COHU earnings call analysis

NASDAQ:COHU Q1 2026 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Call Operator: Good day and thank you for standing by. Welcome to CoHUE's first quarter 2026 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Jeff Jones, Chief Financial Officer.

Please go ahead. Jeff Jones | Chief Financial Officer

Good afternoon and welcome to our conference call discussing CoHUE's first quarter 2026 financial results and our outlook for the second quarter of 2026. I'm joined today by Luis Mueller, CoHUE's President and CEO, and Matt Hutton, CoHUE's VP of Strategy and Investor Relations. If you need a copy of our earnings release, it can be found on our website at cohue.com or by contacting Cohue Investor Relations. A slide presentation accompanying today's call is also available in the Investor Relations section of the website. Replays of this call will be accessible via the same page after the conclusion of the call. During this call, we will be making forward-looking statements that reflect management's current expectations concerning Cohue's future business. These statements are based on information available to us at this time, but they are subject to rapid and sometimes abrupt changes. We encourage everyone to review the forward-looking statement section of our slide presentation and the earnings release, as well as co-use filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments are current as of today, April 30th, and COHU does not assume any obligation to update these statements for events occurring after this call. Additionally, we will discuss certain non-GAAP financial measures during this call. Please refer to our earnings release and slide presentation for the reconciliation 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 Mueller | President and CEO

Good day, everyone. Thank you for joining our Q1 2026 earnings call. We started the year with strong momentum across multiple product lines with orders up 57% year-over-year, reflecting both improved semiconductor market conditions and the increasing relevance of our technology portfolio across AI and high-performance compute applications. An important driver of this momentum is the expansion of AI workloads and inference processing, driving greater computing power density that has become a primary bottleneck. AI accelerators and HPC processors generate immense amounts of heat during operation. Testing these chips requires maintaining precise temperature environments to ensure functional accuracy and long-term reliability. If a chip is tested at the wrong temperature, its performance metrics may be skewed, leading to lower yields or worse, latent field failures. As a result, Cohue's proprietary and industry-leading thermal capabilities are highly valued by customers. Based on current engagements and design activity, we now see a computing segment opportunity pipeline of approximately $750 million. including roughly $650 million in test handlers and an additional $100 million from HBM inspection, and both growing at rapid rates. For fiscal 2026, we're now increasing our high-performance computing revenue outlook to approximately $80 to $100 million. We're emboldened by the opportunity pipeline across 12 customers with five customers in qualification stage and another seven in early engagement stage. During the first quarter, we continue to benefit from rising device complexity, higher power density, and accelerating AI adoption, trends that are reshaping tasks, inspection, and manufacturing requirements across the semiconductor value chain. In fact, semiconductor value is moving to the mid- and the back-end manufacturing driving substantial growth in the test arena. Estimated semiconductor test serialization also increased sequentially to 78% at the end of the first quarter. Automotive and industrial markets are gradually improving again as customers started investing in test capital. Many of our customers are broadening their product portfolio to serve AI data centers as these transition to 800-volt DC infrastructure And more power management efficient solutions with gallium nitride technology at rack-scale server boards such as the new Vera Rubin platform. Across each of these applications, our customers are prioritizing quality, performance, and scalability. At the same time, software platform gained traction as analytics moved from pilot deployments into broader production environments. These wins validate both the technical performance of our solution and the growing appetite for software-enabled yield and productivity investments. There's a significant SIEM opportunity for Cohue in this space and a significant lifetime value in software subscription. This is illustrated well in the first quarter, when a $20 million system order came together with $330,000 a year of software subscription, which over the course of the lifetime of these systems could yield approximately $5 million in recurring revenue. The financial implication of this shift is twofold. First, software subscriptions provide high margin, recurring revenue that is less susceptible to capex cycles. Second, by improving overall equipment efficiency and reducing mean time to repair for customers, we build deep operational stickiness that makes it difficult for competitors to displace our systems. I would now like to highlight a few customer wins in the first quarter. Starting with our test handler business, we've orders up 54% year over year. We secured two major Eclipse orders in the first quarter. The first win supports AI data center applications with a US Fabless customer developing server and inference devices. As power density and mechanical complexity increase, Eclipse, combined with our T-Core active thermal control, enables the customer to standardize on a common handler platform across multiple device generations. This reduces capital risk while extending the life and value of the installed base. Closed-loop junction temperature control was a key differentiator, ensuring consistent temperature test quality, higher yields, and faster production ramps. In addition, the customer is adopting CoHue-based prescriptive analytics software to improve equipment efficiency, increasing system value, enabling recurrent revenue for CoHue, and strengthening long-term engagement. Strategically, this win deepens our computing footprint, embeds Eclipse into the customer's roadmap, and positions us as the platform of record, representing an estimated $100 million incremental revenue opportunity at this account over the next three years. The second order supports data center computing, mobile, and automotive processors at another EUS-based Fabless customer using the Eclipse platform. Our solution allows both the customer and their OSATs to address multiple markets while leveraging T-Core thermal control to maximize yield and asset utilization. Together, these strengthen our engagement across high-performance computing and AI markets, driving near-term system revenue and long-term platform, software, and recurring value growth. Our customer engagement for Eclipse expanded in the first quarter, with an additional five customers in different stages of qualification, representing an incremental $200 million of revenue opportunity starting late this year and into next year. We're very bullish about the customer traction and the growing opportunities to expand our presence in this $750 million high-performance computing market. These opportunities are rapidly taking shape as compute power increases and with the need to actively manage silicon junction temperature at higher power and power densities. Now turning to our inspection and metrology business with orders up 64% year over year. In HBM memory, we continue to see strong momentum for final inspection of HBM3 and HBM4. We're investing in this market and keeping pace with design requirements to support next-generation HBM5. We're now forecasting revenue growing 80% year-over-year to approximately $20 million with our Neon HBM platform. In the first quarter, we also secured a a significant volume repeat order for our Eon inspection system from a U.S. headquarter and also from a Korean customer. Our inspection business is growing fast, and we estimate revenue at approximately $70 million this year. Semiconductor test orders recorded an impressive 163% increase year over year. Headlines around AI infrastructure typically focus on the massive compute devices required to train and run large language models, along with the memory and networking technologies that enable scale across the data center. Less visible, but equally critical, is power delivery. Every AI system depends on precise, efficient power management to sustain peak performance. This is where the DiamondX precision instrumentation becomes decisive. Our tester was qualified for testing power devices, strategically expanding our footprint in AI-related applications, and embedding it more deeply into our customers' roadmaps. As power density increases, customers are implementing GAN-based technology to minimize energy loss and thermal impact. While GAN offers a clean efficiency advantage, it remains less mature than traditional CMOS, creating technical and economic challenges as customers scale production to meet data center demand. Moving to our interface solutions group, We've seen increased adoption of our higher current contactors for AI power applications at existing customers. We also expanded our product offering and received multi-unit order for a new silicon photonics solution. These photonics switches form the backbone of cloud and AI Ethernet fabric, and we're now testing them. In closing, Q1 was a strong start for the year and a clear validation of our strategy. We see momentum rapidly build across AI infrastructure, high-performance compute, power management, and smart manufacturing, driven by rising device complexity and increasing power density. Our expanding presence in thermal handling, advanced inspection, precision test, and high-value software is translating into larger platform wins, recurrent revenue opportunities, and deeper customer engagement. With a $750 million computing segment opportunity in front of us and improving utilization across our core markets, we are accelerating R&D investments to capture new customers, and we are expanding production capacity to move confidently through the remainder of this year and into 2027. These secular tailwinds, combined with disciplined execution and continued investment in innovation, position Cohute to deliver durable value for our customers and shareholders. Thank you for your continued support. I will now turn the call over to Jeff for a deeper review of our financial results and forward-looking guidance. Jeff?

Jeff Jones | Chief Financial Officer

Thank you, Luis. Before reviewing the first quarter results and providing second quarter guidance, please note that my comments refer to non-GAAP figures. Details about non-GAAP financial measures, including GAAP to non-GAAP reconciliations and other disclosures, are included in the earnings release and investor presentation on our website. For Q1, 2026, revenue exceeded midpoint of guidance at 125.1 million. Recurring revenue driven primarily by consumables and typically more stable than systems revenue represented 60% of total revenue. No customer accounted for more than 10% of total sales during the quarter. Gross margin was 46.5% above guidance, primarily reflecting a more favorable mix as recurring revenue exceeded our forecast. Operating expenses were higher than guidance at 55 million, reflecting our decision to scale resources to support the rapid increase in high performance compute opportunities. This included accelerated spending on design materials as well as incremental engineering and field support to fulfill production orders and complete new opportunity qualifications. Net interest income after interest expense and a small foreign currency loss was approximately 2.1 million. The Q1 tax provision was lower than guidance at $4.8 million. Now moving to the balance sheet. Cash and investments increased approximately $5 million during Q1 to $489 million, and cash from operations was $10 million. No stock repurchases were completed during the quarter. Total debt is $305 million and includes $288 million from the Q4 2025 convertible debt offering. Capital expenditures were approximately $2 million, mainly for facility improvements and IT equipment. We're targeting total capital expenditures to be about 2% of revenue in 2026. Looking ahead, we expect Q2 revenue to increase 15% sequentially and 34% year-over-year to approximately $144 million plus or minus $7 million. The increase is driven by demand tied to the ramp and high-performance compute opportunities and continued recovery in automotive and industrial segments. We're increasing our full-year 2026 revenue outlook for growth over last year of 20% to 25%. Q2 gross margin is projected to be approximately 44%, For the full year, 2026, we project gross margin in the mid 40% range as we ramp our supply chain and production capacity to support the rapid business expansion in high performance computing customers. Operating expenses are expected to be lower than Q1 at about 53 million. We intend to continue investing in resources to capitalize on the growing list of HPC opportunities and we expect quarterly operating expenses through the balance of the year to remain in the low 50 million range consistent with our Q2 guidance. Net interest income in Q2 after interest expense and foreign currency impacts is projected to be approximately 2 million at current interest rates. The Q2 tax provision is expected to be about 5.3 million and diluted shares are projected to be approximately $52.6 million, including 4.2 million shares attributable to the convertible debt. And of that amount, 3.3 million shares will be fully offset by the capped call, but are required for U.S. GAAP diluted EPS calculations. In summary, our operational focus for 2026 is to support R&D investments and production ramp needed to secure multiple design wins in the compute market, including AI data center infrastructure, HBM memory, and physical AI applications, while progressively increasing free cash flow generation. That concludes our prepared remarks, and now we'll open the call to questions.

