COHU 10-K & 10-Q changes, risk factors and insider trading

Semiconductor equipment and processes are subject to rapid technological change. We believe that our future success will depend in part on our ability to enhance existing products and develop new products with improved performance capabilities. In fiscal 2025, we incurred $92.2 million in R&D expenses. We expect to continue to invest heavily in research and development and must manage product transitions successfully, as introductions of new products, including the products obtained in our acquisitions, may adversely impact sales and/or margins of existing products. We have in the past made material investments in new product platforms that for various reasons, such as technical challenges or lack of customer adoption, have not generated the expected sales or return. In addition, the introduction of new products by us or by our competitors, the concentration of our revenues in a limited number of large customers, the migration to new semiconductor testing methodologies and the custom nature of our inventory parts increases the risk that our established products and related inventory may become obsolete, resulting in significant excess and obsolete inventory exposure. This exposure resulted in chargesleading to operations during each of the years in the three-year period ended December 28, 2024. Future inventory write-offs and increased inventory reserve requirementsrequirements, which could have a material adverse impact on our results of operations and financial condition. WeAdditionally, are investing significantly in new product development programs relating to test handlers, test contactors and automated test equipment. In fiscal 2024, we incurred $84.8 million in research and development expenses. We expect to continue to make investments and we may, at any time, based on product need or marketplace demand, decide to significantly increase our product development expenditures in these or other products. Thethe cost of investments in new product offerings and product enhancements cancould have a negative impact on our operating results. We have in the past made material investments in new product platforms that for various reasons, such as technical challenges or lack of customer adoption, have not generated the expected sales or return. For example, in January 2025, we acquired Tignis, Inc., a provider of AI process control and analytics-based monitoring software to expand our analytics offerings to a broader market, but there can be no assurance that this or other new products we develop or acquire will be accepted in the marketplace or generate material revenues for us.

We outsource certain product manufacturing to third-party service providers. OutsourcingDependence on outsourcing reduces our control over the performance of the outsourced functions.functions Dependence on outsourcingand may also adversely affect our ability to bring new products to market. For example, we depend upon Jabil Manufacturing Co. (“Jabil”) to manufacture most of our semiconductor test systems from its facility located in Malaysia. In the event that Jabil is unable to meet Cohu’sour current delivery schedule for semiconductor test systems, or if Jabil experienced unexpected downtime, we may not be able to sell to our customers, or have significant delays in fulfilling their orders. If we experiencedexperience significant delays or disruptions with Jabil, it would take us significant time to ramp up a new manufacturer for our semiconductor test products, either in-house or with another contract manufacturer. Therethere can be no assurance that alternative capacity could be obtained on favorable terms, if available at all. If we do not effectively manage our outsourcing strategy orwith ifthese third-party service providers do not perform as anticipated,providers, we may experience operational difficulties, increased costs, manufacturing interruptions or inefficiencies in the operation of our supply chain, any or all of which could delay our delivery of products to our customers, and materially and adversely affect our business, financial condition, and results of operations.

If we deliver systems with defects, our reputation and demand offor our systems may decrease, and the cost of quality events could be harmful to our operating results.

In the course of conducting our business, we must adequately address quality issues associated with our products and services, including defects in our engineering, design and manufacturing processes, as well as defects in third-party components included in our products. Our systems are complex and have occasionally containedcontain errors, defects and bugs when introduced. When this occurs, our credibility and the market acceptance and sales of our systems may be harmed. Further, if our systems contain errors, defects or bugs, computer viruses or malicious code as a result of cyber-attacks to our computer networks, our customers may experience costs due to the loss of use of the equipment or software and we may be required to expend significant capital and resources to alleviate these problems.problems, including if related to a recall, as well as maintain or repair our reputation. To proactively address quality issues, we work extensively with our customers and suppliers and engage in product testing to determine the cause of quality problems and appropriate solutions. Finding solutions to quality issues can be expensive and may result in additional warranty, replacement and other costs.

We use numerous vendors to supply parts, components and subassemblies for the manufacture of our products. It is not always possible to maintain multiple qualified suppliers for all of our parts, components and subassemblies. As a result, manyMany key parts may be available only from a single supplier (“sole source”) or a limited number of suppliers.suppliers, increasing our vulnerability to supply interruptions. In addition, suppliers maymay, with or without advance notice, significantly raise prices or cease manufacturing certain components (with or without advance notice) that are difficult to replace without significant reengineering of our products. On occasion, we have experienced problems in obtaining adequate and reliable quantities of various parts and components from certain key or sole source suppliers. For example, atin the beginning of fiscal 2022,2025, we experienced supply constraints and delays in accessing certain specialtycritical semiconductorscomponents necessaryused forin the production ofour test instrumentssockets fordue ourto semiconductorgovernmental ATEregulatory products,changes, which if not managed quickly and thesediligently, supplycould constraintshave adversely impacted our ability to supply the finished goods and our overall gross margin in fiscal 2022. Although the supply constraints subsided during fiscal 2023, they may reoccur at any time due to factors beyond our control.2025. More broadly, our results of operations may be materially and adversely impacted if we do not receive sufficient parts to meet our requirements in a timely and cost-effective manner.

The semiconductor equipment industry is intensely competitivecompetitive, and we may not be able to maintain or win business over that of our competition.

The industriessemiconductor weequipment servemarket areis intensely competitive, andwith wea facefew substantiallarge competitioncustomers accounting for most sales. In 2025, our ten largest customers represented 60% of total revenue. During the past five years, the percentage of our sales derived from numerousthese companiessignificant throughoutcustomers has varied greatly. Losing a major customer or failing to keep up with competitors’ innovations could significantly impact our results. For example, the world. The test handlerautomation industry, while relatively small in terms of worldwide market size compared to other segments of the semiconductor equipment industry, has several participants resulting in intense competitive pricing pressures. Future competition may include companies that do not currently supply test handlers. In addition, there are emerging companies that provide or may provide innovative technology incorporated in products that may compete successfully against our products. We expect our competitors to continue to improve the design and performance of their current products and to introduce new products with improved performance capabilities. Our failure to introduce new products in a timely manner, the introduction by our competitors of products with perceived or actual advantages, or disputes over rights to use certain intellectual property or technology could result in a loss of our competitive position and reduced sales of, or margins, on our existing products. Intense competition has adversely impacted our product average selling prices and gross margins on certain products. If we are unable to price our existing products competitively and successfully introduce new technologically advanced and competitively priced products, then we expect that these competitive conditions would negatively impact our gross margin and operating results in the foreseeable future.results.

Consolidation in the semiconductor industry may reduce our customer base and could adversely affect the market for our products, which could cause a decline in our revenues. With consolidation, the number of actual and potential customers for our products has decreased in recent years. Consolidation may lead to relatively fewer opportunities to sell our products if we are not chosen as a supplier by any given prospective customer and may lead to increased pricing pressures from customers that have greater volume purchasing power. There has also been consolidation within the semiconductor test equipment market. This consolidation trend could change our interactions and relationships with complementary tester, instrument, and probe card suppliers, and negatively impact our revenue and operating results.

