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DATE

Thursday, July 30, 2026 at 4:00 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer - Luis Antonio Mueller
• Senior Vice President and Chief Financial Officer - Jeffrey D. Jones
• Vice President of Strategy and Investor Relations - Matt Hutton

TAKEAWAYS

• Revenue -- $149 million, up 38% year over year driven by expanded adoption of high-performance computing solutions.
• Recurring Revenue -- 53% of total revenue, reflecting durable demand for consumables and interface solutions.
• Non-GAAP Gross Margin -- 45.5%, exceeding guidance due to a more favorable product mix.
• Non-GAAP Operating Expenses -- $52.7 million, in line with guidance as the company scaled resources for computing opportunities.
• Non-GAAP EPS -- $0.26 per share for the second quarter.
• Adjusted EBITDA -- 12% for the second quarter.
• Cash and Investments -- $498 million as of the end of the second quarter, representing a $9 million sequential increase.
• Third Quarter Revenue Guidance -- $170 million, plus or minus $7 million, representing 14% sequential growth and 35% growth over last year.
• Full-Year 2026 Revenue Outlook -- 35% growth over last year, increased from a prior estimate of 25%.
• High-Performance Computing (HPC) Pipeline -- $850 million annual addressable opportunity, up from $750 million in the prior quarter.
• Qualified HPC Opportunity -- $190 million across four customers, including one high-bandwidth memory (HBM) customer.
• Active Qualification Pipeline -- $250 million across five additional customers.
• Early Stage Engagement Pipeline -- $445 million across 10 customers focused on custom ASIC and network processors.
• Fiscal 2026 HPC Revenue Estimate -- $100 million to $110 million, raised from a prior range of $80 million to $100 million.
• Semiconductor Test Utilization -- 80% at quarter end, reaching what management described as a turning point for capital expenditures by core customers.
• Computing Segment Orders -- 46% of total system orders, growing 150% year over year.
• Industrial Segment Orders -- growing 87% year over year with utilization rates above 80%.
• Automotive Segment Orders -- down 24% year over year as the segment continues to lag in the recovery cycle.
• Software Analytics Revenue -- $1 million for the quarter, with orders increasing 140% year over year.
• Interface Solutions Revenue -- 19% of consolidated revenue, supported by traction in silicon photonics test.
• Capital Expenditure Target -- 2% of revenue for 2026, including expansion of the Malaysia manufacturing facility.
• Operating Profit Leverage -- 40%, representing the expected conversion rate of projected sequential revenue growth into operating profit.
• Recent Q3 System Order -- $26 million from a single customer for Eclipse systems, expected to ship largely in the fourth quarter.
• Interface Solutions Orders -- $500,000 for optical engine test, pursuing emerging requirements for co-packaged optical devices.

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RISKS

• CFO Jones stated, "The rapid expansion of high performance computing opportunities has increased demand across our supply chain and production base resulting in longer lead times and higher input costs for certain semiconductors and specialty components," indicating potential impacts on profitability and lead times.

SUMMARY

Management of **Cohu, Inc.** (COHU +18.07%) increased the fiscal 2026 revenue outlook to 35% growth, citing expanded visibility in the high-performance computing pipeline and a recovery in core industrial markets. The company is doubling its manufacturing capacity in Malaysia and expanding operations in the Philippines to support demand for thermal test handlers and memory inspection systems. Leadership reported a strategic focus on converting software pilots into production deployments and expanding the adoption of interface solutions for advanced semiconductor devices. Second quarter results were supported by a sequential increase in semiconductor test utilization to 80%, a level management identified as a threshold for renewed customer capital investment.

• CEO Mueller clarified that the $850 million high-performance computing pipeline represents an "annual spend" by targeted customers rather than a multiyear total.
• Management reported receiving a $26 million single-customer order in early July for Eclipse systems, which is expected to utilize significant production capacity through the end of the year.
• Manufacturing expansion in Malaysia is on track to double output by the end of 2026, with a target to triple output by late 2027 as market demand evolves.
• CEO Mueller stated that "Cohu's thermal technologies are sort of the best thermal in the market" according to feedback from a major high-performance computing customer.
• The company advanced its on-site AI appliance for software analytics in the second quarter to address strict data sovereignty requirements that prevent customers from using public cloud processing.
• Automotive utilization remains a laggard at 77% to 78%, and CEO Mueller stated he does not expect that segment to reach the 80% utilization threshold until "late Q1 or Q2 of next year."
• The company expects to maintain quarterly operating expenses in the low-$50 million range through the balance of 2026 while supporting research and development for AI data center infrastructure.

INDUSTRY GLOSSARY

• Eclipse: A configurable thermal test handler designed to manage extreme power levels in high-performance computing processors.
• HBM (High Bandwidth Memory): A high-speed computer memory interface used in 3D-stacked DRAM, critical for AI training and inference.
• ATE (Automated Test Equipment): Specialized machinery used to perform tests on semiconductor devices during manufacturing.
• OSAT (Outsourced Semiconductor Assembly and Test): Third-party vendors that provide packaging and testing services for semiconductor manufacturers.
• DI-Core: Cohu's data analytics software suite designed to monitor equipment performance and improve factory productivity.
• Silicon Photonics: An evolving technology that uses light (photons) instead of electrical signals to transmit data within silicon chips.
• GaN (Gallium Nitride): A high-performance semiconductor material used in power electronics for its efficiency and power density advantages.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. We Welcome to Cohu's Second Quarter 26 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Matt Hutton, Vice President of Strategy and Investor Relations. Please go ahead.