Operator | Conference Call Operator

As a reminder, if you'd like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from Brian Chin with Stifel.

Brian Chin | Analyst, Stifel

Hi there. Good afternoon. Thanks for letting us ask a few questions. So, a lot here, but in a good way. Maybe firstly, breaking down the guidance for 2Q, 15% Q1Q growth. Can you maybe give us a sense how much of that is the ramping new HPC customer business versus maybe ramp in the broader base business, if that makes sense? And also tied to that, of the maybe $100 million, if you were to sign up no more new customers through the end of the year, of that $100 million, how much of that still remains to be revenue through the second half?

Jeff Jones | Chief Financial Officer

Yeah, so at least on your first point here, Brian, the quarter over quarter increase in HPC systems revenue was about 10 million. So it's just under half of our increase quarter over quarter. And that puts us then for HPC at least systems revenue, in the first half of 2026 at roughly about $30 million.

Luis Mueller | President and CEO

I think that pretty much answers the second part of the question of what's left for the second half right there.

Brian Chin | Analyst, Stifel

Exactly. I can do that math. Thank you. Okay, that's helpful. And in terms of the – how are you thinking about – and this maybe could mature over time around higher volume, but how should we think about the – system margin contribution, gross margin relative to the overall blended average company?

Jeff Jones | Chief Financial Officer

Yeah, what we saw in Q1 was a gross margin split of roughly 50% on recurring, roughly 40% on systems.

Unidentified Speaker

So I think we're going to hold that for Jeff Jones | Chief Financial Officer: the balance of the year, the system's revenue percentage will increase. Well, the system's revenue is going to increase faster than the recurring. And so that is why we see the 46.5 gross margin in Q2 hitting a little bit of a headwind in the second half. And so we think we're going to end the year somewhere in the mid 40% gross margin.

Brian Chin | Analyst, Stifel

Okay, great. And then maybe one other question. You talked about sort of this pipeline where you have three customers. Was that 100 million kind of the aggregation of this year, or is that over a multi-year horizon?

Luis Mueller | President and CEO

No, the qualified 100 million is sort of this year's spend from these customers. Now, we're... Like I said, we're probably going to be getting a portion of that this year, not the entirety of it this year.

Brian Chin | Analyst, Stifel

Like an annualized sort of potential?

Unidentified Speaker

Yeah.

Brian Chin | Analyst, Stifel

Luis, with the other five customers, are they kind of equal size within that $150 to $200 million? Or how would you sort of gauge which ones are like, you know, further along or less far along in terms of ones that could be, you know, contributors even to the back end of this year?

Luis Mueller | President and CEO

Yeah, they're not all equal size, Brian. I mean, we got, you know, kind of a 10 to $40 million spread depending on the customer here on an annual basis, the way we see it. We expect to be getting some qualifications completed by early Q3. The question is, do we then have an opportunity to get orders and participate on demand still in 2026. Those are lead times, support that as well or not. And so it's hard to call right now if it's going to end up hitting revenue in Q4, plus obviously revenue recognition as well. You've got to account for accounting rules or if this is going to end up spilling more like early 2027 at this point.

Brian Chin | Analyst, Stifel

Great. And then maybe a a good problem to have here. But in terms of where lead times for sort of the thermal test handler, T-Core, Eclipse, are, where do you think you can kind of keep them this year? And that maybe will also, like you said, inform what the revenue could be this year versus what might have to be captured next year.

Luis Mueller | President and CEO

So we are operating at about 14 weeks. I should say cycle time instead of saying lead time on handlers right now, on our thermal handlers. I think a bit of the challenge is if you get a $30 million order, not all of it's going to ship in 14 weeks, as you can imagine. It's spread over several weeks, several months. And as we start layering additional customers, we are working hard here to open that manufacturing pipeline, both from a supply chain side, meeting regularly now with suppliers and understanding who are the choke points, particularly for our thermal heads, As well as internally, we are hiring resources in Malaysia. We're looking at a relay out of the facility in Malaysia to open up more floor space. So I can tell you 14-week cycle time, but lead time really largely depends on the size of the backlog we have in front of it.

Unidentified Speaker

Great.

Operator | Conference Call Operator

Thanks. Our next question comes from David Dooley with Steelhead Securities.

David Dooley | Analyst, Steelhead Securities

Yes, thanks for taking my questions. Congratulations on nice results, particularly the outlook. I was wondering, you know, as far as your core business goes, you know, all of your customers on the conference calls are really talking about how their AI data center business, you know, are ramping at very rapid growth rates, you know, 50 to 100%. And I get the sense that that kind of fills gaps you know, all of the excess capacity that might have been pointed from those customers at other end markets. And so I guess, are you hearing that from your customers that essentially that their AI businesses have kind of, you know, filled up their utilization rates and they're coming in for more larger volume purchase orders going forward?

Luis Mueller | President and CEO

What I'm seeing more, Dave, is actually a bit of a pivot towards... towards CPU, large CPU demand, ASIC, accelerators. We're seeing also network processing demand. Up until recently, a lot of it seemed to be very focused on a singular or largely a singular customer driving a lot of GPU capacity in the industry. As of maybe a quarter ago, a little bit more than a quarter ago, that seems to be spreading out more broadly here as inference starting to pick up and sort of the realization we need more computing power going along with the GPU power that's being deployed. That's more of what I'm seeing. It's sort of that spread out of demand for different types of processors and network processors inclusive.

David Dooley | Analyst, Steelhead Securities

Okay. That kind of leads me to my next question. You know, I think you used the term XPU, but typically CPUs, GPUs, XPUs, TPUs, whatever you want to call them. Right. Right, of all sorts, all have, you know, high voltages, create a lot of heat. So all of these, you know, in-market customers that you hear about from the custom ASIC guys to the GPU guys to the CPU guys, all of them need some sort of temperature-controlled handling equipment for their processors, correct?

Correct. Luis Mueller | President and CEO

That is correct.

David Dooley | Analyst, Steelhead Securities

And is that the market that you're referring to when you talk about the $750 million TAM? Is that kind of aggregating what most of these customers' thermally controlled temperature handler demand is? Or how do you come up with that $750 million?

Luis Mueller | President and CEO

Yeah, and by the way, we're not calling it necessarily a TAM. We're calling it more like a SAM, to be fair. because we have a pretty defined list of customer and customer device classes that we're tallying up to 750 million. I think if we were to talk about a TAM, it's likely a bigger number, and we're not attempting to gas that, so we're not going there. We're being very targeted here to the list of 15 customers that we have tallied and customer applications that we have tallied up. that comes up to the $750 million. That's what it is. It's a very targeted list. We know what these customers have for buying pattern this year. And that's where we come up with that number. We also understand that some of these customers are ramping. So I guess the expectation is that that SAM itself could be bigger next year. But like I said, we're not trying to guess the TAM, the total available market. We're just guessing here from customer information what we see for their spending this year.

David Dooley | Analyst, Steelhead Securities

Okay. And then final question for me is could you just elaborate a little bit more on the silicon photonics and what exactly the application is you addressed there and, you know, how big a piece of business that could be, let's say, you know, next year, I realize, because we're just starting off now. But maybe just elaborate a little bit more on what you're seeing there.

Thank you. Luis Mueller | President and CEO

Sure. That is really, I would call, a beachhead business at this point. We sold a number of interface, you know, we call it contactors, right, interface products here for silicon photonic application at one of the large accounts. You know, there's really two major drivers in the industry, I think, today and a few others. But these are interface products. So you're talking about sort of $10,000 or so contactors that we sold several off. We are working to provide solutions that include our handler with the contactors, but I'm not going to venture to guess what kind of revenue opportunity for 2027 that is at this point. It's not included, not really included in our $750 million at the moment.

David Dooley | Analyst, Steelhead Securities

Okay, but the point is, you know, you kind of got your foot in the door with the test contactors, and hopefully you can sell them a piece of capital equipment as well. That is correct. That's going to be a big market.

Luis Mueller | President and CEO

That is correct. Thank you, Luis. You're welcome, Dave.