The semiconductor equipment industry is characterized by dramatic and sometimes rapid changes in demand for products. Sudden demand changes in business conditions, positive or negative, are common in our industry but the timing of such changes is very difficult to predict. Regardless of the reason, sudden changes in demand for semiconductor equipment may have a significant impact on our operations, and suchincreases changesor decreases in demand (up or down) are difficult to predict and proactively plan for. We have in the past and may in the future experience difficulties, particularly in manufacturing, and with training and recruiting large numbers of additions to our workforce. The volatility in headcount and business levels, combined with the cyclical nature of the semiconductor industry, may require that we invest substantial amounts in new operational and financial systems, procedures and quality controls. We may not be able to timely or successfully adjust our systems, facilities, production capacity and quality standards to meet our customers’ changing requirements. Any inability to meet such requirements will have an adverse impact on our business, financial position and results of operations.

The process of developing new high technology products and services and enhancing existing products and services is complex, costly and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately could significantly harm our sales and results of operations. Our customers’ selection processes typically are lengthy and can require us to incur significant sales, service and engineering expenses, and to provide the customer evaluation systems for a period of time at no charge, in pursuit of a single customer opportunity. For example, we typically expend significant resources educating our prospective customers regarding the uses and benefits of our products, customizing our products in ways that are specific to the potential customer’s needs or loaning out testconsigning equipment, and we might not be reimbursed for such activities. The substantial resources we devote to our sales efforts may not result in any revenues from a customer. For example, any semiconductor project may never reach production or customers may elect to validate a project with our products and then search for a lower cost vendor for production equipment. We may not win the competitive selection process and may never generate any revenue despite incurring such expenditures. In addition, prospective customers might decide not to use our products or use our products for a relatively small percentage of their requirements after we have expended significant effort and expense toward product design, development, and/or manufacture. The delays inherent in these lengthy sales cycles increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales.

The use of Artificial Intelligence (“AI”) within Cohu’sour product development involves risks and uncertainties that may impact our operational performance and be subject to legal and/or regulatory action.

TheWe informationuse technologyAI industryin hasour experiencedproducts rapidto technologicalimprove developments,efficiency and performance. However, AI models may produce inaccurate results if not properly designed or trained, leading to increased downtime and higher maintenance costs for customers. Regulatory changes inrelated industryto standards,AI changescould inrequire customercostly requirementsmodifications to our products and frequent new product introductions and improvements. We currently utilize, and expect in the future to continue to utilize, AI technology within certain of our products.processes. For example, weour recentlyacquisition acquiredof Tignis, Inc.,Inc. a(“Tignis”) providerin of2025 AIintroduced processnew controlcompliance requirements for data privacy and analytics-basedalgorithmic monitoring software. The primary goal of these technologies is to improve the efficiency and performance of our customer deployed systems. These solutions, along with our data analytics software designed to provide predictive maintenance recommendations and vision inspection software designed to find pattern recognition within large image datasets, utilize AI models that are trained using various data sets.transparency. While our use of commercially developed and internally created AI technology is intended to accelerate innovation and improve productivity, the algorithmic calculations used by AI may result in incorrect data production and flawed root cause analysis of identified issues. If our AI models are incorrectly designed or implemented or doinput notdata receiveis picturesinaccurately or visual data,captured, they may produce inaccurate or unreliable results, negatively impacting the performance and reliability of our solutions. If the data is incomplete, inadequate, or biased, it could lead to suboptimal model performance, impairing the functionality of our solutions. Any malfunction or unexpected behavior in our AI-driven systems could lead to increased downtime and higher maintenance costs for our customers and potential loss of revenue. Additionally, failures in the performance of our AI models could damage our reputation, erode customer trust, and result in loss of business and negative publicity.

Additionally, itthe EU AI Act went into effect on August 1, 2024, which sets requirements for developers and deployers of AI systems based on a risk approach and extends its reach to those developers of AI outside of the EU where the AI product or output is likelyused thatin legalthe EU. AI regulation is continually evolving at the federal, state and/or regulatoryinternational actionslevel thatand will becontinue takento require financial and resource investment by impacted jurisdictions may include enhanced legislation that addresses the protection of individuals from data privacy harm resulting from AI use. The continued rapid evolution of AI, including potential government regulation of AI, will require resourcesus to develop, test and maintain our products and features to help us implement AI ethically in order to minimize unintended harmful impact. If we are unable to respond quickly and successfully to these developments in AI requirements or policies, we may lose our competitive position, and our products or technologies may become uncompetitive or obsolete resulting in a loss of sales.

We are exposed to the risks of operating in certain foreign locations where Cohuwe manufacturesmanufacture certain products and supportssupport our sales and services to the global semiconductor industry.

We are a global corporation with offices and subsidiaries in certain foreign locations to manufacture our products and support our sales and services to the global semiconductor industry. As such, we face risks in doing business globally. For example, while our corporate headquarters are located in California, additional key engineering, sales and administrative personnel are located in China, Germany, Japan, Malaysia, the Philippines, Singapore, Switzerland, Taiwan and elsewhere in the U.S., and our manufacturing operations are primarily located in Japan, Singapore, Malaysia, Philippinesthe Philippines, Japan, and the U.S. Additionally, sales of our products to customers outside of the United StatesU.S. represent a significant part of our past and anticipated revenues. Our international salessales, based upon the ship-to location, as a percentage of our revenues were 86%,90%, 88%86% and 90%88% for fiscal 2024,2025, 20232024 and 2022,2023, respectively. Certain of our non-U.S. based customers also purchase through their subsidiaries in the United States. In the future we expect international sales to continue to account for a significant percentage of our revenues. Certain aspects inherent inof transacting business internationallyinternationally, couldincluding negativelymanaging impactgeographically dispersed operations presents difficult challenges associated with organizational alignment and infrastructure, communications and information technology, inventory control, customer relationship management, currency fluctuations, terrorist threats and related security matters and cultural diversities. If we are unsuccessful in managing such operations effectively, our operatingbusiness results,and including:results of operations will be adversely affected.

We have observed a continuing trend of increasing risks and challenges in the conduct of our international business activities, including expanded tariffs and other trade barriers affecting the UnitedU.S., StatesChina and China.other locations. Additionally, we are required to comply with foreign import and export requirements, customs and value added tax standards that can be unclear or complex. Our failure to meet these requirements and standards could negatively impact our business operations. If one or more of these risks occurs,occur, it could require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our financial results will suffer.

Geopolitical instability in locations critical to Cohuus and itsour customers may adversely impact our operations, sales and profitability.