Unidentified Speaker: Thank you, operator. Welcome to Cohu's second quarter 26 Earnings Call. Our agenda begins with Luis Mueller, Cohu's president and CEO, who will provide a business update followed by a financial review and outlook from Jeffrey D. Jones. Our senior vice president and chief financial officer. Following our prepared remarks, we will open up the call for your questions. 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 the information available to us at this time. But they are subject to rapid and sometimes abrupt changes. We encourage everyone to review the forward looking statements section of our slide presentation and the earnings release as well as Cohu's filings with the SEC, including the most recently filed Form 10 k And Form 10 Q. Our comments are current as of today, July 30, 2026. And Cohu does not assume any obligation to update these statements for events occurring after the call. Additionally, we will discuss certain non GAAP financial measures during this call.

Please refer to our earnings release and slide presentation for reconciliation to the most comparable GAAP measures. Now I would like to turn the call over to Luis Antonio Muller, Cohu's President and CEO. Luis?

Luis Antonio Muller: Good afternoon, and thank you for joining Cohu's second quarter 26 Earnings Call. We delivered a strong quarter with sales of $149 million up 38% year over year and recurring revenue of approximately 53% of total. These results reflect solid execution across the company and continued customer adoption of our solutions. Our Q2 results show progress in areas where we have focused investments. Advanced thermal test handlers for AI processors, HBM inspection, flexible ATE platforms for power and connectivity devices, and software analytics. Cohu is benefiting from durable demand drivers in AI infrastructure and edge computing, where customers are investing to address increasing power levels, production yield, and increased factory productivity.

Estimated semiconductor test utilization and improved sequentially to 80% at the end of the second quarter. Typically, a turning point for capex by our core IDM customer base. The strongest segments were computing and industrial, with test utilization in the low 80s, followed by automotive and mobile in the high 70s. Bookings generally follow utilization trends. And in the second quarter, computing led with 46% of total system orders, representing an impressive 150% increase year over year driven by Eclipse growth in high performance computing. With utilization above 80%, industrial was the next largest growth area with orders up 87% year over year.

The balance included consumer up 29% year over year, mobile essentially flat, year over year, and automotive down 24% year over year in a segment that continues to struggle in this recovery cycle. Let me now review the quarter by product lines starting with the areas where we see the strongest customer traction. Starting with our test handlers. Building on the momentum from Q1, we continue to expand our position in high performance computing through the adoption of our Eclipse Handler, enabled by advanced active thermal control for extreme power, and next generation JetAc Max devices used in data centers.

The Eclipse delivers a configurable thermal handler that can be used across multiple device generations, helping customers reduce capital risk, extend the value of their installed base, and support faster production ramps. Our high power thermal control technology remains a key differentiator improving task quality and first pass yield. During Q2, high performance computing customers also expanded adoption of Cohu's PACE prescriptive analytics software reinforcing our strategy to improve equipment efficiency and customer value. Separately, we are increasing our presence and infrastructure at OSATs in Southeast Asia to support fabless and hyperscaler programs as they move from qualification to production ramp.

Overall, this momentum reinforces an expanding high performance computing customer pipeline that we now estimate at approximately $850 million annually. This includes about $190 million in qualified annual opportunity across 4 customers $250 million in active qualification across 5 customers, and approximately $445 million in early stage engagement across 10 additional customers. Based on this progress, we are raising our fiscal 2026 high performance computing revenue estimate to between $100 million and $110 million. To support this demand, we are working with supply partners to increase capacity and we are expanding our internal manufacturing in Malaysia. We expect this expansion to double output by year end and support another step up in capacity by mid-2027.

Now turning to your inspection in metrology. During Q2, we shipped additional final inspection systems for HBM3, HBM4, and HBM4e devices to a US based IDM. With a strong forecast into the second half of 2026. HBM is the memory backbone of AI training and inference infrastructure. And we continue to invest to stay ahead of customer road maps into HBM5 and beyond. We recently qualified Neon at a Taiwan based OSAT establishing strategic foothold in a high volume outsourced assembly environment, where we can pursue additional advanced package mobile, and AI adjacent inspection opportunities. We also released a new vision inspection sensor, which shortwave infrared capability that detects inner cracks in complex silicon devices.

This gives customers a step change improvement and outgoing quality for advanced packages and further reinforces Neon as a reference plot for silicon inspection applications. Moving to semiconductor test, Demand is increasingly tied to 2 AI enabling requirements. Efficient power delivery and high speed connectivity across edge devices, vehicles, industrial equipment, and connected infrastructure. These systems depend on precise power management to achieve peak performance while controlling energy consumption, heat, and operating costs. Customers are increasingly adopting gallium nitride power devices for their efficiency and power density advantages. At the same time, AI enabled devices require seamless connectivity. The industry is investing in both ground based and nonterrestrial networks, including satellite constellations and high altitude platforms that extend coverage globally.

