Q1 2025 Cohu Inc Earnings Call
Okay.
Yeah.
Operator: Good day and thank you for standing by.
Speaker Change: Good day and thank you for standing by welcome to <unk> first quarter 2025 financial results call.
Operator: Welcome to Cohu's first quarter 2025 financial results 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.
At this time all participants are in a listen only mode.
Speaker Change: After the Speakers' presentation, there'll be a question and answer session.
Operator: 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.
Speaker Change: To ask a question during the session you will need to press star one one on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised.
Operator: To withdraw your question, please press star 118.
Speaker Change: To withdraw your question. Please press star one again.
Operator: Please be advised that today's conference is being I would now like to hand the conference over to Jeff Jones, Chief Financial Officer. Please go ahead.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would 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 to discuss Cohu's first quarter 2025 results and second quarter 2025 outlook. I'm joined today by our President and CEO Luis Muller.
Speaker Change: Good afternoon, and welcome to our conference call to discuss co. He is first quarter 2025 results in second quarter 2025 outlook I'm joined today by our President and CEO Luis meal, or if you need a copy of our earnings release, you may access it from our website at <unk> dot com or by contacting <unk> investor relation.
Jeff Jones: If you need a copy of our earnings release, you may access it from our website at Cohu.com or by contacting Cohu Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed on Cohu's website in the Investor Relations section. Replays of this call will be available via the same page after the call concludes.
Speaker Change: <unk>.
Speaker Change: There's also a slide presentation in conjunction with today's call that may be accessed on co. His website in the Investor Relations section.
Speaker Change: Replays of this call will be available via the same page after the call concludes.
Jeff Jones: Now to the safe harbor. During today's call, we will make forward-looking statements reflecting management's current expectations concerning Cohu's future business. These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes. We encourage you to review the forward-looking statement section of the 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.
Speaker Change: Now to the Safe Harbor during today's call, we will make forward looking statements, reflecting management's current expectations concerning <unk> future business.
Speaker Change: Statements are based on current information that we have assessed but which by its nature is subject to rapid and even abrupt changes.
Speaker Change: We encourage you to review the forward looking statements section of the slide presentation and the earnings release as well as <unk> filings with the SEC, including the most recently filed Form 10-K and Form 10-Q.
Jeff Jones: Our comments speak only as of today, May 1st, 2025, and Cohu assumes no obligation to update these statements for developments occurring after this call. Finally, during this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures.
Speaker Change: Our comments speak only as of today.
Speaker Change: May 1st 2025, and Cohiba assumes no obligation to update these statements for developments occurring after this call.
Speaker Change: Finally during this call we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures.
Luis Muller: Now I'd like to turn the call over to Luis Muller, Cohu's president and CEO. Luis?
Luis Mueller: Now I'd like to turn the call over to Luis Mueller co use president and CEO Luis.
Luis Muller: Hello and welcome to your quarterly earnings call. First quarter 2025 results were in line with guidance, with revenue approximately $97 million, and non-GAAP gross margin approximately 44%. As previously announced, we implemented a restructuring program in late February to reduce manufacturing and operating expenses through this year. This program includes some incremental manufacturing transfers to our Asia factories and related expense reductions in the U.S. and Europe.
Speaker Change: Hello, and welcome to our quarterly earnings call.
Speaker Change: First quarter 2025 results were in line with guidance with revenue approximately $97 million.
Speaker Change: non-GAAP gross margin approximately 44%.
Speaker Change: As previously announced we implemented a restructuring program in late February to reduce manufacturing and operating expenses through this year.
Speaker Change: This program includes some incremental manufacturing transfers to our Asia factories and related expense reductions in the U S and Europe.
Luis Muller: The majority of these will start benefiting the second quarter onwards. Jeff will provide more details as part of our financial results later. The total revenue was split 63% recurring in the balance system. Systems revenue increased sequentially in automotive and consumer segments, although offset by declines in computing, industrial, and mobile. Estimated test cell utilization at the end of March was down 1.25 to 72%.
Speaker Change: The majority of these will start benefiting the second quarter onwards.
Speaker Change: Jeff will provide more details as part of our financial results later.
Speaker Change: But our revenue was split 63% recurring and the balance systems.
Speaker Change: Systems revenue increased sequentially in automotive and consumer segments.
Speaker Change: Although offset by declines in computing industrial and mobile.
Speaker Change: Estimated test cell utilization at the end of March was down one point quarter over quarter to 72%.
Luis Muller: I won't comment further on utilization at this time, as we plan to implement changes going forward that we anticipate will increase accuracy when segmenting utilization by market. On a positive note, recurring orders increased 28% quarter over quarter, demonstrating the value of Cohu's non-capital equipment revenue streams and indicating the possibility of utilization picking up in the coming quarters. Although Cohu factories in Malaysia and the Philippines have been running below nominal capacity, we are starting to selectively add resources to support recent customer requests for fast turn-on kits and contacts. On the customer design wins, in the first quarter we landed three new opportunities for our handlers, including a leading package and test subcontractor in China supporting the local automotive industry.
Speaker Change: I won't comment further on utilization at this time as we plan to implement changes going forward that we anticipate will increase accuracy when segmenting utilization by market.
Speaker Change: On a positive note recurring orders increased 28% quarter over quarter, demonstrating the value of co Hughes non capital equipment revenue streams, and indicating the possibility of utilization picking up in the coming quarters.
Speaker Change: Although core <unk> factories in Malaysia, and the Philippines have been running below nominal capacity.
Speaker Change: We are starting to selectively add resources to support recent customer requests for fast turn on kits and contractors.
Speaker Change: On the customer design wins in the first quarter, we landed three new opportunities for our handlers, including a leading package and test subcontractors in China supporting the local automotive industry.
Luis Muller: We also won a selection with our Diamond X tester at a European Fabless supplier of communications ICs. This diamond axe will ship for production to a TASC subcontractor in Asia. Additionally, we qualified and received the initial orders for Cohu's power probe cards from a leading European semiconductor company testing silicon carbide IGBT products. On customer expansion, we received a repeat, multi-unit order for HBM inspection systems in the first quarter, continuing to increase our penetration in the memory market. We're excited about this opportunity to reposition and expand our vision inspection technology aligned with the growing data center market.
Speaker Change: We also won a selection with our diamond Ax faster at a European Fabless supplier of Communications Ics.
Speaker Change: This time on Ax will ship for production to a test subcontractor in Asia.
Speaker Change: Additionally, we qualified and received initial orders for co Hughes power probe cards from a leading European semiconductor company testing silicon carbide IGT products.
Speaker Change: On customer expansion, we received a repeat multiunit order for H B M inspection systems in the first quarter continuing to increase our penetration in the memory market.
Speaker Change: We're excited about this opportunity to reposition and expand our vision inspection technology aligned with the growing data center market.
Luis Muller: Two customers expanded Diamond X application in the quarter, one targeting RF IoT devices, and the other gallium nitride high-voltage device test. Several customers expanded the use of our contactors, notably with Cohu's ICON interface supporting tests of high-performance network switches.
Speaker Change: Two customers expanded diamond acts application in the quarter, one targeting RF Iot devices in the other gallium nitride high voltage device test.
Speaker Change: Several customers expanded the use of our contractors, notably with co Hughes icon interface supporting tasks of high performance network switches.
Luis Muller: On the software front, this was our first quarter combining the recently acquired Tignes and Cohu's DI-Core predictive maintenance solution. We have signed three new demonstration opportunities in the quarter to prove the value of our AI process monitoring platform. including with a front-end equipment company, a semiconductor materials supplier, and a U.S. Defense Military Research Group. The team has been asked to evaluate multiple applications for AI process monitoring in the back-end semiconductor manufacturing, which is an encouraging validation of our strategy to support and expand Cohu's own DI-Core solution. We are optimistic about the business prospects of our design wins, pick up in recurring orders, and expansion into new market segments.
Speaker Change: On the software front. This was our first quarter, combining the recently acquired thickness and co Hughes Dirk or predictive maintenance solutions.
Speaker Change: We have signed three new demonstration opportunities in the quarter to prove the value of our AI process monitoring platform, including with our front end equipment company.
Speaker Change: Semiconductor materials supplier.
Speaker Change: And a U S defense military research group.
Speaker Change: The team has been asked to evaluate multiple applications for AI process monitoring the backend semiconductor manufacturing, which is an encouraging validation of our strategy to support and expand <unk> one core solutions.
Speaker Change: We are optimistic about the business prospects of our design wins pick up in recurring waters and expansion into new market segments.
Luis Muller: The second quarter started with positive momentum from growing customer interest in our system. And at this moment, we have not seen any meaningful change in customer buying patterns due to tariff.
Speaker Change: Second quarter started with positive momentum from growing customer interest in our systems.
Speaker Change: And at this moment, we have not seen any meaningful change in customer buying patterns due to tariffs.
Jeff Jones: Let me now turn it over to Jeff for further details on last quarter results and next quarter guidance. Jeff?
Jeff Jones: Let me now turn it over to Jeff for further details on last quarter results and next quarter guidance.
Speaker Change: Jeff.
Jeff Jones: Thanks Luis. Before I walk through the Q1 results and Q2 guidance, please note that my comments that follow all refer to non-GAAP figures. Information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures, are included in the accompanying earnings release and investor presentation, which are located on the investor page of our website.
Jeff Jones: Thanks, Luis before I walk through the Q1 results and Q2 guidance. Please note that my comments that follow I'll refer to non-GAAP figures.
Jeff Jones: Information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures are included in the accompanying earnings release and Investor presentation, which are located on the investor page of our website.
Jeff Jones: Now turning to the Q1 financial results, revenue for the quarter was within guidance at $96.8 million. Recurring revenue, which is largely consumable-driven and more stable than systems revenue, represented 63% of total revenue in Q1. During the first quarter, one customer in the automotive and industrial market accounted for more than 10% of sales. Q1 gross margin was 44.2% and in line with guidance. Operating expenses for Q1 were slightly lower than guidance at $48.6 million, driven by lower labor costs due to the initial restructuring actions announced in late February. Q1 interest income, net of interest expense, and a small foreign currency loss was 1.4 million.
Now turning to the Q1 financial results revenue for the quarter was within guidance at $96 8 million.
Jeff Jones: Recurring revenue, which is largely consumable driven and more stable than systems revenue represented 63% of total revenue in Q1.
Jeff Jones: During the first quarter, one customer in the automotive and industrial market accounted for more than 10% of sales.
Jeff Jones: Q1, gross margin was 44, 2% and in line with guidance.
Jeff Jones: Operating expenses for Q1 were slightly lower than guidance at $48 6 million driven by lower labor costs due to the initial restructuring actions announced in late February.
Jeff Jones: Q1 interest income net of interest expense and a small foreign currency loss was $1 4 million.
Jeff Jones: In Q1, we recorded a tax benefit of $3.6 million, yielding a non-GAAP net loss of approximately $800,000. Non-GAP EPS for the first quarter was a two cent loss.
Jeff Jones: In Q1, we recorded a tax benefit of $3 6 million, yielding a non-GAAP net loss of approximately 800000.
Jeff Jones: non-GAAP EPS for the first quarter was of two sat loss now moving to the balance sheet.
Jeff Jones: Now moving to the balance sheet. Overall, cash and investments decreased by $61 million during Q1 to $201 million due primarily to $35 million used to acquire Tignan. Approximately $9 million used to repurchase 432,000 shares of Cohu common stock. and $10 million used in operation. From inception of our share repurchase plan through Q1, 2025. We've repurchased approximately 4 million shares for approximately $117 million, leaving approximately $23 million available for us to repurchase additional shares in the future. Total debt increased in the first quarter by approximately $9 million due to a revolving credit facility used to finance the purchase of our Malacca, Malaysia facility.
Jeff Jones: Overall cash and investments decreased by $61 million during Q1 to $201 million due primarily to $35 million used to acquire taken us approximately $9 million used to repurchase 432000 shares of <unk> common stock.
Jeff Jones: And $10 million used in operations.
Jeff Jones: From inception of our share repurchase plan through Q1 2025.
Jeff Jones: We have repurchased approximately 4 million shares for approximately $117 million, leaving approximately $23 million available for us to repurchase additional shares in the future.
Jeff Jones: Total debt increased in the first quarter by approximately $9 million due to revolving credit facility used to finance the purchase of our Melaka, Malaysia facility.
Jeff Jones: CapEx of $11 million in Q1 is driven primarily by the Malacca facility purchase of approximately $9 million. Overall, Cohu's balance sheet remains strong, supporting investment opportunities to expand our served markets and technology portfolio in line with our growth strategy and returning capital to shareholders through our share repurchase program.
Jeff Jones: Capex of $11 million in Q1 is driven primarily by the Melaka facility purchase of approximately $9 million.
Jeff Jones: Overall <unk> balance sheet remains strong supporting investment opportunities to expand our served markets and technology portfolio in line with our growth strategy and returning capital to shareholders through our share repurchase program.
Jeff Jones: Now moving to our Q2 Outlook. Recent increases in recurring revenue orders and HBM inspection systems are driving a 10% increase in revenue quarter over quarter. We're guiding Q2 revenue to be approximately $106 million, plus or minus $7 million. Second quarter gross margin is forecasted to be approximately 45%. benefiting from Cohu's differentiated products and our stable, high-margin recurring business. which adds resilience to profitability and provides consistent cash flow through industry cycles. Based on our internal analysis, we do not expect the recently announced tariffs will create a measurable and direct increase in cost of goods sold. Under Cohu's standard shipping terms, the customer is the importer of record and responsible for tariff costs, if any.
Jeff Jones: Now moving to our Q2 outlook recent increases in recurring revenue orders and H P. M inspection systems are driving a 10% increase in revenue quarter over quarter.
Jeff Jones: Regarding Q2 revenue to be approximately 106 million plus or minus $7 million.
Jeff Jones: Second quarter gross margin is forecasted to be approximately 45%.
Jeff Jones: Benefiting from co use differentiated products and our stable high margin recurring business, which adds resilience to profitability and provides consistent cash flow through industry cycles.
Jeff Jones: Based on our internal analysis, we do not expect the recently announced tariffs will create a measurable and direct increase in cost of goods sold.
Jeff Jones: Under co use standard shipping terms the customer is the importer of record and responsible for tariff costs if any.
Jeff Jones: Additionally, the Cohu supply chain and manufacturing operations are primarily Asia-based and shipping to Asia-based customer facilities, completing the product manufacturing and delivery cycle outside of the U.S.
Jeff Jones: Additionally, the <unk> supply chain and manufacturing operations are primarily Asia based.
In shipping to Asia based customer facilities, completing the product manufacturing and delivery cycle outside of the U S.
Jeff Jones: Looking back to 2024, with assumptions that U.S. suppliers are sourcing components and parts offshore. We estimate a possible tariff impact to 2024, cost of goods sold could have been approximately $3 million for the entire year. And lastly, our efforts to transition supply chain to minimize impacts of revised UF tariff scheme is ongoing. Q2 operating expenses are forecasted to be approximately $48 million, about $500,000 lower than Q1, realizing increasing cost savings from the mid-Q1 restructuring action. Once the full impact of the restructuring plan has taken effect in the beginning of 2026, we expect quarterly operating expenses to be approximately $47 million per quarter when revenue is approximately $100 million.
Jeff Jones: Looking back to 2024 with assumptions that U S suppliers are sourcing components and parts off shore.
Jeff Jones: We estimate a possible tariff impact to 'twenty 'twenty four cost of goods sold could have been approximately $3 million for the entire year.
Jeff Jones: And lastly, our efforts to transition the supply chain to minimize impacts of revised U S. Tariff scheme is ongoing.
Jeff Jones: Q2 operating expenses are forecasted to be approximately $48 million about 500000 lower than Q1, realizing increasing cost savings from the mid Q1 restructuring actions.
Jeff Jones: Once the full impact of the restructuring plan has taken effect in the beginning of 2026, we expect quarterly operating expenses to be approximately $47 million per quarter. When revenue is approximately $100 million.
Jeff Jones: We're projecting Q2 interest income, net of interest expense, and foreign currency impacts to be approximately $900,000 at current interest rates. The Q2 non-GAAP tax provision is expected to be approximately $1.6 million. The basic share count for Q2 is expected to be approximately 46.7 million shares.
Jeff Jones: We're projecting Q2 interest income net of interest expense and foreign currency impacts to be approximately 900000 at current interest rates.
Jeff Jones: The Q2 non-GAAP tax provision is expected to be approximately $1 6 million.
Jeff Jones: The basic share count for Q2 is expected to be approximately $46 7 million shares.
Operator: That concludes our prepared remarks and now we'll open the call to questions. As a reminder, to ask a question, 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. Please stand by while we compile the Q&A roster.
Jeff Jones: That concludes our prepared remarks, and now we'll open the call to questions.
Jeff Jones: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Jeff Jones: Please stand by while we compile the Q&A roster.
Brian Chin: Our first question comes from Brian Chin with Steve Hi there, good afternoon. Thanks for letting us ask a few questions. Maybe to start off with, when we look at the roughly 9 million revenue increase at the midpoint of the 2Q guidance. How much of that is improvement in recurring revenue versus the shipments for the HBM inspection? Yeah, it turns out it's about half and half. So half of that quarter over quarter increase, half systems, half recurring.
Speaker Change: Our first question comes from Brian Chin with Stifel.
Jeff Jones: Yes.
Speaker Change: Hi, there good afternoon, thanks for letting us ask a few questions.
Speaker Change: Maybe to start off with when we look at the roughly $9 million.
Speaker Change: Our revenue increase at the midpoint of <unk> guidance.
Speaker Change: How much of that is that.
Speaker Change: <unk> and recurring revenue versus the <unk>.
Shipments for the HBM inspection.
Speaker Change: Yes, it turns out it's about half and half.
Speaker Change: So half of that half of that quarter over quarter increase F systems have recurring.
Brian Chin: Got it. And given the multi... unit order for inspection. Does that increase the prior $7 million target for the full year? Does that give you more visibility shipping either, you know, in the mid-year, maybe even in the second half? And I understand that's mainly been sort of, you know, one lead customer.
Speaker Change: Got it.
Speaker Change: And given the.
Speaker Change: Multi <unk>.
Speaker Change: Unit order for inspection does that increase the prior 7 million dollar target for the full year.
Does that give you more visibility shipping either in the midyear, maybe even into the second half an hour.
Speaker Change: I understand thats, mainly been sort of one lead customer whats the potential maybe not this year, but.
Brian Chin: What's the potential, you know, maybe not this year, but, you know, potential to add customers beyond your initial customer for that product and application?
Speaker Change: Potential to add customers beyond your initial customer for that.
Speaker Change: <unk> and application.
Luis Muller: Hi, Brian, this is Luis. Yeah, so we're projecting about $8 million of revenue in HBM this year. That's the best view we have at this time.
Brian Lewis: Hi, Brian Lewis.
Speaker Change: Yes, so we're projecting about $8 million of revenue in <unk> This year.
Brian Lewis: That's the best view, we have at this time.
Luis Muller: And we have started discussions with a second customer, but it's still at the exploratory phase, so nothing concrete to put a number on. But we certainly expect that revenue to grow, you know, going out to 2026. I just don't have a number to put on that at this time. Okay, great.
Brian Lewis: We have started discussions with a second customer, but it's still it's still exploratory phase. So nothing nothing concrete you to put a number on.
Brian Lewis: But we certainly expect.
Brian Lewis: That revenue to grow.
Brian Lewis: Going out to 2026.
Brian Lewis: Just don't have a number to put to put on that at this time.
Brian Chin: Maybe one last question from me here. Um, yeah, some of your some of your customers have been talking more favorably about Yeah, maybe some inflection in their shipments, and you know, the way this works, right, that, you know, that's one, that's one part of it, but then there's a matter of absorbing capacity and, you know, etc, etc, in terms of actually materializing into some, maybe, you know, capacity, equipment that's required from you guys, but you haven't made a commentary about some pickup in the recurring revenue. Can you maybe discuss how those things might connect a little bit and kind of what that would Yeah, if that suggests any sort of signals around maybe timing on when...
Speaker Change: Okay, Great and then maybe one last question for me here.
Speaker Change: Yeah. Some of your some of your customers have been talking more favorably about.
Speaker Change: Yeah, maybe some inflection on their shipments and the way this works right.
Speaker Change: That's one that's one part of it but then.
Speaker Change: As a matter of absorbing capacity and et cetera, et cetera in terms of actually materializing.
Speaker Change: Maybe capacity.
Speaker Change: <unk> that's required from you guys, but.
Speaker Change: You have you made the commentary about some pickup to meet recurring revenue can you maybe discuss how the how those things might come back a little bit and kind of what that was.
Speaker Change: Does that suggest any sort of signals around maybe timing on when.
Luis Muller: You know, you could start to see some improved backlog for maybe the equipment side. Yeah, I mean, that's, that's the expectation, right? We, we should see When we see any pickup in recurring We should naturally expect to see an improvement in utilization. So I think we'll be watching pretty closely here in the next quarter to see if utilization levels go up, if it matches the segments that we're seeing the pickup in recurring, and the magnitude of that pickup in utilization. I think that would be more indicative of the trend or confirmation of the trend for when to expect.
Speaker Change: Yeah, you could start to see some improved backlog for the equipment side of the business.
Speaker Change: Yeah, I mean, that's the expectation right.
Speaker Change: We should see.
Speaker Change: When we see any pickup in recurring.
Would naturally expect to see an improvement in utilization. So I think we'll be watching pretty closely here in the next quarter to see utilization levels go up.
Speaker Change: If it matches the segments that we're seeing the pickup in recurring and the magnitude of that pickup in utilization I think that that would be more indicative of the trend are confirmation of the trend for when to expect.
Luis Muller: sort of capital equipment demand increases again, right?
Speaker Change: Sort of capital equipment demand increases again alright.
Luis Muller: With that said, I think if you look back in history here, this is our first quarter in about three and a half years now that they were guiding the quarter up year over year. So if you look at Q2 of 24 versus Q2 guidance year 25, revenues up sequentially, and the last time that happened was Q1, oh, sorry, Q3 of 21. So, you know, we've got to see a little bit more of utilization pickup, like I said, continuation or recurring pickup to call it a solid trend, but it's a positive sign and certainly a noticeable turn of the corner.
Speaker Change: With that said I think if you look back in history. Here. This is our first quarter in about three five years now that we're there we're guiding.
Speaker Change: The quarter up year.
Speaker Change: Year over year. So if you look at Q2 of 24 versus Q2 guidance here at <unk> 25.
Speaker Change: Revenues up sequentially in the last time that happened was Q1, I'm sorry, Q3 of 'twenty. One so we got to see a little bit more of utilization pick up like I said, Rick continuation of recurring pickup to call. It a solid trend, but it is a positive sign.
Speaker Change: Certainly noticed alternative corner.
Speaker Change: Okay.
Brian Chin: Great, thank you.
Speaker Change: Great. Thank you.
David Duley: Our next question comes from David Duley with Steelhead Security. Thank you for taking my question. I was wondering, you know, in what segments are you seeing the pickup in the reoccurring orders that you mentioned? Hi Dave, the recurring order pickup is predominantly in the mobile segment. Okay, is it broad base? Or is it just really with one or two customers? Or how would you describe the The depth of it. Um, you know, in this case, it's actually fairly concentrated, Dave. Um, it's fairly concentrated. I'm just going to leave it at that. Okay.
Speaker Change: Our next question comes from David Duley with Steelhead Securities.
Speaker Change: Oh. Thank you for taking my question I was wondering you know what in what segments are you seeing the pickup in the reoccurring orders that you mentioned.
Speaker Change: Hi, Dave the recurring order pickup is predominantly in the mobile the mobile segment.
Speaker Change: Okay.
Speaker Change: Is it broad based or is it just really with one or two customers or how would you describe the.
The depth of it.
Speaker Change: In this case, it's actually fairly concentrated Dave.
Speaker Change: It's fairly concentrated.
Speaker Change: I'm just going to leave it at that.
Speaker Change: Okay.
Luis Muller: And, um, could you just elaborate a little bit more, um, to one of the comments you made on the Power Probe Card design win for SIC and, you know, um, just talk about how you won that business and, you know, what the opportunity for, uh, the revenue stream there is this year and next year or what we should expect. Sure, sure. We have introduced this product in the second half of 2024. It's really aimed at very high voltage testing at probe where you have the risk of creating an arc between probe tips. And so we have sort of a unique technology, a patent technology on how to enable multi-site testing of high voltage dye applications, which in this case is silicon carbide.
Speaker Change: It.
Speaker Change: Could you elaborate a little bit more.
Speaker Change: One of the comments you made on the power probe card design win for <unk>.
Speaker Change: Just talk about how you won that business and what's the opportunity for revenue.
Speaker Change: The revenue stream there is this year and next year or what we should expect.
Speaker Change: Sure sure we have.
Speaker Change: We have introduced this product in.
Speaker Change: Second half of 'twenty four it is really aimed at.
Speaker Change: Very high voltage testing at pro where you have the risk of creating an arc between probe chips and so we have we have sort of a unique technology of patent technology on how to enable multi site testing of high voltage.
Speaker Change: <unk> applications, which in this case the silicon carbide, we had a qualification win I believe it was at the end of 'twenty. Four this is our second customer win.
Luis Muller: We had a qualification win, I believe it was at the end of 2024. This is our second customer win and there's a third customer that we have right behind us that we're working on at this time. Let me check here on the second part of your question. Yeah, in a second. We were looking. I think we're looking at this application having, on this customer win that we had here, this opportunity is about a two million dollars a year opportunity. How much is that going to happen this year? You know, just given timing, qualification, production ramp, I would say definitely a fraction of the two million on this one customer, but that's about the size on a per customer base.
Speaker Change: There's a third customer that we that we have.
Speaker Change: Right behind this that we're working on at this time.
Let me check here on Europe.
Speaker Change: Second part of your question.
Speaker Change: Okay.
Speaker Change: Second.
Speaker Change: We were looking.
Speaker Change: I think we're looking at this application.
Speaker Change: Having on this customer win that we had here this opportunity is about a $2 million a year opportunity how much is that going to happen this year.
Speaker Change: Just given timing qualification and production ramp I would say definitely a fraction of the $2 million on this one customer but.
Speaker Change: That's about the size on a per customer base. The other customer that we won the one that we're working in there about similar sizes. So it's sort of a 2 million dollar a year per customer give or take opportunity.
Luis Muller: You know, the other customer that we won, the one that we're working in, they're about similar sizes, so it's sort of a two million a dollar a year per customer, give or take, opportunity.
Luis Muller: Okay, and then finally for me is one of your other prepared remarks about winning some handler business in China.
Speaker Change: Okay.
Joe: And then Joe.
Joe: Finally for me is.
Speaker Change: One of your other prepared remarks about winning some handler business in China could you elaborate.
Luis Muller: Could you elaborate? What that represents and is that market share wins or how would you describe this and what's the application? Thanks. Sure. Yeah, it's a fabulous, it's a fabulous customer in China. in the automotive space. They're outsourcing it, obviously, to a test house also in China. We have, over time, actually captured You know, a small number of You know, startup fabless companies in China. This is viewed as small at this time.
Joe: No.
Joe: Yes.
Speaker Change: What that represents and is that market share wins or or how would you describe the application.
Speaker Change: Sure, Yes, it's a fabulous fabulous customer in China.
Speaker Change: In the in the automotive in the automotive space.
Speaker Change: They're outsourcing obviously to test house also in China.
Speaker Change: We have over time actually capture.
Speaker Change: A small number of.
Speaker Change: Startup fabless companies in China. This is this is viewed as small at this time.
Luis Muller: But if I extract and I go beyond this particular customer, the collection of all design wins I talked about for Q1, we tally it as a $6.5 million of orders that we got that we expect to ship throughout this year with a potential total revenue of $18 million a year. That's estimated, obviously. That's not in-hand PO. The in-hand POs are the $6.5 million. And that's the collection of all design wins.
But if you.
Speaker Change: If I extract and I go beyond this particular customer of the collection of all design wins I talked about.
Speaker Change: For Q1, we tally it as a $6 $5 million of.
Speaker Change: Orders that we got that we expect to ship throughout this year.
Speaker Change: The potential total revenue of $18 million a year.
Speaker Change: That's estimated obviously thats not in hand in.
Speaker Change: Ian Mpls or the $6 5 million.
Speaker Change: And Thats.
Speaker Change: Just a collection of all design wins this is not the Chinese specific.
Luis Muller: This is not the China-specific customer that you have asked. All right, thank you.
Speaker Change: Customer that you have asked.
Speaker Change: Alright, thank you.
Craig Ellis: Our next question comes from Craig Ellis with B. Reilly Security. Yeah, thanks for taking the question. Guys, congratulations on seeing the nice upturn and recurring orders.
Speaker Change: Our next question comes from Craig Ellis with B Riley Securities.
Craig Ellis: Yes, thanks for taking the question guys. Congratulations on seeing the nice upturn in recurring orders.
Craig Ellis: Luis, I was hoping we could just spend a little time looking beyond 2Q. And what is a nice guidance, your point, the first in a long time, that's up here on your, as you talk to your customers across your different end markets on both the systems and the recurring side of the business. How are they thinking about their needs for systems and recurring products in the back half of the calendar year? Are they thinking that we'll need to see a step up in system deployment as we go into 3Q and recurring in 4Q with a more seasonal...
Speaker Change: Luis I was hoping we could.
Speaker Change: Just spend a little time looking beyond <unk>.
Speaker Change: And what is a nice guidance share point the first in a long time.
Speaker Change: <unk> up year on year as you talk to your customers across your different end markets on both the systems and the recurring side of the business.
Speaker Change: How are they how are they thinking about their needs for.
Speaker Change: Systems and recurring products in the back half of the calendar year are they thinking that.
Speaker Change: We'll need to see a step up in system deployment as we go into <unk> and recurring <unk> with a more seasonal.
Craig Ellis: 4Q off of that or what kind of indication are they giving you and what are they telling you to get ready for in your production facilities beyond the current 2Q?
Speaker Change: For Q after that or what kind of indication or are they giving you and what are they telling you to get ready for and your production facilities beyond <unk>.
Speaker Change: Current to care.
Luis Muller: Yeah, great question, Craig. I would say two things. First of all, and I said this in my prepared remarks, we started the second quarter with a positive momentum. We have seen really a pickup in interest in systems, in our systems and system orders. With that said, I think we're all in this space a little cautious right now in trying to understand, look, we haven't really seen any meaningful change in customer buying pattern due to tariffs. With that said, I think we're cautious and we want to remain cautious and not get ahead of ourselves.
Craig Ellis: Yeah, Great question Craig.
Craig Ellis: I'd say two things first of all and I've said this in my prepared remarks.
Craig Ellis: We started the second quarter.
Craig Ellis: The positive momentum we have we have seen really a pickup in.
Craig Ellis: Interest in systems, and our systems and system orders.
That said I think we're all in this space a little cautious right now and trying to understand look we haven't really seen any meaningful change in customer buying pattern due to tariffs with that said I think for cautious and we want to remain cautious and not get ahead of ourselves. So we're in.
Luis Muller: So we're not going to say a ton about third quarter and beyond, other than to say we still expect this to be a year over year growth, year for Cohu. And at this point, we feel that consensus estimates for us are in a good place for the second half of the year. And we're going to leave it at that until we gain more visibility into what's happening. I might also add that, you know, our lead times for our systems are still, except for the exception of a couple of specific configurations, are within a quarter. And so customers generally are um i'm showing their hand more or less uh you know more than one quarter at a time here That's helpful, guys.
Craig Ellis: We're not going to say a ton about.
Craig Ellis: Third quarter and beyond other than to say, we still expect this to be a year over year growth year for <unk>.
Craig Ellis: And at this point, we feel we feel that consensus estimates for us are in a good place for the second half of the year and we're going to leave it at that until we gain more visibility into what's happening.
Craig Ellis: I might also add that our lead times for our systems are still except for the exception of a couple of specific configurations are within a quarter and so customers generally art.
Craig Ellis: I don't know showing their hand more or less.
Craig Ellis: More than one quarter at a time here.
Craig Ellis: That's helpful guys and then the follow up question goes back to the point you made about <unk>.
Craig Ellis: And then the follow-up question goes back to the point you made about Monitoring Industry Utilization.
Luis Muller: Luis, and I won't ask you for numbers, but what I would appreciate better understanding is when you look at the system that was in place that you had, what did you think that was missing? What are you trying to fix? And what are you trying to get to in the future? Just help us understand the to and from without all the numbers in between.
Speaker Change: Monitoring industry utilization, Luis and I won't ask you firm numbers, but what I would.
Craig Ellis: Appreciate better understanding is.
Craig Ellis: When you look at that system with him plays that you had what did you think that was missing what are you trying to fix them and what are you trying to get to in the future just help us understand.
Craig Ellis: The current problem without all the numbers in between.
Luis Muller: Okay and I'll give you a couple more data points here, Craig. So as I said, utilization closed the quarter at about 72%. IDMs were about 70% and OSATs about 73%. What we're trying to refine is the distribution of utilization now down to auto and industrial, computing, mobile, consumer applications. We have a methodology to do it. I think it's a little coarse and we intend to refine it. We have the means to refine that a little bit better. I don't know how that's going to be comparable to the prior methodology. We haven't ran that through yet entirely.
Craig Ellis: Okay, and I'll give you a couple more data points here Craig.
Craig Ellis: And so as I said utilization closed the quarter at about 72%.
Craig Ellis: I'd.
Craig Ellis: <unk>.
Craig Ellis: We're about 70% in OS at about 73%, what we're trying to refine is the distribution of utilization now down to auto and industrial computing mobile consumer.
Craig Ellis: Applications.
Craig Ellis: We have a methodology to do it I think it's a little of course, and we intend to refine and we have the means to refine that a little bit better.
Craig Ellis: I don't know, how thats going to be comparable to the prior methodology. We haven't we haven't ran that through yet entirely so.
Luis Muller: So I'm avoiding breaking down utilization by end market at this time until we get a better handle on the new methodology. But that's not going to affect the total utilization nor utilization by IDMs and OSATs. So I'm comfortable stating that as it is at the end of Q1 and we'll see where that is at the end of Q2. Those are going to be comparable quarter over quarter still.
Craig Ellis: Voiding breaking down utilization by end market at this time until we get a better handle on the new methodology, but but that's not going to affect the total utilization not utilization.
Craig Ellis: Utilization by Idms, and <unk> set some comfortable stating that as it is at the end of Q1, and we'll see where that is at the end of Q2 those are going to be.
Craig Ellis: Comparable quarter over quarter steel.
Craig Ellis: That's helpful. And then if I could sneak in one more before I go back in the queue. It sounds like the Tingviz acquisition is integrating well and that that's on track with your expectations, Luis.
Speaker Change: That's helpful and then if I could sneak in one more before I go back in the queue. It sounds like the Tengiz acquisition is integrating well and.
Speaker Change: And that that's on track with your expectations for beef anything else you'd like to say about that and how we should think about.
Luis Muller: Anything else you'd like to say about that and how we should think about, you know, the coming next couple of quarters and then what might be possible for that business in 2026? Thank you. Sure. Yeah, I mean, so far, only one quarter or less than a quarter behind us, right? We basically have, I think, 10 or 11 weeks of integration at the quarter end, because we closed it at mid-January. Yeah, it's pretty interesting to see the level of interest from our customers. You know, that business was not necessarily focused on the back end. So, what they booked in the first quarter was still things that were in play at the time of the acquisition, you know, so to speak, a front-end company, a materials supplier to semiconductor manufacturing, and a research group within the U.S.
Speaker Change: Coming.
Speaker Change: Next couple of quarters, and then what might be possible for that business in 2026. Thank you.
Speaker Change: Sure, Yes, I mean, so far only one quarter or less than a quarter behind us.
Speaker Change: Basically have.
Speaker Change: Think 10 or 11 weeks of integration at the quarter end, because we closed it mid January.
Speaker Change: Yes.
Speaker Change: It's pretty interesting to see the level of interest from our customers that business was not necessarily focus on the backend.
Speaker Change: So.
Speaker Change: What they booked in the first quarter was still things that were in play at the time of the acquisition so to speak or front end company.
Speaker Change: Materials supplier to semiconductor manufacturing in our research group within the U S military.
Luis Muller: military. But at the same time, in the last quarter, there has been a flurry of requests for meetings all over the globe here. So, people have been traveling and holding up interactions with customers in various countries. The activity level has picked up a lot, and we've got to be careful now how much we buy all at once.
Speaker Change: But at the same time in the last quarter. There has been a flurry of requests for meetings.
Speaker Change: All over the globe here, so people have been traveling and holding up interactions with.
Speaker Change: Customers in various countries.
Speaker Change: The activity levels picked up a lot.
We got to be careful how much we buy all at once.
Luis Muller: What do you expect for 2026? Well, if this momentum continues, I'm pretty excited about it, but we don't have a number to say. We have to take these activities down to paper plans, specifics, business plans by customer, and then see what we're going to embrace to create numbers that we can tag in more precisely for 2026. So, I don't want to get ahead of myself, but it is pretty exciting. Do you think he'd be at that point when we talk again at the end of July or early August, Luis, or would it take longer than that?
Speaker Change: And what you expect for 2026, well if this momentum continues and I am pretty excited about it but we don't have a number to say we have to take these activities down to paper plans.
Speaker Change: Specifics business plans by customer and then see what we're going to what are we going to embrace.
Speaker Change: <unk> numbers that we can.
Speaker Change: Bagging more precisely for 2026, so I don't want to get ahead of myself.
Speaker Change: But it is pretty exciting.
Speaker Change: Do you think you'd be at that point when we talk again at the end of July early August Luis or would it take longer than that.
Luis Muller: I would give it about another six months, Craig. I'm expecting more towards the Q3 earnings. time frame to be discussing numbers for for software. Okay. So maybe around Semicon West. Okay.
Speaker Change: I would give it a out another six months, Craig I'm expecting more towards.
Speaker Change: The Q3 earnings.
Speaker Change: Time frame to be discussing numbers for <unk>.
Speaker Change: For software, Okay. So maybe around semicon west Okay. Thank you very much guys.
Craig Ellis: Thank you very much, guys.
Operator: You're welcome.
Speaker Change: You're welcome.
Charles Shih: Our next question comes from Charles Shih with Needham. Hey, good afternoon, Luis and Jeff. I want to go back to the recurring order, the pickup. Sounds like it's predominantly mobile and fairly concentrated to a small number of customers. I want to ask you, how do you think about the sustainability of the recurring revenue or order going from here and, let's say, going another few quarters? Because if I think if this were in a normal environment, we would definitely look at this as possibly a leading indicator of a very, very, very positive maybe cyclical recovery for at least the mobile segment.
Speaker Change: Our next question comes from Charles <unk> with Needham.
Charles: Hey, good afternoon Lewis Jeff.
Speaker Change: Wanted to go back to the recurring.
Speaker Change: Order pickup sounds like it's a predominantly mobile and.
Speaker Change: Fairly concentrated.
Speaker Change: To a small number of customers.
Speaker Change: Wanted to ask you how do you think about the sustainability of that.
Speaker Change: <unk>.
Speaker Change: Revenue order going from here.
Speaker Change: And let's say go go go.
Speaker Change: Another few quarters.
Speaker Change: If I think.
Speaker Change: This was in a normal environment, we would definitely look at this as possibly a leading indicator.
Barry.
Barry: Very positive.
Barry: Maybe cyclical recovery.
Barry: For at least at the mobile segment.
Luis Muller: But we're not quite in a kind of environment right now. There has been lots of debate on whether the demand is real or is it the tariff-related pull-ins. I know for you guys, as equipment supplier, multiple degrees away from the end market, it's probably harder for you guys to really find evidence one way or the other. But I want to get your thoughts. How do you think about the sustainability and what this actually means? And maybe at a more macro level, what do you think this mobile customer is trying to do here? Thank you.
Speaker Change: We're not cutting kind of environment right now there has been lots of debate on whether the demand is real or is it the tariff related pull ins I know for you guys.
Speaker Change: A premier supplier of multiple degrees away.
Speaker Change: From an end market, that's probably harder for you guys to really.
Speaker Change: Evidence, one way or the other but that one I get your thoughts.
Speaker Change: How do you think about the sustainability and what this actually means.
Speaker Change: Maybe more at a more macro or micro level. What do you think of this at this mobile customers are trying to do here. Thank you.
Speaker Change: Okay.
Luis Muller: Well, multiple answers or multiple questions here, Charles. The The sustainability, right? In mobile, what I would expect here to happen is once we ship these recurring orders that we would see a pickup in mobile market utilization quarter over quarter. That's my expectation. Following that, I would expect an increasing system orders in mobile that You know, would probably translate into revenue here in the coming quarter, say Q3 and beyond. That would be sort of a trend of sustainability in the mobile market, and I feel like that's actually quite doable.
Speaker Change: Well multiple multiple answers or multiple questions here Charles the.
Speaker Change: This sustainability right.
Speaker Change: In mobile what I would expect here to happen is once we ship. These recurring orders that we would see a pickup in mobile market utilization quarter over quarter, that's my expectation.
Speaker Change: Following that I would expect any increasing system orders in mobile that.
Speaker Change: We will probably translate into revenue here in the coming quarters say Q3, Q3 and beyond.
Speaker Change: That would be sort of a trend of sustainability in the mobile market and I feel like that's actually quite doable.
Luis Muller: If you talk recurring more broadly. you know, we would have to see the same happen across auto, industrial, consumer segments to be able to speak to the same trend. I don't see that quite yet, Charles. I see it more in mobile, and we have been talking here for the last couple quarters that we would expect mobile to be the leading market for us and the general volume market, followed by industrial, and then later on followed by automotive. I still believe that that's the sequence, and what we're seeing right now is in mobile. um As far as tariff pull-in, your question about tariff pull-in, I really don't believe this is a tariff pull-in because if you just look at the window of time that everybody has against the current exemptions and tariff rates to supposedly change back up again to a higher level and the timing of shipments of these recurrings, I have a hard time believing that they can actually make any meaningful change until until sort of mid-summertime.
Speaker Change: If you talk recurring more broadly.
Speaker Change: We would have to see the same happen across auto industrial consumer segments to be able to speak to the same trend.
Speaker Change: I don't see that quite yet Charles so I see it more in mobile and we have been talking here for the last couple of quarters that.
Speaker Change: That we would expect mobile to be the leading market for us in general volume market, followed by industrial and then later on followed by automotive still believe that that's the sequence in what we're seeing right now is in mobile.
Speaker Change: As far as tariff pull in your question about tariff pull in I really don't believe this is a tariff pull in because if you just look at the window of time.
Speaker Change: At.
That everybody has against the.
Speaker Change: Sort of the current exemptions in tariff rates to supposedly change back up again to a higher level and the timing of shipments of these recurring.
Speaker Change: I have a hard time, believing that they can actually make any meaningful change in too.
Speaker Change: And to sort of mid summer time.
Speaker Change: Yeah.
Speaker Change: Okay.
Charles Shih: Got it. So it sounds like for other verticals you have auto-industrial or consumer computing, similar behavior hasn't really been seen by you guys so far.
Speaker Change: Got it so it sounds like.
Speaker Change: So are there.
Speaker Change: The verticals, you had auto industrial or consumer computing things.
Speaker Change: Similar behavior, Hasnt really being seen by you guys.
Speaker Change: So far.
Charles Shih: So maybe, let me ask another from the other way. For the remainder of the year, I mean, you kind of gave some color about Q2, the incremental revenue dollar, half of that is from system, half of that is from recurring. Sounds like you're holding, maybe shift the mix for recurring will come down slightly, mix of system come up slightly. But for the remainder of the year, what's your best guess based on The trend right now, where the system versus recurring revenue percentage, the mix could be as we go into the second half of the year.
Speaker Change: So maybe maybe.
Speaker Change: Let me ask another front of the other way.
Speaker Change: For the remainder of the year.
Speaker Change: And I gave some color about Q2 right that incremental dollar.
Speaker Change: Revenue dollars half of that is that system.
Speaker Change: Is that recurring SaaS likely are holding.
Speaker Change: May be shaped.
Speaker Change: The mix of recurring will come down slightly mix of system come up slightly but for the remainder of the year. What's your best guess based on.
Speaker Change: Okay.
Speaker Change: Right now.
Speaker Change: The <unk> 10 versus the recurring revenue.
Speaker Change: On page at the mix could be.
Speaker Change: As we go into the second half of the year.
Luis Muller: Thank you. at this point, hard to tell. But as we go into the second half of the year, it's It's likely to be close to the 60-40 relationship, or it's not too far from that today, 63-37, 63% being recurring. So it's probably going to maintain somewhere close to that 60-40, give or take a couple hundred basis points. Thanks, Jeff.
Speaker Change: At this point hard to tell but as we go into the second half of the year.
Speaker Change: Likely to be close to the 60 40 relationship where it's not too far from that today, 63, 37, 63% being recurring.
Speaker Change: So, it's probably going to maintain somewhere close to that 60, 40 give or take a.
Speaker Change: Couple of hundred basis points.
Speaker Change: Okay.
Speaker Change: Thanks, Jeff.
Robert Mertens: Our next question comes from Robert Mertens with TD Cowell. Hi, this is Robert Mertens on for Krish Sankar. Thanks for taking my questions.
Speaker Change: Our next question comes from Robert Mertens with TD Cowen.
Speaker Change: Yes.
Speaker Change: Hi, This is Robert Mertens on for Chris Thanks for taking my questions.
Robert Mertens: I guess the first one that I don't want to get too hung up on it because we've touched upon it, but in terms of test cell utilization rates, do you typically see different order patterns between OSATs and IDM customers from a test cell utilization perspective? Does one see their uptick in earlier in the cycle? Or is it sort of based on these end markets that you're exploring and provide more information next quarter?
Speaker Change: I guess, the first one that I don't want to.
Speaker Change: Get too hung up on it because we have touched upon it but in terms of test cell utilization rates.
Speaker Change: Do you typically see different order patterns between SaaS and IDM customers from a utilization.
Speaker Change: Utilization perspective, just one feed their uptick in demand earlier in the cycle.
Speaker Change: Or is it sort of based on these end markets that you're exploring and we'll provide more information next quarter.
Luis Muller: Hi Robert. No, uptick in buying is usually dictated by utilization regardless if you're an OSAT or IDM. Nevertheless, through different cycles of the industry would notice that the OSATs tend to drop utilization start the down cycle and they also tend to start the up cycle. That's that's sort of the general observable trend of past cycles. So the OSATs tend to lead and that's more because of the sort of the end market exposure that fabulous companies are leveraging the OSATs versus the more traditional industrial automotives that have their own factories and tend to be the segments that lag both in a recovery as well as in a downside.
Robert Mertens: Hi, Robert.
Robert Mertens: The uptick in buying is usually dictated by utilization, regardless, if you are an offset or IDM. Nevertheless.
Robert Mertens: Unless.
Robert Mertens: Through different cycles of the industry would notice that the <unk> 10-Q.
Robert Mertens: Drop utilization start the down cycle, but also tend to start the up cycle.
Robert Mertens: That's sort of the general.
Robert Mertens: Observable trend of past cycles. So the <unk> tend to lead and that's more because of the sort of the end market exposure that fabless companies are leveraging the <unk> SaaS versus the more traditional industrial automotive's that have their own factories.
Robert Mertens: And then should be segments that lag both on a recovery as well as on the downside.
Robert Mertens: Okay.
Luis Muller: Okay, got it, that's helpful.
Okay got.
Robert Mertens: Got it Thats helpful.
Luis Muller: And then automotive was up substantially in the March quarter after maybe a year or so of digestion. Just how should we think about the turnaround in that market? Are you expecting similar strength to continue into the June quarter or really need to see mobility turn around and then auto might trail after that? Yeah, there's no hard set rule that mobility has, mobile has to go first and then somebody second, somebody third. That's not a hard, fast rule, but I still expect that to be the case here, where auto is going to trail. If you look at our customers, you know, the large automotive semiconductor manufacturers, their earnings release, some have called the trough as Q3 of 24, others just called the trough as being this past quarter, Q1 of 25.
Robert Mertens: Then.
Robert Mertens: Automotive was.
Robert Mertens: Substantially in the March quarter, after maybe a year or so of digestion, just how should we think about the turnaround in that market.
Robert Mertens: Are you expecting similar strength to continue into the June quarter really need to see.
Robert Mertens: Mobility turnaround than it might trail after that.
Robert Mertens: Yes, Theres no hard set rule that mobility has mobile has to go first and then somebody seconds somebody there.
Robert Mertens: A hard fast rule, but I still expect that should be the case here what auto is going to trail if.
Robert Mertens: If you look at our customers.
Robert Mertens: Large automotive semiconductor manufacturers their earnings release, some have called the trough as Q3 of 'twenty four.
Robert Mertens: Others, just called the trough was being this past quarter Q1 of 'twenty five.
Luis Muller: So there is a general theme here that they're calling somewhere between the last three quarters the trough of the cycle. So we'd expect utilization to start creeping up, recurrent orders to start picking up as well. The question is at what pace, right? Inventory levels have corrected, although some customers have had an increase, still quarter over quarter in Q1, and talking about keeping that flat going over to the next quarter. So I think the auto space has turned the corner, but I don't know yet at what pace it's going to recover. And I would bet at this moment, slowly for now.
Robert Mertens: So there is a general theme here that they are calling.
Robert Mertens: Somewhere between the last three quarters the trough of the cycle. So we would expect utilization to start creeping up recurring orders to start picking up as well. The question is at what pace right inventory levels.
Robert Mertens: Have corrected although some customers have had an increase quarter over quarter in Q1, and talking about keeping that flat going over to the next quarter.
Robert Mertens: So I think the auto space has turned the corner.
Robert Mertens: But I don't know yet at what pace is going to recover and I would bet at this moment.
Robert Mertens: Slowly for now so that's our expectation at least for the next quarter or two.
Robert Mertens: So that's our expectation, at least for the next quarter or two. Okay, got it.
Robert Mertens: Thank you, that's helpful. Appreciate it.
Robert Mertens: Okay got it. Thank you that's helpful. I appreciate it.
Tyler Burmester: Our next question comes from Christian Schwab with Craig Ellis. Hey, this is Tyler Burmester on behalf of Christian. Thanks for letting us ask a couple questions here. Maybe first on the restructuring, you know, it looks like after the restructuring, you know, we're kind of to a break even on a quarterly revenue run rate, you know, in the low 100 millions. I guess, you know, the way you think about that, you know, at these sort of levels, as we see recovery over time, you know, what kind of revenue levels, you know, can these sort of expense levels now support in a recovery?
Speaker Change: Our next question comes from Christian Schwab with Craig Hallum.
Speaker Change: Hey, this is Tyler burmeister on behalf of Christian Thanks for letting us ask a couple of questions here.
Speaker Change:
Speaker Change: Maybe first on the restructuring.
Speaker Change: It looks like after the restructuring we're kind of to a breakeven on a quarterly revenue run rate in the low 100 million I guess the way you think about that.
Speaker Change: At these sort of levels as we see recovery over time, what kind of revenue levels.
Speaker Change: Can be sort of.
Speaker Change: Expense levels now support <unk>.
Speaker Change: Cover situations.
Luis Muller: So, From an op, you're asking from an op-ex standpoint, Tyler? Yeah, yeah, essentially from an op-ed. Yeah, so after after we see full benefit of the restructuring And if revenue is at this $100 million level, we'd expect OPEX to be around $47 million. And then as that revenue grows and Let's just call out $130 million a quarter. We'd expect OffX to be about $49 million.
Speaker Change: So.
Speaker Change: From an app.
Speaker Change: And from an Opex standpoint Tyler.
Speaker Change: Yeah, Yeah, essentially from an Opex standpoint.
Speaker Change: Yes, so after after we see full benefit of the restructuring.
Speaker Change: And if revenue was at the $100 million level, we would expect opex to be around $47 million.
Speaker Change: And then as that revenue grows.
Speaker Change: Let's just call out a $130 million a quarter.
Speaker Change: We would expect opex to be about $49 million.
Speaker Change: Okay.
Jeff Jones: Okay, all right, understood.
Speaker Change: Okay, all right understood.
Jeff Jones: Um, it may be a little bit of housekeeping on the model, Jeff, on taxes, the benefit in the quarter, I guess a little more color what that was exactly. And then, you know, maybe level set us going forward, you said 1.6 million in Q2, is that what we should kind of be thinking about is kind of a fixed run rate until we until we see, you know, revenue and profitability accelerate for Yeah, so in the in the first quarter, we did have a non gap tax benefit, we had a tax loss. And we did have a tax benefit of 3.6 million.
Speaker Change: Yes.
Speaker Change: It may be a little bit of housekeeping on the model, Jeff on taxes, the benefit in the quarter I guess, a little more color what that was exactly and then.
Speaker Change: Maybe level set us going forward, you said $1 6 million in Q2 is that what we should kind of be thinking about as kind of a.
Speaker Change: Fixed run rate until we until we see.
Speaker Change: Revenue and profitability accelerate from here.
Speaker Change: Yes, so in the first quarter.
Speaker Change: Did have a non-GAAP tax benefit we had a tax loss.
Speaker Change: And we did have a tax benefit of $3 6 million.
Jeff Jones: So based on revenue and the guidance You know, Q2 was looking like a small profit. But our effective tax rate is is high at this sort of break even level if you will the effective tax rate was a little bit wacky so the rate becomes in the you know 90 percent range of pre-tax book pre-taxing So I would carry that 90% into the second half as well. I'll give a guidance update obviously on the next call, but that's what I would run with for now. Perfect, very helpful.
Speaker Change: So based on revenue and the guidance.
Speaker Change: Q2 is looking like a small profit.
Speaker Change: But our effective tax rate.
Speaker Change: As is high at this sort of breakeven level. If you will the effective tax rate was a little bit wacky.
Speaker Change: So the rate becomes in the 90% range of pretax book pre tax income.
Speaker Change: So I would carry that 90% into the second half as well I will give a guidance update.
Speaker Change: On the next call, but Thats, what I would run with for now.
Speaker Change: Perfect very helpful.
Jeff Jones: And then, you know, last one, maybe on capital allocation, you know, cash did come down in the quarter, you know, but still at a pretty substantial level here, I guess, you know, are we still potentially looking at other, you know, kind of strategic tucking M&A opportunities out there? You know, any thought about an accelerated buyback or raising that given the level of the stock price down here? Any, any commentary on capital allocation would be great. Thanks. Yeah, you bet. Sure. Yeah, you know, the review of the acquisition funnel is sort of within our what's in our blood.
Speaker Change: Then last one maybe on capital allocation.
Speaker Change: Did come down in the quarter.
Speaker Change: But still at a pretty substantial level here I guess.
Speaker Change: Are we still potentially looking at other.
Speaker Change: Strategic tuck in M&A opportunities out there any thought about an accelerated buyback or raising that given the level of the stock price down here and any commentary on capital allocation would be great. Thanks, Yeah, you bet sure.
Speaker Change: Yes.
Speaker Change: Review of the acquisition funnel is sort of within our in our blood. It's part of our normal process so that the <unk>.
Jeff Jones: It's part of our normal process so that the process continues. From a buyback standpoint, our stated goal for 2025 was to offset dilution from our equity compensation plans. We were able to do that in the first quarter of the buyback of 432,000 shares. So at least for now, it's a pause on buyback. That obviously could change. You know, at a moment's notice, but but for now, for Q2 anyway, the posture is pause on the on the buyback. Sounds good.
Speaker Change: Process continues.
Speaker Change: From a buyback standpoint, our stated goal for 2025 was to offset.
Speaker Change: Dilution from our equity compensation plans, we were able to do that in the first quarter the buyback of 432000 shares.
Speaker Change: So at least for now Thats, a pause on buybacks debt that obviously could change.
Speaker Change: Sure.
Speaker Change: At a moment's notice, but for now for Q2 anyway. The posture is pause on the on the buyback.
Speaker Change: Okay.
Speaker Change: Sounds good.
Tyler Burmester: That's all for us. Thanks, guys. Thanks, Tyler.
Speaker Change: Thanks, guys.
Speaker Change: Thanks Tyler.
Operator: That concludes today's question and answer session.
Speaker Change: That concludes today's question and answer session I would like to turn the call back to Jeff Jones for closing remarks.
Jeff Jones: I'd like to turn the call back to Jeff Jones for closing. Thank you, and before we sign off, I'd like to note that we'll be attending the following investor conferences over the next two months, and those conferences are the B. Reilly Securities Institutional Investor Conference on May 21st in Los Angeles, the T.D. Cowan TMT Conference on May 28th in New York City. the Stiefel Cross-Sector Conference on June 3rd in Boston and the Bayard Consumer and Technology Conference on June 4th in New York City. So if you plan on attending any of these conferences, please reach out to your conference contacts or let me know and we'll arrange for an in-person one-on-one meeting.
Speaker Change: Thank you and before we sign off.
Speaker Change: I'd like to note that we will be attending the following investor conferences over the next two months and those conferences are.
Speaker Change: B Riley Securities Institutional Investor Conference on May 21 in Los Angeles.
Speaker Change: TD Cowen TMT Conference on May 28 in New York City.
Speaker Change: The Stifel Cross sector conference on June 3rd in Boston, and the Baird Consumer Technology Conference on June 4th in New York City. So if you plan on attending any of these conferences. Please reach out to your conference contacts or let me know.
Speaker Change: We will arrange for an in person one on one meeting.
Jeff Jones: That's all for today. Thank you again for joining the call and we look forward to speaking with you soon.
Speaker Change: That's all for today. Thank you again for joining the call and we look forward to speaking with you soon.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This.
Speaker Change: Today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.