Operator | Conference Call Operator

Our next question comes from Craig Ellis with B.

Reilly Securities. Craig Ellis | Analyst, B. Reilly Securities

Yeah, thanks for taking the question, and congratulations, son. the revenue performance in the quarter and the outlet guys. Luis, I wanted to start off just by understanding the specific drivers to the increase in HPC system revenues this year. It looks like about a $20 million increase at the midpoints of the prior to the new expected range. Can you just detail what's going on inside of that?

Luis Mueller | President and CEO

Yeah, thanks, Greg. Thanks for the question. I think we finished the qualification. We're very successful in the qualification of the Eclipse at one particular account that sort of looked like, okay, we could capture a bigger share of the revenue in 2026. So we qualified, I guess, in time to catch the next round of orders. And that just increased the size of the pipeline for this year.

That's just simply that. Craig Ellis | Analyst, B. Reilly Securities

Okay. And then, nice to see orders up 62% quarter on quarter. Can you help us with some color on where you're seeing that strength? Is there a performance towards OSAP versus IDM? And do you expect to ship all those systems this year in any color on linearity would be helpful?

Luis Mueller | President and CEO

Yeah. When we look at orders here, it's actually roughly, depending on the market segment you pick, it's about 30%, 40% increase year over year. There's one segment in particular that is driving, not surprisingly, given what we're talking about here, it's computing, that it's up about 211% year over year. That's pretty much what's driving the business. Now, I do have to say... The industrial segment is picking up a bit as well. That is also strong, came out pretty decently strong in the first quarter.

Unidentified Speaker

Okay, and regarding shipment timing for all those orders?

Jeff Jones | Chief Financial Officer

Yeah, so I see a ramp in... in Q3 and of course some of that will fall into Q4 as well.

Unidentified Speaker

Got it.

Craig Ellis | Analyst, B. Reilly Securities

And then just going back to the point that the company is making on page seven of the deck where we've got the expanded AI computing pipeline with almost a half a billion in engagement and then 150 million to 200 million in qualification. Can you provide any color how quickly we can move some of that engagement activity into qualification and then through qualification, how much of that is really something that can convert in 2026 versus what you might have your eye on for 2027, guys?

Luis Mueller | President and CEO

I think at this point, Craig, it would be safe to say that we're working to complete the qualification of the about $200 million opportunity in 2026. As I mentioned earlier on a previous question, we'll see if we can get some of that revenue also in 2026, but largely 2027. On the balance here, the remaining $450 million, $500 million, Those engagements are likely to move into QUAL later this year, beginning of 27. I don't expect it to be any sooner than that.

Craig Ellis | Analyst, B. Reilly Securities

Okay. So a way we could look at it would be you have an opportunity to convert a significant amount this year, but the larger percentage would be something that you could convert next year. Is that right, Luis?

Luis Mueller | President and CEO

That is right. That is right. And, you know, a qualification of these things take a good six months time frame. And then from there, production ramp. I do have to point out a little bit here, too. Largely, the recurring portion of this is going to come out, you know, about a year after shipping systems, right? So you got to remember our system ship with about a year's worth warranty. Once that expires, you start getting the spares, the service. These devices typically have 18 months lifetime anyways. Thereafter you start getting new kit orders, you start getting potentially new thermal head orders for upgrades. It's high performance computing, so those thermal heads are very specific to the application. Maybe you can use it across two generations, but the thermal heads themselves eventually you need to replace. You know, within a 12-month time frame, we should start seeing the recurring revenue kicking in. And the recurring revenue, maybe it wasn't really clear on the slide here, is included on that $500 million bucket as well.

Craig Ellis | Analyst, B. Reilly Securities

Okay. So you've got a nice one, too, but with the second punch included in the chart.

Luis Mueller | President and CEO

Yep.

Unidentified Speaker

All right. Thanks, Luis. Thanks, Jack.

Operator | Conference Call Operator

Our next question comes from Robert Mertens with TD Cowan.

Robert Mertens | Analyst, TD Cowan

Hi, this is Robert Mertens on for Christian Sancar. Thanks for taking my questions. So I believe last quarter you had highlighted a Krypton inspection metrology system order for an automotive customer had transitioned into using some positive benefit in your inspection software. and then also mentioning all the additional software opportunities during this March quarter. I'm just trying to wrap my head around how we should think about the potential software opportunities throughout your business if there's a specific platform or area that the software opportunity might be higher.

Luis Mueller | President and CEO

Yeah, sure, Rob. The software right now is very much going – kind of hand-in-hand with our sort of test handlers and inspection systems. So basically the automation pieces, okay? We have an element of software we call PACE inspection, goes in with the inspection platforms. It helps optimize yield of the inspection systems. And then we got a PACE prescriptive that goes along with both test handlers as well as inspection metrology systems that help optimize overall equipment efficiency optimized maintenance, predictability, and output of the factory. If you think about that software base, we are now currently at an ARR, annual recurring revenue here, of about $1.2 million. This is what we have in bookings for annual subscription of software. The attachment rate of that subscription, it's still pretty low. It's really about 1.3% of our systems have a software subscription attached to it. So a low number, so plenty of room to grow. But as I pointed out here in the script, the value of that software is pretty big because if you get it in, like we got here in the example given, $20 million system order, $330,000 of software annual subscription, through the lifetime of that product, that's about a $5 million of recurring revenue we're going to collect through the lifetime of the product at a pretty high margin. So it's still a small piece of the business. It is a growing piece of the business. It's growing fast. I think we're expecting it to be close to $3 million in revenue this year. That's more than 200% growth year over year. But it does carry a really nice lifetime value recurring component to it. that adds to our overall recurring business.

Unidentified Speaker

Got it. Thank you.

That's very helpful. Robert Mertens | Analyst, TD Cowan

And then just, you mentioned some incremental strength in the orders from automotive and industrial markets this quarter. I'm just trying to wonder how you expect that business, the auto handler business to pick up in the back half of the year. And then maybe if I can just squeeze one last one in, if there's any typical seasonality in the RF test business.

Luis Mueller | President and CEO

Okay. So in the first portion, I think, you know, if I refer to how Jeff answered the question of what's driving the incremental quarter over quarter here in Q2, about half of our Q2 increase in revenue is driven by non-compute markets, right? And that is fundamentally industrialized. and to a small degree, auto, but fundamentally industrial. We're seeing that pick up right now. Another interesting data point here, the industrial utilization, test utilization at the end of Q1 was 79%. So it's right there at that capacity by threshold of 80%. Industrial is doing well. It had a good increase in orders quarter over quarter, and about half of the revenue growth quarter over quarter going into Q2. On the RF side to your question, we're also seeing a bit of a pickup on RF tester orders sales in the second quarter. There is typically a seasonality. That seasonality tends to be late year, like Q4 to early Q1 when RF picks up. It's a little late here. We're going into Q2 and seeing a bit of a pickup in RF. Can't completely explain that to you why. And then obviously there are technology transition points that are major drivers in RF, one coming up in the next 18 months or so associated with FR3 or what's commonly known as 6G.

Unidentified Speaker

Thank you.

That's very helpful. Operator | Conference Call Operator

Our next question comes from Christian Schwab with Craig Hallam.

Christian Schwab | Analyst, Craig Hallam & Co.

Great. Thanks for all the guidance and congratulations on giving multi-quarter guidance again. My only question has to do with M&A. Previously, we've talked about acquisitions, particularly possibly in recurring revenue streams that you were looking at and targeting. Can you give us an update on your thoughts on M&A currently?

Matt Hutton | VP of Strategy & Investor Relations

Hi, Christian. Matt Hutton here. Yeah, so, I mean, we continue to look at opportunities, as you can imagine from what Luis and Jeff highlighted. They're mostly opportunities in the reoccurring space, our growth areas. You know, we'll continue to be disciplined, look at buy versus build analysis. and look for opportunities you know unfortunately a lot of the tailwinds that some of these companies are receiving that we're receiving they're also receiving so a lot of valuations remain remain elevated but we'll continue to be disciplined and look at opportunities in our growth areas great and and then louise given you know i know we're moving now multi-quarter guidance here for 26 but Christian Schwab | Analyst, Craig Hallam & Co.: Given all the positive dynamics as well as future orders transitioning to revenue in 27 instead of 26, should we assume if all things remain consistent that you'll grow in 27, your top line, at the same rate that you expect to grow in 26?

Luis Mueller | President and CEO

We certainly expect growth in 27. I mean, we have that in-qualification bucket there of $150 to $200 million that will add to 2027. I'm also pretty encouraged with overall test utilization getting very close to that 80% mark. So all things being equal, yeah, growth in 2027. At what rate? We haven't tried to pencil that in yet, so we're going to reserve another quarter or two before we talk about that.

Christian Schwab | Analyst, Craig Hallam & Co.

Great.

No other questions. Thank you. Operator | Conference Call Operator

Thanks. Our next question comes from Dennis Piacinan with Needham.

Dennis Piacinan | Analyst, Needham

Great. Thank you. So prior, your HPC forecast was about $25 to $30 million for this year, and now you've moved it up to about $100 million. And I think in your presentation, it said that about $30 million of the $100 or so would be eclipsed. So can you tell us about the remaining $50 to $70 million of that? mostly testers? Is that other handlers? Can you kind of break down that remainder, please?

