuel only had seven employees but was generating around $1 million in revenue. Now the firm is owned by Flutter Entertainment (PDYPF), a global sports betting, gaming and entertainment provider, which is valued at $27 billion.
Sports betting landscape
The US sports betting industry has exploded since Martino first invested in FanDuel. Morgan Stanley expects the industry to be worth $8 billion by 2025. And has an extremely bullish estimate of $15 billion, if all states are legalized by 2025, according to MarketWatch.
Each month brings another set of record breaking statistics for sports betting apps. A recent Bank of America research report said there had been a 104% year-over-year growth in gross gaming revenues based on October sports betting data.
The main competitors are currently FanDuel and DraftKings (DKNG). However, the competitive landscape is shifting with more players entering the market, such as MGM Resorts (MGM), William Hill (WMH) and PennNational (PENN).
Breakdown of competitors market share in key sports betting states from Bank of America November 18 research note
Bank of America
"I think as time goes by the regional players and other national brands are going to continue to chip away at the early market share leads that FanDuel and DraftKings have," Martino said. "I just don't know if they could ever sustain that, in some states 70% to 80% of the revenues go to those two companies."
Legalization will be the growth engine driving the industry, Martino said. He expects 40 states to be legalized over the next decade.
"As every new state opens, it's a new set of players. It's a new set of regulations. It's a new set of money to be made," Martino said. "And I just think we're gonna go through a tremendous decade from 2018, where it was legalized, to 2028."
There are currently 20 operational sports betting states - 19 allow land-based sports betting, 14 allow online sports betting and 6 allow online casinos, according to the Bank of America research report.
Bank of America expects another 14 states to be legalized in 2021 and 2022. The analysts also highlight the growing momentum in Canada.
Table on the waves of sports betting adoption from Bank of America November 18 research note
Bank of America
Martino expects Pennsylvania to be the main sports betting state for the next two to four years. Then larger population states like Illinois, California and New York could overtake Pennsylvania after that.
In fact, Martino believes so much in the growth of sports betting and in the state of Pennsylvania that he is launching a sports-betting parlour and restaurant in the heart of downtown Philadelphia called Bankroll. The parlour will route bets to betting operators in the state, capitalizing on the growth of sports betting without taking bets.
"We think this is a model we can replicate in other cities, like Denver, like Chicago, and like Detroit, where we think this would work," Martino said. "And oh, by the way, since it's all on your phone, and there's no money changing hands, the city doesn't mind that it's downtown."
Ultimately Martino's approach to Bankroll is how he thinks retail investors should approach the growth of sports betting. He thinks investors should be looking for opportunities on the fringe of the industry, where they can capitalize on sports betting without the high multiples.
"Companies like Flutter, who own fanduel, and DraftKings are, to some extent, priced with so much forward appreciation built into them where they know there's going to be 10 years of legalization," Martino said. "And so if you're a retail investor, sure, you might want to hold them, but there might be real risks there because the multiples are so high."
Instead one opportunity area is within technology. Martino suggests investors consider the "picks and shovel" companies that provide support to the sports betting companies up and down the technology stack. Investors could see significant price appreciation as tools and technologies get used more and more by incumbents, he said.
One example of this type of company is GameAccount Network (GAN), a company that provides back-end services to casino and gaming companies.
Another option for investors to explore is iGaming more broadly. iGaming is the wider industry focused on gambling online through activities like online poker, sports betting and online casinos. The revenue expectations are much higher, according to market research and consulting company, Grand View Research, the global online gambling industry is expected to be worth $127 billion by 2027.
But at the same time because of the gamification qualities, it is more likely to face regulation, even potentially on the federal level, Martino said,
"Addictive workflows to make you play a free spin game vs a sports bet. I know which one I think the regulators would come after," Martino said.