Together, GaN power and advanced connectivity represent an estimated $340 million annual addressable market opportunity over the midterm. During Q2, we continue to engage with leading power and RF customers on Diamondx configurations for GaN, mobile front end, and advanced connectivity applications. Switching to software analytics. We built on last quarter's momentum and moved from early production wins toward a repeatable pattern. Land a first deployment, prove measurable value, and expand within that account. This business delivered the first $1 million revenue quarter and orders increased an impressive 140% year over year. First, land and expand is working.

Last quarter, we noted that a leading high performance computing chipmaker had committed to deploying our predictive maintenance technology across its test handler fleet. We are now progressing toward what is expected to become our largest software to a single customer,. With expansion plan during the second half of the year. Second, we are deploying DI-Core AI where the data lives. Semiconductor manufacturers operate under strict data sovereignty requirements. And most cannot send process, yield, or equipment data to a public cloud. In Q2, we advanced our on-site AI appliance, which runs modern AI models autonomous agents entirely inside the customer's network. With no data leaving the factory.

These agents can conduct investigations across equipment, maintenance, and test data more frequently and at a lower cost than manual analysis. These deployments are important because they convert Cohu's installed base into a recurring software revenue opportunity while helping customers improve uptime, yield learning, and factory productivity. Moving to our interface solutions, This is a key element of our recurring revenue stream, about 19% of Cohu consolidated revenue in Q2. Our high speed interface technology continue to gain traction in silicon photonics test. We booked $500 thousand in interface solutions used in optical engine test and are pursuing additional customer engagements tied to emerging requirements for co packaged optical devices.

In parallel, we remain focused on increasing share of our core semiconductor customer base, where new applications and replacement of incumbent technologies create opportunities for additional Cohu content. In summary, Q2 demonstrated progress across the strategic priorities we outlined earlier this year. Scaling high performance computing handler adoption, advancing inspection solutions, expanding Diamondx into power and connectivity, converting software pilots into production deployments, and broadening interface solution adoption into optical and advanced semiconductor devices. I want to thank our customers for their partnership, our employees for their execution, and our shareholders and supply chain partners for their continued support. With that, I will turn the call over to Jeffrey to review our financial results, and outlook in more detail. Jeffrey?

Jeffrey D. Jones: Thank you, Luis. Before reviewing the second quarter results and providing third quarter guidance, please note that my comments refer to non GAAP figures. Details about non GAAP financial measures, including GAAP to non GAAP reconciliation and other disclosures, are included in the earnings release and investor presentation on our website. For Q2 26, revenue of $149 million exceeded the midpoint of guidance. Recurring revenue driven primarily by consumables represented 53% of total revenue. 1 industrial customer accounted for more than 10% of total sales during the quarter. Gross margin was 45.5% above guidance primarily reflecting a more favorable product mix.

Operating expenses were in line with guidance at $52.7 million reflecting our decision to scale resources to support the rapid increase in high performance compute opportunities. Net interest income after interest expense and a $600 thousand foreign currency loss was approximately $1.7 million. The Q2 tax provision was lower than guidance at $2.7 million due to improved profitability in The US. Non GAAP EPS for the second quarter was $0.26 and adjusted EBITDA was 12%. Moving to the balance sheet. Cash and investments increased by approximately $9 million during Q2 to $498 million and cash from operations was $10 million. No stock repurchases were completed during the quarter.

Total debt is $304 million and includes $288 million from the Q4 2025 convertible debt offering. Capital expenditures were approximately $2 million mainly for manufacturing machinery, and equipment. Facility improvements, and IT equipment. We are targeting total capital expenditures to be about 2% of revenue in 2026 including the capital expansion of our Malaysia test handler manufacturing facility mentioned by Luis. Looking ahead, we expect Q3 revenue to increase 14% sequentially and 35% year-over-year to approximately $170 million, plus or minus $7 million. The increase is driven by demand tied to the ramp in high performance compute opportunities, and continued recovery in our core business segments.

We are increasing our full-year 2026 revenue outlook for growth over last year to approximately 35%. Q3 gross margin is projected to be approximately 45%, and for full-year 2026, we continue to expect gross margin in the mid-40% range. The rapid expansion of high performance computing opportunities has increased demand across our supply chain and production base resulting in longer lead times and higher input costs for certain semiconductors and specialty components. We are taking proactive steps when available to secure critical components to minimize impacts on our lead times, profitability, and customer pricing. Operating expenses are expected to be about $54 million.

We intend to continue investing in resources to capitalize on the growing list of HPC opportunities and we expect quarterly operating expenses through the balance of the year to remain in the low-$50 million range consistent with our Q3 guidance. In light of expanded resources to support HPC related growth, our operating model continues to demonstrate solid profitability leverage with approximately 40% of projected sequential revenue growth expected to convert to operating profit. Net interest income in Q3 after interest expense and foreign currency impacts is projected to be approximately $1.6 million at current interest rates.

