COHU — Cohu, Inc.

Cohu Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Revenue: Q1 2026 revenue was $125.1 million, exceeding the midpoint of guidance.
• Recurring Revenue: Represented 60% of total revenue, driven mainly by consumables.
• Gross Margin: Reported at 46.5%, above guidance due to a favorable revenue mix.
• Operating Expenses: Increased to $55 million, higher than expected due to scaling resources for high-performance computing (HPC) opportunities.
• Net Interest Income: Approximately $2.1 million.
• Cash and Investments: Increased by $5 million to $489 million; cash from operations was $10 million.
• Total Debt: Stood at $305 million, primarily from a convertible debt offering.
• Capital Expenditures: Approximately $2 million, targeting 2% of revenue for the year.

2. Strategic Updates and Business Highlights:

• Order Growth: Orders increased by 57% year-over-year, with significant contributions from AI and HPC applications.
• Market Opportunities: Cohu identified a $750 million opportunity pipeline in the computing segment, with $650 million in test handlers and $100 million in HBM inspection.
• Customer Engagement: Strong traction with 12 customers, with 5 in qualification and 7 in early engagement stages.
• Software Growth: Annual recurring revenue from software subscriptions reached $1.2 million, with expectations for significant growth.
• Product Wins: Major orders secured in test handlers and inspection systems, particularly for AI data center applications.

3. Forward Guidance and Outlook:

• Q2 2026 Revenue Guidance: Expected to increase by 15% sequentially and 34% year-over-year to approximately $144 million.
• Full Year 2026 Revenue Outlook: Increased to a growth rate of 20% to 25% over the previous year.
• Gross Margin Projection: Anticipated to be around 44% for Q2 and mid-40% range for the full year.
• Operating Expenses: Expected to decrease slightly to about $53 million in Q2, remaining in the low $50 million range for the rest of the year.

4. Bad News, Challenges, or Points of Concern:

• Operating Expenses: Higher than anticipated due to increased investments in resources and design materials for HPC.
• Gross Margin Pressure: Expected decline in gross margins due to initial costs associated with ramping up the Eclipse supply chain and production.
• Lead Times: Current cycle time for thermal handlers is about 14 weeks, which could affect revenue recognition based on backlog size.
• Market Volatility: Potential risks associated with fluctuating demand and supply chain challenges in the semiconductor industry.

5. Notable Q&A Insights:

• HPC Revenue Breakdown: Approximately $30 million of the $100 million HPC revenue forecast for 2026 is expected from Eclipse handlers, with the remainder from other testers and handlers.
• Customer Demand: Increased demand for various processors (CPUs, GPUs, etc.) is noted, with a shift towards broader customer engagement beyond a singular focus on GPUs.
• Software Opportunities: The attachment rate for software subscriptions is low, indicating significant growth potential as Cohu expands its software offerings.
• M&A Strategy: Cohu is actively looking for acquisition opportunities, particularly in recurring revenue streams, but is cautious due to high valuations in the current market.
• Future Growth: Cohu anticipates continued growth in 2027, driven by ongoing customer qualifications and increased test utilization rates.

This summary encapsulates the key points from Cohu's Q1 2026 earnings call, highlighting both the positive momentum and the challenges the company faces moving forward.