Jeff Jones | Chief Financial Officer

Yeah. Hey, let's back up a little bit. So initially we came out and we said HPC revenue in the $60 to $85 million range for 2026. What we're doing now is increasing that $60 to $85. We're increasing that to $80 to $100 million. Most of that relates to the Eclipse handler. The NEON for HBM inspection, we previously said was 15 to 20. I think we're at the higher end now of that range. And we're, you know, we are, as Luis had mentioned, we're in qualifications or finished qualifications for our testers also participating in some HBC revenue.

Unidentified Speaker

Does that help clarify? Yeah, okay.

Dennis Piacinan | Analyst, Needham

Yes, yes. Thank you. And then, so I think you, so you'd also said that, um, you're now kind of expecting 2026 total revenue to be up 20 to 25%. So, I mean, if I kind of just run rate you at 100 and, you know, 44 million, basically for the rest of the year, you basically get to that number. So, um, and we're basically assuming revenue will be going flat from one 44 through the rest of the year will be, will there be a little bit of a dip in Q3? Is there anything more you can say about kind of the cadence of revenue?

Jeff Jones | Chief Financial Officer

Yeah, the way we see it now, Dennis, you know, we would expect Q3 to be pretty similar to Q2, somewhere in that 144, 145 range. Q4, you know, we could have some seasonality, so a slightly weaker Q4, maybe down single, single mid, single, single, mid single digit, yeah.

Luis Mueller | President and CEO

uh quarter over quarter great that's helpful thank you and then lastly maybe i think you mentioned um you know some further engagements with the the us and korean customers can you tell us more about that please yeah we were talking about inspection metrology business here we we saw um a big increase in orders in inspection metrology in the um in the first quarter in fact Let's see here. I think it's up year over year 64%. We are expecting that business to hit about $70 million in revenue this year. And what's driving that? One is HBM, which we're now guiding to about $20 million in the year. And the other one is just further demand for inspection products from both a US and a Korean customer with large orders in the Q1 time Unidentified Speaker: That's helpful. Thank you.

That's it for me. Operator | Conference Call Operator

Our next question comes from Vedvati Shrotra with Evercore ISI.

Vedvati Shrotra | Analyst, Evercore ISI

Hi. Thanks for taking my question. So I kind of wanted to double-click a little bit on the gross margin piece. So, you know, you have good RAMs on the HPC front in the second half. So, like, would the systems gross margins, like, wouldn't they sort of pick up in second half versus first half?

Jeff Jones | Chief Financial Officer

Yeah, I think that's a good observation, Vee. However, we are having, we are incurring some higher initial costs here to ramp the Eclipse supply chain and production. It's coming out very quickly. It's a new configuration. And so we're having to spend more money, more cost, again, on supply chain and production. I expect those costs to carry through almost probably through this year. So 2027, you know, we will see lower costs, particularly for Eclipse. On top of that, I think similar or in line with other companies, right, there's there's a smaller, there's a small impact from higher energy and freight costs. So, you know, to the tune of about 10 basis points. On top of that, we are also seeing higher cost of memory ICs that we use on our products. You know, it's not a large, huge number, but it's about 10 basis points.

I understand. Vedvati Shrotra | Analyst, Evercore ISI

Are those the drivers for the dip into Q1 gross margins? Is that like the, the, the, Jeff Jones | Chief Financial Officer: know 200 bits of a decline that you have can you maybe characterize what's cost driven what's uh kind of mixed driven uh well yeah it's kind of a combination here it is it is okay uh definitely cost driven as i mentioned for the eclipse platform in terms of supply chain and production um and then you know to a certain extent that also relates to mix right but i'd say i'd say Cost first, mix second.

Vedvati Shrotra | Analyst, Evercore ISI

Understood. Okay. And then in terms of R&D spend, like, how should we think about R&D intensity for the rest of the year? Like, I would assume, like, as you're going after these bigger markets, you know, $750 million in SAM opportunities, essentially what's the right way to think about R&D intensity? I assume it would be higher, but maybe some color there.

Jeff Jones | Chief Financial Officer

Yeah, you bet. So I'm forecasting Q2 will be lower than Q1, but we're going to still be elevated from the model. So we're going to be about $53 million for Q2 operating expense, and that's because we are going to continue to invest in the resources to capitalize on these opportunities that we have in HPC. So I expect that sort of 53 or call it low, you know, low 50 million range to persist through the second half of this year.

Luis Mueller | President and CEO

For OpEx.

Jeff Jones | Chief Financial Officer

For OpEx.

Yes. Vedvati Shrotra | Analyst, Evercore ISI

Okay. And then the last one on the, you know, on the qualifications you have on the pipeline, 150 to 200 million, how, how does that split, you know, or maybe the five customers, like how does that, neon versus eclipse opportunity?

Luis Mueller | President and CEO

These are all eclipse. These are all eclipse thermal handler application to some form or another of a processor device.

Vedvati Shrotra | Analyst, Evercore ISI

Understood. Yeah, that's all the questions I had.

Thank you very much. Unidentified Speaker

Thank you. Thanks, James.

Operator | Conference Call Operator

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

Jeff Jones | Chief Financial Officer

Thank you very much. And before we sign off, I'd like to note that we'll be attending the following investor conferences during Q2, and those conferences are the TD Cowen Conference on May 27th in New York City, Craig Hallam Conference on May 28th in Minneapolis, the Stiefel Conference on June 2nd in Boston, and the Evercore Conference on June 3rd in San Francisco. And if any of you plan on attending these conferences, please reach out to your conference contacts or let us know, and we'll arrange for a one-on-one meeting.

Unidentified Speaker

So thank you for joining today's call. We look forward to speaking with you again very soon.

Operator | Conference Call Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. jsPDF 3.0.3 D:20260606090050-00'00'

NASDAQ:COHU Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good day and thank you for standing by. Welcome to Cohue's fourth quarter 2025 financial results conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Jones, Chief Financial Officer.

Please go ahead. Jeff Jones | Chief Financial Officer

Good afternoon and welcome to our conference call discussing CoHUE's fourth quarter 2025 financial results and our outlook for the first quarter of 2026. I'm joined today by Luis Mueller, CoHUE's President and CEO. If you need a copy of our earnings release, it can be found on our website at cohue.com or by contacting Cohue Investor Relations. A slide presentation accompanying today's call is also available in the Investor Relations section of the website. Replays of this call will be accessible via the same page after the conclusion of the call. During this call, we will be making forward-looking statements that reflect management's current expectations concerning Cohue's future business. These statements are based on the information available to us at this time, but they are subject to rapid and sometimes abrupt changes. We encourage everyone to review the forward-looking statement section of our slide presentation and the earnings release, as well as COHU's filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments are current as of today, February 12, 2026. And COHU does not assume any obligation to update these statements for events occurring after this call. Additionally, we will discuss certain non-GAAP financial measures during this call. Please refer to our earnings release and slide presentation for reconciliation 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 Mueller | President and Chief Executive Officer

Good day, everyone. Thank you for joining our Q425 earnings call. I'm pleased to share our latest results as we close the year and highlight the continued momentum across the business. First off, let's talk about some highlights. Recurring business remained strong, representing about 60% of total revenue in the fourth quarter. Recurring bookings were up 34% sequentially, driven by stronger demand across service contracts, interface solutions, and handler-related spares business. Systems demand increased 47% quarter over quarter, driven by higher equipment orders from major global customers, specifically increased activity from a leading analog and mixed signal semiconductor customer, renewed investment from a top automotive and industrial semiconductor manufacturer, strength from RF and connectivity device customers, and stepped up spending from top-tier fabulous computing and mobile companies. The top 10 customers accounted for approximately 63% of Q4 bookings, a healthy level of diversification for this stage of the cycle. For the full year 2025, orders increased 29% year-over-year. Now let's dive into the detailed results. Fourth quarter revenue of $122 million is up 30% year-over-year and split 40% systems and 60% recurring. Recurring revenue grew 4% quarter-over-quarter and 25% year-over-year. We believe the strong recurring business reflects the value of our install base and customer reliance on Cohue across their production environment. Our recurring model continues to provide stable performance particularly over the past two years of soft equipment demand. Full-year revenue of $453 million is up 13% year-over-year, confirming the trajectory of the market recovery and initial design win successes. We estimate higher test serialization trends from September through December among both OSAT and IDM customers, with revenue improvements most pronounced in markets tied to computing and automotive applications. Estimated test serialization is up a point to 76% at the end of December, with computing segment the strongest at 78% and automotive at 75%. We believe this improved utilization during an otherwise slow seasonal quarter underscores a broader positive market dynamic. While some long-standing customers strengthened their install-based support as utilization levels gradually improved, others have engaged with us on new programs. There's a clear change in customer engagement, reflecting both new program ramps and renewed investment in back-end test infrastructure. Design win activity was strong in Q4 with expansions across automotive ADAS, analog and power devices, compute-related applications, and predictive maintenance use cases. More specifically, we secured a key transition win for Cohue test interface products at a leading analog and mixed signal customer. We closed the first order for a high-performance thermal configuration of the Eclipse Handler supporting a customer's AI device roadmap. We booked a multi-unit order for a new handler still in development targeting automotive and physical AI device test. We'll be shipping an initial qualification system this summer and follow-on units later in the year. We received a new order for HBM inspection at a customer's engineering lab supporting development activity of next-generation memory devices. won the first mixed signal tester order at an analog and connectivity business unit of a large semiconductor manufacturer, broadening the Diamond X tester penetration beyond earlier wins. Wingui secured an order for Krypton Inspection Metrology System for production of automotive ADAS processors. This order continued to demonstrate the success of Krypton, and it included the subscription component for PACE inspection software that uses machine learning to improve yield. We secured booking for tri-temperature handlers across multiple customer sites to support growing power module test demand. Across markets, customers consistently emphasized quality, yield and productivity, and cost of test efficiency, areas where co-use solutions continue to be highly differentiated. As global trade dynamics remain fluid, our low direct exposure to China and strong customer diversification across North America, Europe, and the rest of Asia provide a solid risk balance profile. We remain confident in our ability to navigate regional shifts while staying aligned with customers investing in critical long-term technology transitions. To conclude, Q4 reflected continued market recovery across end markets. With a balanced mix of recurring and system revenue, improving customer engagement, increasing design win traction, expanding AI data center opportunities, and strengthening market signals across several strategic verticals, we entered 2026 with a solid foundation and positive momentum. Thank you for your continued support. I'll now turn the call over to Jeff for a deeper review of our financial results. Jeff?