The majority of our sales are made to destinations in Asia. Political or economic instability, particularly in Asia, may adversely impact the demand for capital equipment, including equipment of the type we manufacture and market. An increase in geopolitical tensions ininvolving Asia, particularly in the Taiwan Strait,Asia could disrupt existing semiconductor chip manufacturing and increase the prospect of an interruption to the semiconductor chip supply across the world. A setback to the current state of relative peace and stability in the region could compromise existing semiconductor chip production and have downstream implications for our Company. The world’s largest semiconductor chip manufacturer is located in Taiwan and is a top supplier for many U.S. companies, many of which are part of the Company’sour customer base. Additionally, theother armedconflicts conflict involving Hamas and Israel, as well as further escalation of tensions between Israel and various countries inthroughout the Middle East and North Africa,world may cause increased inflation in energy and logistics costs and could further cause general economic conditions in the U.S. or abroad to deteriorate. It is unknown how long any of these disruptions will continue and whether such disruptions will become more severe. If these trade sanctions, and related geopolitical tensions, are not resolved in the short term they could cause a lengthy disruption to all global companies. Any of these conflicts or other threatened conflicts could in turn cause an interruption to semiconductor chip supply. Related impacts to our customers and any increased costs, increased competition or constraints on resources such as freight, or other disruption in our supply chain, could result in an adverse impact to our financial results.

CohuFor isthe afiscal leadingyear supplierending ofDecember test27, and2025, inspectionour metrologynet automationsales systems,increased MEMS12.7%, test modules, test contactors, thermal subsystems, data analytics softwareyear-over-year, to optimize$453.0 manufacturingmillion. yieldRevenue and productivity, and automated test equipment (ATE) used by global semiconductor manufacturers and test subcontractors. We offer a wide range of products and services andfrom our revenue from capital equipment products is primarily driven by thecustomers’ capital expenditureexpenditures and operating budgetsbudgets, ofwhich ourcan customers,fluctuate whosignificantly oftenbased abruptly delay or accelerate purchases in reaction toon variations in their business.business Theconditions. levelThese ofexpenditures expenditure by these companies dependsdepend on the current and anticipated market demand for semiconductor devices and the products that incorporate them. OurIn contrast, revenue from our recurring products—such areas driventest consumables and services—is influenced by the numbervolume of semiconductor devices that are tested and by the continuousongoing introduction of new products and new technologies by our customers. As a result, our recurring productsgenerally provideprovides a more stable recurring source of revenue and generallyexhibits do not have the same degree ofless cyclicality as ourthan capital equipment products.

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience, forecasts and on various other assumptions that are believed to be reasonable under the circumstances; however actual results may differ from those estimates under different assumptions or conditions. The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our critical accounting estimates that we believe are the most important to investors’ understanding of our financial results and condition and require complex management judgment and include:

Revenue Recognition: Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant. We recognize revenue when the obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our systems and non-system products or the completion of services. In circumstances where control is not transferred until destination or acceptance, we defer revenue recognition until such events occur. Revenue for established products that have previously satisfied a customer’s acceptance requirements is generally recognized upon shipment. In cases where a prior history of customer acceptance cannot be demonstrated and in the case of new products, revenue and cost of sales are deferred until customer acceptance has been received. Our post-shipment obligations typically include standard warranties. Service revenue is recognized over time as the transfer of control is completed for the related contract or upon completion of the services if they are short-term in nature. Spares,Spares and contactor and kit revenue isare generally recognized upon shipment. Certain of our equipment sales have multiple performance obligations. These arrangements involve the delivery or performance of multiple performance obligations,obligations that may occur at different points in time or over different periods of time. For arrangements containing multiple performance obligations, the revenue relating to the undelivered performance obligation is deferred using the relative standalone selling price method utilizing estimated sales prices until satisfaction of the deferred performance obligation. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. At December 28,27, 2024,2025, and December 30,28, 2023,2024, we had $5.6$5.1 million and $6.2$5.6 million of revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) with expected durations of over one year, respectively. As allowed under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we have opted not to disclose unsatisfied performance obligations for contracts with original expected durations of less than one year. We generally sell our equipment with a product warranty. The product warranty provides assurance to customers that delivered products are as specified in the contract (an “assurance-type warranty”). Therefore, we account for such product warranties under ASC Topic 460, Guarantees (“ASC 460”), and not as a separate performance obligation. The transaction price reflects our expectations about the consideration we will be entitled to receive from the customer and may include fixed or variable amounts. Fixed consideration primarily includes sales to customers thatin arewhich the amount of consideration is known as of the end of the reporting period. Variable consideration includes sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period. Such consideration primarily includesrelates to sales made to certain customers with cumulative tier volume discounts offered. Variable consideration arrangements are rare; however, when they occur, we estimate variable consideration as the expected value to which we expect to be entitled. Included in the transaction price estimate are amounts for which it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The estimate is based on information available for projected future sales. Variable consideration that does not meet revenue recognition criteria is deferred. Accounts receivable represents our unconditional right to receive consideration from our customer. Payments terms do not exceed one year from the invoice date and therefore do not include a significant financing component. To date, there have been no material impairment losses on accounts receivable. There were no material contract assets recorded on the consolidated balance sheet in any of the periods presented. On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in our consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped.

Segment Information: We appliedapply the provisions of ASC Topic 280, Segment Reporting (“ASC 280”), which sets forth a management approach to segment reporting and establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products, major customers and the geographies in which the entity holds material assets and reports revenue. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the Chief Operating Decision Maker (“CODM”) and for which discrete financial information is available. We have determined that our three identified operating segments are: Test Handler Group (“THGTH”), Semiconductor Tester Group (“STGST”) and Interface Solutions Group (“ISGIS”). Our THG, STG and ISGthree operating segments qualify for aggregation under ASC 280 due to similarities in their customers, their economic characteristics, and the nature of products and services provided. As a result, we report in one segment, Semiconductor Test & Inspection.

Goodwill, Intangible Assets and Other Long-lived Assets: We evaluate goodwill for impairment annually and when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. We test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting unit. If the fair value is determined to be less than the book value, a second step is performed to compute the amount of impairment as the difference between the fair value of the reporting unit and its carrying value of goodwill, not to exceed the carrying value of goodwill. We estimate the fair values of our reporting units using a weighting of the income and market approaches. Under the income approach, we use a discounted cash flow methodology to derive an indication of value,methodology, which requires managementsignificant tojudgment makeand estimates and assumptions related toto, among other things, forecasted revenues, gross profit margins, operating income margins, working capital cash flow,flows, perpetual growth rates, and long-termlong‑term discount rates,rates. among others. For theThe market approach,approach we useutilizes the guideline public company method.method, Underunder thiswhich methodvaluation wemultiples utilize informationderived from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the reporting unit’s operating performance metricsmetrics. of the reporting unit being tested, in order to obtain an indication of value. We then apply a 50/50 weighting to theThe indicated values derived from the income and market approaches are equally weighted to derivedetermine the estimated fair valuesvalue of theeach reporting units. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on customer forecasts, industry trade organization data and general economic conditions. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.unit.

Share-based Compensation: Share-based compensationCompensation expense related tofor restricted stock unit (RSU) awards is calculated based on the market price of our common stock on the grant date,date. reducedAs byCohu thedoesn’t presentcurrently valuepay ofdividends, no reduction for expected dividends expectedis toapplied. beCompensation paidexpense on our common stock prior to vesting of the restricted stock unit. Share-based compensation onfor performance stock units (PSUs) with market-based goals is calculateddetermined using a Monte Carlo simulation model on the dateas of the grant.grant date. When granted, share-based compensation expense related tofor stock options is recordedmeasured based on the fair value of the award on its grant date, which we estimate using the Black-Scholes valuation model.

