Earnings call transcript: Cohu Q4 2024 misses EPS forecast, stock rises

Cohu (NASDAQ:COHU) Inc. reported fourth-quarter 2024 earnings with an EPS of -$0.15, missing the forecasted -$0.09. Revenue reached $94.1 million, slightly below the anticipated $95.11 million. Despite the earnings miss, Cohu's stock rose 2.87% to $21.47 in after-hours trading, reflecting investor optimism about future growth prospects and strategic initiatives. According to InvestingPro, the company maintains a "Fair" overall financial health score, with particularly strong cash flow management. Notably, Cohu holds more cash than debt on its balance sheet, providing financial flexibility during challenging market conditions.

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Key Takeaways

• Cohu's Q4 2024 EPS of -$0.15 missed the forecast by $0.06.
• Revenue for Q4 was slightly below expectations at $94.1 million.
• Stock price increased by 2.87% in after-hours trading.
• Strategic expansion into new semiconductor markets highlighted.
• Positive outlook on software revenue growth over the next three years.

Company Performance

Cohu's performance in Q4 2024 showed resilience despite missing EPS forecasts. The company is expanding into the memory and silicon carbide power semiconductor markets, which are expected to drive future growth. The acquisition of Tignis, an AI process control software provider, indicates a strategic focus on enhancing its technology portfolio.

Financial Highlights

• Revenue: $94.1 million for Q4 2024, slightly below the forecast.
• Earnings per share: -$0.15, missing the forecast by $0.06.
• Full-year 2024 revenue: $401.8 million.
• Q4 gross margin: 41.8%, impacted by a $2.1 million inventory reserve.
• Cash and investments: $262 million, a decrease of $7 million in Q4.

Earnings vs. Forecast

Cohu's actual EPS of -$0.15 fell short of the forecasted -$0.09, representing a negative surprise of approximately 66.7%. This miss reflects challenges in aligning with market expectations, although it is consistent with broader industry trends of inventory corrections.

Market Reaction

Despite the earnings miss, Cohu's stock price increased by 2.87% to $21.47 in after-hours trading. This rise suggests investor confidence in the company's strategic initiatives and future growth prospects, especially in new market segments. The stock is currently trading near its 52-week low of $20.76, with InvestingPro analysis indicating the stock is in oversold territory based on RSI. The stock has experienced a significant decline of 36.24% over the past year, presenting a potential opportunity for value investors.

Outlook & Guidance

Cohu provided guidance for Q1 2025, with expected revenue of $97 million ± $7 million and a gross margin forecast of 44%. The company anticipates significant growth in its software segment, projecting over 50% annual revenue growth over the next three years. Cohu also expects market recovery in automotive and industrial segments. Analyst consensus from InvestingPro shows mixed sentiment, with price targets ranging from $23 to $40, though five analysts have recently revised their earnings expectations downward.

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Executive Commentary

CEO Luis Mueller emphasized strategic alignment with compute applications, stating, "We're working hard to align new Cohu products to compute applications." He also highlighted the potential value of productivity improvements in semiconductor manufacturing.

Risks and Challenges

• Ongoing inventory corrections in the automotive and industrial segments.
• Potential volatility in semiconductor market demand.
• Integration challenges following the acquisition of Tignis.
• Competitive pressures in expanding markets such as high-bandwidth memory.

Q&A

During the earnings call, analysts inquired about new business drivers, which are expected to contribute $25-30 million in 2025. Questions also focused on the gross margin projections for new businesses, anticipated to grow to 50%, and the expansion of Cohu's software business beyond its equipment offerings.

Full transcript - Cohu Inc (COHU) Q4 2024:

Conference Operator: Good day and thank you for standing by. Welcome to Cohu's Fourth Quarter twenty twenty four 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.

Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jeff Jones, Chief Financial Officer. Please go ahead.

Jeff Jones, Chief Financial Officer, Cohu: Good afternoon, and welcome to our conference call to discuss Cohu's fourth quarter twenty twenty four results and first quarter twenty twenty five outlook. I'm joined today by our President and CEO, Luis Mueller. If you need a copy of our earnings release, you may access it from our website at cohu.com or by contacting Cohu Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed on Cohu's website in the Investor Relations section. Replays of this call will be available via the same page after the call concludes.

Now to the safe harbor. During today's call, we will make forward looking statements reflecting management's current expectations concerning Cohu's future business. These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes. We encourage you to review the Forward Looking Statements section of the slide presentation and 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 speak only as of today, 02/13/2025, and Cohu assumes no obligation to update these statements for developments occurring after this call.

Finally, during this call, we will discuss certain non GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Mueller, Cohu's President and CEO. Luis?

Luis Mueller, President and CEO, Cohu: Hello, and welcome to our quarterly earnings call. Full year twenty twenty four revenue was about $4.00 $2,000,000 as Cohu's main market segments are crossing the chasm of a downturn. On the other hand, the full year non GAAP gross margin of 45% demonstrates the value of selling differentiated products and optimizing our manufacturing cost structure. Fourth quarter revenue was within guidance range, but gross margin was impacted by an inventory reserve charge of $2,100,000 Jeff will get into more details on these later. Revenue for the quarter was split 62% recurring in the balanced systems.

Systems revenue increased sequentially in computing, industrial and consumer segments, although offset by declines in automotive and mobile where customers are working through ongoing inventory correction. Estimated test December increased one point quarter over quarter to 73, driven by OSATs that improved two points to 76%, while IDMs closed the quarter at 70%. We see our traditional IDM customers at different stages in the cycle and OSATs benefiting from the strength of fabulous customers aligned with data center and network infrastructure. As mentioned last quarter, Cohu entered the memory and silicon carbide power semiconductor markets with orders for HBM inspection and die level burn in. We shipped our first HBM inspection system and received a repeat order early in first quarter that we expect to ship in the middle of this year.

Growth prospects in HBM look positive with the potential to deliver $7,000,000 of revenue this year as we support HBM3e and a new HBM4 product ramp later in the year. We're working hard to align new Cohu products to compute applications, mainly positioning the company to capitalize on the growth in the data center market and later opportunities with AI at the edge. Our interface product team had a design win for testing 800 gs switches used in next generation data centers and cloud computing. These are high bandwidth devices that accelerate AIML workloads with stringent signal performance requirements in test. We're excited to see our products gaining traction across various data center applications, spending memory, network infrastructure and compute.

Turning

Craig Ellis, Analyst, B. Riley Securities: to

Luis Mueller, President and CEO, Cohu: our software platform. We are strong believers in the value AI will bring to semiconductor manufacturing with opportunities to optimize yield and productivity. Just last month, the CFO of TSMC made a comment during a public interview that 1% productivity improvement has the potential to drive $1,000,000,000 of value for their business. Putting this a bit in context, the global semiconductor process control market is believed to be about $2,600,000,000 today. We estimate that the potential total available market for data analytics for process control, data visualization, connectivity and predictive applications in the back end semiconductor manufacturing segment to be about $600,000,000 which accounts for third party and in house developed solutions.

We're pushing to establish Cohu as a main player in this area, focusing primarily on back end manufacturing and our current customers spending on the software stack. In the fourth quarter, we qualified Cohu's DI core and received the first PO to optimize visual headquarter semiconductor manufacturer with operations in Asia. Customers continue to subscribe to our software solutions, adding to our critical recurring revenue stream in an area that we expect can generate substantial growth over term. In line with this strategy, last quarter, we announced the definitive agreement and early this year confirmed closing the acquisition of Tigness, a provider of artificial intelligence process control and analytics based monitoring software. We believe there is an opportunity to grow Cohu's software revenue at an annual rate of 50% or more over the next three years as the industry seeks solutions to optimize yield and productivity using AI powered process control and data analytics solutions.

As our core automotive, industrial and mobile customers continue to navigate an inventory correction, we're committed to growing Cohu in 2025 with customer design wins and SAM expansion driven by new product investments targeting data center and edge AI applications. Let me now turn it over to Jeff for further details on last quarter results and next quarter guidance. Jeff?

Jeff Jones, Chief Financial Officer, Cohu: Thanks, Luis. Before I walk through the Q4 results and Q1 guidance, please note that my comments that follow all refer to non GAAP figures. Information about the non GAAP financial measures, including the GAAP to non GAAP reconciliations and other disclosures are included in the accompanying earnings release and investor presentation, which are located on the Investor page of our website. Now turning to the Q4 financial results. Revenue for the quarter was within guidance at $94,100,000 dollars Full year 2024 revenue was $401,800,000 Recurring revenue, which is largely consumable driven and more stable than systems revenue, represented 62% of total revenue in Q4 and 65% of full year '20 '20 '4 revenue.

During the fourth quarter, '1 customer in the automotive market accounted for more than 10% of sales. However, no customer accounted for more than 10% of sales for the full year 2024. Q4 gross margin was 41.8%, about two twenty basis points lower than guidance due to a $2,100,000 charge to our inventory reserve for old, slow moving, customer specific inventory. Excluding the impact of the inventory reserve, gross margin was in line with guidance. Full year 2024 gross margin was resilient and higher than model at 45%.

Operating expenses for Q4 were lower than guidance at $45,300,000 driven by lower labor costs due to replacement and new hire delays as well as higher vacation utilization than forecasted. Fourth quarter non GAAP operating loss was approximately $6,000,000 Q4 interest income, net of interest expense and a small foreign currency gain was $2,300,000 Q4 pre tax income consists of foreign profits combined with a loss in The U. S. The Q4 tax provision of $3,400,000 reflects tax expense on foreign profits, but no tax benefit from The U. S.

Loss due to our valuation allowance against deferred tax assets. Non GAAP EPS for the fourth quarter was a $0.15 loss. The $2,100,000 inventory charge accounts for approximately $0.04 of EPS. Moving to the balance sheet. Overall, cash and investments decreased by $7,000,000 during Q4 to $262,000,000 due to $2,000,000 used in operations, debt repayment of $2,000,000 and fourth quarter CapEx of approximately $3,000,000 CapEx for full year 2024 was approximately $11,000,000 lower than prior years and primarily driven by facility improvements in The Philippines and Germany supporting operations for our interface and automation businesses.

Cohu had zero share repurchase activity in Q4. Through the end of Q3 in fiscal twenty twenty four, we had repurchased approximately 915,000 shares for $27,000,000 which exceeds our goal to offset share dilution from our equity compensation plan of approximately 500,000 shares per year. Overall, Cohu's balance sheet remains strong, supporting investment opportunities to expand our served markets and technology portfolio in line with our growth strategy and returning capital to shareholders through our share repurchase program. Now moving to our Q1 outlook. Recent customer requests to delay Q1 shipments to later in 2025 have impacted our initial view of first quarter revenue.

As a result, we're guiding Q1 revenue to be approximately $97,000,000 dollars plus or minus $7,000,000 First quarter gross margin is forecasted to be approximately 44% benefiting from Cohu's differentiated products and our stable high margin recurring business, which adds resilience to profitability and provides consistent cash flow through industry cycles. We expect gross margin to increase again when our revenue recovers with a broader semiconductor device market recovery and with better absorption of our factories infrastructure costs. Q1 operating expenses are forecasted to be approximately $49,000,000 about $4,000,000 higher than Q4. Nearly half of the quarter over quarter increase is due to the addition of Tigness, a provider of artificial intelligence process control and analytics based monitoring software. The balance of the increase is due to higher labor costs quarter over quarter, including the implementation of a delayed merit increase across the employee base and the typical reset of employer payroll taxes that are unique to Q1.

For the rest of 2025, operating expenses should be approximately $48,000,000 per quarter when revenue is approximately $100,000,000 As revenue grows to about $130,000,000 operating expenses are projected to increase to approximately $50,000,000 per quarter. We're projecting Q1 interest income, net of interest expense and foreign currency impacts to be approximately $1,300,000 at current interest rates. The Q1 non GAAP tax provision is expected to be approximately 3,000,000 because of tax on foreign profits without benefit from The U. S. Loss.

Until the markets recover, we expect a similar tax provision profile as we navigate through this cycle. The basic share count for Q1 is expected to be approximately 46,600,000.0 and that concludes our prepared remarks. And now we'll open the call to questions.

Conference Operator: Our first question comes from the line of Craig Ellis with B. Riley Securities. Craig, you may be on mute.

Craig Ellis, Analyst, B. Riley Securities: Yes. Thanks for taking the question and appreciate all the detail on the new businesses that are coming into the model. I wanted to start my questioning there. So Jeff, you said that Tingus and I apologize if I pronounced it wrong, but you said that would be about $2,000,000 of OpEx in the quarter. The question is, is there any revenue associated with that OpEx?

And if not, when would we expect that business to be earnings per share breakeven as we think about its ability to grow with that 50% CAGR you outlined?

Jeff Jones, Chief Financial Officer, Cohu: Yes. So, hey Craig, it's Tignis, T A G M I S. And last year's revenue was sub $1,000,000 likely to be the same this year. Are expecting healthy growth rates over the next few years, but at the moment, probably right around $1,000,000 or sub $1,000,000 for 2025. So it's going to take a few years for it to get to the breakeven point.

Craig Ellis, Analyst, B. Riley Securities: Got it. And then, Luis, if I wanted to hone in on the revenue impact this year of some of these incremental drivers. I think in the deck we identified that the high bandwidth memory opportunity could be around $7,000,000 If we look at software all in, Tigmis and DI Core, how big could that be? And then the silicon carbide market expansion, the single chip burn in capability that you've identified recently, how big could that be this year? How big are these new drivers as we think about 2526?

Luis Mueller, President and CEO, Cohu: So if I take 25, Craig, like I said, HBM about seven, the silicon carbide about five, so tallying up to 12. We think as Jeff mentioned here, softer about 113. And then I think you got to top it off with the Diamondx win at an automotive customer that we talked about in the last two quarters. That is likely to be $10,000,000 to $15,000,000 So I think if you put it all together, we're looking at sort of $25,000,000 30 million dollars incremental this year from these new either same expansion or design wins. And I would expect those to accelerate in '26, but I wouldn't have a number to give you at this time on that.

Craig Ellis, Analyst, B. Riley Securities: Yes. And then if we look at those together, Louise, and thanks for the color on that. If we look at them all in, is that a mid-40s gross margin that we should be thinking about? Would it be higher than that? I think down the road in a couple of years, it would be higher with software growing, but how do we think about the gross margin on that incremental business this year?

Jeff Jones, Chief Financial Officer, Cohu: Yes. Hey, Craig, I would say, high 40s, but ultimately growing to 50 as software grows.

Craig Ellis, Analyst, B. Riley Securities: Okay, nice. And then lastly, if I could guys, as we look at utilization levels across some of the end markets, ANI is the closest to that somewhat magical 80% threshold at 75%. The question is, is ANI on its way up towards 80% or is it actually drifting lower just given some of the comments we've heard from bigger U. S. Based analog companies over the last month?

Luis Mueller, President and CEO, Cohu: Sorry, what do you Craig, clarification here. What do you mean by ANI? Auto and Industrial. Okay. Yes.

Dennis Piastian, Analyst, Stifel: Thank you.

Luis Mueller, President and CEO, Cohu: Thank you. Yes, You're correct. AutoIndustrial continues to be the one that's sitting at the highest plateau. Nevertheless, it continues to be the customer base, particularly in the analog space that has the highest inventory correction yet to be digested. Some of these customers are talking about another two quarters of digestion, another one seemingly three quarters if you look at the numbers.

In the meantime, while mobile is sitting at a lower level, there's some dynamic happening between Android and iOS that I think is going to drive some incremental business. I guess I'm not going to pick a side here to say it, but in one of those in particular that we expect to see some leverage on the business for us starting in the middle of this year.

Craig Ellis, Analyst, B. Riley Securities: Got it. Thanks guys. So I'll hop back in the queue.

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

David Dooley, Analyst, Steelhead Securities: Yes. Thanks for taking my questions. Could you just remind us you just referred to the Diamond Excellent of $10,000,000 to $15,000,000 in '25. Could you just elaborate on the application again and how you won, what was the key parameter for you winning that business?

Luis Mueller, President and CEO, Cohu: Sure, Dave. Well, starting from the end here, the key parameter to winning that business is ultimately cost of test. It's being able to do their portfolio of devices, which spans power semiconductor applications, microcontrollers, and there is also a PMIC group that's separate from power. In the moment, we're addressing two of the three groups, hoping to be able to extend it to the third group. So it's sort of a cost of tasks differentiation.

And I guess, like I said, two of the three groups is what we're addressing today.

David Dooley, Analyst, Steelhead Securities: Okay. And then in aggregate, I think you've had a few years now of declining year over year revenue. When would you expect there to be some sort of turn, either driven by new products or recovery in the end markets? What's your best guess at this point for your recovery?

Luis Mueller, President and CEO, Cohu: Dave, guessing the market is the toughest part of it all as you understand. And people seem to always indicate that it's six months away is the turning point. So we're not at a position of necessarily gas in the market nor sitting idle on it. So we've been working on is to expand our penetration in segments that have at the moment higher growth, which would be particularly things associated with data centers that we haven't had a lot of exposure in the past. HBM is one example.

We have other activities that hopefully we can talk through in the coming quarters this year. The software investment is perhaps more of a long term play than necessarily a material 2025 investment. But we see many of the factories driving automation and optimization, whether it's yield or productivity that could be benefited by predictability, which in essence becomes the use of AI models or machine learning models sometimes. They're different, but in both cases software. So our focus right now is pivoting to areas that have both near term opportunity for growth, but as well as long term opportunity for growth.

In the meantime, the market is going to do what the market is going to do. And the primary analog segment of the market, which is mostly automotive, industrial, continues to be depressed. There's still inventory digestion happening. We keep looking at our customers' reduction of inventory quarter over quarter and where are they relative to trend lines. So it's very likely that at the current pace, we'll see another two quarters before our customers in that segment turn the corner from a general market perspective.

David Dooley, Analyst, Steelhead Securities: Okay. And then, as far as when you start to see recovery in the revenue line, you gave us some nice numbers, Jeff, about what we would expect for operating expenses going forward at higher revenue levels. What would you expect maybe at those same revenue levels the gross margins to be?

Jeff Jones, Chief Financial Officer, Cohu: So when we're hovering around $100,000,000 gross margin will be somewhere in the 44% to 45% range. Then as we migrate up to $130,000,000 we're expecting to be about 46.5% on gross margin.

David Dooley, Analyst, Steelhead Securities: Okay. Thank you.

Conference Operator: Our next question comes from the line of Ross Cole with Needham.

David Dooley, Analyst, Steelhead Securities: Thank you for taking my question. I was wondering if you could verify the different segment revenues for 2024 and then provide your latest assumptions on the segment revenues for 2025 and maybe rank order them if possible? Thank you.

Jeff Jones, Chief Financial Officer, Cohu: Ross, are you talking about all of 2024 and projecting all of 2025?

David Dooley, Analyst, Steelhead Securities: That would be great if possible, yes.

Jeff Jones, Chief Financial Officer, Cohu: Yes, we don't have we've got the historical data on 2024, just we don't have that perspective yet on 2025. So let's see. We look at systems revenue by market, so I'm going to give you those percentages for 2024. And we were 9% was automotive, 6% was industrial, 11 mobile, four consumer, three compute and two for IoT.

David Dooley, Analyst, Steelhead Securities: Great. Thank you. And I was wondering if you could possibly rank order these in terms of your best guess for 2025?

Jeff Jones, Chief Financial Officer, Cohu: Yes. I think at the moment, as Luis said, auto and industrial has probably the most inventory to work through at the moment. But if we're looking at second half, I believe the indications or the projections at the moment would be that automotive and industrial begin a recovery followed by mobile.

David Dooley, Analyst, Steelhead Securities: Great. Thank you. And if I can ask one more quick question. I remember previously you had shipped a couple of tools for HBM and sick wafer test. Could you confirm if you plan on recognizing the revenue for these in the first quarter or if that's more of a second quarter opportunity?

Jeff Jones, Chief Financial Officer, Cohu: The HBM is a Q1 revenue recognition. First tool. Yes, the first tool, one tool in Q1. High level burn in is the other one you referred to, which is further perhaps second half of twenty twenty five.

David Dooley, Analyst, Steelhead Securities: Great. Thank you so much. I appreciate the color.

Conference Operator: Our next question comes from the line of Robert Mertens with TD Cowen.

Robert Mertens, Analyst, TD Cowen: Hi. This is Robert Mertens on for Chris Shankar. Thanks for taking my questions. I guess first, I believe you had mentioned earlier that some of the strong order flows in the September, sort of gave you confidence to look beyond the December guide and into March, expecting that quarter to be up sequentially maybe around 10% or so. There's some trying to parse out that commentary in the new low single digit guide.

Is this new outlook primarily just because of some of those customer order push outs that you mentioned earlier on your prepared remarks? And if so, would that be something you would expect to come back in the June? And then I have one follow-up.

Jeff Jones, Chief Financial Officer, Cohu: Hey, Robert. The answer to your first part is yes. It was due to a recent push out of tools out of Q1. So we have the orders. It's the actual shipment date that was has been delayed.

Now it's not necessarily Q2, it's throughout 2025. It's about $7,000,000 So again, it's spread through the balance of the year.

Robert Mertens, Analyst, TD Cowen: Okay. Thank you. That's helpful. And then just another quick follow on question. In terms of the new neon and die level burn and test opportunity with high bandwidth memory, congrats on securing another follow on order.

With the growth in this emerging business, will you be primarily driven just by scaling that success with this initial customer? Or are you currently working on getting other tools, potentially full acceptances with other major memory suppliers? Or do they tend to go internally or have sort of incumbent suppliers themselves that would make it harder to gain business there?

Luis Mueller, President and CEO, Cohu: Yes. Robert, it's kind of both. The numbers that I quoted to the first question in terms of what you expect for 2025, we're essentially scaling with the first customer orders that we got for these new tools. But we absolutely are working on advocating for these tools and promoting them, selling them to other customers that could benefit from what these tools can do. But none of that is accounted for in the numbers that I referenced on the first question today.

Robert Mertens, Analyst, TD Cowen: Okay, I got it. Thank you. Very helpful.

Conference Operator: Our next question comes from the line of Brian Chin with Stifel.

Dennis Piastian, Analyst, Stifel: Good afternoon. This is Dennis Piastian on for Brian. Thanks for letting us ask a few questions. In light of the ongoing inventory control in the industry and fab utilization cuts that we've seen recently, how stable do you believe that the $60,000,000 run rate is for your services and spares recurring revenue?

Jeff Jones, Chief Financial Officer, Cohu: It is stable. It's proven to be stable over the historically. Now it's not immune to the downturn and we can see that in the numbers, but it probably has about a third of the volatility of systems. So the utilization of equipment in customers facilities has remained pretty steady. So we would expect our recurring revenue to also remain fairly steady.

Dennis Piastian, Analyst, Stifel: Great. And I think you were previously somewhat more positive on mobile RF test. Has this changed? I think you'd mentioned a little bit earlier on this call that you think mobile will recover after industrial automotive. Did I understand that correctly?

Luis Mueller, President and CEO, Cohu: The general market could be after. There is some dynamics, as I mentioned earlier, between sort of Android in the particularly in the Android market space on certain customer share gain in transitions of devices that could be beneficial for us on the second half of the year or sort of starting the middle of the year, so to speak. But overall, the mobile market is still projected to be sort of a low single digit growth this year. I think more of the dynamics in between customers could be more interesting.

Dennis Piastian, Analyst, Stifel: Great. And then as my last question, it looks like industrial saw a little bit of strength that the systems revenue might have finished at a high for 2024 in the fourth quarter. Can we expect industrial to stay at this level or what kind of you've bounced around a little bit around this $8,000,000 to $9,000,000 mark?

Luis Mueller, President and CEO, Cohu: So industrial has the potential to actually come up ahead of automotive as we see it today. But we'll see how that plays out in the next few quarters.

Dennis Piastian, Analyst, Stifel: Great. That's it for me. Thank you very much.

Conference Operator: Our next question comes from the line of Craig Ellis with B. Riley.

Craig Ellis, Analyst, B. Riley Securities: Yes. Thanks for taking the follow-up question. Guys, I wanted to go back to the software business and just understand how you plan to execute that in a little bit more detail. Can you focus on the selling motion that you plan to implement in that business? Is DI Core and Tigris.

Is that going to sell out as a complement to new systems? Does it sell into the installed base as an enhancement to existing systems? Is it both? Just help us understand a little bit more how you plan to go to market and therefore how we can expect you're going to start to accrue sales and grow that high margin business? Thank you.

Luis Mueller, President and CEO, Cohu: Yes, good question, Craig. The DIA (BME:DIDA) core that we do today, it really has two branches, okay. It has a vision inspection branch on the software that is using a newer network for vision technology and that branch will stay pretty much will stay as is. Don't think of Tignus getting much involved on that branch at the moment or at least not the initial plans, okay. There's a second branch in the I Corps that is using machine learning for fault detection and predictability for equipment maintenance.

So the intention there is to leverage on Tecna's artificial intelligence software to give continuity to the DI core to products outside of the Cohu umbrella. So we would like to expand our DI core predictive maintenance capability to serve more than just Cohu products in the broader semiconductor back end space. So that is an area that Tigness should be able to augment what we're currently doing with TI Core and go much broader. Separately, Tigness itself, it has a solution that it's being used for front end manufacturing that has nothing to do to Cohu current markets. We don't intend to shut that down.

In fact, we intend to see Cygnus continue to evolve there and sort of back up what they're pursuing at the moment and provide the necessary infrastructure and resources that they need to be successful in more in the general process control market. So to summarize, Tigma's own growth factor is going to stay and we intend to back it up. And at the same time, we plan on leveraging Tigma's technology on our DI Core PDM tools for the back end, so we can go broader and beyond Cohu owned equipment. I hope that was clear. Got it.

Craig Ellis, Analyst, B. Riley Securities: Yes, that's helpful. Thank you, Luis.

Conference Operator: That concludes today's question and answer session. I'd like to turn the call back to Jeff Jones for closing remarks.

Jeff Jones, Chief Financial Officer, Cohu: Well, thank you for joining today's call. We really appreciate your participation and we look forward to speaking with you soon. Have a good day.

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

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