Jeff Jones | Chief Financial Officer

Thank you, Luis. Before reviewing the fourth quarter results and providing first quarter guidance, please note that my comments refer to non-GAAP figures. Details about non-GAAP financial measures, including GAAP to non-GAAP reconciliations and other disclosures, are included in the earnings release and investor presentation on our website. For Q4 2025, revenue was in line with guidance at $122.2 million. Recurring revenue, which is primarily driven by consumables and is more stable than systems revenue, accounted for 60% of total revenue for the quarter. Revenue for the full year 2025 was $453 million and 13% higher year over year. During the fourth quarter, two customers, one in the mobile segment and one in the automotive segment, each represented more than 10% of our total sales. For the full year 2025, no customer represented more than 10% of our total sales. The Q4 gross margin of 40.8% was lower than guidance due to one-time inventory charges resulting from discontinuing certain product lines and consolidating offerings which better align our engineering and support resources with customer requirements. By streamlining our offerings, we're better positioned to respond quickly to market changes and focusing our resources on high performance computing, HBM memory, and AI related high growth opportunities. Operating expenses for Q4 were in line with guidance at 49.8 million. Net interest income after accounting for interest expense and a small foreign currency loss was approximately 1.9 million for Q4. The Q4 tax provision was higher than guidance due to a $5 million increase in tax reserves against tax assets. The reserves have no impact on the future benefit of the tax assets or cash taxes. Therefore, while the accounting rules require an increase in reserves, this does not change our expectation of using these assets in the future or affect our cash flow. Moving to the balance sheet, cash and investments increased by $286 million during Q4 to $484 million at year end. This was due to the net proceeds from the convertible debt and cash generated by operations. No stock repurchases were completed during Q4. Total debt is $305 million and includes $288 million from the Q4 convertible debt offering. Q4 capital expenditures were $3.4 million, mainly for facility improvements. Capital expenditures for full year 2025 were $21 million, including $9 million for the purchase of our Malaysia factory in Q1. In late Q3, we announced a strategic convertible notes offering. Early in Q4, we completed the upsized offering, raising gross proceeds of $287.5 million at attractive rates, including 1.5% interest rate, 32.5% conversion premium, and a five-year term. We purchased a 100% capped call to limit shareholder dilution until the stock price doubles and exceeds $41 per share. The repayment structure of the notes is net share settlement. meaning COHU will repay the principal of $287.5 million in cash. The banks cover the capped call up to $41 per share. And thereafter, COHU has the option to settle any in-the-money amounts in cash, shares, or a combination of both. This structure limits shareholder dilution. The net proceeds will provide additional liquidity to strengthen our balance sheet and support strategic initiatives. Looking ahead, we expect Q1 revenue to be seasonally flat with Q4. Our recurring revenue is forecasted to represent about 60% of total Q1 revenue, while systems offset the typical seasonality of the first quarter and account for 40% of total Q1 revenue. Our guidance for Q1 revenue is approximately $122 million plus or minus $7 million. The gross margin for Q1 is projected to return to corporate average at approximately 45%. The unique inventory charges that occurred in Q4 are not projected to continue in Q1. Operating expenses are expected to be flat compared to Q4 at about 50 million. Q1 interest income, net of interest expense, and foreign currency impacts is projected to be approximately 1.9 million at current interest rates. The Q1 tax provision is expected to be about 5.5 million, and the diluted share count for Q1 is projected to be approximately 48.5 million. We're targeting total capital expenditures to be about 2% of revenue in 2026. The company is well positioned now to support the business ramp, and we anticipate normal maintenance capex each quarter this year. Our focus for 2026 will be to support R&D investments that are enabling several design wins in the compute market, including AI data center infrastructure, HBM memory, and physical AI applications, along with progressively increasing our cash flow generation. This concludes our prepared remarks, and now we'll open the call to questions.

Operator | Conference Operator

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Craig Ellis from B.

Reilly Securities. Craig Ellis | Analyst, B. Riley Securities

Thanks for taking the question. Luis, I wanted to go back to the order activity in the fourth quarter. It looked very strong in both systems and recurring. Can you just talk about what you're seeing with those orders? How much of that converts in the first quarter versus being pipelined for later in the year? Appreciate any insight on that.

Luis Mueller | President and Chief Executive Officer

Okay. Hi, Craig. Yeah, I can make some comments on the orders here. I'm probably going to need a little bit of help from Jeff on the timing of the conversion to revenue. So just to recap, right, we had systems orders were up 47% quarter on quarter. So that really sort of bucked the trend on the seasonality. That really affected primarily handlers, thermal subsystems, which we typically sell for mobile processor tests in SLT and some testers for mixed signal and RFM device. On the recurring side, orders were up 34% quarter over quarter. There was actually a couple of large service contracts involved on that recurring business that renew annually. And so that obviously is going to spread out throughout 2026. But we also saw an increase in bookings on interface products and handler spares that typically go along with utilization improvement. And Jeff, I don't know if you have better comments on the timing.

Jeff Jones | Chief Financial Officer

Yeah, I think you're absolutely right about the recurring orders, Luis, and the portion that's going to be longer term, multiple quarters. The systems, we have about 70% of are guided revenue in backlog coming into Q1 with a majority of the balance being shipped in Q2. So it's really the system shipments showing up in Q1 and Q2, Craig.

Craig Ellis | Analyst, B. Riley Securities

Got it. Thanks for that, Jeff. And then the follow-up question is related to revenue and then with clarification on gross margin. Neon high bandwidth memory has been a sharp focus through the year in 2025. Louise, can you tell us where the business exited with revenue in that product group and remind us what your expectations are in 2026 and then the clarification is on your end, Jeff, and it relates to gross margin. Is it fair to say that that one time end of manufacturing charge in the fourth quarter was about 400 basis points the variance between guidance and what was reported or were there other things at play?

Jeff Jones | Chief Financial Officer

That was the majority of it, Craig. I'd say about 350 of it was, 350 basis points was due to that one-time charge. There was some mix that accounted for the balance.

Luis Mueller | President and Chief Executive Officer

And to your comment about the NEON revenue, we did exit 2025 at $11 million on the HBM market. We booked a system in Q4 We already booked three more systems here in January for Q1. Obviously, that's next quarter, but it's booked. And we're forecasting revenue this year in HBM between $15 and $20 million.

spk07

That's helpful, guys.

Thank you. Operator | Conference Operator

Next question. Our next question comes from the line of David Dooley from Steelhead Securities.

David Dooley | Analyst, Steelhead Securities

Yeah, thanks for taking my question. I was wondering if you could just recap what you said about eclipse activity during the quarter. I think there was a couple of mentions of that. And then maybe help us understand how that product line should ramp throughout 2026. And do you have the capacity to meet demand?

Luis Mueller | President and Chief Executive Officer

Hi, Dave. Yeah, so we booked a first configuration of a, I guess I can say super high power, but probably a year from now there's going to be another super high power. So let's just say an even higher power version of our T-Core thermal control on an Eclipse handler. We booked that system in Q4. It's a system that we have been working with a customer on qualification. We shipped a first unit, the real production unit here already in the late January timeframe. I don't think I can really sort of disclose what the volume projections are for the year for the Eclipse handler, but fair to say that we have you know, we have forecasts for ramping production and we do have the capacity. Yes, we do have the capacity to ship systems this year based on the forecast that we have received so far from more than one customer actually for that system.

David Dooley | Analyst, Steelhead Securities

Okay. And then when you think about 2026 and just whatever revenue profile, you know, it's obviously going to grow. But I'm just kind of wondering how you might think about the first half versus the second half. And, you know, it seems like you have strong order momentum and, you know, you kind of buck seasonal trends in the first quarter here. And so I suspect that, you know, we're kind of starting our recovery period through the balance of the year. Maybe you could just make some comments on that.