Gross margin consists of net salessales, less cost of sales. Cost of sales consists primarily of the materials, assembly and test labor and overhead from operations. Our gross margin can fluctuate due to a number of factors, including, but not limited to, the mix of products sold, product support costs, changesincreases in inventory reserves, the sale of previously reserved inventory and business volume which impacts the utilization of our manufacturing capacity. Our gross margin, as a percentage of net sales, decreased to 42.7% in fiscal 2025 from 44.9% in fiscal 2024 from 47.6% in fiscal 2023.2024. During fiscal 2024,2025, our gross margin hasexperienced declineda duedecline primarily driven by the product mix of systems delivered to lowercustomers, businessalong volumewith whicha hasone‑time negatively impacted our ability to leverage fixed costs. In fiscal 2023, cost of sales also included the recognition of $1.1 million of step-up adjustmentscharge related to acquiredour inventoriesdecision into theend acquisitionsmanufacturing of MCTcertain andproducts, EQT.discussed below.

We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage forecasts. During fiscal 2024,2025, we recorded net charges to cost of sales of approximately $5.4$7.5 million for excess and obsolete inventory.inventory, which includes a one-time charge of $3.3 million related to our decision to end manufacturing of certain products. In fiscal 2023,2024, net charges to cost of sales for excess and obsolete inventory were $4.5$5.4 million. We believe our reserves for excess and obsolete inventory and lower of cost or net realizable value are adequate to cover known exposures at December 28,27, 2024.2025. ReductionsHowever, reductions in customer forecasts, continued modifications to products, or our failure to meet specifications or other customer requirements may result in additional charges to operations that could negatively impact our gross margin in future periods.

R&D expense consists primarily of salaries and related costs of employees engaged in ongoing research, product design and development activities, costs of engineering materials and supplies and professional consulting expenses. Our future operating results depend, to a considerable extent, on our ability to maintain a competitive advantage in the products we provide, and historically we have maintained our commitment to investing in R&D in order to be able to continue to offer new products to our customers. R&D expense in fiscal 20242025 was $92.2 million, or 20.4% of net sales, compared to $84.8 million, or 21.1% of net sales, compared to $88.6 million, or 13.9% of net sales in fiscal 2023.2024. R&D expensesexpense decreasedincreased during fiscal 20242025, primarily due to lower spending onhigher material costs associated with new product development andinitiatives. lowerIn incentiveaddition, compensationR&D dueexpense toduring currentfiscal business conditions. Fiscal 2024 and 20232025 included $1.6 million and $0.3 million of incremental costs fromof EQT,approximately respectively.$3.9 million related to our integration of Tignis, reflecting our continued investment in advanced analytics and AI-driven solutions to enhance product capabilities.

Amortization of purchased intangibles is the process of expensing the cost of an intangible asset acquired through a business combination over the projected life of the asset. Amortization of acquisition-related intangible assets was $39.1$37.5 million and $36.4$39.1 million for fiscal 20242025 and 2023,2024, respectively. The increasedecrease in expensesexpense recordedin duringfiscal 2025 was primarily attributable to certain purchased intangible assets becoming fully amortized in the currentfourth yearquarter, waspartially aoffset result ofby the amortization of acquired intangible assets from EQT.Tignis.

Interest expense was $2.1 million in fiscal 2025 compared to $0.6 million in fiscal 2024 compared to $3.4 million in fiscal 2023.2024. The year-over-year decreaseincrease in interest expense resulted from athe reductionissuance of convertible notes in the outstandingfourth balancequarter of ourfiscal Term Loan Credit Facility which was paid off in February of 2024.2025.

Interest income was $10.0$8.0 million and $11.5$10.0 million in fiscal 20242025 and 2023,2024, respectively. The decrease in interest income year-over-year iswas aprimarily resultdriven ofby lower average cash and investment balances and lowera decline in interest rates.rates during fiscal 2025. While we received proceeds from the issuance of convertible notes in the fourth quarter of fiscal 2025, the timing of the transaction limited its impact on average balances for the year.

We have operations in foreign countries and conduct business in the local currency in these countries. We enter into foreign currency forward contracts to hedge against future movements in foreign exchange rates that affect certain U.S. Dollar denominated assets and liabilities that are held at our subsidiaries whose functional currency is the local currency. During fiscal 2024, the U.S. Dollar strengthened against foreign currencies we operate in. During fiscal 20242025, we recognized losses of $2.4$0.8 million, net of $7.5$6.0 million inof lossesgains generated by our foreign currency forward contracts. In fiscal 2023,2024, the U.S. Dollar weakenedstrengthened against foreign currencies we operate in resulting in recognized losses of $5.2$2.4 million, net of $2.1$7.5 million of gainslosses generated by our foreign currency forward contracts.

The income tax provision expressed as a percentage of pre-tax income or loss in fiscal 20242025 and 20232024 was (7.519.0)% and 38.6%,(7.5)%, respectively. The provision for income taxes decreasedincreased from $17.7 million in fiscal 2023 to $4.9 million in fiscal 2024 to $11.9 million in fiscal 2025 primarily due to the reductionincrease in pre-tax income from operations.foreign operations and valuation allowances established to offset net deferred tax assets of our subsidiaries in Switzerland and Malaysia.

Based on the evidence available including a lack of sustainable earnings and history of expiring unused NOLs, and tax credits, we continue to maintain our judgement that a previously recorded valuation allowance against substantially all of our net deferred tax assets in the United StatesU.S. is still required. In addition, due to the cumulative loss position in Switzerland and the worldwide consolidated cumulative loss, we recorded valuation allowances against the net deferred tax assets in Switzerland and Malaysia during fiscal 2025. If a change in judgement regarding thisthese valuation allowanceallowances were to occur in the future, we willwould record a potentially material deferred tax benefit, which could result in a favorable impact on the effective tax rate in that period.

Net (Loss) Income

As a result of the factors set forth above, our net loss was $74.3 million in fiscal 2025 and $69.8 million in fiscal 2024 and our net income was $28.2 million in fiscal 2023.2024.

On February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding principal of our Term Loan Credit Facility. InThe fiscalterms 2024of the Term Loan Credit Facility are described in Note 3, “Borrowings and 2023,Credit weAgreements” repurchasedin 915,504Part sharesIV, andItem 700,270 shares15(a) of ourthis outstandingForm common stock for $27.0 million and $23.6 million, respectively, to be held as treasury stock.10-K.

