Business Overview and History
Cohu Inc. (NASDAQ:COHU) is a global technology leader supplying a diverse range of equipment and services that optimize semiconductor manufacturing yield and productivity. With a rich history spanning over seven decades, Cohu has established itself as a pioneer in the semiconductor test and inspection industry, continuously evolving to meet the dynamic needs of its customers.
Cohu's journey began in 1947 when it was incorporated as Kalbfell Lab, Inc. in California, commencing active operations in the same year. The company underwent several name changes, becoming Kay Lab in 1954 and later reincorporating in Delaware as Cohu Electronics, Inc. in 1957. In 1972, the company adopted its current name, Cohu, Inc.
Throughout its history, Cohu has faced numerous challenges and achieved significant milestones. A pivotal moment came in 2018 with the acquisition of Xcerra Corporation, a strategic move that expanded Cohu's product and service offerings. However, this acquisition also led to restructuring charges as the company worked to reposition its organization and improve its cost structure.
Cohu has continued its growth strategy through both organic development and strategic acquisitions. In 2023, the company completed two significant acquisitions: MCT Worldwide, LLC, a U.S.-based provider of automated solutions for the semiconductor industry, and Equiptest Engineering Pte. Ltd. (EQT), a Singapore-based provider of semiconductor test contactors and other test consumables.
More recently, in January 2025, Cohu announced the completion of its acquisition of Tignis, Inc., a provider of artificial intelligence (AI) process control and analytics-based monitoring software. This strategic move has enabled Cohu to expand its analytics offerings to the semiconductor process control market, aligning with the growing demand for AI-powered solutions to optimize manufacturing yield and productivity.
Product Segments and Offerings
Cohu operates in two main product segments: Semiconductor Test and Inspection Equipment, and Recurring Revenues.
The Semiconductor Test and Inspection Equipment segment includes Cohu's semiconductor automated test equipment (ATE), test handlers, and interface products. The ATE solutions consist primarily of two platforms - the Diamond x tester for testing various semiconductors like microcontrollers, ASSP, power management, RF, display drivers, sensors, and other mixed signal devices, as well as the PAx tester focused on RF Front End IC and Module applications. Cohu's semiconductor handlers automate the testing of packaged semiconductor devices, supporting a variety of package sizes and device types used in automotive, mobile, industrial, and computing applications. The interface products, including test contactors, probe heads, and probe pins, serve as the interface between the test handler and the semiconductor device under test.
The Recurring Revenues segment includes interface products, spares and kits, Cohu's DI-Core software and data analytics suite, and service and support. Interface products are consumable and non-consumable items used to maintain, sustain, and enable Cohu's customers' equipment. The DI-Core software provides real-time online performance monitoring, process control, predictive maintenance, and data integration across Cohu's equipment. Services include installation, maintenance, and training for Cohu's installed base of systems.
Financial Performance and Liquidity
Financials
Cohu's financial performance has been mixed in recent years, reflecting the cyclical nature of the semiconductor industry. In fiscal 2024, the company reported net sales of $401.8 million, a 36.9% decrease from the previous year's $636.3 million. The decrease in net sales was primarily due to lower demand in automotive, industrial, and mobile applications, driven by global economic conditions.
The Semiconductor Test and Inspection Equipment segment accounted for 35% of net sales, while Recurring Revenues made up 65% of net sales in fiscal 2024. This shift in revenue mix reflects the resilience of Cohu's recurring revenue streams during industry downturns.
Cohu's gross margin for fiscal 2024 was 44.9%, compared to 47.6% in the prior year. The decrease in gross margin was partially attributed to a $2.1 million charge to the company's inventory reserve for old, slow-moving, customer-specific inventory. Excluding this impact, Cohu's gross margin for the fourth quarter of 2024 was 41.8%, in line with the company's guidance.
Research and development expenses were $84.8 million, or 21.1% of net sales, in fiscal 2024, compared to $88.6 million, or 13.9% of net sales, in the prior year. Selling, general, and administrative expenses were $128 million, or 31.9% of net sales, in fiscal 2024, down from $132.3 million, or 20.8% of net sales, in the prior year. The decrease was due to cost control measures and lower incentive compensation in response to current business conditions.
For the most recent fiscal year (2024), Cohu reported: - Revenue: $401.78 million - Net Income: -$69.82 million - Operating Cash Flow: $2.80 million - Free Cash Flow: -$7.86 million
For the most recent quarter (Q4 2024), Cohu reported: - Revenue: $94.12 million - Net Income: -$21.36 million
Liquidity
Despite the challenging market conditions, Cohu maintained a strong balance sheet, with cash, cash equivalents, and short-term investments totaling $262.1 million as of December 28, 2024. The company's working capital stood at $449.1 million, providing ample liquidity to support its operations and strategic initiatives.
