Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 28, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4298 COHU, INC. (Exact name of registrant as specified in its charter) Delaware 95-1934119 (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 12367 Crosthwaite Circle, Poway, California 92064-6817 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (858) 848-8100 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Exchange on Which Registered Common Stock, $1.00 par value COHU The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $1,512,400,000 based on the closing stock price as reported by the Nasdaq Stock Market LLC as of June 28, 2024. Shares of common stock held by each officer and director and by each person or group who owns 5% or more of the outstanding common stock have been excluded in that such persons or groups may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 5, 2025, the Registrant had 46,710,033 shares of its $1.00 par value common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for Cohu, Inc.’s 2025 Annual Meeting of Stockholders to be held on May 16, 2025, and to be filed pursuant to Regulation 14A within 120 days after registrant’s fiscal year ended December 28, 2024, are incorporated by reference into Part III of this Report. Table of Contents COHU, INC. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 28, 2024 TABLE OF CONTENTS PART I Page Item 1. Business 1 Item 1A. Risk Factors 7 Item 1B. Unresolved Staff Comments 30 Item 1C. Cybersecurity 30 Item 2. Properties 31 Item 3. Legal Proceedings 31 Item 4. Mine Safety Disclosures 31 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 6. Reserved 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44 Item 8. Financial Statements and Supplementary Data 46 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 46 Item 9A. Controls and Procedures 46 Item 9B. Other Information 48 Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 48 PART III Item 10. Directors, Executive Officers and Corporate Governance 48 Item 11. Executive Compensation 48 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 49 Item 13. Certain Relationships and Related Transactions, and Director Independence 49 Item 14. Principal Accounting Fees and Services 49 PART IV Item 15. Exhibits, Financial Statement Schedules 50 Item 16. Form 10-K Summary 94 Signatures 95 Table of Contents This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933, which are subject to known and unknown risks and uncertainties. The forward-looking statements include statements concerning, among other things, our business strategy (including the influence of anticipated trends and developments in our business and the markets in which we operate), financial results, operating results, revenues, gross margin, operating expenses, products, projected costs and capital expenditures, research and development programs, sales and marketing initiatives, acquisitions and competition. In some cases, you can identify these statements by our use of forward-looking words, such as “may,” “might,” “will,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend” and “continue,” the negative or plural of these words and other comparable terminology. Forward-looking statements are based on information available to us as of the filing date of this Annual Report on Form 10-K and our current expectations about future events, which are inherently subject to change and involve assumptions and known and unknown risks and uncertainties. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. We have no obligation to update any of these statements, and we assume no obligation to do so. Actual events or results may differ materially from those expressed or implied by these statements due to various factors, including but not limited to the matters discussed below in the section entitled “Item 1A: Risk Factors,” and elsewhere in this Annual Report on Form 10-K. This Form 10-K also contains estimates, projections and other information concerning our industry, our business, and the markets for certain of our products, including data regarding the estimated size of those markets. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, general publications, government data, and similar sources. PART I Item 1. Business. Cohu, Inc. (“Cohu”, “we”, “our”, “us” and the “Company”) is a global technology leader supplying test, interface, automation, inspection and metrology, and software products and related services to the semiconductor industry. Cohu’s differentiated and broad product portfolio enables optimized yield and productivity, accelerating customers’ manufacturing time-to-market. We offer a wide range of products and services, and revenue from our capital equipment products is driven by the capital expenditure budgets and spending patterns of our customers, who often delay or accelerate purchases in reaction to variations in their business. The level of capital expenditure by these companies depends on the current and anticipated market demand for semiconductor devices and the products that incorporate them. Our recurring revenues are driven by increases in our product installed base and in the number of semiconductor devices that are tested, and by the continuous introduction of new products and technologies by our customers. Cohu was incorporated under the laws of California in 1947, as Kalbfell Lab, Inc. and commenced active operations in the same year. Our name was changed to Kay Lab in 1954. In 1957, Cohu was reincorporated under the laws of the State of Delaware as Cohu Electronics, Inc. and, in 1972, our name was changed to Cohu, Inc. On January 7, 2025, we completed the acquisition of Tignis, Inc. (“Tignis”), a provider of artificial intelligence (AI) process control and analytics-based monitoring software. This strategic acquisition is intended to enable us to expand our analytics offerings to the semiconductor process control market. Tignis’ PAICe Monitor and PAICe Maker solutions leverage the insights of physical phenomena with cutting-edge AI, machine learning (ML), and data science to deliver advanced predictive and prescriptive automation solutions for semiconductor manufacturing. Tignis is also expected to deepen Cohu’s expertise in data science while adding advanced analytics to our DI-Core software. The acquisition of Tignis was a fiscal 2025 event. On January 30, 2023, we completed the acquisition of MCT Worldwide, LLC (“MCT”), a U.S.-based company. MCT provides automated solutions for the semiconductor industry and designs, manufactures, markets, services and distributes strip test handlers, film frame handlers and laser mark handlers. On October 2, 2023, we acquired Equiptest Engineering Pte. Ltd. (“EQT”), a Singapore-based company. EQT is a provider of semiconductor test contactors and other test consumables. MCT and EQT are included in Cohu’s consolidated results from operations as of the date of acquisition. We have one reportable segment, Semiconductor Test and Inspection Equipment (“Semiconductor Test & Inspection”). Financial information on our reportable segment for each of the last three years is included in Note 11, “Segment and Geographic Information” in Part IV, Item 15(a) of this Form 10-K. 1 Table of Contents Our Products We currently sell the following products: Semiconductor Automated Test Equipment (“ATE”) is used both for wafer-level and device package testing. Our semiconductor ATE solutions consist primarily of two platforms for the system on a chip (“SoC”) device market. The Diamondx tester offers high-density instrumentation for testing various semiconductors: microcontrollers, application specific standard products (“ASSP”), power management, radio frequency (RF), display drivers, sensors and other mixed signal devices. The PAx tester is a focused tester for RF Front End IC and Module applications. Semiconductor Handlers are used in conjunction with semiconductor ATE to automate the testing of packaged semiconductor devices. Our handlers support a variety of package sizes and device types, including those used in automotive, mobile, industrial and computing applications, among others. We offer a broad range of test handlers, including pick-and-place, turret, gravity, strip, film frame, laser marker, micro-electromechanical system (MEMS) and thermal sub- systems. T-Core is our proprietary thermal technology for improving device under test temperature accuracy, enabling higher test yield, particularly for power dissipative devices such as microprocessors, graphic processor units, and high-performance semiconductors used in artificial intelligence data centers. Interface Products are comprised of test contactors, probe heads and probe pins. Test contactors serve as the interface between the test handler and the semiconductor device under test (such as digital semiconductor devices utilizing spring probe technology, power management and LED semiconductor devices utilizing cantilever technology) and RF semiconductor devices based on contacts designed to operate at high frequencies. With the acquisition of EQT, we expanded our interface products in mid- to high-power contactors. Test contactors and probe heads are specific to individual semiconductor device designs, need to be replaced frequently, and increase in size with the number of devices tested in parallel. Interface Products are included in our recurring revenues. Inspection Metrology are products that provide advanced vision capabilities. We offer a wide range of solutions for inspection of singulated molded leaded and leadless devices, and post-singulated wafer-level chip scale packages (“WLCSP”) and bare dies. NV-Core is our unique vision technology, enabling advanced inspection metrology, such as 3-dimensional topographic inspection, sidewall micro-crack detection, and infrared inspection for sub-surface defect detection. DI-CoreTM Data Analytics is a comprehensive software suite used to optimize Cohu equipment performance. DI-Core data analytics provides real-time online performance monitoring and process control to improve utilization, manage predictive maintenance, and link semiconductor tester, handler and test contactor data. DI-Core data analytics is a software subscription service included in our recurring revenue. Spares and Kits are consumable, non-consumable and spare items that are used to maintain, sustain or otherwise enable customers’ equipment to meet its performance, availability and production requirements. We also design and manufacture a wide range of device dedication kits that enable handlers to process different semiconductor packages. Spares and Kits are included in our recurring revenues. Services are provided by our worldwide service organization and include installation and necessary maintenance of our systems’ installed base. We provide various parts and labor warranties on our test and handling systems and instruments. We also provide training on the maintenance and operation of our systems as well as application, data management software and consulting services on our products. Services are included in our recurring revenues. 2 Table of Contents Sales by Product Line and Related Marketing Efforts During the last three years, our consolidated net sales were distributed as follows: 2024 2023 2022 Semiconductor test & inspection systems (including kits) 35% 51% 58% Recurring revenues (1) 65% 49% 42% (1) Recurring revenues include interface products, spares, kits (not as part of system sales), DI-Core software and services We market our products worldwide through a combination of a direct sales force and independent sales representatives. In geographic areas where we believe there is sufficient sales potential, we generally employ our own personnel. Our U.S. sales offices are located in Poway and Milpitas, California; St. Paul, Minnesota; Lincoln, Rhode Island and Norwood, Massachusetts. Our European sales offices are located in Kolbermoor, Germany; Grenoble, France; Agrate, Italy and La Chaux-de-Fonds, Switzerland. We operate in Asia with sales and service offices in Singapore, Malaysia, Thailand, Philippines, Taiwan, China, South Korea and Japan. Customers Our customers include semiconductor integrated device manufacturers, fabless design houses, and test subcontractors throughout the world. Repeat sales to existing customers represent a significant portion of our sales. During the last three years, customers that comprised 10% or greater of our consolidated net sales were as follows: 2024 2023 2022 STMicroelectronics * 12.0% * * Less than 10% of consolidated net sales. The loss of, or a significant reduction in, orders by these or other significant customers, including reductions due to market, economic or competitive conditions or the outsourcing of final integrated circuit test to subcontractors that are not our customers, would adversely affect our financial condition and results of operations. For further information, see Item 1A entitled “Risk Factors” below. Additional financial information on revenues from external customers by geographic area for each of the last three years is included in Note 11, “Segment and Geographic Information” in Part IV, Item 15(a) of this Form 10-K. Backlog Our backlog of unfilled orders for products was $138.0 million at December 28, 2024 and $160.4 million at December 30, 2023. Backlog is generally expected to ship within the next twelve months. Our backlog at any point in time may not be representative of actual sales in any future period due to the possibility of customer changes in delivery schedules, cancellation of orders, potential delays in product shipments, and difficulties in obtaining parts from suppliers or failure to satisfy customer acceptance requirements resulting in the inability to recognize revenue under accounting requirements. Furthermore, many orders are subject to cancellation or rescheduling by the customer with limited or no penalty. A reduction in backlog during any period could have a material adverse effect on our business, financial condition, and results of operations. Competition The semiconductor equipment industry is intensely competitive and is characterized by rapid technological change and demanding worldwide service requirements. Significant competitive factors include product performance, price, reliability, lead-time, customer support and installed base of third-party systems which are not compatible with our systems. While we are the leading global supplier of test handlers, we face substantial competition from suppliers headquartered in Japan, China and Taiwan. In the semiconductor ATE market, we face competition from two dominant suppliers headquartered in the U.S. and Japan, both of which are substantially larger than Cohu’s test business. While we are among the leading worldwide suppliers of test contactors, this market is fragmented with a large number of global and local competitors. To remain competitive within the industries we serve, we believe we will require significant financial resources to offer a broad range of products, maintain localized customer support and service centers worldwide, and to invest in research and development of new products. Failure to introduce new products in a timely manner or the introduction by competitors of products with actual or perceived advantages could result in a loss of competitive position and reduced sales of existing products. No assurance can be given that we will continue to compete successfully throughout the world. 