Operating Activities: Cash provided by operating activities consists of our net loss adjusted for non-cash expenses and changes in operating assets and liabilities. These adjustments include impairment charges, depreciation expense on property, plant and equipment, share-based compensation expense, amortization of intangible assets, deferred income taxes, amortization of cloud-based software implementation costs, amortization of debt discounts and issuance costs and gains from the sale of property, plant and equipment. Our net cash flows provided by operating activities in fiscal 20242025 totaled $2.8$31.7 million compared to $101.5$2.8 million in fiscal 2023.2024. The decreaseincrease in cash provided by operating activities in the current year was a result of weakerimproved business conditions, which drove a net loss in the current fiscal year.conditions. Cash provided by operating activities was also impacted by changes in current assets and liabilities which included decreasesa decrease in other assets of $15.4 million, primarily reflecting the collection of income taxes receivable, an increase in accounts receivable of $14.5 million due to the timing of fourth quarter shipments, a decrease in inventories of $4.3 million attributable strict management and targeted inventory reduction actions, an increase in accounts payable.payable Netof sales$10.3 million driven by the timing of supplier receipts and payments in the fourth quarterquarter, an increase in deferred profit of fiscal$3.7 2024million related to revenue deferrals made in accordance with our revenue recognition policy, and thean timing of the resulting cash conversion cycle drove the $34.9 million decreaseincrease in accounts receivable, and the timing of payments to our suppliers resulted in the $3.6 million decrease in accounts payable. Accruedaccrued compensation, warranty and other liabilities decreasedof $15.5$8.6 million duereflecting tothe lower business volume resulting in lower ratestiming of accrual.incentive Cashcompensation providedaccruals byand operatingwarranty activitiesprovisions wasconsistent also impacted by decreases in income taxes payable of $2.2 million because of payments made. During fiscal 2024, otherwith current assetssales increased $16.1 million due to an increase in income taxes receivablelevels and prepaidproduct vendor deposits, and inventories decreased $6.4 million due to lower business volume and strict inventory management.mix.

Investing Activities: Investing cash flows consist primarily of cash used for capital expenditures in support of our business, purchases of investments, business acquisitions and proceeds from investment maturities and asset disposals. Our net cash providedused byin investing activities in fiscal 20242025 totaled $21.9$257.0 million. In fiscal 20242025 we used $78.6$263.4 million in cash for purchases of short-term investments and generated $114.2$63.8 million from sales and maturities. We invest our excess cash, in an attempt to seek the highest available return while preserving capital, in short-term investments since excess cash may be required for a business-related purpose. Additions to property, plant and equipment in fiscal 20242025 were $10.6$21.0 million and were made to support our operating and development activities. Cash paid for the settlement of net investment hedges totaled $3.2$2.1 million in fiscal 2024.2025. Our net cash usedprovided inby investing activities in fiscal 20232024 totaled $30.2$21.9 million. In fiscal 20232024 we used $97.3$78.6 million in cash for purchases of short-term investments and generated $152.6$114.2 million from sales and maturities. During fiscal 2023, we used $26.3 million of cash, net of cash received, for the acquisition of MCT which was a strategic transaction for our test handler group. In fiscal 2023, we also used $43.4 million of cash, net of cash received, for the acquisition of EQT, which was a strategic transaction for our interface solutions group. Additions to property, plant and equipment in fiscal 20232024 of $16.1$10.6 million were made to support our operating and development activities.

Financing Activities: Financing cash flows consist primarily of net proceeds under our employee stock purchase plans, repurchases of shares made under our share repurchase program and repayments of debt, net of new borrowings. In fiscal 2025, our cash provided by financing activities totaled $246.3 million, primarily due to $287.5 million of proceeds from our issuance of convertible senior notes reduced by $31.4 million cash paid for purchase of capped calls related to our convertible senior notes and $9.4 of debt issuance costs. During fiscal 2025, we also had proceeds of $8.5 million from borrowings on a revolving line of credit used to finance the purchase of our factory in Malaysia. In fiscal 2024, our cash used in financing activities totaled $59.0 million.million Inprimarily fiscaldue 2023, our cash used in financing activities totaled $68.1 million. Repayments of short-term borrowings and long-termto debt duringrepayments fiscal 2024 totaledtotaling $31.3 million, which includes $29.3 million of cash prepayments of our Term Loan Credit Facility. DuringIn fiscal 2023 our2025, repayments totaled $38.8 million and included $34.1 million of cashdebt prepaymentswere of$1.7 our Term Loan Credit Facility.million. During fiscal 20242025 and 2023,2024, we made payments totaling $27.0$8.6 million and $23.6$27.0 million, respectively for shares of our common stock repurchased under our share repurchase program to be held as treasury stock. We issue restricted stock units, including performance stock units, and maintain an employee stock purchase plan as components of our overall employee compensation. In fiscal 2024,2025, net proceeds from shares issued under our employee stock purchase plan (“ESPP”) net of cash used to settle the minimum statutory tax withholding requirements on behalf of our employees upon vesting of restricted and performance stock awards, net of proceeds from shares issued under our employee stock purchase plan and from the exercise of employee stock options was $0.1$1.2 million. In fiscal 2023,2024, net cash used to settle the minimum statutory tax withholding requirements on behalf of our employees totaled $5.7$0.1 million. The decreasechange in cash used to settle tax withholding requirements between fiscal 20242025 and 20232024 is directly correlated to the decrease in Cohu’s stock price at the end of March year over year when the majority of awards vest.vest, while maintaining similar levels of participation and proceeds from our ESPP.

On October 1, 2018, we entered into a Credit Agreement providing for a $350.0 million Term Loan Credit Facility and borrowed the full amount to finance a portion of the Xcerra acquisition. Loans under the Term Loan Credit Facility amortizewere amortized in equal quarterly installments of 0.25% of the original principal amount, with the balance payable at maturity. All outstanding principal and interest in respect of the Term Loan Credit Facility would have been due on or before October 1, 2025. The loans under the Term Loan Credit Facility bore interest, at Cohu’s option, at a floating annual rate equal to the London Interbank Offered Rate (“LIBOR”) plus a margin of 3.00%. On June 16, 2023, in connection with the discontinuation of LIBOR, we entered into an amendment to our Term Loan Credit Facility, which provided for the transition of the benchmark interest rate from LIBOR to the Secured Overnight Financing Rate (“SOFR” or “Term SOFR”). Effective with the interest period beginning July 1, 2023, LIBOR was replaced with Adjusted Term SOFR, a floating annual rate equal to SOFR plus a margin of 3.0%. At December 30, 2023, the outstanding loan balance, net of discount and deferred financing costs, was $29.1 million and $3.4 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets.

On February 9, 2024, we made a cash payment of $29.3 million to repay the remaining outstanding amounts owed under our Term Loan Credit Facility. We accounted for the transaction as a debt extinguishment, and in the first quarter of fiscal 2024 we recognized a loss of $0.2 million in our consolidated statement of operations due to the recognition of the remaining debt discount and deferred financing costs. During fiscal 2023, we repurchased $34.1 million in principal of our Term Loan Credit Facility in cash. We accounted for the repurchase as a debt extinguishment, which resulted in a loss of $0.4 million reflected in our consolidated statement of operations, as well as a $0.4 million reduction in debt discounts and deferred financing costs in our consolidated balance sheets.

