COHU — Cohu, Inc.

Cohu, Inc. Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Q4 Revenue: $122 million, up 30% year-over-year, aligning with guidance.
• Recurring Revenue: 60% of total revenue, grew 4% quarter-over-quarter and 25% year-over-year.
• Full-Year Revenue: $453 million, a 13% increase year-over-year.
• Gross Margin: 40.8% for Q4, lower than guidance due to one-time inventory charges related to product line discontinuation.
• Operating Expenses: $49.8 million, in line with guidance.
• Net Interest Income: Approximately $1.9 million for Q4.
• Cash and Investments: Increased to $484 million, largely due to convertible debt proceeds.
• Total Debt: $305 million, primarily from the Q4 convertible debt offering.

2. Strategic Updates and Business Highlights

• Recurring Business Strength: Represented about 60% of total revenue, indicating strong customer reliance.
• Order Growth: Recurring bookings rose 34% sequentially; systems demand increased by 47% quarter-over-quarter, driven by major global customers.
• Customer Diversification: Ten customers accounted for 63% of Q4 bookings, reflecting healthy diversification.
• Design Wins: Secured multiple key wins in high-performance computing, automotive, and AI applications, including a significant order for a new handler targeting automotive ADAS.

3. Forward Guidance and Outlook

• Q1 2026 Revenue Guidance: Expected to be approximately $122 million, plus or minus $7 million, with recurring revenue projected to remain at 60%.
• Gross Margin Projection: Expected to return to corporate average of approximately 45% in Q1.
• 2026 Capital Expenditures: Targeted at about 2% of revenue, focusing on R&D investments for design wins in AI and HBM memory.
• Overall Outlook: Anticipating continued growth in 2026, supported by strong order momentum and improving customer engagement.

4. Bad News, Challenges, or Points of Concern

• Gross Margin Decline: Q4 gross margin was impacted by one-time charges, raising concerns about cost management and product line efficiency.
• Inventory Charges: The one-time inventory charges contributed significantly to the lower gross margin, indicating potential operational challenges.
• Tax Provision Increase: Higher than expected tax reserves could impact future cash flow, although it does not affect the expected benefit from tax assets.

5. Notable Q&A Insights

• Order Conversion: Approximately 70% of guided revenue for Q1 is already in backlog, indicating strong order conversion into revenue.
• High Bandwidth Memory (HBM) Revenue: Exited 2025 with $11 million in HBM revenue, with expectations of $15 to $20 million in 2026.
• Eclipse Handler Demand: Anticipated ramp in Eclipse handler shipments, particularly in the second half of 2026, with sufficient capacity to meet demand.
• Customer Activity Trends: Notable increase in customer engagement and order momentum, particularly in automotive and industrial sectors, suggesting a positive market recovery.

Overall, Cohu, Inc. demonstrated strong financial performance in Q4 2025, with a solid outlook for 2026 despite some operational challenges impacting margins. The company is well-positioned to capitalize on growth opportunities in high-performance computing and automotive sectors.