Key liquidity metrics include: - Debt/Equity Ratio: 0.021 - Cash and Short-Term Investments: $262.09 million - Current Ratio: 6.27 - Quick Ratio: 4.61
Cohu's strong liquidity position is further supported by available credit lines: - Kita has revolving credit facilities up to 960 million JPY, with $633,000 outstanding - A subsidiary in Switzerland has a 2 million CHF line of credit, with no amounts outstanding
Operational Highlights and Strategic Acquisitions
Throughout 2024 and into 2025, Cohu has been actively diversifying its product portfolio and expanding its addressable market by targeting emerging semiconductor applications. The company's acquisition of Tignis, Inc. in January 2025 was a significant step in this direction, as it enabled Cohu to leverage Tignis' innovative AI-powered solutions to enhance its data analytics and process control offerings.
Cohu's DI-Core software suite, which provides real-time online performance monitoring and process control, has been gaining traction among semiconductor manufacturers seeking to improve equipment utilization, manage predictive maintenance, and optimize their manufacturing processes. The company's recent design win for testing 800G switches used in next-generation data centers and cloud computing applications further highlights Cohu's ability to capitalize on the growing demand for high-performance semiconductor devices.
In addition to its software and analytics offerings, Cohu has also made inroads into emerging semiconductor markets, such as high-bandwidth memory (HBM) and silicon carbide power semiconductors. The company shipped its first HBM inspection system in 2024 and received a repeat order early in 2025, with total HBM-related revenue expected to reach $7 million this year as it supports the ramp-up of HBM3 and the introduction of HBM4 products.
Challenges and Risks
The semiconductor industry is inherently cyclical and volatile, and Cohu's business is heavily influenced by the capital expenditure budgets and spending patterns of its customers. The company's financial performance is closely tied to the current and anticipated market demand for semiconductor devices, which can be subject to sudden changes due to various factors, including global economic conditions, geopolitical tensions, and industry-specific trends.
Moreover, Cohu faces intense competition from a range of suppliers, both domestic and international, in the semiconductor test and inspection equipment market. The company's ability to maintain its competitive edge and market share depends on its continued investment in research and development, as well as its capacity to introduce new and innovative products that meet the evolving needs of its customers.
Another key risk factor for Cohu is its reliance on a limited number of large customers, which can expose the company to potential revenue volatility if these customers' businesses experience significant changes. The company's efforts to diversify its customer base and expand into new market segments may help mitigate this risk, but it remains an ongoing challenge.
Geographic Performance and International Exposure
Cohu's business has a significant international presence, with international sales accounting for 86% of total revenue in fiscal 2024. This global exposure allows the company to capitalize on growth opportunities in various markets but also exposes it to risks associated with international operations, such as currency fluctuations, trade policies, and geopolitical tensions.
Outlook and Guidance
For the first quarter of fiscal 2025, Cohu is guiding for revenue of approximately $97 million, plus or minus $7 million. The company expects its first-quarter gross margin to be around 44%, benefiting from its differentiated products and stable high-margin recurring business, which provides resilience during industry downturns.
Cohu's management is projecting operating expenses of approximately $49 million in the first quarter of 2025, with nearly half of the sequential increase attributable to the addition of Tignis and its AI-powered software solutions. As revenue recovers and reaches around $130 million, the company expects operating expenses to increase to approximately $50 million per quarter.
For Q1 2025, Cohu projects interest income, net of interest expense and foreign currency impacts, to be approximately $1.3 million. The Q1 2025 non-GAAP tax provision is expected to be approximately $3 million.
The company's long-term growth strategy focuses on capitalizing on the increasing ubiquity of semiconductors, the growing complexity of these devices, and the expanding focus on automation and Industry 4.0 initiatives across the semiconductor industry. Cohu's investments in AI-driven data analytics, process control, and software solutions position the company to support its customers' efforts to optimize manufacturing yield and productivity, a critical imperative in an increasingly competitive global semiconductor market.
Conclusion
Cohu Inc. (NASDAQ:COHU) is a diversified technology company that has demonstrated its resilience and adaptability in the face of cyclical challenges within the semiconductor industry. Through strategic acquisitions, such as the recent addition of Tignis and its AI-powered solutions, Cohu is expanding its addressable market and strengthening its position as a provider of innovative equipment and services that optimize semiconductor manufacturing processes.
While the company faces ongoing risks related to industry cyclicality, competition, and customer concentration, Cohu's strong balance sheet, growing portfolio of differentiated products, and focus on emerging semiconductor applications provide a solid foundation for long-term growth. As the semiconductor industry continues to evolve, driven by the increasing demand for advanced technologies, Cohu is well-positioned to capitalize on these trends and deliver value to its shareholders.