We have a series of term loans with Japanese financial institutions primarily related to the expansion of our facility in Osaka, Japan. The loans are collateralized by the facility and land, carry interest rates ranging from 0.05% to 0.72%,0.96%, and expire at various dates through 2034. At December 28,27, 2024,2025, the outstanding loan balance was $1.7$1.5 millionmillion, and $0.2 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets. At December 30,28, 2023,2024, the outstanding loan balance was $2.1$1.7 millionmillion, and $0.2 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets. The term loans are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.

For the three months endedending MarchJune 28,27, 2026, net sales increased 2.3%19.1% sequentially to $125.1$149.0 million. Revenue from our capital equipment products is primarily driven by customers’ capital expenditures and operating budgets, which depend on capacity utilization, inventory levels, and anticipated end‑ market demand and may fluctuate significantly with industry conditions, with capital spending related to artificial intelligence (“AI”) and high‑ performance computing currently more resilient than automotive, industrial, and consumer markets. In contrast, revenue from our recurring products, such as test consumables and services, is influenced by the volume of semiconductor devices tested and customers’ ongoing technology transitions, and because this revenue is tied to the installed base and production activity rather than discrete capital purchase decisions, it is generally more stable and less cyclical than capital equipment revenue.

Global macroeconomic and geopolitical factors continue to influence the semiconductor industry. While elevated interest rates and ongoing geopolitical uncertainty have moderated capital spending in certain end markets, industry conditions havecontinue becometo increasinglybe bifurcated. Automotive,While industrial,automotive, and consumer‑orientedconsumer-oriented semiconductor markets remainshow subdued asimprovement, customers continue to manage excess inventory levels closely and delayare certaincautious with capacity investments, leading many semiconductor companies to maintain cost controls and selectivelycarefully defermanage expansion plans.

By contrast, demand related to artificial intelligence (“AI”), high‑ performance computing, and data center applications has remained comparatively strong and continues to support investment in advanced semiconductor testing and inspection solutions. Demand for semiconductors for the industrial market increased during the second quarter as reflected by an increase in estimated test cell utilization to low 80% at the end of June. During the firstsecond quarter of fiscal 2026, our net sales benefited from increased customer activity associated with AI‑ driven computing applications, and higher demand in the industrial semiconductor market, which helped to offset ongoing weakness in automotive, industrial, and consumer‑ focused markets. These trends are broadly consistent with industrymarket conditions and customer spending patterns specific to our end markets.

In response to economic conditions, in fiscal 2025, we initiated a global restructuring program designed to improve profitability while maintaining investmentinvestments in product development. We continue to manage our cost structure with discipline while preserving flexibility to support anticipated growth opportunities, particularly in AI‑ related applications. We remain focused on building a well‑ balanced and resilient business model, executing on customer design wins, and developing innovative products. We are expanding our addressable market with new test, inspection, automation, and automationAI-driven software solutions and are encouraged by increasing customer adoption of semiconductor test and inspection equipment used in AI‑ enabled data centers and advanced packaging applications.centers. Despite continued near‑ term variability across certain semiconductor end markets, we believe our long‑ term market drivers remain intact, supported by increasing semiconductor complexity, higher quality and reliability requirements, test intensity, automation, smart manufacturing initiatives, and the proliferation of electronics across automotive, mobile, industrial, computing, and consumer markets.

Revenue Recognition: Our net sales are derived from the sale of products and services and are adjusted for estimated returns and allowances, which historically have been insignificant. We recognize revenue when the obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our systems and non-system products or the completion of services. In circumstances where control is not transferred until destination or acceptance, we defer revenue recognition until such events occur. Revenue for established products that have previously satisfied a customer’s acceptance requirements is generally recognized upon shipment. In cases where a prior history of customer acceptance cannot be demonstrated and in the case of new products, revenue and cost of sales are deferred until customer acceptance has been received. Our post-shipment obligations typically include standard warranties. Service revenue is recognized over time as the transfer of control is completed for the related contract or upon completion of the services if they are short-term in nature. Spares and contactor and kit revenue are generally recognized upon shipment. Certain of our equipment sales have multiple performance obligations. These arrangements involve the delivery or performance of multiple performance obligations that may occur at different points in time or over different periods of time. For arrangements containing multiple performance obligations, the revenue relating to the undelivered performance obligation is deferred using the relative standalone selling price method utilizing estimated sales prices until satisfaction of the deferred performance obligation. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. On MarchJune 28,27, 2026, we had $4.9$4.8 million of revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) with expected durations of over one year. As allowed under ASC 606, we have opted not to disclose unsatisfied performance obligations for contracts with original expected durations of less than one year. We generally sell our equipment with a product warranty. The product warranty provides assurance to customers that delivered products are as specified in the contract (an “assurance-type warranty”). Therefore, we account for such product warranties under ASC 460, and not as a separate performance obligation. The transaction price reflects our expectations about the consideration we will be entitled to receive from the customer and may include fixed or variable amounts. Fixed consideration primarily includes sales to customers in which the amount of consideration is known as of the end of the reporting period. Variable consideration includes sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period. Such consideration primarily relates to sales made to certain customers with cumulative tier volume discounts offered. Variable consideration arrangements are rare; however, when they occur, we estimate variable consideration as the expected value to which we expect to be entitled. Included in the transaction price estimate are amounts for which it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. This estimate is based on information available for projected future sales. Variable consideration that does not meet revenue recognition criteria is deferred. Accounts receivable represents our unconditional right to receive consideration from our customer. Payments terms do not exceed one year from the invoice date and therefore do not include a significant financing component. To date, there have been no material impairment losses on accounts receivable. There were no material contract assets or contract liabilities recorded on the condensed consolidated balance sheet in any of the periods presented. On shipments where sales are not recognized, gross profit is generally recorded as deferred profit in the condensed consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped.

Goodwill is also required to be evaluated for impairment between annual testing dates if indicators of impairment arise. Based on our evaluation of events, including operating results and market conditions through MarchJune 28,27, 2026, we determined that no such triggering events had occurred. If circumstances change and an interim impairment assessment is required, it could result in a non‑cash impairment charge, which could be material and would adversely affect our results of operations and financial condition.

During the first threesix months of fiscal 2026, no events or conditions occurred suggesting an impairment in our long-lived assets.

FirstSecond Quarter of Fiscal 2026 Compared to FirstSecond Quarter of Fiscal 2025

Our consolidated net sales increased 29.3%38.4% to $125.1$149.0 million in 2026, compared to $96.8$107.7 million in 2025. Net sales for the firstsecond quarter of fiscal 2026 increased compared to the same period in fiscal 2025, primarily driven by stronger demand across mobile and AI‑based computing applications.applications, Whileindustrial theand globalautomotive macroeconomicsemiconductor environmentmarkets. continuedMeanwhile, todemand weighin on automotive, industrial,mobile and consumer end markets,markets demandremained forrelatively mobileconsistent and AI‑based computing applications helped to offset these pressures and was the primary contributor to year‑over‑year growth.year-over-year.

