Cohu Q1 2025 Earnings Report

Cohu EPS Results

• Actual EPS: -$0.02
• Consensus EPS: -$0.16
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $0.01

Cohu Revenue Results

• Actual Revenue: $96.80 million
• Expected Revenue: $96.61 million
• Beat/Miss: Beat by +$184.00 thousand
• YoY Revenue Growth: -10.00%

Cohu Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 4:30PM ET

Cohu (NASDAQ:COHU), through its subsidiaries, provides semiconductor test equipment and services in China, the United States, Taiwan, Malaysia, the Philippines, and internationally. The company supplies semiconductor test and inspection handlers, micro-electromechanical system (MEMS) test modules, test contactors, thermal sub-systems, and semiconductor automated test equipment for semiconductor manufacturers and test subcontractors. It also provides semiconductor automated test equipment for wafer level and device package testing; various test handlers, including pick-and-place, turret, gravity, strip, and MEMS and thermal sub-systems; interface products comprising test contactors, and probe heads and pins; spares and kits; various parts and labor warranties on test and handling systems, and instruments; and training on the maintenance and operation of its systems, as well as application, data management software, and consulting services on its products. In addition, the company offers data analytics product that includes DI-Core, a software suite used to optimize Cohu equipment performance, which provides real-time online performance monitoring and process control. It markets its products through direct sales force and independent sales representatives. The company was formerly known as Cohu Electronics, Inc. and changed its name to Cohu, Inc. in 1972. The company was incorporated in 1947 and is headquartered in Poway, California.

Cohu Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1 Cohu reported $96.8 million in revenue with a non-GAAP gross margin of 44.2% and a net loss of $0.8 million (EPS –$0.02), while Q2 guidance calls for roughly $106 million in revenue (±$7 million) and a ~45% gross margin.
• Recurring revenue made up 63% of Q1 sales and grew orders 28% sequentially, highlighting the strength of consumable-driven streams and suggesting a potential uptick in test cell utilization.
• Cohu initiated a restructuring in late Q1 to shift manufacturing from the U.S. and Europe to Asia, expecting most cost benefits from Q2 onward and targeting quarterly operating expenses of about $47 million once fully realized.
• Design wins in Q1 include three new handler opportunities in China’s automotive market, selection of the Diamond X tester by a European fabless communications IC supplier, and initial orders for SiC IGBT power probe cards, plus a repeat multi-unit HBM inspection order.
• The integration of the Tignis acquisition with Cohu’s DI-CORE AI maintenance platform is underway, with three new demonstration contracts secured across front-end equipment, material suppliers, and U.S. defense research.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to Cohu's First Quarter twenty twenty five Financial Results Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you'll need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jeff Jones, Chief Financial Officer. Please go ahead.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Good afternoon, and welcome to our conference call to discuss Cohu's first quarter twenty twenty five results and second quarter twenty twenty five outlook. I'm joined today by our President and CEO, Luis Mueller. 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. Replays of this call will be available via the same page after the call concludes.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

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 SEC, including the most recently filed Form 10 ks and Form 10 Q. Our comments speak only as of today, 05/01/2025, and Cohu assumes no obligation to update these statements for developments occurring after this call.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

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, Cohu's President and CEO. Luis?

[Luis Müller, President, CEO & Board Member at Cohu]

Hello, and welcome to our quarterly earnings call. First quarter twenty twenty five results were in line with guidance, with revenue approximately $97,000,000 and non GAAP gross margin approximately 44%. As previously announced, we implemented a restructuring program in late February to reduce manufacturing and operating expenses through this year. This program includes some incremental manufacturing transfers to our Asia factories and related expense reductions in The U. S.

[Luis Müller, President, CEO & Board Member at Cohu]

And Europe. The majority of these will start benefiting the second quarter onwards. Jeff will provide more details as part of our financial results later. Revenue was split 63% recurring in the balance systems. Systems revenue increased sequentially in automotive and consumer segments, although offset by declines in computing, industrial and mobile.

