COHU - NASDAQ
Cohu, Inc.
COHU·NASDAQ
$56.12
+3.0%TechnologySemiconductors
Cohu, Inc., through its subsidiaries, provides semiconductor test equipment and services in China, the United States, Taiwan, Malaysia, the Philippines, and internationally. The company supplies semiconductor test and inspection handlers, micro-electromechanical system (MEMS) test modules, test contactors, thermal sub-systems, and semiconductor automated test equipment for semiconductor and electronics manufacturers, and test subcontractors. It also provides semiconductor automated test equipment for wafer level and device package testing; various test handlers, including pick-and-place, turret, gravity, strip, and MEMS and thermal sub-systems; interface products comprising test contactors, and probe heads and pins; spares and kits; various parts and labor warranties on test and handling systems, and instruments; and training on the maintenance and operation of its systems, as well as application, data management software, and consulting services on its products. In addition, the company offers data analytics product that includes DI-Core, a software suite used to optimize Cohu equipment performance, which provides real-time online performance monitoring and process control. It markets its products through direct sales force and independent sales representatives. The company was formerly known as Cohu Electronics, Inc. and changed its name to Cohu, Inc. in 1972. Cohu, Inc. was incorporated in 1947 and is headquartered in Poway, California.
At a Glance
Live SnapshotMarket Cap$2.65B
EPS-1.5900
P/E Ratio-35.30
Earnings Date07/30/2026
Earnings Call Transcript
COHU • 2026 • Q1
Operator
Good day, and thank you for standing by. Welcome to Cohu'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. 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
Good afternoon, and welcome to our conference call discussing Cohu's first quarter 2026 financial results and our outlook for the second quarter of 2026. I'm joined today by Luis Müller, Cohu's President and CEO, and Matt Hutton, Cohu's VP of Strategy and Investor Relations. If you need a copy of our earnings release, it can be found on our website at cohu.com or by contacting Cohu 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 Cohu'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.
Jeff Jones
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.
Jeff Jones
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.
Jeff Jones
Looking ahead, we expect Q2 revenue to increase 15% sequentially and 34% year-over-year to approximately $144 million, ±$7 million. The increase is driven by demand tied to the ramp in 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%-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. OpEx are expected to be lower than Q1 at about $53 million.
Jeff Jones
We intend to continue investing in resources to capitalize on the growing list of HPC opportunities. 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. Diluted shares are projected to be approximately 52.6 million, including 4.2 million shares attributable to the convertible debt. 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.
Jeff Jones
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
As a reminder, if you'd like to ask a question at this time, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from Brian Chin with Stifel.
Brian Chin
Hi there. Good afternoon. Thanks for letting us ask a few questions. A lot, a lot here, but in a good way. Maybe firstly, breaking down the guidance for 2Q, 15% Q1 Q growth. Can you maybe give 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? Also tied to that, you know, maybe $100 million, if you were to sign up no more new customers through the end of the year, that $100 million, how much of that still remains to be revenued through the second half?
Jeff Jones
Yeah. At least on your first point here, Brian, the quarter-over-quarter increase in HPC systems revenue was about $10 million. It's just under half of our increase quarter-over-quarter. That puts us then for HPC, at least systems revenue in the first half of 2026 at roughly about $30 million.
Brian Chin
I think that pretty much answers the second part of the question of what's left for the second half right there.
Jeff Jones
Exactly.
Brian Chin
I can do that math, but thank you. Okay, that's helpful. How are you thinking about, and this maybe could mature over time or on higher volume, but how should we think about the system margin contribution, gross margin relative to the overall blended average company?
Jeff Jones
What we saw in Q1 was a gross margin split of roughly 50% on recurring, roughly 40% on systems. I think we're gonna hold that for the balance of the year. The systems revenue percentage will increase. Well, systems revenue is gonna increase faster than the recurring. That is why we see, you know, the 46.5% gross margin in Q2 hitting a little bit of a headwind in the second half. We think we're gonna end the year somewhere in the mid-40% gross margin.
Brian Chin
Yeah. Great. Great. Thanks.
Operator
Our next question comes from David Duley with Steelhead Securities.
Operator
Our next question comes from Craig Ellis with B. Riley Securities.
Craig Ellis
Okay. regarding shipment timing for all those orders?
Jeff Jones
Yeah. We see a ramp in Q3 and of course, some of that will fall into Q4 as well.
Craig Ellis
All right. Thanks, Luis. Thanks, Jeff.