Luis Mueller | President and Chief Executive Officer

Yeah, we were certainly seeing an increase in order momentum across our traditional customers in auto and industrial space. With that said, I think we're a lot more excited really is about the high performance computing opportunities that we see with the Eclipse handler. We should be increasing shipment rate of Eclipse in the second quarter going into third quarter. A little too soon to talk about what it looks like in the fourth quarter, perhaps more of a typical seasonality, I don't know. But right now we're seeing sort of a ramp heading into the middle of the year.

spk07

Okay.

Excuse me. David Dooley | Analyst, Steelhead Securities

Jeff, if you could just comment on how the gross margin profile should look throughout the year with the higher revenues expected in Q2 and Q3.

spk01

Yeah, absolutely, Dave. So I'll just go back to my model here.

And Jeff Jones | Chief Financial Officer

kind of reference, maybe I'll just reference the analyst consensus as well, which let's just call it roughly 130 Q2 and Q3. So at that level of revenue, 130 million a quarter, gross margin should be sort of in the high 46% range, 46.7, 46.8, that range. And then as we get into, you know, a range of $150 million per quarter, that starts to breach the 48% gross margin number, so just under 48. And then when we get back to what we believe at the moment is sort of our normalized run rate, sort of normalized business conditions, would be about $160 million a quarter, and that would be 48% gross margin.

David Dooley | Analyst, Steelhead Securities

Okay, and then final thing for me is if you could just comment, you know, I think many companies have seen an increase in customer activity and, you know, customer forecasts increasing. You know, maybe you could just describe how your customer activity has changed over the last month or so as we're moving into an upturn year.

Luis Mueller | President and Chief Executive Officer

Well, I think it goes along with what I said initially here, Dave, that we are seeing an increase in demand for our systems from traditional KOHU customers, the traditional automotive industrial IDMs. But more importantly, we're seeing a strong pull, or I should say a forecast, for the Eclipse product line going into compute and mobile applications. So yeah, it is a situation that's improving. I think it's visible on the utilization rate that in a seasonal fourth quarter went up instead a point to 76%. So I think we're pretty excited about how we're entering 2026. It should be a good year. We're definitely projecting another growth year. We did have 13% revenue growth in 2025. And we are modeling another growth in 2026.

Jeff Jones | Chief Financial Officer

Just to add to that, Dave, in terms of a market indicator, recurring revenue now has increased sequentially four quarters in a row. And so that, as you know, is a sign of market recovery. And so we couple that with utilization, and it looks like it's all headed in the right direction. All right, thank you.

Operator | Conference Operator

Thank you. One moment for our next question. Our next question comes from the line of Robert Mertens from TD Cowan.

Robert Mertens | Analyst, TD Cowan

Hi, this is Robert on behalf of Krish. Thanks for taking my questions. I just wanted to clarify in terms of the high bandwidth memory inspection, you secured a new when for that to use in the engineering lab. Is that working with the same customer or is that a new customer that you've worked with?

Luis Mueller | President and Chief Executive Officer

That is, hi Robert, that's the same customer. Same customer but going into the lab for future HBM development.

Robert Mertens | Analyst, TD Cowan

Okay, got it, thank you. And then just in terms of, just making sure I heard correctly, the multi-unit order for the new handler under development, with the qualification shipment later in the summer, is that revolving around your Eclipse handler and the GPU opportunity, or is that separate from that commentary?

Luis Mueller | President and Chief Executive Officer

That's separate from that commentary. That is targeting primarily automotive ADAS and physical AI-type devices, so a different type of application, different product altogether.

spk07

Okay.

Got it. Thank you. Operator | Conference Operator

Thank you. One moment for our next question. Our next question comes from the line of Brian Chin from Stifel. on behalf of Brian Chin\ Hi, this is Daniella Talia. I'm on for Brian Chin. Thank you for your questions. My first question is around HBM inspection, to continue on that. Is your customer, the same customer, doing 100% inspection with your NEON platform, and how does that inspection intensity for this step change moving to HBM4?

Luis Mueller | President and Chief Executive Officer

Hi. Yes, the customer is doing 100% inspection with our platform. As new generation HBM devices come up, the requirement in terms of size, defects that you're looking, size of defects you're looking for, or ball pillar count that you have to measure, obviously increases. And with that, so does the time it takes to do the inspection. I don't have a number to give you right now and say what percentage increase in the time of inspection and therefore slow down of the process. But certainly those devices are getting larger and with a higher interconnect count as we move along here in newer generations. on behalf of Brian Chin\ Okay, great. Thank you. And then also, I know you mentioned $15 to $20 million for that revenue base. Do you see the shipments more linear or weighted to the first half or the second half going into 2026?

Luis Mueller | President and Chief Executive Officer

At this point, we're seeing this fairly linear through the year.

Operator | Conference Operator

Okay, great. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Mr. Dennis from Needham and Company.

Mr. Dennis | Analyst, Needham & Company

Great. Thanks for taking our questions. My first one is about the IDM versus OSAT performance. Maybe you guys could provide some more color in what you saw in the fourth quarter for IDMs versus OSATs, and then maybe some segment color for what you're seeing in the first quarter. And I may be beyond that if you can.

Luis Mueller | President and Chief Executive Officer

Hi, Dennis. What I can say is from a utilization standpoint, In the fourth quarter, IDMs were a little over 76%, and OSATs a little over 75%. As we look into the first quarter here, I'm starting to think that we don't typically forecast utilization, but starting to believe that that may flip. I think utilization may go up a bit, but I'm thinking the OSATs may be going up faster than the IDMs. at least as an early view of the first quarter. We'll see how that really ends up in March.

Mr. Dennis | Analyst, Needham & Company

Great. And for the second part of that question about the segments, so maybe compute versus auto and industrial, how are they looking from a systems perspective into the first quarter?

Luis Mueller | President and Chief Executive Officer

As we exit at Q4, compute was at 78%, auto 75%, industrial 77%. Mobile, 72%. Consumer, 76%. Going into first quarter, I'm seeing the biggest momentum around mobile, thinking utilization in mobile is going to potentially cross the 75% mark. Compute should continue to rise. And I don't know much about the others at this point.

Mr. Dennis | Analyst, Needham & Company

Great. And then for my second question, regarding that analog and mixed signal, could you give us some more color on that?

Luis Mueller | President and Chief Executive Officer

Sure. We have one customer a little over a year ago that is a large mixed signal supplier into the automotive market. They're one of the top six or seven automotive semiconductor manufacturers. We've been deploying that tester into, you know, more recently here, two out of their three major business units. And they also have been diversifying their product line. So we... We got an order qualification from that second business unit that I just referenced. We know that their products that are going through our testers now are some digital controllers and PMIC devices that are being used in data centers. They're actually shown in some news released there for data center racks and data center boards surrounding large GPUs. And we're expecting to see an acceleration, at least of one of these tester design wins, particularly in the digital controller side, coming up towards the middle of the year.

spk07

Thank you for the call.

That's it for me. Operator | Conference Operator

Thank you. At this time, I would now like to turn the conference back over to Jeff Jones for closing remarks.

spk01

I'd just like to say thank you for joining today's call, and we look forward to speaking with you again soon.

Jeff Jones | Chief Financial Officer

Have a good day.

Operator | Conference Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. jsPDF 3.0.3 D:20260606090051-00'00'

NASDAQ:COHU Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good day and thank you for standing by. Welcome to COU's third quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Jeff Jones, Chief Financial Officer.

Please go ahead. Jeff Jones | Chief Financial Officer

Good afternoon and welcome to our conference call discussing Cohue's third quarter 2025 financial results and our outlook for the fourth quarter of 2025. I'm joined today by Luis Mueller, Cohue's President and CEO. If you need a copy of our earnings release, it can be found on our website at cohue.com or by contacting Cohue Investor Relations. A slide presentation accompanying today's call is also available in the Investor Relations section of the website. Replays of this call will be accessible via the same page after the conclusion of the call. During this call, we will be making forward-looking statements that reflect management's current expectations concerning CoHUE's future business. These statements are based on the information available to us at this time, but they are subject to rapid and even abrupt changes. We encourage everyone to review the forward-looking statement section of our slide presentation and the earnings release, as well as COHU's filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments are current as of today, October 29, 2025, and COHU does not assume any obligation to update these statements for events occurring after this call. Additionally, We will discuss certain non-GAAP financial measures during this call. Please refer to our earnings release and slide presentation for reconciliation 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 Mueller | President and Chief Executive Officer