[Luis Müller, President, CEO & Board Member at Cohu]

Estimated test cell utilization at the March was down one point quarter over quarter to 72%. I won't comment further on utilization at this time as we plan to implement changes going forward that we anticipate will increase accuracy when segmenting utilization by market. On a positive note, recurring orders increased 28% quarter over quarter demonstrating the value of Cohu's non capital equipment revenue streams and indicating the possibility of utilization picking up in the coming quarters. Although Cohu factories in Malaysia and The Philippines have been running below nominal capacity, we are starting to selectively add resources to support recent customer requests for fast turn on kits and contactors. On the customer design wins, in the first quarter we landed three new opportunities for our handlers, including a leading package and test subcontractor in China supporting the local automotive industry.

[Luis Müller, President, CEO & Board Member at Cohu]

We also won a selection with our Diamond X tester at a European fabless supplier of communications ICs. This Diamond X will ship for production to a test subcontractor in Asia. Additionally, we qualified and received the initial orders for Cohu's power probe cards from a leading European semiconductor company testing silicon carbide IGBT products. On customer expansion, we received a repeat multiunit order for HBM inspection systems in the first quarter, continuing to increase our penetration in the memory market. We're excited about this opportunity to reposition and expand our vision inspection technology aligned with the growing data center market.

[Luis Müller, President, CEO & Board Member at Cohu]

Two customers expanded Diamond X application in the quarter, one targeting RF IoT devices and the other gallium nitride high voltage device test. Several customers expanded the use of our contactors, notably with Cohu's ICON interface supporting tests of high performance network switches. On the software front, this was our first quarter combining the recently acquired Tignis and Cohu's DICORE predictive maintenance solutions. We have signed three new demonstration opportunities in the quarter to prove the value of our AI process monitoring platform, including with a front end equipment company, a semiconductor material supplier and a U. S.

[Luis Müller, President, CEO & Board Member at Cohu]

Defense military research group. The team has been asked to evaluate multiple applications for AI process monitoring the back end semiconductor manufacturing, which is an encouraging validation of our strategy to support and expand Cohu's own DI core solutions. We're optimistic about the business prospects of our design wins, pickup in recurring orders and expansion into new market segments. The second quarter started with positive momentum from growing customer interest in our systems. And at this moment, we have not seen any meaningful change in customer buying patterns due to tariffs.

[Luis Müller, President, CEO & Board Member at Cohu]

Let me now turn it over to Jeff for further details on last quarter results and next quarter guidance. Jeff?

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Thanks, Luis. Before I walk through the Q1 results and Q2 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. Now turning to the Q1 financial results. Revenue for the quarter was within guidance at $96,800,000 Recurring revenue, which is largely consumable driven and more stable than systems revenue, represented 63% of total revenue in Q1.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