The Q3 tax provision is expected to be about $5.2 million, and diluted shares are projected to be approximately 55 million, including 5.8 million shares attributable to the convertible debt. And of that amount, 2.4 million shares will be fully offset by the capped call but are required for US GAAP diluted EPS calculations. In summary, our 2026 priorities remain focused on supporting the R&D investments and production ramp required to secure multiple design wins in the compute market including AI data center infrastructure, HBM memory, and physical AI applications while progressively increasing EBITDA margin and free cash flow. That concludes our prepared remarks. And now we will open the call to questions.

Operator: Wait for your name to be announced. Our first question comes from Krish Sankar with TD Cowen.

Krish Sankar: Hi, thanks for taking my question and congrats on solid results and guidance. Luis, I have 2 questions. The first 1, just want to check you of your pipeline of $850 million, you said your 4 customers qualified Are those 3 HPC and 1 HBM customer? And the other 5 customers in qualification, are they all HPC? For AI handlers? And when do you expect that to potentially convert into revenues?

Luis Antonio Muller: Oh, hi, Krish. Yeah. You are correct on all of your statements here. We have 3 HPC, 1 HBM on the qualified. Which review about $190 million annual opportunity for revenue. And then and then we have close to $200 million in the near term qualification here. So your question on the timeline, it straddles over months. To be honest with you. We have 1 customer that is right on the edge of giving us the, you know, the green light of being qualified. I think the data all supports it we do not have the official yet. We are already, planning on shipping a production configuration for the actual production INTERCEPT device, which is a next generation.

You know, we typically qualify on an existing generation device so it can do a correlation to what they have with, other systems out there. But we are shipping the production configuration here at the end of August. To get it-- I do not know if the right word is certified. So we can go on with the actual intercept. So we should get a qualification pretty soon within a month, I would say.

And then you know, I think the fifth 1 on the list we are looking at early next year systems that we are shipping late August and I think accounting for about a 6-month qualification process, I think, would put us, sort of mid Q1 for the last 1 on this on this bucket of in qualification. Got it. Very helpful, Luis. And then as a quick follow-up, you mentioned about getting traction in silicon photonics for the optical engine. Can you quantify how much that opportunity would be either this year, next year, the next few years? And is this mainly an insertion 1, or which insertion are you targeting? Yeah.

Today, we are shipping interface solutions, not full handlers yet. We are shipping interface solutions for insertion 3. Which is the optical engine test. And that is where we commented here on prepared remarks that we booked in the second quarter. I think it was a $500 thousand order for Interface And this is a continuation of A business we started in Q1. We are shipping or planning to ship a qualification unit for insertion 3 by the end of the year with a handler We are also, demonstrating an insertion 4 configuration with a handler to certain customers that I do not really have a specific timeline for shipment yet.

I do not know if it is going to be Q4 or Q1 next year. A little tricky now getting systems to go on qualification given the production orders that we are satisfying. I have not quantified we have not quantified yet the total CPO revenue in 2027, 2028 because we view it as part of the evolution of HPC. So it is it is embedded in the $850 million pipeline at the moment. Got it. Thank you very much, guys. Congrats again. Thank you.

Operator: Our next question comes from Brian Chin with Stifel.

Brian Chin: Hi there. Good afternoon. Thanks. Nice results and outlook, and thanks for letting us ask a few questions. Maybe the first question looking at this the multistage pipeline graphic you have in the slides, I think last cut, it was aggregating to $750 million. Now it is $850 million you maybe break down, what that $100 million increase is And also, I think part of this maybe is that recurring portion. Can you also maybe explain and break down what you mean by recurring?

Luis Antonio Muller: Okay. Yeah. Hi Brian. Yeah. 2 separate things. On the totality of the pipeline increased to $100 million, by $100 million, it is really getting better visibility in the forecast. And I think we added a couple customers on the in engagement phase as well. But, we certainly have better visibility now on the customers that are in the in qualified or qualified, I should say,, the qualified portion of the pipeline. And, the numbers are bigger what they are giving us for next year than what we had originally estimated. To your question on recurring, there are really 3 components to recurring. 1 of them is device application kits.

You know, you these device life cycles are typically 18 months in production, something else. Launches, and you gotta do a new device kit for that handler. The other component is thermal heads. Do not necessarily change the entire thermal head, but as devices grow in size, so does the required thermal head coverage over the die. It could be multidise. It could be actually even multi, skyline heights on dies. So that thermal head touchdown on the die has to evolve with the product evolution. So that is a that is an upgrade element of the system. You could also include a thermal head itself if the upgrade includes higher fouling.

And the third element is, basically, the maintenance of the equipment. You know, there are, spares and consumables in the equipment. Part of that today, I guess, a 4th element that is a novelty here is the softer sale. As I mentioned last quarter, we sold, I think it was about $330 thousand a year. Subscription software. Into an HPC customer in conjunction with system orders. And that has a lifetime you know, through the product life cycle. I think we estimated, a few million dollars life cycle value lifetime value of that software subscription. So that would be sort of the fourth component that I forgot to mention, but it is part of recurring.

Brian Chin: Okay. Great. that is that is super helpful. Also, in terms of the full year revenue guide increase, going from 25% to 35% growth, I think it is something like $45 million on the math there. You only increase your HPC forecast by maybe, you call it, $10 million to $15 million? And so, like, I guess, the majority residual there is all the kind of the core business. Historical core business for Cohu. Can you maybe expand upon kind of what you are seeing there in terms of improvement?

Luis Antonio Muller: Industrial, obviously, is taking up Yeah. that is right Brian. Seeing industrial pick up. We are seeing the utilization rate overall pick up, and part of the growth there in the 0.55% here over the last 6 quarters or so. So it is it is really a nice increase But you are right. it is the core business that is coming back led by industrial. Or maybe if I can sneak 1 last thing in. Just from a supply standpoint, Jeffrey and Luis, And if I know that the qual the in-qualification bucket is not, you know, you know, banded within, you know, 2027 or a year.

Interval even, but what are you sort of targeting to be able to get capacity to in 12 months' time or whatever horizon in terms of the Malaysia expansion? And kind of what, given what the business looks like in terms of the funnel again. Hi Brian. Frankly, that is a key question. Because as part of the, you know, 35% projected growth in fiscal 26 this year, I do not think we have much more room to grow in the HP side this year. We are expanding capacity between end of Q2 and end of the year. The plan is to increase output by about 50% over the next 6 months, and that is for the HPC handlers, specifically.

Between now and the middle of next year, the intent is to increase output by a little more than 100-- a little more than 100% so double essentially the output or a little more than double between now and July June, July next year. And we do see a path to triple that output between now and the end of next year if the market takes us there. On the HPC side.

So that is that is essentially we are evolving that, production pipeline in Malaysia and our factory in Malaysia in line with the expansion of the business in this customer pipeline that yields $850 million. that is the idea. it is a bit easier to do it in our own side. You know, we are expanding the factory in Malaysia. We already started the fitting out the production floor. We are looking at a new construction of a building essentially office building at this point. I think it will suffice that we can clear up production space on the current facility.

To be ready probably in Q1 of next year. it is quite a bit more challenge on exercising the supply chain. that is what is taking most of the attention right now. That we can get, suppliers, and more suppliers to, support the expansion plan that we have-- that we have in place and being presenting here. Great. Appreciate the updates. Thank you.

Operator: Our next question comes from Kevin Garrigan with Jefferies.

Kevin Garrigan: Yes. Hey, guys. Congrats on great results. Hey. Your new customers and engagement just talk a little bit more about how those opportunities developed? Are these customers that are using competing platforms and are looking to switch And, you know, how much additional opportunity do you see beyond the current pipeline that you have So you mentioned $850 million I mean, is it pretty much sky's the limit at this point?

Luis Antonio Muller: Well, there is always a limit. there is a finite number of customers out there. We are not really, engaged with all of them yet. And I think we are quite honestly fairly busy here Kevin, with the sort of the 20, sorry, the 19, 20 customers that we have on the list. there is a lot to do here. there is a lot of a lot of projects, a lot of applications and qualifications in work. Will we add more? Sure. You know, as these customers flow down this pipeline and, it is it starts to get wider at the bottom, we will we will start adding a few more at the top.

But you know, you can imagine who the names are. Right? I am not gonna rattle them on a call. I should not. But they are essentially, the fabless and hyperscalers that are developing or have developed their own semiconductor GPUs or custom ASIC devices, network processors, you know, and their variety of names there, including, you know, tensor and whatnot that they have their own names for their custom ASIC devices. Right? So those are the cons constituents on this, on this customer pipeline.

Kevin Garrigan: Got it. Okay. Yeah. That makes a ton of sense. And then can you just talk about the you mentioned higher input costs. Any specific components that you can kind of call out and know, are these components something that you expect to be, you know, a potential headwind for getting systems out the door at some point?

Jeffrey D. Jones: Hey Kevin. it is Jeffrey. At the moment, it is mainly memory. Memory is sort of leading in the higher cost and longer lead times. And so we have taken advantage of advanced purchases and looked out over multiple quarters and made buys based on the quantities that we need for that time frame. So it is not it is not a, you know, an issue for Q3. And our guidance has taken into consideration all of the risks and potential constraints. So at the moment, we are we are working through it like Luis said, though, it is probably the biggest challenge at the moment is ramping supply chain.

Kevin Garrigan: Okay. Perfect. Thanks, guys, and congrats.

Luis Antonio Muller: Thank you.

Operator: Our next question comes from Craig Ellis with B. Riley Securities.

Craig Ellis: Yes. Thanks for taking the question and nice job on the execution, guys. I will start with some things that are just near term. You mentioned that we are looking for third quarter growth up 14% quarter-on-quarter. With HPC and some of the traditional businesses contributing to growth But can you provide a little bit more detail on the relative contribution of each as we look at this quarter's growth.

Jeffrey D. Jones: Yeah. Hey. Hey Craig. it is roughly about 50% HPC driven and 50% core business. So about $10 million out of each.

Craig Ellis: Got it. Thanks for that, Jeffrey. And then as we look ahead to the fourth quarter, remind us what you would think the seasonality would be a Q4&And then as we look ahead, are there any particular items we should be aware of as we think about more 1-off things that could be impacting the business beyond the third quarter?

Operator: To answer the first part of your question, we have stated that we now see revenue increasing about 35% year-over-year.

Jeffrey D. Jones: So that puts us in a range of about $610 million to $615 million for the year. And to get there, that would basically be Q4 sort of flattish To Q3.

Luis Antonio Muller: Yeah. As far as seasonality Craig, utilization now, broadly hovering at 80%, right, in a couple markets here at 82, couple markets are at 77%, 78%. We are right at that threshold that you know, if we see a seasonality, Pull back, I think it would quickly accelerate again in Q1. We are not really sure exactly, how that is gonna play in Q4. So at the moment, we are we are viewing this core business kinda staying flattish going into q 4. As I mentioned before, I think I think we are kind of maxed out on the HPC side in Q4 as well. We are still building that capacity through the end of this year.

So that is the positive news. We did get a we did get here in early Q3 a single customer order for $26 million again for our Eclipse 6 systems, for the HP market, and that is largely gonna largely gonna ship in Q4 as well. So that Eclipse output capacity is, is filling up quickly here in the fourth quarter already. Yes. You have got really good visibility on the fourth quarter. And going back to the comment on capacity and being pretty high with that relative to capacity, Louise. What are the what are the levers that you have that can give you some wiggle room in the 0.5% to 1% increase.

Around midyear to the extent that you do have any? Well, I do not know if it is wiggle room, Craig. it is it is really a lot of hard work. From supply chain side and operations. Side with the expansion of the factory in Malacca. We are also doing a, a small expansion in The Philippines because that is where we build the thermal heads. So necessarily call it wiggle room, but I think we are on track right now. To, like I said, to really double our output between the quarter just finished and beginning of next year end of this year, beginning of next year.

So really looking forward to being able to deliver a $200 million to $250 million incremental HPC $200 million to $250 million HPC revenue year or more. I mean, it depends. I think we have some wiggle room is more into next year where we could we could potentially triple the output as the market takes us there. Got it. Yep. Okay. So the step up is exiting this year to next year, not a year from now. Okay. Clear point. Thanks for all that help, Luis. Thanks, Jeffrey. You are welcome.

Operator: Our next question comes from David Duley with Steelhead Securities.

David Duley: Good afternoon. Thanks for taking my question. I am sorry to kind of continue along the HPC questions. When I look at your funnel chart this quarter of qualified customers, you have 4 for $150 million, and last quarter, it was 3 for $100 million. So there is 1 customer kind of adding to the qualified segment of the added up to about $50 million. I am kinda wondering when you look at the 5 other customers that are in Qual, how should we think about them? Mix of those customers? Are they all do I just take 5 and divide by the average there? Or how should we think about how each customer adds to the qualified SAM.

Luis Antonio Muller: Yeah. Hi David. So we do have-- no. No, there is there is a bit of a range here. You know, we have we have customers that we view as 30 low-$30 million annual opportunity. We have a couple of customers that are likely to be individually $60 million annual opportunity. And, I am looking at a table here. And that is about the range, actually. it is a sort of $30 million to $60 million on a per individual customer basis. Okay. Thank you. You are welcome.

You just gave us gave me 1 of my other questions, which is the way your capacity expansion is unfolding you will be able to double the revenue stream of your of your Eclipse high performance computing segment in 2027. Yes. In into early 27. And then from there, I think tying a little bit with Craig Ellis' question, we do have some wiggle room to expand further from there. And we will see how this funnel develops. And then we will drive that expansion in 2027. But for now, you just hang your head on We will be able to double the output we just finished in Q2 of this year.

By the end of this year, meaning into early 27. Now remember, that is more than where we started in 2026. So the reality is if we are delivering $100 million to $110 million this year, we should have the capacity to do more than $200 million, probably closer to $250 million by the beginning of next year, all things being, you know, linear throughout the year. And from there, we can expand more in 2027 to, exit at a higher rate in 2027 again and are okay.

And as far as just remind us who the key competition is for some of these slots and you know, Or are a lot of these brand new that, you know, where it is a jump ball, or is there someone that is kind of the incumbent with a lot of these customers? it is pretty much a single competitor, so to speak. I mean, you can you can claim there is a second 1, a 2nd competitor out there, but I would say there is primarily a single competitor, which has been the, you know, forever supplier at the, test subcontractor. it is a Han Precision from Taiwan. Has been the primary competitor in this space.

And as power levels are increasing in these more complex processors. Right? All sorts of classification of processors. The management of power dissipation is becoming much more prevalent. And driving a much stronger interest by you know, like I said, the fabless and the hyperscalers into finding a solution to the problem. Which Cohu's Thermotechnologies, 1 big company here in The Bay Area said, Cohu's thermal technologies are sort of the best thermal in the market. Period. End of story. Let's figure a way to make this happen. Okay. Well, that is great to hear.

