COHU INC (COHU)·Q3 2025 Earnings Summary

Executive Summary

• Q3 revenue was $126.2M, up 17% q/q and 32% y/y, with recurring revenue 55% and non-GAAP gross margin 44.1% .
• Results beat S&P Global consensus modestly on revenue ($126.25M actual vs $124.98M*) and materially on non-GAAP EPS (-$0.06 vs -$0.198*); EBITDA came in below consensus (SPGI methodology) despite company “Adjusted EBITDA” improvement (see Estimates Context) .
• Q4 guide: revenue ~$122M ± $7M (≈3.5% q/q down), non-GAAP gross margin ~45%, OpEx ~ $50M, recurring mix ~60%, net interest income ~$1.7M, tax provision ~$4M, diluted shares ~47.1M .
• Strategic catalysts: accelerating AI exposure with NEON HBM inspection (repeat orders; first HBM4 shipment) and Eclipse thermal handler wins (up to 3,000W device power) in data center compute, plus $287.5M 1.5% convert financing (32.5% premium) with capped call to limit dilution, supporting M&A and growth initiatives .

What Went Well and What Went Wrong

• What Went Well

  • Sequential and y/y revenue growth with resilient recurring mix; non-GAAP GM stable at 44.1% and recurring at 55% of sales in Q3 .
  • Clear AI traction: “repeat orders for NEON HBM inspection,” first system configured for HBM4 shipped; Eclipse handler selected for next‑gen AI processors; Eclipse thermal control supports up to 3,000W .
  • Operating execution beat: Q3 OpEx ~$48M was ~$2M below guidance (R&D timing) and tax provision ~$3.5M lower than forecast (audit resolution), aiding EPS vs expectations .

• What Went Wrong

  • GAAP net loss persisted ($4.1M; $(0.09) per diluted share) and non‑GAAP net loss ($2.8M; $(0.06) per diluted share) despite top-line growth .
  • Mix/gross margin below prior-year levels (non‑GAAP GM 44.1% vs 47.1% in Q3’24), reflecting cycle/product mix headwinds .
  • Systems outlook softer near term: management flagged a typical seasonal systems slowdown into Q4; systems orders “moderated” in the quarter, though recurring remains firm .

Financial Results

Segment/mix

KPIs

Guidance Changes

Note: Management reiterated OpEx framework once restructuring is fully realized in early 2026 (~$49M per quarter at ~$130M quarterly revenue) .

Earnings Call Themes & Trends

Management Commentary

• “Recurring revenue continued to grow… We shipped our first [NEON] system configured for HBM4 inspection… Our Eclipse handler… was selected for production test of next generation AI processor devices… up to 3,000 watts power dissipation” — Luis Müller, CEO .
• “Operating expenses for the quarter were $48 million… ~$2 million lower than guidance… tax provision came in about $3.5 million lower than forecast at $11.7 million…” — Jeff Jones, CFO .
• “We completed the upsized [convertible] offering, raising gross proceeds of $287.5 million at… 1.5% interest… 32.5% conversion premium… purchased a 100% capped call… limits shareholder dilution” — CFO .
• “We anticipate a seasonal slowdown in Q4, partially offset by ongoing market recovery… recurring revenue… should represent about 60% of total Q4 revenue… gross margin ~45%” — CFO .

Q&A Highlights

• AI/test thermal leadership: Management emphasized Eclipse thermal capability to 3,000W and broader evaluations across GPU, networking ASICs; expects computing to reach low‑teens % of revenue in 2026 if traction continues .
• HBM revenue run-rate: 2025 AI/edge/data center-related systems revenue around ~$40M, from near zero in 2024, indicating strong ramp potential into 2026 .
• Mix and margin mechanics: Q4 gross margin uplift driven by recurring mix moving to ~60% (mid‑50s gross margin on recurring) even as systems moderate seasonally .
• Segment cadence: Mobile led Q3; Q4 shifts more to auto/computing; auto/industrial recovery improving but gradual; China exposure remains low .
• Capital deployment: Convert proceeds target both organic investments (AI, software) and M&A; buyback paused but opportunistic in future .

Estimates Context

Q3 2025 Actual vs S&P Global Consensus

• Interpretation: Revenue and EPS beat; EBITDA (SPGI standard) below consensus while company-reported Adjusted EBITDA improved to $11.65M (different definition) .
• Forward implications: Q4 guidance (revenue ~$122M ± $7M; GM ~45%) suggests consensus may need to adjust mix/gross margin assumptions upward even if revenue is seasonally lower .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Broadening AI exposure is tangible: repeat NEON HBM orders (incl. first HBM4) and Eclipse wins at leading AI processor customers point to structurally higher compute exposure into 2026 .
• Mix tailwind near term: recurring revenue rising to ~60% in Q4 should lift non‑GAAP GM to ~45% even as systems decline seasonally; margin sensitivity to mix is a core driver .
• Operating discipline: OpEx tracking below guidance in Q3 and a 2026 OpEx framework provide leverage as revenue recovers; watch for sustained cost control as AI programs scale .
• EPS quality: Q3 EPS outperformance benefited from a lower tax provision vs forecast; normalize for this when modeling run‑rate profitability .
• Balance sheet optionality: $287.5M 1.5% converts with capped call supply dry powder for M&A/software, while limiting dilution until ~$41/share, supporting multiple expansion if AI design‑wins convert .
• Cycle read‑through: Utilization steady (74.5%) and mobile-led recovery are constructive; auto/industrial improving gradually; plan for non‑linear recovery with seasonal Q4 softness .
• Risk watch: Gross margin still below prior-year levels; systems orders moderated; macro/tariff/export and China end demand remain variables despite low current exposure .

Appendix: Additional Data From Q3 Materials

• Q3 GAAP net loss $(4.1)M; non‑GAAP net loss $(2.8)M; Adjusted EBITDA $11.65M; GAAP GM 43.8%/non‑GAAP GM 44.1% .
• Cash & investments $198.2M; cash decreased $11.2M q/q on AR build and operations; debt ~$18M; no Q3 buybacks; ~$23M authorization remaining .
• Q4 modeling parameters: OpEx ~$50M; net interest income ~$1.7M; tax provision ~$4M; diluted shares ~47.1M .