During the first quarter, '1 customer in the automotive and industrial market accounted for more than 10% of sales. Q1 gross margin was 44.2% and in line with guidance. Operating expenses for Q1 were slightly lower than guidance at $48,600,000 driven by lower labor costs due to the initial restructuring actions announced in late February. Q1 interest income, net of interest expense and a small foreign currency loss, was 1,400,000.0 In Q1, we recorded a tax benefit of $3,600,000 yielding a non GAAP net loss of approximately $800,000 Non GAAP EPS for the first quarter was a $02 loss. Now moving to the balance sheet.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Overall, cash and investments decreased by $61,000,000 during Q1 to $2.00 $1,000,000 due primarily to $35,000,000 used to acquire Tignis, approximately $9,000,000 used to repurchase 432,000 shares of Cohu common stock and $10,000,000 used in operations. From inception of our share repurchase plan through Q1 twenty twenty five, we've repurchased approximately 4,000,000 shares for approximately $117,000,000 leaving approximately $23,000,000 available for us to repurchase additional shares in the future. Total debt increased in the first quarter by approximately $9,000,000 due to a revolving credit facility used to finance the purchase of our Malacca, Malaysia facility. CapEx of $11,000,000 in Q1 is driven primarily by the Malacca facility purchase of approximately $9,000,000 Overall, Cohu's balance sheet remains strong, supporting investment opportunities to expand our served markets and technology portfolio in line with our growth strategy and returning capital to shareholders through our share repurchase program. Now moving to our Q2 outlook.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Recent increases in recurring revenue orders and HBM inspection systems are driving a 10% increase in revenue quarter over quarter. We're guiding Q2 revenue to be approximately $106,000,000 plus or minus 7,000,000 Second quarter gross margin is forecasted to be approximately 45, benefiting from Cohu's differentiated products and our stable high margin recurring business, which adds resilience to profitability and provides consistent cash flow through industry cycles. Based on our internal analysis, we do not expect the recently announced tariffs will create a measurable and direct increase in cost of goods sold. Under Cohu's standard shipping terms, the customer is the importer of record and responsible for tariff costs, if any. Additionally, the Cohu supply chain and manufacturing operations are primarily Asia based and shipping to Asia based customer facilities, completing the product manufacturing and delivery cycle outside of The U.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

S. Looking back to 2024, with assumptions that U. S. Suppliers are sourcing components and parts off shore, we estimate a possible tariff impact to 2024 cost of goods sold could have been approximately $3,000,000 for the entire year. And lastly, our efforts to transition supply chain to minimize impacts of revised UF tariff scheme is ongoing.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Q2 operating expenses are forecasted to be approximately 48,000,000 about $500,000 lower than Q1, realizing increasing cost savings from the mid Q1 restructuring actions. Once the full impact of the restructuring plan has taken effect in the beginning of twenty twenty six, we expect quarterly operating expenses to be approximately $47,000,000 per quarter when revenue is approximately $100,000,000 We're projecting Q2 interest income, net of interest expense and foreign currency impacts to be approximately 900,000 at current interest rates. The Q2 non GAAP tax provision is expected to be approximately $1,600,000 The basic share count for Q2 is expected to be approximately 46,700,000.0 shares. That concludes our prepared remarks, and now we'll open the call to questions.

[Operator]

Our first question comes from Brian Chin with Stifel.

[Brian Chin, Director at Stifel Financial Corp]

Hi there. Good afternoon. Thanks for letting us ask a few questions. Maybe to start off with, when we look at the roughly $9,000,000 revenue increase at the midpoint of the 2Q guidance, how much of that is improvement in recurring revenue versus the shipments for the HPM inspection?

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Yeah, it turns out it's about half and half. So half of that quarter over quarter increase, half systems, recurring.

[Brian Chin, Director at Stifel Financial Corp]

Got it. Given the multi unit order for inspection, does that increase the prior $7,000,000 target for the full year? Does that give you more visibility shipping either in the mid year or maybe even into the second half? And I understand that's mainly been sort of one lead customer. What's the potential, maybe not this year, but potential to add customers beyond your initial customer for that product and application?

[Luis Müller, President, CEO & Board Member at Cohu]

Hi, Brian, this is Luis. Yes, so we're projecting about $8,000,000 of revenue in HBM this year. That's the best view we have at this time. And we have started discussions with a second customer, but it's still at this exploratory phase. So nothing concrete to put a number on, but we certainly expect that revenue to grow going out to 2026.

[Luis Müller, President, CEO & Board Member at Cohu]

I just don't have a number to put on that at this time.

[Brian Chin, Director at Stifel Financial Corp]

Okay, great. Maybe one last question for me here. Some of your customers have been talking more favorably about maybe some inflection in their shipments. And the way this works, that's one part of it, but then there's a matter of absorbing capacity and etcetera, etcetera in terms of actually materializing into some maybe capacity equipment that's required from you guys. But you have made the commentary about some pickups in the recurring revenue.