Gross margin consists of net sales, less cost of sales. Cost of sales consists primarily of materials, assembly, test labor, and overhead from operations. Our gross margin can fluctuate due to a number of factors, including, but not limited to, the mix and volume of products sold, product support costs, changes in inventory reserves, the sale of previously reserved inventory, manufacturing cost structure, and business volume which impacts the utilization of our manufacturing capacity. Our gross margin, as a percentage of net sales for the firstsecond quarter, was 46.3%45.4% in fiscal 2026 and 43.7% in fiscal 2025. Gross margin in the firstsecond quarter of fiscal 2026 was impacted by a more favorable mix of systems sold to customers, as well as higher overall business volume, which enabled improved utilization of our existing manufacturing cost structure.

We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage forecasts. During the firstsecond quarter of fiscal 2026 and 2025, we recorded charges to cost of sales of $2.3$3.2 million and $1.6$1.5 million for excess and obsolete inventory, respectively. We believe our reserves for excess and obsolete inventory and lower of cost or net realizable value are adequate to cover known exposures as of MarchJune 28,27, 2026. Further reductions in customer forecasts, continued modifications to products, or our failure to meet specifications or other customer requirements, may result in additional charges to operations that could negatively impact our gross margin in future periods.

R&D expense consists primarily of salaries and related costs of employees engaged in ongoing research, product design and development activities, costs of engineering materials and supplies and professional consulting expenses. R&D expense was $26.4$24.9 million in fiscal 2026 and $23.2 million in fiscal 2025, representing 21.1%16.8% and 23.9%21.5% of net sales, respectively. During the firstsecond quarter of fiscal 2026 R&D expenses increased primarily due to higher material costs incurred for new products under development, reflecting continued investment in our product roadmap.

SG&A expense consists primarily of salaries and benefit costs of employees, commission expense for independent sales representatives, product promotion and costs of professional services. SG&A expense was $34.6$34.4 million or 27.7%23.1% of net sales in fiscal 2026, compared to $30.0$29.9 million or 31.0%27.7% in fiscal 2025. SG&A expense during the firstsecond fiscal quarter of 2026 increased on a year-over-year basis, primarily driven by higher business volume and the associated increase in selling and administrative activity. These increases were partially offset by improved operating leverage as SG&A declined as a percentage of net sales.

Amortization of purchased intangibles is the process of expensing the cost of an intangible asset acquired through a business combination over the projected life of the asset. Amortization of acquisition-related intangible assets was $7.3 million and $9.9$10.0 million in the firstsecond fiscal quarter of 2026 and 2025, respectively. The decrease in amortization expense during the firstsecond quarter of fiscal 2026 was primarily due to certain acquisition‑related intangible assets becoming fully amortized during fiscal 2025.

We initiated a broad strategic restructuring program during the first quarter of fiscal 2025 aimed at repositioning our global organization and optimizing our cost structure. As a result of this program, during the firstsecond fiscal quarters of fiscal 2026 and fiscal 2025, we incurred restructuring charges totaling $0.8$0.6 million and $6.6$1.2 million, respectively. The year‑over‑year decrease in restructuring charges reflects the substantial completion of the program and lower related activities in fiscal 2026.

Interest expense was $1.6 million and $0.2$0.1 million in the firstsecond fiscal quarter of 2026 and 2025, respectively. The increase in interest expense compared to the prior year was primarily attributable to higher interest expense associated with the convertible notes issued during the fourth quarter of fiscal 2025.

Interest income was $3.8$3.9 million and $1.6$1.4 million in the firstsecond quarter of fiscal 2026 and 2025, respectively. The increase in interest income compared to the prior year was primarily driven by higher average investment balances during the second fiscal quarter of 2026, reflecting the investment of the proceeds from the issuance of the convertible notes in the fourth quarter of fiscal 2025. DespiteThe a lower interest‑rate environment compared to the prior year, the increase inhigher invested balances more than offset the impact of lower market rates, resultingresulted in higherincreased interest income forduring the quarter.period.

We account for income taxes in accordance with ASC 740. The provision or benefit for income taxes is attributable to U.S. federal, state, and foreign income taxes. Our effective tax rate (“ETR”) used for interim periods is based on an estimated annual effective tax rate, adjusted for the tax effect of items required to be recorded discretely in the interim periods in which those items occur. Our ETR is different than the statutory rate in the U.S. due to foreign income taxed at different rates than in the U.S., generation of tax credits, changes in uncertain tax benefit positions, changes to valuation allowances, the accrual of taxes on unremitted income of our foreign subsidiaries, state taxes, and theforeign impactwithholding of Net CFC Tested Income (“NCTI” formerly known as GILTI).taxes. In addition, we have numerous tax holidays related to our manufacturing operations in Malaysia and the Philippines. The tax holiday periods expire at various times in the future; however, we actively seek to obtain new tax holidays. Our first quarter 2026 tax provision is lower than the first quarter 2025 tax provision primarily due to a reduction in items recognized discretely during the first quarter.

We conduct business globally, and as a result, Cohu or one or more of its subsidiaries files income tax returns in the U.S. and various state and foreign jurisdictions. In the normal course of business, we are subject to examinations by taxing authorities throughout the world and are currently under examination in Germany, the Philippines, MalaysiaMalaysia, Taiwan, and California. We believe our financial statement accruals for income taxes are appropriate.

As a result of the factors set forth above, our net loss was $12.1$0.2 million for the three months ended MarchJune 28,27, 2026, and $30.8$16.9 million for the three months ended MarchJune 29,28, 2025.

Our primary historical source of liquidity and capital resources has been cash flow generated by operations and we manage our business to maximize operating cash flows as our primary source of liquidity. We use cash to fund growth in our operating assets and to fund new products and product enhancements primarily through research and development. As of MarchJune 28,27, 2026, $160.6$169.6 million or 76.1%77.2% of our cash and cash equivalents was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we may be required to accrue and pay foreign withholding taxes if we repatriate these funds. Except for working capital requirements in certain jurisdictions, we provide for all withholding and other residual taxes related to unremitted earnings of our foreign subsidiaries.

On MarchJune 28,27, 2026, our total indebtedness, net of deferred financing costs included $278.9$279.3 million outstanding under the Notes, $1.5$1.4 million outstanding under Kita’s term loans, $5.9$5.5 million outstanding under Cohu GmbH’s construction loan, $9.4$9.7 million outstanding under Cohu Malaysia’s revolving credit facility and $0.4$0.3 million outstanding under Kita’s lines of credit.

