Cohu Inc ((COHU)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Cohu Inc’s recent earnings call revealed a balanced outlook, highlighting both promising developments and notable challenges. The company expressed optimism with advancements in software and new market segments, although they are facing difficulties due to inventory corrections and shipment delays, which are affecting short-term revenue and margins.
Positive Revenue Prospects in HBM and Silicon Carbide Markets
Cohu Inc is optimistic about its revenue potential in the HBM inspection systems and silicon carbide applications. The company projects generating $7 million and $5 million from these markets, respectively, by 2025, indicating strong growth opportunities in these segments.
Software Revenue Growth
The company’s software revenue is on an upward trajectory, expected to grow at an impressive annual rate of 50% over the next three years. This growth is supported by the recent acquisition of Tignis, highlighting Cohu’s strategic focus on expanding its software capabilities.
Stable Recurring Revenue Stream
Cohu has maintained a stable recurring revenue stream, accounting for 65% of its full-year 2024 revenue. This steady income provides a cushion against market fluctuations, showcasing the company’s resilience in volatile market conditions.
Operational Efficiency
The company achieved operational efficiency in Q4, with operating expenses lower than guidance at $45.3 million. This reduction was attributed to lower labor costs and higher vacation utilization, reflecting effective cost management strategies.
Inventory Reserve Charge Impact
A $2.1 million inventory reserve charge adversely impacted Cohu’s Q4 gross margin by 220 basis points, underlining the challenges faced in inventory management and its effect on profitability.
Revenue Decline in Automotive and Mobile Segments
Cohu experienced a decline in revenue within its automotive and mobile segments as customers continue to work through ongoing inventory corrections, highlighting sector-specific challenges impacting the company’s performance.
Lower Gross Margin
The company’s Q4 gross margin stood at 41.8%, falling short of expectations due to the aforementioned inventory reserve charges, affecting overall profitability.
Q1 Revenue Guidance Impacted by Shipment Delays
Cohu’s Q1 2025 revenue guidance has been adjusted downwards due to customer requests to delay shipments until later in the year, affecting short-term financial forecasts.
Forward-Looking Guidance
For the fourth quarter of 2024, Cohu reported revenue of $94.1 million, aligning with guidance, though gross margin was affected by inventory reserve charges. Looking ahead to 2025, the company projects first-quarter revenue to be around $97 million, with expectations of a 44% gross margin. Cohu anticipates significant growth in software revenue, driven by its acquisition of Tignis and market expansion efforts in memory and silicon carbide power semiconductors.
In summary, Cohu Inc’s earnings call provides a nuanced picture of its current standing. While there are promising growth prospects in software and new markets, challenges such as inventory corrections and shipment delays pose hurdles for short-term revenue and margin performance. The company remains steadfast in its strategic focus on software growth and market expansion, underpinning its long-term growth aspirations.