[Brian Chin, Director at Stifel Financial Corp]

Can you maybe discuss how those things might connect a little bit and kind of what that would if that suggests any sort of signals around maybe timing on when you could start to see some improved backlog for maybe the equipment side of the business?

[Luis Müller, President, CEO & Board Member at Cohu]

Yes, I mean, that's the expectation, right? We should see when we see any pickup in recurring, we should naturally expect to see an improvement in utilization. So I think we'll be watching pretty closely here in the next quarter to see if utilization levels go up, if it matches the segments that we're seeing the pickup in recurring and the magnitude of that pickup in utilization. I think that that would be more indicative of the trend or confirmation of the trend for when to expect sort of capital equipment demand increases again, right? With that said, I think if you look back in history here, this is our first quarter in about three and a half years now that we're guiding the quarter up year over year.

[Luis Müller, President, CEO & Board Member at Cohu]

So if you look at Q2 of twenty four versus Q2 guidance year of '25, revenue is up sequentially. And the last time that happened was Q3 of 'twenty one. So we've got to see a little bit more of utilization pick up, like I said, continuation of recurring pickup to call it a solid trend, but it's a positive sign and certainly a noticeable turn of corner.

[Brian Chin, Director at Stifel Financial Corp]

Great, thank you.

[Operator]

Our next question comes from David Dooley with Steelhead Securities.

[David Duley, Managing Principal at Steelhead Securities]

Thank you for taking my question. I was wondering, know, what in what segments are you seeing the pickup in the reoccurring orders that you mentioned?

[Luis Müller, President, CEO & Board Member at Cohu]

The, Hi, Dave. The the recurring order pickup, is predominantly in the mobile, not in the mobile segment.

[David Duley, Managing Principal at Steelhead Securities]

Okay. Is it broad based or is it just really with one or two customers or how would you describe depth of it?

[Luis Müller, President, CEO & Board Member at Cohu]

In this case, it's actually fairly concentrated, Dave. It's fairly concentrated. I'm just gonna leave it at that.

[David Duley, Managing Principal at Steelhead Securities]

Okay.

[David Duley, Managing Principal at Steelhead Securities]

Could you just elaborate a little bit more to one of the comments you made on the power probe card design win for SIC and just talk about how you won that business and what the opportunity for the revenue stream there is this year and next year or what we should expect?

[Luis Müller, President, CEO & Board Member at Cohu]

Sure, sure. We have introduced this product in second half of twenty four. It's really aimed at very high voltage testing at probe where you have the risk of creating an arc between probe tips. And so we have sort of a unique technology, patent technology on how to enable multi site testing of high voltage die applications, which in this case is silicon carbide. We had a qualification win, I believe it was at the end of twenty twenty four.

[Luis Müller, President, CEO & Board Member at Cohu]

This is our second customer win and there's a third customer that we have right behind this that we're working on at this time. Let me check here on your second part of your question. I think we're looking at this application having on this customer win that we had here, opportunity is about a $2,000,000 a year opportunity. How much is that gonna happen this year? Just given timing, qualification, production ramp, I would say definitely a fraction of the 2,000,000 on this one customer.

[Luis Müller, President, CEO & Board Member at Cohu]

But that's about the size on a per customer base. The other customer that we won, the one that we're working in, they're about similar sizes. So it's sort of a 2,000,000 a dollar a year per customer give or take opportunity.

[David Duley, Managing Principal at Steelhead Securities]

Okay. And then finally for me is one of your other prepared remarks about winning some handler business in China. Could you elaborate what that represents and is that market share wins or how would you describe this and look at the application? Thanks.