Operating Activities: Operating cash flows for the threefirst six months of fiscal 2026 consisted of our net loss, adjusted for non-cash expenses and changes in operating assets and liabilities. Significant non-cash adjustments included depreciation and amortization, share-based compensation expense, non-cash inventory-related charges, amortization of debt discounts and issuance costs, and amortization of cloud-based software implementation costs. Our net cash provided by operating activities in the threefirst six months of fiscal 2026 totaled $10.3$20.8 million. Net cash provided by operations was positively impacted by working capital changes, including a $4.9$21.3 million decreaseincrease in accounts receivablepayable, a $3.6 million increase in accrued compensation, warranty, and other liabilities, a $2.6$2.2 million increase in customer advances,advances; partially offset by a $4.8$18.2 million increase in inventories,inventories and a $5.1$16.8 million increase in otheraccounts current assets, and a $1.0 million decrease in deferred profit.receivable. The decreaseincrease in accounts receivablepayable was primarily due to the timing of cashsupplier collectionspayments, the increase in accrued compensation, warranty, and other liabilities reflects the timing of payments and settlements during the quarter,period, whileand the increase in customer advances reflects timing of customer payments received in advance of performance obligations. Inventory increased during the six months ended June 27, 2026, reflecting higher production levels to support anticipated customer demand and changes in product mix, partially offset by continued efforts to manage inventory and working capital efficiently across global operations. The increase in otheraccounts current assetsreceivable was largelyprimarily drivendue byto higher prepaidbusiness expenses,volume reflectingas well as the timing of paymentscash andcollections accrualsduring forthe certain operating costs. The decrease in deferred profit is due to recognition of previously deferred revenue in accordance with our revenue recognition policy.quarter.

Investing Activities: Investing cash flows consist primarily of cash used for capital expenditures in support of our business, purchases of investments, and proceeds from investment maturities and sales. Our net cash used in investing activities in the threefirst six months of fiscal 2026 totaled $22.4$23.2 million. We generated $48.2$111.0 million from sales and maturities and used $68.6$131.3 million of cash for purchases of short-term investments in the threefirst six months of fiscal 2026. We invest our excess cash to seek the highest available return while preserving capital, in short-term investments since excess cash may be required for a business-related purpose. Additions to property, plant and equipment in the first threesix months of fiscal 2026 were $2.0$4.3 million, and were made to support our operating and development activities.

Financing Activities: Financing cash flows consist primarily of share repurchases and repayments of debt. We did not have any cashnet proceeds from the issuance of common stock under our stock-based compensation or employee stock purchase plansplan duringand therepayments period.of debt. We issue restricted stock units, including performance stock units, and maintain an employee stock purchase plan as components of our overall employee compensation. In the threefirst six months of fiscal 2026, cash used to settle the minimum statutory tax withholding requirements on behalf of our employees upon vesting of restricted and performance stock awards, net of proceeds from shares issued under our employee stock purchase plan, was $4.6$3.4 million. We did not repurchase shares under our share repurchase program to be held as treasury stock during the period. Repayments of debt during the threefirst six months of fiscal 2026 totaled $0.4$0.7 million.

On October 28, 2021, we announced that our Board of Directors authorized a $70 million share repurchase program. This share repurchase program was effective as of November 2, 2021, and has no expiration date. On October 25, 2022, our Board of Directors authorized an additional $70 million under the share repurchase program. The timing of share repurchases and the number of shares of common stock to be repurchased will depend upon prevailing market conditions and other factors. Repurchases under this program will be made using our existing cash resources and may be commenced or suspended from time to time at our discretion without prior notice. Repurchases may be made in the open market, through 10b5-1 programs, or in privately negotiated transactions at prevailing market rates in accordance with federal securities laws. For the threesix months ended MarchJune 28,27, 2026, we did not repurchase any shares of our common stock and, as of MarchJune 28,27, 2026, $22.8 million remained available for us to repurchase shares of our common stock under our share repurchase program.

Prior to the close of business on the business day immediately preceding October 15, 2030, noteholders will have the right to convert their Notes only upon the occurrence of certain events. On or after October 15, 2030, noteholders may convert all or any portion of their Notes at any time at their election until the close of business on the second scheduled trading day immediately preceding the maturity date. UponThe conversion,Notes wewere willnot satisfyconvertible during the conversionfiscal obligationsquarter byended payingJune cash27, up2026. toThe Notes will, however, be convertible at the aggregate principal amountoption of theholders Notesthereof tofrom beJuly converted28, and2026 payingthrough and/orSeptember delivering8, cash,2026 shares of common stock oras a combinationresult of cash and shares of common stock, at our election, in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the Notes being converted. The initial conversion rate for the Notes is 36.7975 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $27.18 per share of common stock), which represents an approximately 32.5% conversion premium over the last reported sale price of $20.51 per share of our common stock onexceeding The130% Nasdaq Stock Market on September 24, 2025. The conversion rate (and accordinglyof the conversion price) is subject to adjustment uponof the occurrencenotes offor certainat events.least Infive addition,trading upondays certain corporate events(whether or uponnot a notice of redemption (as described belowconsecutive), we will, under certain circumstances, increase the conversion rate for noteholders who convert Notes in connection with such a corporate event or convert their Notes called (or deemed called) for redemption during the relatedfirst redemption20 period,trading asdays of the casefiscal mayquarter be.commencing June 28, 2026.

The effective interest rate for the Notes is 2.2% after considering the effect of the accretion of the related debt discount over the term of the Notes. For the three months ended MarchJune 28,27, 2026, total interest expense related to the Notes was $1.5 million, with coupon interest expense of $1.1 million and amortization of debt discount of $0.4 million. For the six months ended June 27, 2026, total interest expense related to the Notes was $3.0 million, with coupon interest expense of $2.2 million and amortization of debt discount of $0.8 million. As of MarchJune 28,27, 2026, the remaining unamortized debt discount of the Notes was $8.6$8.2 million. At MarchJune 28,27, 2026, the outstanding Notes balance, net of discount, was $278.9$279.3 million. At December 27, 2025, the outstanding Notes balance, net of discount, was $278.5 million.

We have a series of term loans with Japanese financial institutions primarily related to the expansion of our facility in Osaka, Japan. The loans are collateralized by the facility and land, carry interest at rates ranging from 0.05% to 1.21%,1.29%, and expire at various dates through 2034. At MarchJune 28,27, 2026, the outstanding loan balance was $1.5$1.4 million and $0.2 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. At December 27, 2025, the outstanding loan balance was $1.5 million and $0.2 million of the outstanding balance is presented as current installments of long-term debt in our condensed consolidated balance sheets. The term loans are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.

At MarchJune 28,27, 2026, total outstanding borrowings under the Loan Facilities was $5.9$5.5 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our condensed consolidated balance sheets. At December 27, 2025, total outstanding borrowings under the Loan Facilities was $6.3 million with $1.1 million of the total outstanding balance being presented as current installments of long-term debt in our condensed consolidated balance sheets. The loans are denominated in Euros and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates. The fair value of the debt approximates the carrying value at MarchJune 28,27, 2026.

On December 30, 2024, our wholly owned subsidiary in Malaysia entered into a revolving credit facility with a Malaysian financial institution that provides up to MYR 40 million, of which MYR 37.940.0 million has been drawn. The revolving credit facility was utilized to finance the purchase of our leased facility in Melaka, Malaysia. Interest is due monthly and is calculated based on the lender’s Effective Cost of Funds plus a spread of 0.5%. The revolving credit facility is secured by the land and building. At MarchJune 28,27, 2026, $9.4$9.7 million was outstanding under the revolving credit facility and the rate of interest was 4.04%.4.06%. As this revolving credit facility agreement renews monthly, it has been included in short-term borrowings in our condensed consolidated balance sheets. The revolving credit is denominated in Malaysian Ringgits and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates.