Company: COHU
Filing Date: 2025-08-01
Form Type: 10-Q
Source: 0001437749-25-024281
Chunk: 55

Company: COHU INC
Filing Date: 2025-08-01
Form: 10-Q
Item: Item 1
Chunk 55
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 2025 we saw increased demand for mobile and AI-based computing applications as compared to the second quarter of fiscal 2024. Cohu acquired Tignis on January 7, 2025, and the results of its operations are included since that date. In the second quarter of fiscal 2025, Tignis’ net sales were not material to Cohu.

Gross Margin (exclusive of amortization of acquisition-related intangible assets described below)

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 and business volume which impacts the utilization of our manufacturing capacity. Our gross margin, as a percentage of net sales for the second fiscal quarter, was 43.7% in 2025 and 44.8% in 2024. Gross margin in the second quarter of fiscal 2025 declined as it was impacted by the mix of systems sold to customers, and $0.3 million of additional manufacturing employee compensation and inventory charges resulting from transitioning certain of our manufacturing activities from the U.S. and Europe to our factories in the Philippines and Malaysia.

We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage forecasts. During the second quarter of fiscal 2025 and 2024, we recorded charges to cost of sales of $1.5 million and $0.3 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 June 28, 2025. 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.

Research and Development Expense (“R&D Expense”)

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 $23.2 million in fiscal 2025 and $21.3 million in fiscal 2024 representing 21.5% and 20.4% of net sales, respectively. During the second quarter of fiscal 2025 R