3 Table of Contents Manufacturing and Raw Materials Our principal manufacturing operations are currently located in Melaka, Malaysia; Laguna, Philippines; Lincoln, Rhode Island; Osaka, Japan; and Singapore. We outsource the manufacturing of many of our semiconductor automated test equipment products to Jabil Circuit, Inc.’s facility in Penang, Malaysia. Our contract manufacturing partner is responsible for significant material procurement, assembly and test. We continue to manage product design through pilot production for the subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our products. While our contract manufacturer is responsible for funding a substantial portion of the capital expenses incurred in connection with the manufacture of our products, we finance and own end-of-line testing equipment and other specific manufacturing equipment utilized in assembling our products or sub-components. Many of the components and subassemblies we utilize are standard products, although some items are made to our specifications. Certain components are obtained or are available from a limited number of suppliers or may be sole supplier sourced. We seek to reduce our dependence on sole and limited source suppliers, however in some cases the complete or partial loss of certain of these sources could have a material adverse effect on our operations while we attempt to locate and qualify replacement suppliers. Patents, Trademarks and Intellectual Property Our technology is protected by various intellectual property laws including patent, license, trademark, copyright and trade secret laws. In addition, we believe that, due to the rapid pace of technological change in the semiconductor and electronic equipment industries, the successful manufacture and sale of our products also depends heavily upon our experience, technological know-how, manufacturing and marketing skills and speed of response to sales opportunities. We believe our intellectual property has value, and we have in the past and will in the future take actions we deem appropriate to protect such property from misappropriation. Research and Development Research and development activities are carried on in our various subsidiaries and are directed toward development of new products and equipment, as well as enhancements to existing products and equipment. Our total research and development expense was $84.8 million in fiscal 2024, $88.6 million in fiscal 2023 and $92.6 million in fiscal 2022. We work closely with our customers to make improvements to our existing products and in the development of new products. We expect to continue to make significant investments in research and development and must manage product transitions successfully. Seasonality and Cyclicality Historically, the semiconductor industry has been cyclical as well as seasonal with recurring periods of oversupply and excess capacity, which often have had a significant effect on the semiconductor industry’s demand for capital equipment, such as the type we manufacture and market. We anticipate that the markets for newer generations of semiconductors and semiconductor equipment will be subject to similar cycles and our business will continue to experience similar fluctuations. Information About Our Executive Officers The following sets forth the names, ages, positions and offices held by all executive officers of Cohu as of February 5, 2025. Executive officers serve at the discretion of the Board of Directors, until their successors are appointed. Name Age Position Luis A. Müller 55 President and Chief Executive Officer Jeffrey D. Jones 63 Senior Vice President, Finance and Chief Financial Officer Christopher G. Bohrson 65 Senior Vice President and Chief Customer Officer Dr. Müller has been the President and Chief Executive Officer of Cohu since December 28, 2014. His previous roles at Cohu include serving as President of Cohu’s Semiconductor Equipment Group (“SEG”) from 2011 to 2014; Managing Director of Rasco GmbH (“Rasco”) from 2009 to 2010; Vice President of Delta Design’s High Speed Handling Group from 2008 to 2010; and Director of Engineering at Delta Design from 2005 to 2008. Prior to joining Cohu, Dr. Müller spent nine years at Teradyne Inc., where he held management positions in engineering and business development. Dr. Müller also serves as a director and Chair of the Audit Committee at Celestica Inc., a solutions-based company providing design, manufacturing and hardware platform and supply chain solutions. 4 Table of Contents Mr. Jones joined Cohu’s Delta Design subsidiary in July 2005 as Vice President Finance and Controller. In November 2007, Mr. Jones was named Vice President, Finance and Chief Financial Officer of Cohu, and was subsequently promoted on February 3, 2022 to Senior Vice President, Finance and Chief Financial Officer. Prior to joining Delta Design, Mr. Jones, was Vice President and General Manager of the Systems Group at SBS Technologies, Inc., a designer and manufacturer of embedded computer products. Prior to SBS Technologies, Mr. Jones was an Audit Manager for Coopers & Lybrand (now PricewaterhouseCoopers). Mr. Bohrson was promoted to Senior Vice President and Chief Customer Officer on February 2, 2023, and prior to that he served as Senior Vice President, Global Customer Group since February 8, 2021. Previously, Mr. Bohrson served as Sr. Vice President and General Manager, Test Handler Group beginning in October 2018 and was Vice President and General Manager for Digital Test Handlers from January 2017 until October 2018 and served as Vice President Sales and Service, Americas from May 2016 to January 2017. Prior to joining Cohu, from 2007 through 2016, Mr. Bohrson held several executive positions at Bosch Automotive Service Solutions/SPX lastly as Vice President and General Manager of the OEM Diagnostics and Information Solutions group. Prior to that, Mr. Bohrson spent twenty years working in a variety of management and technical roles at Teradyne, Inc.’s semiconductor and broadband test division in the U.S. and Asia. Governmental Regulations Our business activities are worldwide and are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and regulations. Notably, the import and export of our products and services are subject to laws and regulations including international treaties, U.S. export controls and sanctions laws, customs regulations, and local trade rules around the world. We believe we are in compliance and are committed to maintaining compliance with all global trade laws applicable to our operations, products and services. Costs incurred to comply with these governmental regulations are presently not material to our capital expenditures, results of operations and competitive position. Although there is no assurance that existing or future government laws applicable to our operations, services or products will not have a material adverse effect on our capital expenditures, results of operations or our competitive position, we do not currently anticipate material expenditures for government regulations. Sustainability We believe that sound corporate governance is critical to helping us achieve our goals, including with respect to sustainability considerations. We continue to evolve a governance framework that exercises appropriate oversight of responsibilities at all levels throughout the Company and manage our affairs consistent with high principles of business ethics. Our Sustainability Report is available on our website and contains further information on our initiatives and performance, including data indices that reflect the Technology and Communications Sector – Semiconductor Standard of the Sustainability Accounting Standards Board. We also submit responses to Carbon Disclosure Project’s (“CDP”) climate change questionnaire and post our responses on our website. The contents of the Sustainability Report, the responses to CDP’s questionnaire, and our website are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file or furnish with the Securities and Exchange Commission (the “SEC”), and any references to the Sustainability Report and our website are intended to be inactive textual references only. Human Capital Management Employees As of December 28, 2024, we had approximately 3,024 employees, including approximately 38 temporary employees, in 25 countries. Approximately 16% of our employees are located in the Americas, 12% are located in EMEA (Europe, the Middle East and Africa) and 72% are located in Asia Pacific. Our employee headcount has fluctuated in the last five years primarily due to the volatile and unpredictable business conditions in the semiconductor equipment industry and has also been impacted by acquisitions and divestitures. To ensure we maintain our position as a global leader in the semiconductor equipment space, we endeavor to provide a safe and positive work environment for our employees that emphasizes learning and professional development, respect for individuals and ethical conduct, and that is facilitated by a direct management-employee engagement model. 5 Table of Contents Management Engagement and Workplace Practices We adhere to our core values and Code of Business Conduct and Ethics with a commitment to treating our employees and all our partners with professionalism, dignity and respect. We pride ourselves at fostering an innovative environment and collaborative work relationships. This includes respecting principles of freedom of association and the right to engage in collective bargaining in accordance with applicable laws. Our employees in the U.S. and most locations in Asia are not covered by collective bargaining agreements. However, certain employees at our operation in Germany are represented by a works council and employees in Switzerland are members of the microtechnology and Swiss watch trade union. The Collective Bargaining Agreement of “Metallurgie (ingenieurs et cadres)” is applicable to all employees of our French subsidiary and certain employees in our China operation belong to local trade unions. We have not experienced any work stoppages and consider relations with our employees to be good. We strive to maintain workplaces that are free from discrimination or harassment based on race, color, religion, gender, gender identity or gender expression, national origin or ancestry, age, disability, veteran status, military service, sexual orientation, genetic information, and any other protected category recognized under applicable laws. We make hiring decisions based on the skills, experience and qualifications of candidates for each job opening. We are committed to respecting and protecting the human rights of all our employees. Health and Safety The health and safety of our employees is of utmost importance to us. Cohu works to protect the health and safety of employees and our customers and intends to conduct all business activities in an environmentally and socially responsible manner. We encourage and strive to have every employee actively champion those behaviors and the attitudes necessary to prevent work-related injuries, illnesses, property damage, and adverse impact to the environment. Our ultimate goal is to achieve a level of work-related injuries and adverse health impacts as close to zero as possible through continuous investment in our safety programs. We provide protective equipment (e.g., eye protection, masks and gloves) as required by applicable standards and as appropriate given employee job duties. Compensation and Benefits Cohu is committed to providing market competitive compensation programs to attract, retain and motivate a high performing workforce critical to our long- term success. As part of our compensation philosophy, we focus Cohu’s workforce on our financial and other business goals to drive and motivate employee performance in key areas through the administration of our management incentive plan, equity incentive plan, global profit-sharing and other local bonus plans, as may be applicable to a given position. Cohu also complies with applicable wage, work hours, overtime and benefits laws. To foster a stronger sense of ownership and align the interests of our employees with shareholders, grants of restricted stock units are provided to many of our employees on an annual basis and certain eligible employees may elect to purchase shares of our common stock, at a 15% discount, through our Employee Stock Purchase Plan. Furthermore, we offer comprehensive, locally relevant and innovative benefits to all eligible employees. In the U.S, these include, among other benefits: ● Comprehensive health and wellness insurance coverage is offered to employees working an average of 24 hours or more each week. ● 401(k) retirement plan with matching company contributions of up to 4% of eligible compensation. ● Tuition reimbursement program. ● Parental leave is provided to all new parents for birth, adoption or foster placement. ● Paid Time Off Programs covering time away from work due to employee and family illness, holidays, vacation, civic duties, and others. Outside of the U.S., we have provided other innovative benefits to help address market-specific needs, such as supplemental medical coverage or reimbursements, paid time off programs, wellness and development events and programs, transportation subsidies, etc. 6 Table of Contents Succession Planning We perform succession planning annually to ensure that we develop and sustain a strong bench of talent capable of performing at the highest levels. Not only is talent identified, but potential paths of development are discussed to ensure that employees have an opportunity to build their skills and are well-prepared for future roles. The strength of our succession planning process is evident through our long history of promoting our leaders from within the organization, including 67% of our current executive leadership team. In fiscal 2024 we deployed a new Emerging Leader Program to approximately 10% of employees to enhance the internal talent pipeline and continuing our investment in educating and growing our next generation of leaders. Available Information Our website address is www.cohu.com. We make available free of charge, on or through our web site, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with the SEC. Our Code of Business Conduct and Ethics and other documents related to our corporate governance are also posted on our website at https://cohu.gcs-web.com/corporate-governance/documents-charters. When required by the rules