Operator
Our next question comes from Robert Mertens with TD Cowen.
Robert Mertens
All right. Thank you. That's very helpful.
Operator
Our next question comes from Christian Schwab with Craig-Hallum.
Christian Schwab
Great. Thanks for all the guidance and congratulations on giving multi-quarter guidance again. My only question has to do with M&A. You know, previously we've talked about, you know, acquisitions, particular 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
Hi, Christian. Matt Hutton here. Yeah. 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. A lot of valuations remain elevated. We'll continue to be disciplined and look at opportunities in our growth areas.
Operator
Our next question comes from Denis Pyatchanin with Needham.
Denis Pyatchanin
Great. Thank you. Prior your HPC forecast was up by $25 million-$30 million for this year, and now you've moved it up to about $100 million. I think in your presentation, it said that about $30 million of the, you know, $100 million or so would be Eclipse. Can you tell us about the remaining, like, $60 million-$70 million? Is that mostly testers? Is that other handlers? Can you kind of break down that remainder, please?
Jeff Jones
Let's back up a little bit. Initially we came out, and we said HPC revenue in the $60 million-$85 million range for 2026. What we're doing now is increasing that $60 million-$85 million, we're increasing that to $80 million-$100 million. Most of that relates to the Eclipse handler. The Neon for HBM inspection, we previously said was $15 million-$20 million. I think we're at the higher end now of that range. We're, you know, we are, as Luis had mentioned, we're in qualifications or finished qualifications for our testers, also participating in some HPC revenue. Does that help clarify, Denis?
Denis Pyatchanin
Understood. Thank you.
Jeff Jones
Yeah. Okay.
Denis Pyatchanin
Yes, yes. Thank you. I think you-- so you'd also said that, you're now kind of expecting 2026 total revenue to be up 20%-25%. I mean, if I kind of just run rate you at $144 million basically for the rest of the year, you basically get to that number. We're basically assuming revenue will be going flat from $144 million through the rest of the year. 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
Yeah. The way we see it now, Denis, you know, we would expect Q3 to be pretty similar to Q2, somewhere in that $144 million-$145 million range. Q4, you know, we could have some seasonality, so a slightly weaker Q4, maybe down single mid single digit, yeah, quarter-over-quarter.
Denis Pyatchanin
That's helpful. Thank you. That's it for me.
Operator
Our next question comes from Vedvati Shrotre with Evercore ISI.
Vedvati Shrotre
Hi. Thanks for taking my question. I kind of wanted to double-click a little bit on the gross margin piece. You know, you have good ramps on the HPC front in the second half. Wouldn't the system's gross margins sort of pick up in second half versus first half?
Jeff Jones
I think that's a good observation, V. However, we are incurring some higher initial costs here to ramp the Eclipse supply chain and production. It's coming at it very quickly. It's a new configuration. We're having to spend more money, more cost, again, on supply chain and production. Expect those costs to carry through almost probably through this year. 2027, you know, we'll see lower costs, particularly for Eclipse. On top of that, I think similar or in line with other companies, right, there's a small impact from higher energy and freight costs. 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.
Vedvati Shrotre
Understand.
Jeff Jones
Yeah.
Vedvati Shrotre
Are those the drivers for the dip in, into Q1 gross margins? Is that like the, you know, 200 basis points of decline that you have? Can you maybe characterize what's cost driven? What's kind of mix driven?
Jeff Jones
Well, yeah, it's kind of a combination here. It is.
Vedvati Shrotre
Okay.
Jeff Jones
Definitely cost-driven, as I mentioned, for the Eclipse platform in terms of supply chain and production. Then, you know, to a certain extent, that also relates to mix, right?
Vedvati Shrotre
Yeah.
Jeff Jones
I'd say cost first, mix second.
Vedvati Shrotre
Understood. Okay. Then in terms of R&D spend, how should we think about R&D intensity for the rest of the year? I would assume, as you're going after these bigger markets of, you know, $750 million in SAM opportunities, essentially, what's the right way to think about R&D intensity? I assume it'll be higher, but maybe some color there.
Jeff Jones
For OpEx, yes.
Vedvati Shrotre
Understood.
Jeff Jones
For OpEx.
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
Thank you very much. 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-Hallum Conference on May 28th in Minneapolis, the Stifel Conference on June 2nd in Boston, and the Evercore Conference on June 3rd in San Francisco. 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. Thank you for joining today's call. We look forward to speaking with you again very soon.
Transcript from April 30, 2026
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