Good day, everyone. Thank you for joining our Q3 2025 earnings call. I'm pleased to share our latest results and provide guidance for Q4. First off, Let's talk about some highlights. Recurring revenue continued to grow for the third consecutive quarter, driven by strength in interface solutions and task handler spares. Systems revenue improved sequentially for the fourth quarter in a row, though it remains below normalized levels. We had several notable events in the third quarter. We announced an offering of convertible notes on favorable terms. which closed just after the quarter end, and will support future growth and strategic initiatives. Jeff will discuss this in more detail later. We welcomed Matthew Hutton, our new vice president of strategy, focused on advancing our growth initiatives, including mergers, acquisitions, and partnerships. Prior to joining Cohue, Matt was head of corporate development at AspenTAC. We communicated repeat orders for NEON HBM inspection tools, raising this year's revenue forecast for these systems to between $10 and $11 million. These systems are used for inspection and metrology of high bandwidth memory devices, which are critical components in high performance computing and generative artificial intelligence applications. We shipped our first system configured for HBM4 inspection, reinforcing our optimism for future market prospects in high bandwidth memory. Our Eclipse handler, equipped with proprietary active thermal control, was selected for production tests of next-generation AI processor devices by a leading U.S.-based semiconductor manufacturer. The Eclipse platform is designed to scale seamlessly across diverse power applications, providing the flexibility and operational efficiency required to support our customers' evolving high-performance processor roadmaps. This adaptability ensures that as processor technologies advance, our solution remains a reliable foundation for next generation computing needs. Our current thermal solution ensures optimal device temperature control and test repeatability up to 3,000 watts power dissipation with ultra-fast temperature ramp rates and tight thermal guard band, supporting demanding semiconductor test requirements. Now let's dive into the detailed results. Consolidated revenue reached $126 million with both systems and recurring revenue improving quarter over quarter. Revenue was split 45% systems and 55% recurring. Non-GAAP gross margin of 44.1% reflects the value differentiation of our products and the resilience of our recurring business model. Estimated test serialization remained stable quarter over quarter, ending September at 74.5%. While systems orders moderated last quarter, growth in recurring revenue and new wins positioned us well for Q4 and beyond. We secured new business wins, including orders for our automated test equipment and automated optical inspection for high-growth markets. During the quarter, We secured roughly $1.7 million in new business, highlighted by our first DiamondX order from a longstanding Cohue handler customer. This order will support the testing of application-specific analog power integrated circuits, serving key automotive and industrial market segments. This customer win marks the continuation of Cohue's growth in the mixed signal test market with DiamondX, as we push to diversify our test platform beyond RF and display driver IC test. We secured a new order of our Krypton system with a European customer enabling advanced optical inspection of devices used by a prominent US mobile phone brand. We booked a $2.3 million order for precision analog test contactors at a US IDM and continue to diversify our test platform portfolio with this customer. We anticipate a seasonal slowdown in Q4, partially offset by ongoing market recovery, and remain optimistic about long-term prospects, especially in computing and high-bandwidth memory inspection. As tariffs return to the spotlight in recent news, I want to reassure everyone that Kohu's current exposure to China remains very limited. Revenue from customers based in China accounts for only a low single-digit percentage of our total consolidated results. Additionally, a substantial share of our business is generated outside of the U.S., further diversifying our global footprint. Thank you for your attention and continued support. And I'll turn it over to Jeff for a deeper dive into our financial results and Q4 guidance. Jeff?

Jeff Jones | Chief Financial Officer

Thank you, Luis. Before reviewing the third quarter results and providing fourth quarter guidance, please note that my comments refer to non-GAAP figures. Details about non-GAAP financial measures including GAAP to non-GAAP reconciliations and other disclosures are included in the earnings release and investor presentation on our website. For Q3 2025, revenue exceeded guidance and reached 126.2 million. Recurring revenue, which is primarily driven by consumables and is more stable than systems revenue, accounted for 55% of total revenue for the quarter. During the third quarter, three customers, one in the mobile segment and two in the automotive segment, each represented more than 10% of our sales. The Q3 gross margin was in line with guidance at 44.1%. Operating expenses for the quarter were $48 million, which is $2 million lower than guidance. This reduction was mainly due to the timing of R&D material now scheduled for receipt in Q4. Net interest income after accounting for interest expense and a small foreign currency loss was approximately $1.1 million for Q3. The tax provision came in about $3.5 million lower than forecast at $11.7 million, resulting from the reversal of tax reserves following the completion of a jurisdictional tax authority audit. Moving to the balance sheet, cash and investments decreased by $11.2 million during Q3. This was primarily due to cash used in operations to support a 17% growth in sales quarter over quarter and to fund a $33 million increase in accounts receivable. No stock repurchases were completed during Q3. Since the inception of our share repurchase plan, we have repurchased around 4 million shares for approximately 117 million, leaving about 23 million available for additional future repurchases. Total debt stands at 18 million, unchanged from the previous quarter. Q3 capital expenditures were 4 million, mainly for facility improvements. We're maintaining our 2025 capital expenditure target of approximately $20 million, which includes the $9 million Malacca facility purchase completed in Q1. In late Q3, we announced a strategic convertible notes offering. In early Q4, we completed the upsized offering, raising gross proceeds of $287.5 million at attractive rates, including 1.5% interest rate, 32.5% conversion premium, and a five-year term. We purchased a 100% capped call to limit shareholder dilution until the stock price doubles and exceeds $41 per share. The repayment structure of the notes is net share settlement, meaning Cohue will repay the principal of $287.5 million in cash and has the option to settle any in-the-money amounts in cash, shares, or a combination of both. This structure, combined with the up 100% capped call, limits shareholder dilution. The net proceeds will provide additional liquidity to strengthen our balance sheet and support strategic initiatives. Looking ahead to Q4, as Luis noted, we anticipate a seasonal slowdown for systems, which is partially offset by continued market recovery. Overall, we expect Q4 revenue to be about $4 million or 3.5% lower than Q3 driven by systems revenue. Our resilient recurring revenue is forecasted to increase for the fourth straight quarter and should represent about 60% of total Q4 revenue. Our guidance for Q4 revenue is approximately $122 million plus or minus $7 million. The gross margin for Q4 is projected at approximately 45%. Operating expenses are expected to be about 50 million, including around 2 million for variable R&D product development prototype materials. Total operating expenses are consistent with the restructuring plan targets implemented in late Q1 of this year. Once the full impact of the restructuring plan is realized at the beginning of 2026, we anticipate quarterly operating expenses to be approximately 49 million when revenue is around 130 million per quarter. Q4 interest income, net of interest expense, and foreign currency impacts is projected to be approximately 1.7 million at current interest rates. The Q4 tax provision is expected to be about $4 million, and the diluted share count for Q4 is projected to be about 47.1 million shares. That concludes our prepared remarks, and now we'll open the call to questions.

Operator | Conference Operator

As a reminder, if you'd like to ask a question at this time, please press star 11 on your touchtone phone and wait for your names to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Brian Chin with Stifel.

Brian Chin | Analyst, Stifel

Hi there. Good afternoon. Thanks for letting us ask a few questions. So I guess first question, nice to see the improved system revenue momentum. particularly from the mobile segment these past few quarters. Based on the customer broadening metric you shared and the uptick in utilization, is that the main area of improved near-term revenue visibility for the company? And how much confidence does this give you on sustaining some top-line momentum, kind of moving beyond the seasonal period into the first half next year?

spk02

Oh, hi, Brian.

Luis Mueller | President and Chief Executive Officer

Yeah, you're correct. I mean, a lot of... A lot of the momentum here in the third quarter was associated with a customer buying the Eclipse handler, but also HBM with the Neon system. I think those are sort of the two main highlights of the quarter. We have the Eclipse, though, qualified at another computing customer. I think we press released that already in the third quarter, just ahead of Semicon West. And then we also have... a few other customers that are evaluating the system, one going into a GPU application, sort of a new product version of a GPU for 2026, and then two others that are associated with data-centered network communication and an ASIC accelerator. So, I think it moves. Talking about confidence going into 26, I think we're more confident is that the HBM business is continuing to progress. We have had now, since the start of the fourth quarter, a couple of repeat orders for HBM. We have an engagement forming with a second customer where we're looking at what are the requirements and how we're going to address requirements to get another qualification going for one of our inspection pools. And like I said, we got several customers here in different stages of evaluating the eclipse for applications in the data center. So I think it's going to continue to move around. We just saw a recent announcement from another one of our customers for their wins in the data center market where they're going after an inference data center device partnership. and we are playing a record with eclipse for that for that application as well so i think we're confident that we're broadening our business beyond the traditional auto mobile consumer industrial more towards the ai use applications whether it's the gpu or or the network processing and we should start seeing some some fruits of that in 2026 with the Eclipse in our inspection systems.

Brian Chin | Analyst, Stifel

Got it. Maybe just to key on the points you made about the Eclipse handler with the active thermal T-Core subsystem. Can you help us understand what's driving that? When is it the higher wattage now for some of the newer AI processors that's coming out? And Does your platform continue to scale, it sounds like, with every year cadence here now in terms of more advanced and hotter chips kind of coming into introduction? Are you supplanting existing incumbents with that tool?

Luis Mueller | President and Chief Executive Officer

Yeah, you basically hit the nail on the head. We talk here about 3,000 watts of power dissipation. I mentioned that in my prepared remarks. But that's sort of the current state. or what would be shipping for production needs in 2026. With that said, the requirements continue to go up, and we're already working on the next generation thermals that will support 2027 in different sets of applications coming up later next year as well. So your question is pretty much the answer to it. It's all about the... thermal power dissipation and power densities. We never talk about power densities, but power density per square inch of silicon as well, the size of the dyes, how delicate and the amount of force you have to apply. So it's all related to that complexity of dynamically controlling heat dissipation on very complex semiconductors actually doing tests.

Brian Chin | Analyst, Stifel

Thanks. Maybe just one last quick follow-up. In terms of revenue contribution, is that sort of first half next year? And just, you know, compute, I think, has not historically been in recent years like a double-digit exposure segment, but do you feel pretty comfortable thinking that could be, you know, double digits next year for the year?

Luis Mueller | President and Chief Executive Officer

Double-digit, you mean double-digit growth, double-digit from a revenue contribution? If you look from a revenue contribution, I would say... You know, I would expect computing to be sort of the low teens. You know, we always talk about systems and recurring, so not counting recurring in the mix here. I'm thinking it would be sort of the low teens percentage contribution of revenue going into 2026. Great.

spk10

Thank you.

Operator | Conference Operator

Our next question comes from David Dooley with Steelhead Securities.

David Dooley | Analyst, Steelhead Securities

yeah thanks for taking my questions um to follow up on brian's question i guess you know it sounds like based on your eclipse win at a major ai processing company and i think you've press released another um win uh or tool of record with the cpu company is it a fair assumption that basically any of these apu cpus xpus gpus whatever the term is for networking processors, that they're all going to have to be thermally controlled and tested. So is it fair to assume that the PAM of this market is quite large, given that there's lots of large customers that you aren't serving yet?

Luis Mueller | President and Chief Executive Officer

Yeah, yeah, that's absolutely correct, Dave. I mean, we have, you know, the power dissipation levels vary quite a bit. I mean, we have some inference processors here that the talk right now is on the order of 600 watts of power dissipation. We have a high-end GPU, as I said, that's approaching 3,000 watts, just under that. We have some network processors that we are qualifying right now on the 1,200 to 1,400 watts. So it's a range of power dissipation levels, but they're really on the hundreds off to a couple thousand watts. and rising, you know, the roadmap really shows that going up.

David Dooley | Analyst, Steelhead Securities

So the higher the wattage, the higher the heat, and so that becomes more and more important. And so I guess it's a fair assumption that going forward, you might have a little bit more exposure on the GPU side with this product, you know, and networking, you know, the hyperscaler custom ASIC customers.

Luis Mueller | President and Chief Executive Officer

That's correct. The higher the wattage, the more complex these things are getting, the more it lends itself to expertise that we have at Cohube. We're being asked by quite a few customers now to address some of their requirements. They're very difficult. I mean, as you can imagine, when you're approaching 3,000, 4,000 watts of power dissipation, this is fairly complex. There aren't that many people out there that have the engineering and the technology to do this. So we're working pretty heavily on it. Needless to say, we're pivoting the business more towards AI applications.

David Dooley | Analyst, Steelhead Securities

Okay. And then when you think about overall AI exposure in 2025, could you help us with, you know, you add up this, you know, HBM inspection product and the eclipse and a few other things. What do you think your revenue stream is that's kind of dedicated to AI in 2025? And I basically assume it was almost next to nothing in 2024.

Luis Mueller | President and Chief Executive Officer

Yeah, I would say it's pretty close to zero in 2024. Um, the AI, I mean, the AI here, you gotta be a little careful, right? To talk about AI, everybody tends to think of data centers, but, uh, there is actually, um, sort of a blend here of processors that are already running some level of language model in them. And I think if I look at 2025, a little tally here would tally up maybe sort of in the order of $40 million, approximately $40 million of system revenue this year on things that I could associate with know edge ai or data center related ai and uh and we expect that you to be growing uh going into 2026. thank you our next question comes from robert mertens with td cowan hi this is robert on behalf of krish sankar thanks for taking my questions i guess just the first one Robert Mertens | Analyst, TD Cowan: With the recent convertible race, how are you thinking about the best use of cash between developing some of the new areas of expansion, be it investment in the software business or high bandwidth memory versus historically completing a number of smaller Tuck and M&A deals to bolster the technology portfolio? And then maybe I'll just add in... your views on using cash for share repurchases? I know this has been on pause for the last few quarters.

Thank you. Jeff Jones | Chief Financial Officer

Yes, good question. And really the answer is we want to pursue both paths. And in order to pursue acquisitions of any meaningful size, we needed to go through To the financing market, we needed capital, which basically drove our decision on the convert, strengthen the balance sheet, and have more flexibility when it came to growing through acquisition. And so we're going to continue to focus on organic development in the areas that Luis has been talking about. But clearly, we want to be opportunistic as well when it comes to M&A. And of course, with the recent hire of Matt, it's a priority for us.

spk03

And so that's really the main driver for the convert.

Jeff Jones | Chief Financial Officer

With respect to buyback, that's a sort of board decision. And yes, we're on pause for now should the stock valuation go to a point where we, you know, is more compelling. I think we would, again, get back into the game. But the objective for 2025 on the share repurchase was to offset dilution from our stock. equity compensation plan. And so we've essentially done that, did that in Q1.

spk03

I suspect it'll be similar for next year.

spk02

Got it.

Thank you. Robert Mertens | Analyst, TD Cowan

And then thanks for the color on the latest Eclipse system. Maybe just going back to that, in terms of the areas where that's focused, is that sort of more of a broad-based system for any sort of in-market and you're just seeing more traction on the compute side with the power and the heat requirements than just in-demand in market today versus sort of your traditional auto industrial? Or is that something that auto and industrial customers could start to look into more once their in-demand picks back up?

Thank you. Luis Mueller | President and Chief Executive Officer

Yeah, Robert, the Eclipse is not really – a traditional product for industrial applications or other applications. You could say we can use it for consumer products, we can use it for RFIC tests, we can use it for general mobile applications, but we've been really being more selective here with our engineering resources and putting them more around these complex thermal requirements. that we see in general AI processor needs. I think they've shared a collection of letters here that people use in AI today, from XPU, TPU, NPU, APU, GPU. And so we're really focused on that. We're really focused on, look, if it is AI related, whether it's a training or inference mode or network mode, backbone network connectivity, that's interesting because it applies or it lends itself well to our thermal technology. It lends itself to where we can differentiate. It lends itself where we can bring value to the table. So we're being quite selective on where we are deploying the Eclipse right now and the bandwidth that we're deploying against customers that have those challenges. So the product could be used for a variety of other things, not traditionally, not your traditional industrial auto use in this case. And so we're being more focused on AI in use cases.

spk02

Got it.

Thank you so much. Operator | Conference Operator

Our next question comes from Dennis Piacinini with Needleman Company.

Dennis Piacinini | Analyst, Needleman Company

Great. Thanks for taking our questions. So even with the recent uptick in Q3, mobile system orders year-to-date versus year-to-date last year seem to be lagging somewhat behind other segments, kind of even in light of utilization recovery there. Why have system purchases in the segment lagged somewhat? And are you perhaps expecting strength in mobile into next quarter, even with systems guided down?

Luis Mueller | President and Chief Executive Officer

No, not exactly, Dennis. I mean, we had a I mean, if you look at our Q3 revenue, mobile, I think, was actually our largest segment, right? Sort of tied hand-in-hand with automotive. I think the mobile-related shipments we largely completed here in the third quarter. Going into fourth quarter, we should see more shipments into the auto and computing space. And then I think mobile goes into, well, Sorry, I'm thinking more in terms of our testing. We'll see some mobile demand in RF test hit in the fourth quarter. So there's going to be a little bit of revenue there on that front. But by and large, I don't think mobile is going to be our largest segment in the fourth quarter. I don't expect that to be the case again.

Great. Dennis Piacinini | Analyst, Needleman Company

So what about for automotive and industrial? The cyclical recovery continues to be kind of somewhat muted. What are you seeing in these markets in terms of recovery? So I think you're saying there's going to be some strength into Q4, but is there any visibility beyond that?

Luis Mueller | President and Chief Executive Officer

Yeah, there's some puts and takes. You're right. This has been sort of an elusive recovery both in auto and industrial. I think we have had a quarter where we had some green shoots in auto in Q2, I want to say, And then it had some green shoots in industrial. What we're having now is more talks from customers that are saying that they are back to the mode of needing initial capacity in the auto and industrial segment. Talking about some initial demand in Q1 of next year, into Q2 of next year. Nothing dramatic yet. But the stocks are starting to improve. We also see an increase in spare sales to our handlers in the auto and industrial segment, basically supporting the fact that they're taking systems that have been put aside, so underutilized segment, for test and bringing those systems back online. I think, like I said, we had three consecutive quarters now of recurring business improving. and continue to project the fourth quarter recurring business to improve again sequentially. This applies both to, like I said, spares for our test handler systems, which is a very good indicator, as well as improvement in our test interface business.

Dennis Piacinini | Analyst, Needleman Company

Great. And then briefly, could you discuss the gross margin strength sequentially into Q4, even with revenue being down a little bit? What's driving that?

Jeff Jones | Chief Financial Officer

There's a mixed component to it, Dennis. And as Luis just mentioned, we've got increasing recurring revenue, which has gross margins in the mid-50s. And so we're expecting the recurring revenue to be about 60% of the total revenue. It was 55% in Q3. I think that's the main driver of that increase in gross margin quarter over quarter.

spk09

Great. That's very helpful.

Thank you very much. Operator | Conference Operator

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

Jeff Jones | Chief Financial Officer

Thank you. And before we sign off, I'd just like to note that COHE will be attending several investor conferences over the next three months. The Stiefel Midwest Conference on November 6th in Chicago, the New York City CEO Summit Conference on December 16th, and the Needham Virtual Conference on January 15th of next year. If you plan to attend any of these conferences, please reach out to your conference contacts or contact us directly to arrange a one-on-one meeting.

spk03

Thank you for joining today's call. We look forward to speaking with you again soon.

Operator | Conference Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. jsPDF 3.0.3 D:20260606090052-00'00'