of the Nasdaq Stock Market, LLC (“Nasdaq”), or the SEC, we will disclose any future amendment to, or waiver of, any provision of the code of conduct for our chief executive officer and principal financial officer or any member or members of our board of directors on our website within four business days following the date of such amendment or waiver. Information contained on our web site is not deemed part of this report. Item 1A. Risk Factors. In addition to the other information in this Annual Report on Form 10-K, you should carefully consider the risk factors discussed in this Annual Report on Form 10-K in evaluating Cohu and our business (the “risk factors”). If any of the identified risks actually occur, our business, financial condition and results of operations could be materially adversely affected, the trading price of our common stock could decline, and you may lose all or part of your investment in our common stock. The risks and uncertainties described in this Annual Report on Form 10-K are not the only ones we face. Additional risks that we currently do not know about, or that we currently deem to be immaterial, may also impair our business operations or the trading price of our common stock. Risk Factors Summary Investing in our securities involves a high degree of risk. The following is a summary of the principal factors that make an investment in our securities speculative or risky, all of which are more fully described below. This summary should be read in conjunction with the full “Risk Factors” described below and should not be relied upon as a complete summary of the material risks facing our business. Risks Relating to Our Business Operations, Growth Strategy and Industry ● Semiconductor equipment is subject to rapid technological change, product introductions and transitions which may result in inventory write-offs, and our new product development involves numerous risks and uncertainties. ● The semiconductor industry we serve is cyclical, seasonal, volatile and unpredictable, and increased cyclicality could have an adverse impact on our sales and gross margin. ● The erosion in mobile automotive & industrial as well as consumer, computing and other market sales are collectively causing an adverse impact on our sales. ● Any failure to effectively manage multiple overseas manufacturing operations could harm our sales, service levels and reputation. ● We outsource select manufacturing activities to third-party service providers, which decreases our control over the performance of these functions. ● If we deliver systems with defects, our reputation and demand of our systems may decrease, and the cost of quality events could be harmful to our operating results. ● Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could adversely impact our operations. 7 Table of Contents ● Inflationary pressures, along with any further increase in interest rates, increase the threat of recession and may impact our financial condition or results of operations. ● The semiconductor equipment industry is intensely competitive and we may not be able to win business over that of our competition. ● Consolidation could adversely affect the market for our products and negatively impact our ability to compete. ● The cyclical nature of the semiconductor equipment industry places enormous demands on our employees, operations and infrastructure. ● A limited number of customers account for a substantial percentage of our net sales. ● If we cannot continue to develop, manufacture, market and support products and services that meet customer requirements for innovation and quality, our revenue and gross margin may suffer. ● If our relationships with our large customers deteriorate, our product development activities could be adversely affected. ● We must attract and retain experienced personnel to help support our future growth, and competition for such personnel in our industry is high. ● The use of Artificial Intelligence (“AI”) within Cohu’s product development involves risks and uncertainties that may impact our operational performance and be subject to legal and/or regulatory action. Risks Associated with Operating a Global Business ● We are exposed to the risks of operating in certain foreign locations where Cohu manufactures certain products and supports our sales and services to the global semiconductor industry. ● Geopolitical instability in locations critical to Cohu and its customers may adversely impact our operations, sales and profitability. ● The occurrence of natural disasters, health epidemics, and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales. ● Our business could be adversely affected by climate change effects and related matters. ● We are exposed to additional risks as a result of increased attention by our stakeholders to sustainability, including environmental, social and governance matters. Risks Relating to Acquisitions and Other Strategic Transactions ● We may choose to acquire new and complementary businesses, products or technologies instead of developing them ourselves, and we may be unable to complete these acquisitions or may not be able to successfully integrate an acquired business in a cost-effective and non-disruptive manner. Risks Relating to our Indebtedness, Financing and Future Access to Capital ● Due to the nature of our business, we need continued access to capital, which if not available to us or if not available on favorable terms, could harm our ability to operate or expand our business. ● Our foreign operations expose us to additional risks relating to currency fluctuations. ● We have recorded restructuring, inventory write-offs and asset impairment charges in the past, and may do so again in the future, which could have a material negative impact on our financial results. ● We are exposed to the instability of financial institutions where we maintain cash deposits or other liquid holdings, which could result in a lack of liquidity. ● Cohu could be required to write off some or all of its goodwill and other intangibles, which may adversely affect the combined company’s financial condition and results of operations. 8 Table of Contents Risks Relating to Owning Our Stock ● Our financial and operating results may vary and fall below analysts’ estimates, or credit rating agencies may change their ratings on Cohu, any of which may cause the price of our common stock to decline or make it difficult to obtain other financing. ● If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting. ● We have experienced significant volatility in our stock price. ● We may underperform relative to our expectations. ● Provisions of our certificate of incorporation and bylaws and Delaware law may make a takeover of Cohu more difficult. ● The issuance of shares of our common stock in connection with any future offerings of securities by us, will dilute our shareholders’ ownership interest in the Company. ● Cohu’s stock repurchase program may not have an impact that is fully reflected in the current stock valuation. Risks Relating to Regulatory Matters ● There may be changes in, and uncertainty with respect to, legislation, regulation and governmental policy in the United States. ● Trade regulations and restrictions impact our ability to manufacture certain products and to sell to customers, specifically in China, which may materially harm and limit Cohu’s business. ● Unanticipated changes in our tax provisions, enactment of new tax laws, or exposure to additional income tax liabilities could affect our profitability. ● Compliance with regulations may impact sales to foreign customers and impose costs and any failure to comply with such laws may result in severe sanctions and liabilities, which may negatively affect our business, operating results and financial condition. ● Any failure to comply with environmental laws and regulations could subject us to significant fines and liabilities, and new laws and regulations (such as involving climate change) or changes in regulatory interpretation or enforcement could make compliance more difficult and costly. Risks Relating to Cybersecurity, Intellectual Property, Privacy and Litigation ● Our business and operations could suffer in the event of cybersecurity breaches within our operational systems or products. ● We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage. ● We may not be able to adequately protect or defend ourselves against intellectual property infringement claims, which may be time consuming and expensive, or affect the freedom to operate our business. ● Data privacy, identity protection and information security compliance may require significant resources and presents certain risks. ● We currently are, and in the future may be, subject to litigation or regulatory proceedings that could have an adverse effect on our business. For a more complete discussion of the material risks facing our business, see below. 9 Table of Contents Risks Relating to Our Business Operations, Growth Strategy and Industry Semiconductor equipment is subject to rapid technological change, product introductions and transitions which may result in inventory write-offs, and our new product development involves numerous risks and uncertainties. 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. 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. 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 charges to operations during each of the years in the three-year period ended December 28, 2024. Future inventory write-offs and increased inventory reserve requirements could have a material adverse impact on our results of operations and financial condition. We 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. The cost of investments in new product offerings and product enhancements can 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. The design, development, commercial introduction and manufacture of new semiconductor equipment is an inherently complex process that involves a number of risks and uncertainties. These risks include potential problems in meeting customer acceptance and performance requirements, integration of the equipment with other suppliers’ equipment and the customers’ manufacturing processes, transitioning from product development to volume manufacturing and the ability of the equipment to satisfy the semiconductor industry’s constantly evolving needs and achieve commercial acceptance at prices that produce satisfactory profit margins. The design and development of new semiconductor equipment is heavily influenced by changes in integrated circuit assembly, test and final manufacturing processes and integrated circuit package design changes. We believe that the rate of change in such processes and integrated circuit packages is accelerating. As a result of these changes and other factors, assessing the market potential and commercial viability of test handling, ATE, system- level and burn-in test equipment and test contactors is extremely difficult and subject to a great deal of risk. In addition, not all integrated circuit manufacturers employ the same manufacturing processes. Differences in such processes make it difficult to design standard test products that can achieve broad market acceptance. As a result, we might not accurately assess the semiconductor industry’s future equipment requirements and fail to design and develop products that meet such requirements and achieve market acceptance. Failure to accurately assess customer requirements and market trends for new semiconductor test products may have a material adverse impact on our operations, financial condition and results of operations. 10 Table of Contents The semiconductor industry we serve is cyclical, seasonal, volatile and unpredictable, and increased cyclicality could have an adverse impact on our sales and gross margin. Capital equipment providers in the semiconductor industry, such as Cohu, have, in the past, been negatively impacted by both sudden slowdowns in global economies and recurring cyclicality within the markets we serve. These cycles have resulted in periods of over-supply and excess capacity; a trend we believe will continue to occur. Our business and results of operations depend, in significant part, upon capital expenditures of manufacturers and designers of semiconductor devices and other industrial products, which in turn depend upon the current and anticipated market demand for those products. Disruption or deterioration in economic conditions may reduce customer purchases of our products, thereby reducing our revenues and earnings. In addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our products, may, among other things, result in increased price competition for our products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, potential reserves for doubtful accounts and write-offs of accounts receivable, increased risk of restructuring charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our operating results. We are unable to predict the likely duration, frequency and severity of disruptions in financial markets, credit availability, and adverse economic conditions throughout the world will have on our customers, and we cannot ensure that the level of revenues or new orders for a fiscal year or quarter will be sustained in subsequent periods. In fiscal 2024, 2023 and 2022, we recorded pre-tax inventory-related charges of approximately $5.4 million, $4.5 million, and $7.2 million, respectively, primarily as a result of changes in customer forecasts. From quarter-to-quarter, we may see material swings in product mix among our product offerings. Given the cyclical nature of our industry, we generally cannot accurately predict swings in product mix from quarter-to-quarter and such changes may have sudden adverse impacts on our gross margin. The erosion in mobile automotive and industrial as well as consumer, computing and other market sales are collectively causing an adverse impact on our sales. A material portion of Cohu’s sales have historically been derived from customers that provide semiconductor devices for use within the mobile and automotive & industrial markets. The demand in these markets continued to soften in fiscal 2024. For example, mobile market sales declined 54% year over year in fiscal 2023 compared with fiscal 2022 and further declined by about 10% year over year in fiscal 2024 as compared with fiscal 2023. Additionally, automotive & industrial system sales declined 24% year over year in fiscal 2023 and further declined 65% year over year in fiscal 2024. This decline, coupled with additional declines as of the end of fiscal 2024 of 64% in consumer products, 64% in computing, and 73% in other markets, has had, and is expected to continue to have, an adverse impact on our business and operating results. Given the inherent uncertainty and volatility within our industry, at this time, we are unable to predict when the mobile, and automotive & industrial markets, or the overall market, will recover or the extent of any such recovery. Any failure to effectively manage multiple overseas manufacturing operations could harm our sales, service levels and reputation. A substantial majority of our products are manufactured in Asia. Our reliance on overseas manufacturers exposes us to significant risks including complex management, foreign currency, legal, tax and economic risks, which we may not be able to address quickly and adequately. In addition, it is time-consuming and costly to qualify and manage overseas supplier relationships. If we should fail to effectively manage overseas manufacturing operations or logistics, or if one or more of them should experience delays, disruptions or quality control problems, or if we had to change or add additional manufacturing sites, our ability to ship products to our customers could be delayed. Also, the addition of overseas manufacturing locations increases the demands on our administrative and operations infrastructure and the complexity of our supply chain management and logistics. Our overseas sites are more susceptible to impacts from natural disasters, health epidemics and geopolitical instability (see risk factor entitled “The occurrence of natural disasters, health epidemics, corruption and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales”). If our overseas manufacturing locations are unable to meet our manufacturing requirements in a timely manner, our ability to ship products and to realize the related revenues when anticipated could be materially affected. 11 Table of Contents Our suppliers are subject to fluctuations in general economic cycles, and global economic conditions may impact their ability to operate their businesses. They may also be impacted by possible import, export, tariff and other trade barriers, increasing costs of raw materials, labor and distribution, resulting in demands for less attractive contract terms or an inability for them to meet our requirements or conduct their own businesses. On February 1, 2025, President Trump issued executive orders directing the United States to impose new tariffs on imports from Canada, Mexico and China. Although a portion of these new tariffs have been temporarily suspended, other parts of these new tariffs are now in effect, and it is unclear for how long and to what extent such suspensions will remain in effect. The U.S. has also announced new tariffs on foreign steel and aluminum, with such tariffs taking effect in early March. The U.S. has further raised the possibility of new tariffs on imports from additional countries, including those in Europe. The new tariffs likely will increase the cost of the products the Company sources from these international jurisdictions and affect future shipments from the Company’s foreign suppliers. The Company may not be able to pass along increases in tariffs and freight charges to its customers, and any alterations the Company may make to its business strategy or operations to adapt to the foregoing, including sourcing products from suppliers in other countries, would be time consuming and expensive. These and other changes in the U.S. trade policy, U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently manufacture and sell products, and any resulting negative sentiments towards the United States as a result of such changes, could have an adverse effect on our business, financial condition and results of operation. Additionally, consolidation in our supply chain due to mergers and acquisitions may reduce the number of suppliers or change our relationships with them. The performance and financial condition of a supplier may cause us to alter our business terms or to cease doing business with a particular supplier, or change our sourcing practices generally, which could in turn adversely affect our own business and financial condition. Failure to effectively manage our manufacturing and our relationships with our suppliers could have a material adverse effect on our business and results of operations. We outsource select manufacturing activities to third-party service providers, which decreases our control over the performance of these functions. We outsource certain product manufacturing to third-party service providers. Outsourcing reduces our control over the performance of the outsourced functions. Dependence on outsourcing 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’s 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 experienced 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. There can be no assurance that alternative capacity could be obtained on favorable terms, if at all. If we do not effectively manage our outsourcing strategy or if third-party service providers do not perform as anticipated, 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 of 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 contained 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, we may be required to expend significant capital and resources to alleviate these problems. 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. In addition, if any of our products contain defects or have reliability, quality or safety issues, we may need to conduct a product recall which could result in significant repair or replacement costs and substantial delays in product shipments and may damage our reputation, which could make it more difficult to sell our products. Defects could also lead to product liability lawsuits against us or against our customers. Our product liability insurance policy currently provides both aggregate coverage as well as overall umbrella coverage. In the event of a successful product liability claim, we could be obligated to pay damages significantly in excess of our product liability insurance limits. Any of these occurrences could have a material adverse effect on our business, results of operations or financial condition. In addition, quality issues can impair our relationships with new or existing customers and adversely affect our reputation, which could lead to a material adverse effect on our operating results. 12 Table of Contents Failure of critical suppliers to deliver sufficient quantities of parts in a timely and cost-effective manner could adversely impact our operations. 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, many key parts may be available only from a single supplier (“sole source”) or a limited number of suppliers. In addition, suppliers may 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, at the beginning of fiscal 2022, we experienced supply constraints and delays in accessing certain specialty semiconductors necessary for the production of test instruments for our semiconductor ATE products, and these supply constraints adversely impacted 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. 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. Inflationary pressures, along with any further increase in interest rates, increase the threat of recession and may impact our financial condition or results of operations. As a global manufacturer, we rely on raw materials, packaging materials, direct labor, energy, a large network of suppliers, distribution resources and transportation providers. In fiscal 2022 and 2023, these costs, including those for transportation and other inputs necessary for the production and distribution of our products, increased in large part due to global inflationary pressures. In addition, we also continue to incur higher employee wage costs and generally higher costs for outside services. These economic events are driven by factors beyond our control, and although inflationary pressures have recently moderated, we are unable to predict the future impacts, and such cost pressures may continue to adversely impact us. Our efforts to offset these cost pressures, such as through product price increases, or attempting to reduce operating costs elsewhere, may not be successful. Higher product prices may result in reductions in sales volume as customers may be less willing to pay a price differential for our products and may purchase lower-priced competitive offerings or may delay some purchases altogether. To the extent that this may result in decreases in sales volume, our financial condition or operating results may be adversely affected. Further, an extended period of higher prices may lead to continued regulatory efforts to tame price inflation, resulting in an increased risk of recession. Our financial condition or operating results may also be affected by increased interest rates, which the Federal Reserve raised multiple times in fiscal 2023. Increased interest rates intended to reduce price inflation may also contribute to the risk of recession, which may result in customer projections of slowed growth and an overall impact on customers’ and Cohu’s corporate earnings. We saw slowing customer demand in fiscal 2023 and 2024. Although the U.S. Federal Reserve lowered interest rates in 2024, it is not known whether additional action will be taken to lower interest rates and if this decrease, and any other decreases, will have an impact on inflation. Additionally, there can be no assurance that such rate cuts will result in a reduction in expense to Cohu or its customers. Cohu is incurring interest expenses on our remaining indebtedness. In addition, our indebtedness may make us more vulnerable to changes in general economic conditions, with future inflationary pressures and efforts to rein in such an impact coupled with continued interest rate increases, thereby making it more costly for us to satisfy our obligations or causing an adverse effect on our free cashflows. The semiconductor equipment industry is intensely competitive and we may not be able to win business over that of our competition. The industries we serve are intensely competitive, and we face substantial competition from numerous companies throughout the world. The test handler 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 competitively priced products, then we expect that these competitive conditions would negatively impact our gross margin and operating results in the foreseeable future. 13 Table of Contents We have increased investments in our test contactor business and targeted growth opportunities. However, the test contactor market is fragmented, with many entrenched regional players, and subject to intense price competition and high localized customer support requirements. We believe that customer support and responsiveness and an ability to consistently meet tight deadlines is critical to our success. If we are unable to continue to reduce the cost of our test contactor products, while also meeting customer support requirements and deadlines, then we expect that these competitive conditions would negatively impact our test contactor operating results and impede us from achieving our test contactor sales goals. With respect to Cohu’s ATE business, our ability to increase ATE sales depends, in part, on our ability to win new customers. Semiconductor and electronics manufacturers typically select a particular vendor’s product for testing new generations of a device and make substantial investments to develop related test program applications and interfaces. Once a manufacturer has selected an ATE vendor for a new generation of a device, that manufacturer is more likely to purchase systems from that vendor for that generation of the device, and, possibly, subsequent generations of that device as well. Cohu has a niche position and relatively low share in the ATE market, which is primarily driven by two larger companies with significantly more resources to invest into the ATE market. Therefore, the opportunities to obtain orders from new customers or existing customers may be limited, which may impair our ability to grow our ATE revenue. We also believe that our niche position results in greater sales cyclicality versus larger more diversified ATE vendors, and Cohu’s reliance on the mobile market for ATE sales continued to have a significant adverse impact on our fiscal 2024 ATE sales. These factors may materially and adversely affect our current and future target markets and our ability to compete successfully in those markets. The transition from product development to the manufacture of new semiconductor equipment is a difficult process and delays in product introductions and problems in manufacturing such equipment are common. We have in the past and may in the future, experience difficulties in manufacturing and volume production of our new equipment. In addition, as is common with semiconductor equipment, after-sales support and warranty costs have typically been significantly higher with new products than with our established products. Future technologies, processes and product developments may render our current or future product offerings obsolete and we might not be able to develop, introduce and successfully manufacture new products or make enhancements to our existing products in a timely manner to satisfy customer requirements or achieve market acceptance. Furthermore, we might not realize acceptable profit margins on such products. Consolidation in the semiconductor industry and within the semiconductor test equipment market could adversely affect the market for our products and negatively impact our ability to compete. 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 cyclical nature of the semiconductor equipment industry places enormous demands on our employees, operations and infrastructure. 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 such changes 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. 14 Table of Contents A limited number of customers account for a substantial percentage of our net sales. A small number of customers have been responsible for a significant portion of our net sales. For fiscal year 2024, net revenue from our ten largest customers represented 57% of our total net revenue. During the past five years, the percentage of our sales derived from these significant customers has varied greatly. Such variations are due to changes in the customers’ business, consolidation within the semiconductor industry and their purchase of products from our competitors. It is common in the semiconductor equipment industry for customers to purchase products from more than one equipment supplier, increasing the risk that our competitive position with a specific customer may deteriorate. No assurance can be given that we will continue to maintain our competitive position with these or other significant customers. We expect the percentage of our revenues derived from significant customers will vary greatly in future periods. The loss of, or a significant reduction in, orders by these or other significant customers as a result of competitive products, market conditions including end market demand for our customers’ products, outsourcing final semiconductor test to test subcontractors that are not our customers or other factors, could have a material adverse impact on our business, financial condition and results of operations. If we cannot continue to develop, manufacture, market and support products and services that meet customer requirements for innovation and quality, our revenue and gross margin may suffer. 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 test 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. If our relationships with our large customers deteriorate, our product development activities could be adversely affected. The success of our product development efforts depends on our ability to anticipate market trends and the price, performance and functionality requirements of semiconductor device manufacturers. In order to anticipate these trends and ensure that critical development projects proceed in a coordinated manner, we must continue to collaborate closely with our largest customers. Our relationships with these and other customers provide us with access to valuable information regarding trends in the semiconductor device industry, which enables us to better plan our product development activities. If current relationships with our large customers are impaired, or if we are unable to develop similar collaborative relationships with important customers in the future, our product development activities could be adversely affected. 15 Table of Contents We must attract and retain experienced personnel to help support our future growth, and competition for such personnel in our industry is high. Our success depends, to a significant degree, upon the continued contributions of our key executive management, engineering, sales and marketing, customer support, administrative and manufacturing personnel. The loss of any of these key personnel, each of whom would be extremely difficult to replace, through resignations, retirement or other circumstances, could harm our business and operating results. Despite our incentive arrangements with key members of our senior management team, these individuals or other key employees may still leave us, which could have a material adverse effect on our business. We do not have key person life insurance on any of our executives. In addition, to support our future growth, we will need to attract and retain additional qualified employees. Competition for such personnel in our industry is intense, and we may not be successful in attracting and retaining qualified employees. The expansion of high technology companies worldwide and growth in the demand for semiconductors have increased demand and competition for qualified personnel has intensified. In addition, the cost of living in San Diego and the Bay Area, California; Boston, Massachusetts; St. Paul, Minnesota; Lincoln, Rhode Island; Kolbermoor, Germany; La Chaux-de-Fonds, Switzerland and Osaka, Japan areas, where the majority of our engineering personnel are located, is high, and increasing further due to inflationary effects, and we have had difficulty in recruiting prospective employees from other locations. There may be only a limited number of persons with the requisite skills and relevant industry experience to serve in these positions and it may become increasingly difficult for us to hire personnel over time. Competition for engineering and other technical personnel in some of the markets in which we operate is especially competitive due to continued increases in the number of technology companies worldwide. In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including cash and stock-based compensation, along with other benefits and workplace policies. If the anticipated value of our stock-based incentive awards does not materialize so that they cease to be viewed as valuable, if our profits decrease, or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened. Our business, financial condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current position, or by our inability to attract and retain skilled employees. The use of Artificial Intelligence (“AI”) within Cohu’s product development involves risks and uncertainties that may impact our operational performance and be subject to legal and/or regulatory action. The information technology industry has experienced rapid technological developments, changes in industry standards, changes in customer requirements 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. For example, we recently acquired Tignis, Inc., a provider of AI process control and analytics-based 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. While our use of 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 do not receive pictures or visual data, 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, it is likely that legal and/or regulatory actions that will be taken 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 resources 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. 16 Table of Contents Risks Associated with Operating a Global Business We are exposed to the risks of operating in certain foreign locations where Cohu manufactures certain products and supports 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, Philippines, Singapore, Switzerland, Taiwan and elsewhere in the U.S., and our manufacturing operations are primarily located in Japan, Singapore, Malaysia, Philippines and the U.S. Additionally, sales of our products to customers outside of the United States represent a significant part of our past and anticipated revenues. Our international sales as a percentage of our revenues were 86%, 88% and 90% for fiscal 2024, 2023 and 2022, 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 in transacting business internationally could negatively impact our operating results, including: ● costs and difficulties in staffing and managing international operations; ● currency exchange rate fluctuations, which could affect the value of our assets denominated in local currency, as well as the price of our products relative to locally produced products; ● legislative or regulatory requirements and potential changes in, or interpretations of, requirements in the United States and in the countries in which we manufacture or sell our products; ● trade restrictions, including treaty changes, sanctions and the suspension of export licenses; ● compliance with and changes in import/export tariffs and regulations; ● complex labor laws and privacy regulations; ● difficulties in adequately supervising employees widely distributed around the world, including due to implementing remote and/or hybrid work arrangements; ● difficulties in enforcing contractual and intellectual property rights; ● longer payment cycles and receivable collections; ● fluctuations in freight rates and transportation disruptions; ● seasonal fluctuations in purchasing patterns in other countries; ● health epidemics or other disruptions to trade and production; ● local and global political and economic instability or foreign conflicts, including trade wars, that involve or affect the countries of our customers; ● natural disasters and other climate risks; ● varied environmental laws and regulations at each of our principal locations; and ● complex tax laws and potentially adverse tax consequences, including restrictions on repatriating earnings and the threat of “double taxation.” Additionally, managing geographically dispersed operations presents difficult challenges associated with organizational alignment and infrastructure, communications and information technology, inventory control, customer relationship management, terrorist threats and related security matters and cultural diversities. If we are unsuccessful in managing such operations effectively, our business and 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 United States and China. 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, it could require us to dedicate significant resources to remedy, and if we are unsuccessful in finding a solution, our financial results will suffer. 17 Table of Contents Geopolitical instability in locations critical to Cohu and its customers may adversely impact our operations, sales and profitability. The majority of our export 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. In addition, we face intense competition from a number of Asian suppliers that have certain advantages over U.S. suppliers, including us. These advantages include, among other things, proximity to customers, lower cost structures, a willingness to compete solely on price, favorable tariffs and other government preferences or subsidy programs, and affiliation with significantly larger organizations. In addition, changes in the amount or price of semiconductors produced in Asia could negatively impact the profitability or capital equipment spending programs of our foreign and domestic customers. An increase in geopolitical tensions in Asia, particularly in the Taiwan Strait, 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’s customer base. Additionally, the armed conflict involving Hamas and Israel, as well as further escalation of tensions between Israel and various countries in the Middle East and North Africa, 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. The tensions related to Russia’s actions have resulted in the U.S. and many European countries imposing significant economic sanctions on Russia and specific individuals targeted as having connections to the Russian government. The totality of these actions has continued to impact international trade relationships, and resulted in sustained increases in the cost of materials, where higher oil and other commodity prices have resulted in further increased shipping and transportation costs. Furthermore, energy shortages, particularly with respect to natural gas, should they occur in Europe, would disrupt our test handler operations and research and development activities at our Kolbermoor, Germany and La Chaux-de-Fonds, Switzerland facilities. In addition, the conflict could adversely impact the supply chain in this region, particularly with respect to critical materials and metals, such as palladium which is used in our interface products as well as in semiconductors. Any increases in the cost, or shortages, of materials or energy may continue to create supply issues for critical materials that could constrain manufacturing levels for Cohu’s customers, leading to a decrease in demand for Cohu’s products. The global impact of the military action and subsequent imposing of sanctions continues to evolve and cannot be sufficiently measured or predicted with certainty. The inherent uncertainty surrounding this war may negatively impact the share prices of publicly traded companies. Government entities and both public and private companies within the United States may be exposed to attempted or actual cybersecurity attacks launched in retaliation, resulting in disruptions to domestic markets and a prolonged state of global market volatility. Furthermore, there remains ongoing uncertainty with respect to China’s willingness to support ongoing or expanded sanctions, which could distance China from its existing trade partners, potentially creating a significant impact to the semiconductor chip and equipment industries that conduct operations within China, Taiwan and the region. There is a likelihood that these sanctions, and related geopolitical tensions, will not be resolved in the short-term but will have a lengthy disruption to all global companies. Any of these conflicts or other threatened conflicts, if they cause interruption to semiconductor chip supply and related impacts to the company’s customers, 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. The occurrence of natural disasters, health epidemics, and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales. Our corporate headquarters is located in the San Diego, California area, our Asian sales and service headquarters are located in Singapore and Taiwan, and the majority of our sales are made to destinations in Asia. In addition, we have Asia-based manufacturing plants in Malaysia, Philippines and Japan. These regions are known for being vulnerable to natural disasters and other risks, such as earthquakes, tsunamis, fires and floods, volcanic eruptions, and geopolitical risks, which at times have disrupted the local economies. For example, a significant earthquake or tsunami could materially affect operating results. Although we believe that we carry reasonable and appropriate business insurance, we may not be insured for certain losses and business interruptions of this kind, or for geopolitical or terrorism impacts, and presently have very limited redundant, multiple site capacity in the event of a disaster. In the event of such disaster, our business would materially suffer. 18 Table of Contents Our business could also be adversely affected by the effects of a widespread outbreak of contagious diseases, such as we were adversely affected by the COVID-19 global pandemic. Our business has previously, and may in the future be, adversely impacted by evolving and extended public health requirements around the world; government-mandated facility shutdowns; import/export, shipping and logistics disruptions and delays; other supply chain and distribution constraints or delays; rapid changes to business, political or regulatory conditions affecting the semiconductor equipment industry and the overall global economy; availability of employees, increased sick time and lost employee productivity; risks associated with, at times, temporarily housing employees in our Malaysia and Philippines factories; remote working and increased cybersecurity risks; increased internal control risks over financial reporting as key finance staff work remotely; delayed product development programs; customers’ canceling, pushing out orders or refusal to accept product deliveries; delayed collection of receivables; other actions of our customers, suppliers and competitors which may be sudden and inconsistent with our expectations; higher shipping, trucking and logistics costs; higher component costs; manufacturing capacity limitations; additional credit rating agency downgrades could occur which would increase our cost of raising capital; and potential additional impairment of goodwill or other intangible assets or inventory write-downs due to lower product demand may become necessary. Any of the foregoing, if they reoccur, may have a material adverse effect on our financial condition and results of operations, and may also have the effect of increasing the likelihood and/or magnitude of other risks described in these risk factors. With any reemerging COVID-19 surge or new health epidemic, we believe the risks of material adverse business disruption increase. We continuously monitor and react to the pandemic but cannot predict its future course or impacts. Our business could be materially and adversely affected by transition and physical climate change effects and related matters. We analyze climate change risks in two separate categories: transition risks and physical risks. Transition risks are those risks relating to the transition of the global economy to a focus on more climate-friendly technologies. This transition could have adverse financial impacts on us in several ways. For instance, more stringent environmental policies or regulations could lead to increased expenses relating to greenhouse gas emissions or other emissions that could increase our operating costs. Enhanced emissions-reporting or shifting technology could require us to write off or impair assets or retire existing assets early. Increased environmental mandates could also increase our exposure to litigation. We could be required to incur increased costs and significant capital investment to transition to lower emissions technologies. In addition, overall market shifts could increase costs of our raw materials and cause unexpected shifts in energy costs. Focus on sustainability has increased, and the company or its industry could be stigmatized as not friendly to the environment, which could adversely affect our reputation and our business, including due to difficulties in employee hiring and retention and our ability to access capital. Any of these matters could materially and adversely affect our business, financial condition or results of operations. Physical risks from climate change that could affect our business include acute weather events such as floods, tornadoes or other severe weather and ongoing changes such as rising temperatures or extreme variability in weather patterns. These events could lead to increased capital costs from damage to our facilities, increased insurance premiums or reduced revenue from decreased production capacity based on supply chain interruptions. Any of these events could have a material adverse effect on our business, financial condition or results of operations (see risk factor entitled “The occurrence of natural disasters, health epidemics, and geopolitical instability caused by terrorist attacks and other threats may adversely impact our operations and sales”). 19 Table of Contents We are exposed to additional risks as a result of increased attention by our stakeholders to sustainability, including environmental, social and governance matters. Our stakeholders, including customers, investors, advisory firms, employees, and suppliers among others, are increasing their attention to, and establishing expectations for, sustainability and related matters. These expectations can extend to our corporate practices, initiatives, and disclosures, as well as stakeholder standards or preferences for investments or doing business. Third-party agencies have also established or added standards for rating companies on a range of sustainability-related factors that may be inconsistent and subject to change. Conversely, “anti-ESG” sentiment has gained momentum across the U.S., with a growing number of states, federal agencies, the executive branch and Congress having enacted, proposed or indicated an intent to pursue “anti- ESG” policies, legislation or issued related legal opinions and engaged in related investigations and litigation. If investors subject to “anti-ESG” legislation view our ESG practices as being in contradiction of such “anti-ESG” policies, legislation or legal opinions, such investors may not invest in us and it could negatively impact the price of our common stock. In addition, corporate diversity, equity and inclusion (“DEI”) practices have recently come under increasing scrutiny. For example, some advocacy groups and federal and state officials have asserted that the U.S. Supreme Court’s decision striking down race-based affirmative action in higher education in June 2023 should be analogized to private employment matters and private contract matters and several media campaigns and cases alleging discrimination based on such arguments have been initiated since the decision. Additionally, in January 2025, President Trump signed a number of Executive Orders focused on DEI, which indicate continued scrutiny of DEI initiatives and potential related investigations of certain private entities with respect to DEI initiatives, including publicly traded companies. If we do not successfully manage expectations across varied stakeholder interests, it could erode stakeholder trust and impact our reputation, the costs of doing business, and the willingness of these stakeholders to engage with, invest in, or retain us. In March 2024, the SEC adopted rules aimed at enhancing and standardizing climate-related disclosures; however, these rules are stayed pending the outcome of consolidated legal challenges in the Eighth Circuit Court of Appeals. Compliance with any new laws or regulations, including new or upcoming California or European requirements, increases our regulatory burden and could result in increased legal, accounting and compliance costs, make some activities more difficult, time-consuming and costly, affect the manner in which we conduct our business and adversely affect our profitability. In addition, the Company has provided voluntary disclosures on sustainability matters, including regarding energy usage, greenhouse gas emissions, health and safety, and labor and human rights. Such disclosures are aspirational and based on frameworks and standards for such initiatives and progress that are still developing, assumptions that may change, and disclosure control and procedures may continue to evolve. We may fail, or be perceived to fail, in attaining or maintaining our sustainability-related initiatives. The topics on which we focus may not be popular with our stakeholders. These events or perceptions may expose us to additional reputational and operational risks. Risks Relating to Acquisitions and Other Strategic Transactions We may choose to acquire new and complementary businesses, products or technologies instead of developing them ourselves, and we may be unable to complete these acquisitions or may not be able to successfully integrate an acquired business in a cost-effective and non-disruptive manner. Our success depends on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. As part of our business strategy, we will continue to regularly evaluate investments in, or acquisitions of, complementary businesses, joint ventures, services and technologies, and we expect that periodically we will continue to make such investments and acquisitions in the future. We may, however, face competition for acquisition targets from larger and more established companies with greater financial resources, making it more difficult for us to complete acquisitions. We cannot provide any assurance that we will be successful in consummating future acquisitions on favorable terms or that we will realize the benefits that we anticipate from one or more acquisitions that we consummate. Integrating any business, product, technology or service into our current operations could be expensive and time-consuming and/or disrupt our ongoing business. Acquisitions and investments involve numerous risks, including, but not limited to: ● acquisitions may underperform and we may not achieve any forecasted growth, benefits or synergies; ● difficulties entering potentially new markets or manufacturing in new geographies where Cohu has no or limited direct prior experience; ● difficulties and increased costs in connection with integration of the personnel, operations, technologies and products of acquired businesses; ● unexpected reduction of sales of existing products as a result of the introduction of new products; ● increasing the scope, geographic diversity and complexity of our business; ● the cost and risk of having to potentially develop new and unfamiliar sales channels for acquired businesses; 20 Table of Contents ● diversion of management’s attention from other operational matters and current products and customers; ● product manufacturing disruptions and delays as we potentially consolidate certain manufacturing sites; ● difficulties and significant costs in integrating the systems and processes of two companies with complex operations including multiple manufacturing sites; ● integration of acquired businesses and their operations, including enterprise resource planning systems, may be costly and time-consuming and divert resources away from other projects; ● the potential loss of key employees, customers or suppliers of Cohu or acquired businesses; ● lack of synergy, or the inability to realize expected synergies, resulting from the acquisition; ● potential unknown liabilities associated with the acquired businesses; ● failure to commercialize or meet the expected performance of the purchased technology or business; ● failure to retain key employees and customer or supplier relationships; ● the impairment of acquired intangible assets and goodwill that could result in significant charges to operating results in future periods; and ● challenges caused by distance, language and cultural differences. We may decide to finance future acquisitions and investments through a combination of borrowings, proceeds from equity or debt offerings and the use of cash, cash equivalents and short-term investments. If we finance acquisitions or investments by issuing equity-linked (such as convertible debt) or equity securities, our existing stockholders may be diluted which would likely affect the market price of our stock. Mergers, acquisitions and investments are inherently risky and the inability to effectively manage these risks could materially and adversely affect our business, financial condition and results of operations. In addition, any impairment of goodwill or other intangible assets, amortization of intangible assets, write-down of other assets or charges resulting from the costs of acquisitions and purchase accounting could harm our business and operating results. Risks Relating to our Indebtedness, Financing and Future Access to Capital Due to the nature of our business, we need continued access to capital, which if not available to us or if not available on favorable terms, could harm our ability to operate or expand our business. Our business requires capital to finance accounts receivable and product inventory that is not financed by trade creditors when our business is expanding. If cash from available sources is insufficient or cash is used for unanticipated needs, we may require additional capital sooner than anticipated. We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities will provide sufficient resources to meet our working capital and cash requirements for at least the next twelve months; however, a material adverse impact on our business from unforeseen events or a desire to reduce our outstanding indebtedness could result in a need to raise additional capital. Alternatively, we could decide to raise capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions. In the event we are required, or elect, to raise additional funds, we may be unable to do so on favorable terms, or at all, and may incur expenses in raising the additional funds and increase our interest rate exposure, and any future indebtedness could adversely affect our operating results and severely limit our ability to plan for, or react to, changes in our business or industry. For example, under our Credit Agreement which was repaid in full on February 9, 2024, we were limited by financial and other negative covenants in our credit arrangements, including limitations on our borrowing of additional funds and issuing dividends. If we cannot raise funds on acceptable terms, we may not be able to take advantage of future opportunities or respond to competitive pressures or unanticipated requirements. Any inability to raise additional capital when required could have an adverse effect on our business and operating results. 21 Table of Contents Our foreign operations expose us to additional risks relating to currency fluctuations. Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. We report our financial results in U.S. dollars, but we incur certain costs in other currencies and have certain foreign currency denominated assets and liabilities. For example, we have significant business operations located in Germany and Switzerland, each of which engage in transactions with end customers, while costs related to manufacturing products are incurred in our manufacturing facilities in Asia and raw material supply chain costs are incurred in yet other currencies. We, therefore, face exposure to fluctuations in currency exchange rates. Significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues and earnings, despite our hedging of a portion of our international currency exposures. Additionally, hedging programs are inherently risky, may be ineffective, and could expose us to additional costs and risks that could adversely affect our financial condition and results of operations. We have recorded restructuring, inventory write-offs and asset impairment charges in the past, and may do so again in the future, which could have a material negative impact on our financial results. We plan to record restructuring charges in the first quarter of fiscal 2025, have previously recorded restructuring charges in prior years and we may implement restructuring plans in the future, which would require us to take additional, potentially material, restructuring charges related to employee terminations, asset disposal or exit costs. We may also be required to write off additional inventory if our product build plans or usage of inventory experience declines, and such additional write-offs could constitute material charges. In addition, significant adverse changes in market conditions could require us to take additional material impairment charges related to our long-lived assets if the changes impact the critical assumptions or estimates that we use in our assessment of the recoverability of our long-lived assets. Any such additional charges, whether related to restructuring, asset impairment or factory underutilization, may have a material negative impact on our operating results and related financial statements. We are exposed to the instability of financial institutions where we maintain cash deposits or other liquid holdings, which could result in a lack of liquidity. To ensure financial flexibility, we maintain a substantial amount of cash deposit holdings in financial banks that exceed the limits insured by the Federal Deposit Insurance Corporation (“FDIC”). A bank failure, default, or other adverse events that restrict the ability of financial institutions to perform, including elevated concerns of such potential events that are rapidly communicated across media platforms, may lead to liquidity constraints for those institutions. For example, on March 10, 2023, Silicon Valley Bank (“SVB”) experienced a significant and rapid withdrawal of funds that led to its collapse. The FDIC determined that it would guarantee all deposit amounts held at SVB, including amounts above FDIC insurance limits. However, there is no guarantee that the FDIC will similarly protect deposit amounts held above insurance limits if other banks were to fail or other adverse conditions were to impact financial institutions. While SVB’s collapse was partly driven by recent interest rate increases, which resulted in steep realized losses to cover the run on withdrawals, the potential for similar events occurring pose ongoing risk to us. Such events could cause the loss of cash deposits, limit our access to debt facilities and restrict our ability to obtain needed liquidity from financial institutions, hampering our ability to make strategic acquisitions or investments. Because a significant portion of Cohu’s total assets is represented by goodwill, which is subject to mandatory impairment evaluation, and other intangibles, Cohu could be required to write off some or all of its goodwill and other intangibles, which may adversely affect the combined company’s financial condition and results of operations. Goodwill and other intangibles comprise 35% of Cohu’s total assets, of which approximately $234.6 million of our total assets are allocated to goodwill. In accordance with Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other, goodwill and certain other intangible assets with indefinite useful lives are not amortized but are reviewed at least annually for impairment, or more frequently if there are indications of impairment. Significant declines in the price of Cohu’s common stock could increase the risk of an impairment. All other intangible assets are subject to periodic amortization. Cohu evaluates the remaining useful lives of other intangible assets each quarter to determine whether events and circumstances warrant a revision to the remaining period of amortization. When Cohu performs future impairment tests, it is possible that the carrying value of goodwill or other intangible assets could exceed their implied fair value and therefore would require adjustment. Such adjustment would result in a charge to operating income in that period. There can be no assurance that there will not be further adjustments for impairment in future periods. 22 Table of Contents Risks Relating to Owning Our Stock Our financial and operating results may vary and fall below analysts’ estimates, or credit rating agencies may change their ratings on Cohu, any of which may cause the price of our common stock to decline or make it difficult to obtain other financing. Our operating results may fluctuate from quarter to quarter due to a variety of factors including, but not limited to: ● seasonal, volatile and unpredictable nature of the semiconductor equipment industry; ● timing and amount of orders from customers and shipments to customers; ● customer decisions to cancel orders or push out deliveries; ● inability to recognize revenue due to accounting requirements; ● inventory write-downs; ● unexpected expenses or cost overruns in the introduction and support of products; ● inability to deliver solutions as expected by our customers; ● geopolitical changes impacting our business, including with respect to China and Taiwan; ● intangible and deferred tax asset write-downs; and ● general economic and market conditions, including impacts from sanctions against Russia and the military conflict in Ukraine, increased inflationary pressures, interest rate changes, and any resurgence of the COVID-19 pandemic. Due to these factors or other unanticipated events, quarter-to-quarter comparisons of our operating results may not be reliable indicators of our future performance. In addition, from time to time our quarterly financial results may fall below the expectations of the securities and industry analysts who publish reports on our company or of investors in general. This could cause the market price of our stock to decline, perhaps significantly. In addition, as a result of the Term Loan Credit Facility, which was paid in February 2024, we maintain credit ratings with Moody’s Investors Service, Inc. (“Moody’s”) and S&P Global Ratings (“S&P”). Any downgrades of Cohu’s credit ratings or rating outlooks, if and when they were to occur, may materially and adversely affect the market price of our equity and the availability, cost or interest rate of other credit or financing. Cohu’s current credit ratings are considered non-investment grade and make it more costly (as compared to investment grade borrowers) for Cohu or its subsidiaries to borrow money or enter into new credit facilities and to raise certain other types of capital and/or complete additional financings. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting. We are required by the SEC to establish and maintain adequate internal control over financial reporting that provides reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses in those internal controls. Although we believe that we have adequate internal controls in place at this time, we cannot be certain that, with significantly greater global complexity, we will be able to maintain adequate internal control over our financial reporting in future periods. Any failure to maintain such internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and Nasdaq Global Select Market, we could face severe consequences from those authorities. In either case, there could be a material adverse effect on our business and/or our stock price. 23 Table of Contents We have experienced significant volatility in our stock price. A variety of factors may cause the price of our stock to be volatile. The stock market in general, and the market for shares of high-technology companies in particular, including ours, have experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. During the three-year period ended December 28, 2024, the price of our common stock has ranged from $43.99 to $22.80. The price of our stock may be more volatile than the stock of other companies due to, among other factors, the unpredictable, volatile and seasonal nature of the semiconductor industry, our significant customer concentration, intense competition in the test contactor, test handler, automated test equipment industry, our limited backlog, our debt levels, and our relatively low daily stock trading volume. The market price of our common stock is likely to continue to fluctuate significantly in the future, including fluctuations related and unrelated to our performance. We may underperform relative to our expectations. Our business and financial performance are subject to certain risks and uncertainties, as described in these risk factors. We may not achieve our forecasted growth rates, levels of revenue, earnings, or operating efficiency that we expect and may incur losses in the business at any time. Any underperformance from our expectations or forecasts could have a material adverse effect on our financial condition, results of operations, and cause abrupt, significant stock price declines. We may become subject to campaigns by shareholders advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases or divestitures. Such activities could interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, divert the attention of management or result in other short-term focused corporate actions, any of which could have an adverse effect on our business or stock price. 24 Table of Contents Provisions of our certificate of incorporation and bylaws and Delaware law may make a takeover of Cohu more difficult. There are provisions in our basic corporate documents and under Delaware law that could discourage, delay or prevent a change in control, even if a change in control may be regarded as beneficial to some or all of our stockholders. The issuance of shares of our common stock in connection with any future offerings of securities by us, will dilute our shareholders’ ownership interest in the company. We may seek additional financing in the future to meet our capital needs or to meet our strategic initiatives or operating activities. We have in the past issued common stock as acquisition consideration and for general corporate purposes. For example, in March 2021, we issued 5,692,500 additional shares of our common stock in an underwritten follow-on public offering, which represented an increase of 13.4% of outstanding shares of common stock at the time. We may determine to utilize common stock as acquisition consideration, issue convertible debt, or pursue another follow-on equity offering to raise capital for debt reduction or for other general corporate purposes, at any time in the future. Any issuances of additional shares of our common stock would dilute shareholders’ ownership interest in our company, and shareholders would have a proportionately reduced ownership and voting interest in our company as a result of equity issuance. If we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants. Additionally, our ability to make scheduled payments or refinance our obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and financial, business and other factors beyond our control. Cohu’s stock repurchase program may not have an impact that is fully reflected in the current stock valuation. Effective November 2, 2021, a $70 million share repurchase program was authorized by our Board of Directors. On October 25, 2022, our Board of Directors authorized an additional $70 million under the share repurchase program. The stock repurchase program was authorized to potentially offset dilution from equity issuances under Cohu’s equity incentive plans and because the Board believes that, for reasons unrelated to the company’s performance, the trading price of Cohu’s common stock from time to time may not be reflective of the true value of the Company. Any repurchases have been and may be made in the future using our existing cash resources. The Company gives no assurances as to when, how much and for what duration stock repurchases may be made. However, stock repurchases may adversely affect the Company if the economy turns downward, as it could leave the Company limited in its ability to obtain cash necessary for ongoing operations or strategic initiatives. In addition, any repurchase of stock may have no positive impact on our stock price. Further, as stock may be repurchased, given the volatility of our stock price, we may repurchase stock at prices which, in hindsight, are materially higher than the subsequent price of our stock. Risks Relating to Regulatory Matters There may be changes in, and uncertainty with respect to, legislation, regulation and governmental policy in the United States. Specific legislative and regulatory proposals that could have a material impact on us include, but are not limited to, infrastructure renewal programs, modifications to international trade policy, increased duties, tariffs or other export restrictions, public company reporting requirements, climate change and environmental regulation, corporate tax legislation, new employment and privacy laws, and antitrust enforcement. Trade regulations and restrictions impact our ability to manufacture certain products and to sell to certain customers, specifically in China, which may materially harm and limit Cohu’s business. We are subject to U.S. laws and regulations that limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, business partners and other persons. In certain circumstances, export control and economic sanctions regulations prohibit the export of certain products, services and technologies, and in other circumstances are required to obtain an export license before exporting the controlled item. We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. We maintain an export compliance program but there are risks that the compliance controls could be circumvented, exposing us to legal liabilities. There have been several significant changes in U.S. export regulations relating to China since 2019. More recently, in fiscal 2022 and again in fiscal 2024, export controls were issued relating to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries, where these additional controls may impact our ability, and/or that of our customers, to sell and ship products to semiconductor fabrication facilities located in China. These export controls include restrictions on certain semiconductor integrated circuits, commodities containing such integrated circuits, and semiconductor manufacturing equipment. Furthermore, the export controls restrict the ability of U.S. persons to support the development or production of integrated circuits at certain semiconductor fabrication facilities in China. In addition to the specific restrictions impacting our business, the regulations may have an adverse impact on certain actual or potential customers and on the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, our business and revenues will be adversely impacted. 25 Table of Contents Additionally, these collective export restrictions and the ongoing unpredictability of U.S.