Now just switching gears, final question for me is when you look at your core business, it kind of-- you obviously, you are guiding flattish. that is, you know, seasonality is being overcome by the return of the cyclical business, so to speak. And, you know, I think when I listened to the big OSAT in Taiwan's conference call last night, they were basically they uptick their growth rate for wire bonding core assembly business from 13% this year to 20% for calendar 26, and they expect that growth rate to continue. So I am kind of wondering and their utilization rates are also in 80%-85%, and the quote was we cannot keep up with purchasing equipment.

So I am wondering what your core customer behavior is You know, there is a list of 8 or 10 of these guys. And they are not all some of them are automotive exposed. And so I think probably that those guys are not inflecting yet. But could you talk about the customers that are, and what their behavior is? Are they coming in and asking for big orders? And big slots and whatnot? Yeah. We are seeing the earlier inflection on the industrial space as we commented here. And yes, indeed.

The ones that have inflected so far are coming in for the sort of traditional volume that we have seen in the past where they are ordering you know, somewhere between 10 and 20 systems in 1 PO. So that is sort of coming back to that original pattern that we are familiar with from the past. Predominantly with industrial based customers. And I think you can see from the earnings release which ones are kind of spearheading the return to business? Thanks very much, and congratulations on nice results. Thanks David.

Operator: Our next question comes from Denis Pyatchanin with Needham and Company.

Analyst: Great. Thank you very much. So I have a question about the HPC rates. So I think previously it was about $90 million expected for calendar 26. Now I think it is about $105 million so $15 million incrementally higher. Maybe you can tell us, is more of the upside coming from Eclipse handlers or the Neon HBM inspection systems?

Luis Antonio Muller: Hi Denis. Yeah. You are right. If you pick up the midpoint of the ranges we gave before and now, it is really a $15 million increase. Note that the new range is also tighter. You know, we originally had an $80 million to $100 million range, and now we are we are calling 100 to 110. This whole increase is on the Eclipse HPC side and entirely there. Got it. Thank you.

Analyst: And then I have a question related to some of these challenges with components specifically related to memory. So do you think you will be able to pass on some of these costs to your customers within the next say, 3 or 6 months, or will you basically have to kind of eat that into your gross margin?

Jeffrey D. Jones: Hey Denis. We have just started conversations with customers. So I would say stay tuned on that. Thank you.

Analyst: Well, that is it for me. Thanks a lot.

Operator: Our next question comes from Quinn Fredrickson with Baird.

Analyst: Hey, afternoon guys. Thanks for taking the question. Just on the cyclical piece, specifically on automotive, I think you mentioned in your prepared remarks that orders were soft there. It sounds like 1 of the few areas that was the case So what is your visibility on the timing of a turn in that business? Yeah.

Luis Antonio Muller: Quinn, it is a it is a good question. I think that is a market has been a little bit more sporadic. We had if I am not mistaken here, we had a bit of a bump in the last 2 quarters in the automotive And then and then the last quarter, it kinda came back down a bit. Again. So I think it is been it is been bouncing around I would expect, frankly, that automotive would not be at 80% up until probably late Q1 or Q2 of next year. That will be my expectation. But like I said, it is been the 1 that is lagging a bit across, the end markets on the core business side.

Thanks. that is helpful.

Analyst: And then on OpEx, can you discuss just your ability to pursue the full $850 million HPC pipeline Would you be able to pursue that full pipeline at this third quarter level of about $54 million of OpEx? Or would there be additional investment you would have to make?

Jeffrey D. Jones: That is the plan and the forecast at the moment is to stay at this. And we think it is a bit elevated from a prior model. But to continue to invest and have OpEx remain pretty constant at this at this level, about $54 million. So we think that is that is a good level that provides the resources necessary to capitalize on these opportunities.

Luis Antonio Muller: Great. And just to help clarify as well Quinn, for you and for others, When we talk about the $850 million that is sort of an annual spend. Right? that is what we see these customers spending annually on this class of equipment, which is largely Eclipse for HPC. So if we were to capture the totality of this opportunity, you know, now, immediately, we would see an $850 million revenue stream next year. that is not the case. You know, we are qualifying over time. And we will see how this evolves.

The market is also changing and growing, but that is to clarify that it is not $850 million over multiple years. it is 850 spent per year by the customers that we are talking about here. Right. that is helpful. Thanks.

Operator: Our next question comes from Vedvati Shrotre with Evercore ISI.

Vedvati Shrotra: Thanks for taking my question. The first 1 I have is so with AgenTake AI, we are seeing the CPU to GPU ratio changing. Right? We are seeing a higher CPU ratio versus CPU. How does this sort of play for you in the HPC opportunity? Like, where do you see how do you see how do you see yourself participating in this kind of shift?

Luis Antonio Muller: Hi Vedvati. This is Luis. First of all, you are you are correct. We are seeing a much-- very strong demand on the CPU side Traditionally, I would say the CPUs would have been at slightly lower levels than the GPU, but that is actually changing. And, CPU power in test, I should say, is, it is really a approaching the GPU levels. How does it change? I do not know that it really changes. You know, the whole intention and purpose of our product configuration is to be flexible. And be able to straddle across applications without having to change the capital equipment. But changing the configuration instead, perhaps upgrading thermal heads, for different applications.