[Luis Müller, President, CEO & Board Member at Cohu]

Sure. Yeah, it's a fabulous customer in China in the automotive space. They're outsourcing it obviously to test house also in China. We have over time actually capture, a small number of startup fabless companies in China. This is viewed as small at this time, but if I extract and I go beyond this particular customer, the collection of all design wins I talked about for Q1, we tally it as a $6,500,000 of orders that we got, that we expect to ship throughout this year, with a potential total revenue of $18,000,000 a year.

[Luis Müller, President, CEO & Board Member at Cohu]

That's estimated obviously, that's not in hand PO, the in hand POs are the 6,500,000.0 And that's the collection of all design wins. This is not the China specific customer that you have asked.

[David Duley, Managing Principal at Steelhead Securities]

All right, thank you.

[Operator]

Our next question comes from Craig Ellis with B. Riley Securities.

[Craig Ellis, Director of Research at B Riley Financial]

Yes. Thanks for taking the question. Guys, congratulations on seeing the nisub turn in recurring orders. Louise, I was hoping we could just spend a little time looking beyond 2Q and what is a nice guidance to your point, the first in a long time that's up year on year. As you talk to your customers across your different end markets on both the systems and the recurring side of the business, how are they thinking about their needs for systems and recurring products in the back half of the calendar year?

[Craig Ellis, Director of Research at B Riley Financial]

Are they thinking that we'll need to see a step up in system deployment as we go into 3Q and recurring in 4Q with a more seasonal 4Q off of that? Or what kind of indication are they giving you? And what are they telling you to get ready for in your production facilities beyond the current 2Q?

[Luis Müller, President, CEO & Board Member at Cohu]

Yeah, great question, Craig. I'd say two things. First of all, and I said this in my prepared remarks, we started the second quarter with a positive momentum. We have seen really a pickup in interest in systems, in our systems and system orders. With that said, I think we're all in this space a little cautious right now in trying to understand, look, we haven't really seen any meaningful change in customer buying pattern due to tariffs.

[Luis Müller, President, CEO & Board Member at Cohu]

With that said, I think we're cautious and we want to remain cautious and not get ahead of ourselves. So we're not going to say a ton about third quarter and beyond other than to say, we still expect this to be a year over year growth year for Cohu. And at this point, we feel that consensus estimates for us are in a good place for the second half of the year and we're going to leave it at that until we gain more visibility into what's happening.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

I might also add that, our lead times for our systems are still, except for the exception of a couple of specific configurations, are within a quarter. And so customers generally aren't showing their hand more or less, more than one quarter at a time here.

[Craig Ellis, Director of Research at B Riley Financial]

That's helpful, guys. And then the follow-up question goes back to the point you made about monitoring industry utilization, Louise. And I won't ask you for numbers, but what I would appreciate better understanding is when you look at the system that was in place that you had, what did you think that was missing? What are you trying to fix And what are you trying to get to in the future? Just help us understand the to and from without all the numbers in between.

[Luis Müller, President, CEO & Board Member at Cohu]

Okay. And I'll give you a couple more data points here, Craig. So as I said, utilization closed the quarter at about 72%. IDMs were about 70% and OSATs about 73%. What we're trying to refine is the distribution of utilization now down to auto and industrial, computing, mobile, consumer applications.

[Luis Müller, President, CEO & Board Member at Cohu]

We have a methodology to do it. I think it's a little coarse and we intend to refine it. We have the means to refine that a little bit better. I don't know how that's going to be comparable to the prior methodology. We ran that through yet entirely.

[Luis Müller, President, CEO & Board Member at Cohu]

So I'm avoiding breaking down utilization by end market at this time until we get a better handle on the new methodology. But that's not going to affect the total utilization nor utilization by IDMs and OSATs. I'm comfortable stating that as it is at the end of Q1, and we'll see where that is at the end of Q2. Those are going to be comparable quarter over quarter still.

[Craig Ellis, Director of Research at B Riley Financial]

That's helpful. And then if I could sneak in one more before I go back in the queue. It sounds like the Tingdus acquisition is integrating well and that's on track with your expectations. Louise, anything else you'd like to say about that and how we should think about the coming next couple of quarters and then what might be possible for that business in 2026? Thank you.

[Luis Müller, President, CEO & Board Member at Cohu]

Sure. Yes, I mean, so far only one quarter or less than a quarter behind us, right? We basically have, I think ten or eleven weeks of integration at the quarter end, because we closed it at mid January. Yes, it's pretty interesting to see the level of interest from our customers. That business was not necessarily focused on the back end.

[Luis Müller, President, CEO & Board Member at Cohu]

So what they booked in the first quarter was still things that were in play at the time of the acquisition, so to speak, a front end company, a material supplier to semiconductor manufacturing and a research group within the U. S. Military. But at the same time, in the last quarter, there has been a flurry of requests for meetings all over the globe here. So people have been traveling and holding up interactions with customers in various countries.

[Luis Müller, President, CEO & Board Member at Cohu]

The activity levels picked up a lot and we got to be careful now how much we buy all at once. What you expect for 2026? Well, if this momentum continues, I'm pretty excited about it, but we don't have a number to say. We have to take these activities down to paper plans, specifics, business plans by customer, and then see what we're going to embrace to create numbers that we can tag in more precisely for 2026. So, don't want to get ahead of myself, but it is pretty exciting.

[Craig Ellis, Director of Research at B Riley Financial]

Do you think it would be at that point when we talk again at the July or early August, Luis, or would it take longer than that?

[Luis Müller, President, CEO & Board Member at Cohu]

I would give it about another six months, Craig. I'm expecting more towards the Q3 earnings timeframe to be discussing numbers for software.

[Craig Ellis, Director of Research at B Riley Financial]

Okay. So maybe around some of the con West. Okay. Thank you very much guys.

[Luis Müller, President, CEO & Board Member at Cohu]

You're welcome.

[Operator]

Our next question comes from Charles Hsieh with Needham.

[Charles Shi, Senior Analyst at Needham & Company]

Hey, good afternoon, Louis, Jeff. I want to go back to the recurring order, the pickup. Sounds like it's predominantly mobile and fairly concentrated to a small number of customers. Why don't I ask you how do you think about the sustainability of the recurring revenue or order going from here? And let's say, going going another few quarters because if I think if if this is working a normal environment, we would definitely look at this as possibly a leading indicator of a very, very, very positive, maybe cyclical recovery for at least the mobile segment, but we're not quite in kind of environment right now.

[Charles Shi, Senior Analyst at Needham & Company]

There has been lots of debate on whether the demand is real or is it the tariff related pull ins. I know for you guys as equipment supplier multiple degrees away from end market that's probably harder for you guys to really find evidence one way or the other, but I want to get your thoughts on how do you think about the sustainability and what this actually means and maybe more at more macro level, what do you think this mobile customer is trying

[Charles Shi, Senior Analyst at Needham & Company]

to do here? Thank you.

[Luis Müller, President, CEO & Board Member at Cohu]

Okay. Well, answers or multiple questions here, Charles. The sustainability, right?

[Luis Müller, President, CEO & Board Member at Cohu]

In mobile, what I would expect here to happen is once we ship these recurring orders that we would see a pickup in mobile market utilization quarter over quarter. That's my expectation. Following that, I would expect an increasing system orders in mobile that would probably translate into revenue here in the coming quarters, say Q3 and beyond. That would be sort of a trend of sustainability in the mobile market. And I feel like that's actually quite doable.

[Luis Müller, President, CEO & Board Member at Cohu]

If you talk recurring more broadly, we would have to see the same happen across auto, industrial, consumer segments to be able to speak to the same trend. I don't see that quite yet, Charles. I see it more in mobile and we have been talking here for the last couple of quarters that we would expect mobile to be the leading market for us and the general volume market, followed by industrial, and then later on followed by automotive. Still believe that that's the sequence and what we're seeing right now is in mobile. As far as tariff pull in, your question about tariff pull in, I really don't believe this is a tariff pull in because if you just look at the window of time that everybody has against the current exemptions and tariff rates to supposedly change back up again to a higher level, and the timing of shipments of these recurring, I have a hard time believing that they can actually make any meaningful change until sort of mid summer time.

[Charles Shi, Senior Analyst at Needham & Company]

Got it. So it sounds like for other verticals you have auto industrial consumer computing, similar behavior hasn't really been seen by you guys so far. So, maybe let me ask another from the other way. For the remainder of the year, I mean, you kind of gave some color about the Q2, that the incremental dollar revenue dollar half of that is from system, half of that is from recurring. Sounds like you're holding maybe shift the mix of recurring will come down slightly, mix of system come up slightly, for the remainder of the year, what's your best guess based on the trend right now?

[Charles Shi, Senior Analyst at Needham & Company]

Where the system versus recurring revenue as a percentage of the mix could be as we go into the second half of the year? Thank you.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

At this point, hard to tell. But as we go into the second half of the year, it's likely to be close to the sixtyforty relationship, where it's not too far from that today, 63%, thirty seven %, sixty three % being recurring. So it's probably going to maintain somewhere close to that sixtyforty, give or take a couple of hundred basis points.

[Charles Shi, Senior Analyst at Needham & Company]

Thanks, Jeff.

[Operator]

Our next question comes from Robert Merton with TD Cowen.

[Robert Mertens, Equity Research Associate at Cowen and Company]

Hi, this is Robert Mertens on for Chris Einkhart. Thanks for taking my questions. I guess the first one that I don't want to get too hung up on it because we've touched upon it, but in terms of test cell utilization rates, do you typically see different order patterns between OSATs and IDM customers from a test cell utilization perspective? Does one see their uptick in demand earlier in the cycle? Or is it sort of based on these end markets that you're exploring and we'll provide more information next quarter?

[Luis Müller, President, CEO & Board Member at Cohu]

Hi, Robert. No, uptick in buying is usually dictated by utilization regardless if you're an OSAT or IDM. Nevertheless, through different cycles of the industry, we've noticed that the OSATs tend to drop utilization, start the down cycle, but they also tend to start the up cycle. That's sort of the general observable trend of past cycles. The OSATs tend to lead, and that's more because of the end market exposure that fabless companies are leveraging the OSATs versus the more traditional industrial automotives that have their own factories, and tend to be the segments that lag both in a recovery as well as in a downside.

[Robert Mertens, Equity Research Associate at Cowen and Company]

Okay. Got it. That's helpful. And then automotive was up substantially in the March after maybe a year or so of digestion. Just how should we think about the turnaround in that market?

[Robert Mertens, Equity Research Associate at Cowen and Company]

Are you expecting similar strength to continue into the June or really need to see, mobility turnaround and then auto might trail after that?

[Luis Müller, President, CEO & Board Member at Cohu]

Yes, there's no hard set rule that mobile has to go first and then somebody second, somebody third. That's not a hard fast rule, but I still expect that should be the case here, where auto is going to trail. If you look at our customers, the large automotive semiconductor manufacturers, their earnings release, some have called the trough as Q3 of twenty four, others just called the trough as being this past quarter, Q1 of twenty five. So there is a general theme here that they're calling somewhere between the last three quarters, the trough of the cycle. So I would expect utilization to start creeping up, recurring orders should start picking up as well.

[Luis Müller, President, CEO & Board Member at Cohu]

The question is at what pace, right? Inventory levels have corrected, although some customers have had an increase to quarter over quarter in Q1 and talking about keeping that flat going over to the next quarter. So I think the auto space has turned the corner, but I don't know yet at what pace is going to recover. And I would bet at this moment, slowly for now. So that's our expectation at least for the next quarter or two.

[Robert Mertens, Equity Research Associate at Cowen and Company]

Okay, got it. Thank you. That's helpful. Appreciate it.

[Operator]

Our next question comes from Christian Schwab with Craig Hallum.

[Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC]

Hey, this is Tyler Brummestad on behalf of Christian. Thanks for letting us ask a couple of questions here. Maybe first on the restructuring, it looks like after restructuring, we're kind of to a breakeven on a quarterly revenue run rate in the low $100,000,000 I guess the way you think about that at these sort of levels as we see recovery over time, what kind of revenue levels can these sort of expense levels now support in a recovery situation?

[Jeffrey Jones, VP, Finance & CFO at Cohu]

So from an op you're asking from an OpEx standpoint, Tyler?

[Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC]

Yes, yes, essentially from an OpEx standpoint.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Yes. So after we see full benefit of the restructuring and if revenue is at this $100,000,000 level, we'd expect OpEx to be around $47,000,000 And then as that revenue grows and let's just call out $130,000,000 a quarter, we'd expect OpEx to be about $49,000,000

[Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC]

Okay. All right, understood. And maybe a little bit of housekeeping on the model, Jeff. On taxes, the benefit in the quarter, I guess, little more color what that was exactly? And then maybe level set us going forward, you said $1,600,000 in Q2.

[Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC]

Is that what we should kind of be thinking about as kind of a fixed run rate until we see revenue and profitability accelerate from here?

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Yes. So in first quarter, we did have a non GAAP tax benefit. We had a tax loss and we did have a tax benefit of $3,600,000 So based on revenue and the guidance, Q2 was looking like a small profit. But our effective tax rate is high at this sort of breakeven level, if you will. The effective tax rate was a little bit wacky.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

So the rate becomes in the 90% range of pre tax book, pre tax income. So I would carry that 90% into the second half as well. I'll give a guidance update, obviously on the next call, but that's what I would run with for now.

[Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC]

Perfect. Very helpful. And then last one maybe on capital allocation. Cash did come down in the quarter, but still at a pretty substantial level here, guess. Are we still potentially looking at other kind of strategic tuck in M and A opportunities out there?

[Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC]

Any thought about an accelerated buyback or raising that given the level of the stock price down here? Any commentary on capital allocation would be great. Thanks.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Yes, you bet. Sure. Yes, the review of the acquisition funnel is sort of within our blood. It's part of our normal process. That process continues.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

From a buyback standpoint, our stated goal for 2025 was to offset dilution from our equity compensation plans. We were able to do that in the first quarter with the buyback of 432,000 shares. So at least for now, it's a pause on buyback that obviously could change at a moment's notice. For now, for Q2 anyway, the posture is pause on the buyback.

[Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC]

Sounds good. That's all for us. Thanks guys.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Thanks Tyler.

[Operator]

That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Thank you. And before we sign off, I'd like to note that we'll be attending the following investor conferences over the next two months. And those conferences are the B. Riley Securities Institutional Investor Conference on May 21 in Los Angeles, the T. D.

[Jeffrey Jones, VP, Finance & CFO at Cohu]

Cowan TMT Conference on May 28 in New York City, the Stifel Cross Sector Conference on June 3 in Boston, and the Baird Consumer and Technology Conference on June 4 in New York City. So if you plan on attending any of these conferences, please reach out to your conference contacts or let me know and we'll arrange for an in person one on one meeting. That's all for today. Thank you again for joining the call, and we look forward to speaking with you soon.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Jeffrey Jones, VP, Finance & CFO
• Luis Müller, President, CEO & Board Member

Analysts

• Brian Chin, Director at Stifel Financial Corp
• David Duley, Managing Principal at Steelhead Securities
• Craig Ellis, Director of Research at B Riley Financial
• Charles Shi, Senior Analyst at Needham & Company
• Robert Mertens, Equity Research Associate at Cowen and Company
• Tyler Burmeister, Equity Research Analyst at Craig-Hallum Capital Group LLC