So we do a pretty good job right now straddling both CPU and GPU and reusability of the equipment. So it does not quite matter to us where the market and that ratio goes because that is 1 of the fundamental value propositions of our Eclipse system. You can you can do both the thermal management at the higher power levels, but you can also use the same equipment at, straddling down to lower power levels and across different applications. Understand. So how about the penetration Like, there are 3 across the x 86 and the ARM ecosystem. Like, how are you thinking about the pipeline and the penetration of the customers?

At the CPU suppliers. it is I mean, I would have to go count to tell you where we are today. I do not know at the top of my head. But I am not going to venture to say you know, we well, I am not gonna venture to say. I am going to say I would have to go count But it is, again, not that relevant to us. We have probably strongest shipments in Q2 that were maybe x86. Or maybe that is gonna be Q3 shipments. I would have to go look But it straddles across both Understand.

Vedvati Shrotra: Okay. And then 1 last question. So on-- you talked about sort of the, you know, input cost and also alluded to your kind of the supply chain of shortages. So maybe can you talk about how your lead times have changed, in the last 3 months? For the Eclipse tools?

Jeffrey D. Jones: Yeah. I mean, just for clarification, we have not seen any shortages yet. And, again, when we have got the opportunity to make some prebuys, we are doing it, and that is worked for us pretty well. However, these pre buys particularly on mainly on integrated circuits, are purchased at an increased cost. And so that there is the higher input cost. Although we have we are securing the supply, it is coming out a little bit higher cost. And as I mentioned before, we are just initiating discussions now with customers about how we pass that on.

Luis Antonio Muller: And your Eclipse handler right now is I think the lead times are still in check. We are we are holding well to 13, 14 weeks. From receipt of PO. With that said, we have signals that the orders are coming. We have the customer forecast, and so we are getting ahead of it, so to speak, getting-- you know,, part of what Jeffrey just said. So when we get the PO itself, we can respond. Now like I said, we earlier, we got, couple weeks ago, we got, $26 million single customer order. Right? As you can imagine, there are tens of systems. We are not gonna ship all that quantity in 13 weeks, lead time.

We have got a certain capacity per week. And that quantity is gonna fill up multiple weeks of shipment. So 13 weeks to the first system shipment, but straddles across multiple weeks from there. And, and then gearing up for the subsequent order from another customer that we will ship in the latter part of Q4. Understand. Thank you very much. You are welcome. Thanks, Vedvati.

Operator: Our next question comes from Christian Schwab with Craig Hallum.

Christian Schwab: Great. Thanks for letting me sneak in a question here. Great quarter and guide. I just have 1 question. it is been quite some time since we have been operating in our core business with 80%-plus utilization. And customers just ordering to add capacity Can you remind us historically when capacity is added when utilization rates go above 80%, and the demand environment looks to be continued, how many quarters or how long does capacity typically get added? We talked about initial orders kind of being, you know, 10 to 20, which was in line with historical norms for systems. But how long does that happen for?

Jeffrey D. Jones: Yeah, we would say about 6 quarters is probably the typical average or call it a cycle. If and I have got this table in front of me and it goes back to 2021 and that was a pretty unique time frame in 2021 and 2022, and we happened to be above 80% utilization for 8 quarters or at least 7. So I think 6 is probably the norm.

Christian Schwab: Great. Fantastic. And then, lastly is, you know, I know we started a few quarters ago talking a little bit more aggressively or about M&A. But given the fact that the core business and, you know, the AI market growth is-- well, we are, you know, chasing extremely strong demand. Are you still looking at M&A? Do we want to get distracted With M&A when the core business is so strong?

Unidentified Speaker: Yeah. Hi. This is Matt. Yeah. I think you are right. Right? The number 1 priority is obviously execution. There definitely are opportunities to accelerate in some areas. Our growth areas are in HPC. And in software, and we will continue to look at bill versus buy opportunities there. But, yeah, I think you nailed it. it is execution and looking at other ways to possibly accelerate some of our growth areas.

Christian Schwab: Fantastic. No other questions. Congrats on the strong results again.

Jeffrey D. Jones: Thank you. Thanks, Christian.

Operator: That concludes today's question and answer session. I would like to turn the call back to Matt Hutton for closing remarks.

Unidentified Speaker: Thanks, operator. Before we sign off, I would like to note that we will be attending the following investor conferences over the next 3 months. The Needham Virtual Semiconductor Conference on August 19, the Jefferies Semiconductor Conference on August 24 in Chicago, and the CEO Summit on October 13 in San Francisco. If you plan on attending any of these conferences, please reach out to your conference contacts or let us know, and we will arrange for a 1-on-1 meeting. I am also pleased to announce that Cohu will host an investor day on November 10 in New York City. We will provide a deeper look at our strategy, and long term financial framework.

Additional event details will be shared closer to the date. Thank you for joining today's call. We look forward to speaking with you soon.

Operator: This concludes today's conference call. You for participating. You may now disconnect.