-China trade relations have encouraged China-based companies to actively seek to obtain a greater supply of similar or substitute products from our foreign competitors that are not subject to these restrictions, thereby decreasing our long-term competitiveness as a supplier to China-based companies. These ongoing actions indicate that the U.S. government may impose other new export restrictions. If implemented with no prior notice, even controls that ultimately have minimal long-term impact to Cohu, may create short-term limitations on Cohu’s business as it evaluates the full impact of such new and any subsequent controls. The prospect of future export controls that are implemented in a similar manner may continue to have an ongoing impact on Cohu’s business, results of operations, or financial conditions. Unanticipated changes in our tax provisions, enactment of new tax laws, or exposure to additional income tax liabilities could affect our profitability. We are subject to income and other taxes in the U.S. and numerous foreign jurisdictions. Our tax liabilities are affected by, among other things, the amounts our affiliated entities charge each other for intercompany transactions. Our United States, German, Singaporean and Philippines subsidiaries have income tax returns currently under routine examination by tax authorities for different periods between fiscal 2017 and 2023. We may be subject to ongoing tax examinations in various jurisdictions. Tax authorities may disagree with our intercompany charges or other matters and assess additional taxes. While we regularly assess the likely outcomes of these examinations to determine the appropriateness of our tax provision, tax audits are inherently uncertain, and an unfavorable outcome could occur. An unanticipated, unfavorable outcome in any specific period could harm our operating results for that period or future periods. The financial cost and management attention and time devoted to defending income tax positions may divert resources from our business operations, which could harm our business and profitability. Tax examinations may also adversely impact the timing and/or amount of our refund claims. Our effective tax rate in the future could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of our deferred tax assets and liabilities, changes in tax laws and the discovery of new information during our tax return preparation process. In particular, the carrying value of our deferred tax assets and the utilization of our net operating loss and credit carryforwards are dependent on our ability to generate future taxable income in the U.S. and other countries. Furthermore, these carryforwards may be subject to annual limitations as a result of changes in Cohu’s ownership. For example, beginning in fiscal 2022, the Tax Cuts and Jobs Act, or the Tax Act, eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Internal Revenue Code Section 174. This increased our effective tax rate and our cash tax payable in fiscal 2022 through 2024. If the requirement to capitalize Section 174 expenditures is not modified, it may also continue to adversely impact our effective tax rate and our cash tax liability in future years. The OECD/G20 Inclusive Framework on Base Erosion & Profit Shifting (“BEPS”) reached agreement on the Pillar Two global minimum tax rules in October 2021 to address the challenges arising from the digitalization of the economy. These new Global Anti-Base Erosion (“GloBE”) rules are now being implemented by jurisdictions around the world and will apply to many companies from fiscal 2024. Pillar Two introduces a global minimum Effective Tax Rate (“ETR”) where multinational groups with consolidated revenue over €750 million are subject to a minimum ETR of 15% on income arising in low-tax jurisdictions. On January 20, 2025, President Trump signed an executive order effectively cancelling the United States’ commitments to the global minimum tax rules, stating that those commitments cannot have any effect in the United States without an act of approval of the U.S. Congress. Any new tax legislation or initiatives could not only significantly increase our tax provision, cash tax liabilities, and effective tax rate, but could also significantly increase tax uncertainty due to differing interpretations and increased audit scrutiny. These specific actions did not impact our consolidated financial statements in fiscal 2024. However, it is likely that these new rules will have an impact in some form on our operations and financial results and may adversely impact our operational decisions and/or our profitability. 26 Table of Contents We have tax incentives or tax holiday arrangements in the Philippines and Malaysia which may change or cease to be in effect or applicable, in part or in whole, for reasons within or beyond our control. In addition, if our assumptions and interpretations regarding tax laws, incentives or holiday arrangements prove to be incorrect or are otherwise modified, our corporate income tax burden may significantly increase. Also, some of our various tax incentives in Malaysia are expiring and if we are unable to secure renewal of the expiring tax incentives, our effective tax rate may be adversely impacted. Compliance with regulations may impact sales to foreign customers and impose costs and any failure to comply with such laws may result in severe sanctions and liabilities, which may negatively affect our business, operating results and financial condition. Certain products and services that we offer require compliance with U.S. and other foreign country export and other regulations. Compliance with complex and dynamic U.S. and other foreign country laws and regulations that apply to our international sales activities increases our cost of doing business in international jurisdictions and could expose us or our employees to fines and penalties. These laws and regulations include import and export requirements, the U.S. State Department International Traffic in Arms Regulations (“ITAR”) and U.S. and other foreign country laws such as the Foreign Corrupt Practices Act (“FCPA”), and local laws prohibiting corrupt payments to governmental officials. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation. Some of our distribution partners are located in parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. The policies and procedures we have implemented to discourage these practices by our employees, our existing safeguards and any future improvements may prove to be ineffective, and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Although we have implemented policies and procedures designed to ensure compliance with these laws, there can be no assurances that our employees, contractors or agents will not violate our policies, or that our policies will be effective in preventing all potential violations. In addition, the U.S. government may seek to hold us liable for successor liability FCPA violations committed by companies in which we invest or that we acquire. Any such violations could include prohibitions on our ability to offer our products and services to one or more countries, and could also materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results. Further, defending against claims of violations of these laws and regulations, even if we are successful, could be time-consuming, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses. On February 10, 2025, President Trump signed an executive order directing the Attorney General, or a period of 180 days (1) effectively halt the initiation of new Foreign Corrupt Practices Act (FCPA) investigations and enforcement actions and (2) undertake a detailed review of any such existing matters with an eye toward restoring proper bounds on enforcement. However, there can be no assurance that potential violations during this pause of enforcement minimizes or eliminates the potential damages identified above. In addition to government regulations regarding sale and export, we are subject to other regulations regarding our products. For example, the U.S. SEC has adopted disclosure rules for companies that use conflict minerals in their products, with substantial supply chain verification requirements if the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining countries. These rules and verification requirements impose additional costs on us and on our suppliers and may limit the sources or increase the cost of materials used in our products. Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers that could place us at a competitive disadvantage, and our reputation may be harmed. 27 Table of Contents Any failure to comply with environmental laws and regulations could subject us to significant fines and liabilities, and new laws and regulations (such as involving climate change) or changes in regulatory interpretation or enforcement could make compliance more difficult and costly. We are subject to various U.S. federal, state and local, and foreign governmental laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites and the maintenance of a safe workplace. We could incur substantial costs, including cleanup costs, civil or criminal fines or sanctions and third-party claims for property damage or personal injury, as a result of violations of or liabilities under environmental laws and regulations or non- compliance with the environmental permits required at our facilities. In addition, new regulations or shareholder or other public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs, and may require us to make additional investments in facilities and equipment. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations. Risks Relating to Cybersecurity, Intellectual Property, Privacy and Litigation Our business and operations could suffer in the event of cybersecurity breaches within our operational systems or products. Attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated and are sometimes successful. These attempts, which might be related to industrial or other espionage, include covertly introducing malware to our computers and networks and impersonating authorized users, among others. We seek to detect and investigate all cybersecurity incidents and to prevent their recurrence, but in some cases, we might be unaware of an incident or its magnitude and effects. We have been impacted by immaterial “phishing” schemes and we are continuing our efforts to train employees on such risks but may still incur damages from such schemes in the future. We believe that the implementation of extensive employee telework practices has increased our cybersecurity risks. The theft, unauthorized use or publication of our intellectual property and/or confidential business information could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business. See Item 1C entitled “Cybersecurity” for additional information about our cybersecurity processes, oversight, risk mitigation and governance. To the extent that any security breach results in inappropriate disclosure of our customers’ or licensees’ confidential information, we may incur liability as a result. In response to these risks, we expect to continue to devote additional resources to the security of our information technology systems. Any future attacks which may disrupt our IT systems, or those of our suppliers, could impact our sales, financial results and stock price. We may fail to adequately protect our intellectual property and, therefore, lose our competitive advantage. Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary technology for our principal product families. If we fail to adequately protect our intellectual property, it will give our competitors a significant advantage. We own or have licensed a number of patents relating to our products, and have filed applications for additional patents. Any of our pending patent applications may be rejected, however, and we may be unable to develop additional proprietary technology that is patentable in the future. In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and/or may be challenged by third parties. Third parties may also design around our patents or copy our patented inventions without our knowledge. In addition to patent protection, we rely upon copyrights for protection of our proprietary software and documentation, trademarks for protection of our brand and source of goods, and trade secret law and confidentiality and exclusivity agreements for protection of our confidential and proprietary information and technology. These measures do not guarantee protection of our intellectual property, however. We can give no assurance that our copyrights will be upheld or will successfully deter infringement by third parties. Even though we routinely enter into confidentiality agreements with our employees and other third parties there can be no assurances that trade secrets and proprietary information will not be disclosed, that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, or that we can fully protect our trade secrets and proprietary information. Violations by others of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive position and cause our sales and operating results to decline as a result of increased competition. It is also possible that third parties will misappropriate our trade secrets or other confidential information. We may be subject to cybersecurity breaches in which a third party obtains our confidential information. Third parties may also reverse engineer our products to copy our technology. Any of these circumstances could result in harm to our competitive position in the market. 28 Table of Contents Failure to protect our trademarks can lead to other companies selling products using confusing similar names, thereby damaging our brand. In some countries, it can be difficult to register trademarks because of the strict examination process or blocking trademarks for other goods. Costly and time-consuming litigation might be necessary to enforce and determine the scope of our intellectual property rights, and failure to obtain or maintain trade secret protection might adversely affect our ability to continue our research or bring products to market. From time to time, we may find it necessary to initiate litigation against other persons or entities to protect and/or enforce our intellectual property or contractual rights. However, litigation is costly and time consuming and there is no assurance that any lawsuit we bring will yield the result that we seek, as (i) the lawsuit may be dismissed or there could be an adverse finding, (ii) we may not be able to pursue the lawsuit due to the laws of the applicable country or (iii) there may be a subsequent unfavorable change in law that limits our ability to pursue the lawsuit. For example, litigation discovery practice in China, Japan, South Korea, continental Europe and Taiwan is not as robust as the United States, so it can be more difficult to determine if a company is infringing on our patents and more challenging to bring a lawsuit. Monitoring and preventing unauthorized use are also difficult and the measures we take to protect our intellectual property rights may not be adequate. Accordingly, infringement of our intellectual property rights poses a serious risk of doing business. There is a risk that we may be unable to adequately protect our intellectual property rights in certain foreign countries. For example, our competitors may independently develop similar technology or duplicate our products. If this occurs, it would be easier for our competitors to develop and sell competing products in these countries resulting in a loss of sales. We may not be able to adequately protect or defend ourselves against intellectual property infringement claims, which may be time-consuming and expensive, or affect the freedom to operate our business. Our competitors or other third parties may hold or obtain patents, copyrights, trademarks or other proprietary rights that could prevent, limit or interfere with our ability to make, use, develop, sell or market our products and services, which could make it more difficult for us to operate our business. From time to time, the holders of such intellectual property rights may assert their rights and urge us to take licenses and/or may bring suits alleging infringement or misappropriation of such rights, which could result in substantial costs, negative publicity and management attention, regardless of merit. While we endeavor to obtain and protect the intellectual property rights that we expect will allow us to retain or advance our strategic initiatives in these circumstances, there can be no assurance that we will be able to adequately identify and protect the portions of intellectual property that are strategic to our business or mitigate the risk of potential suits or other legal demands by third parties. Accordingly, we may consider the entering into licensing agreements with respect to such rights, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase our operating expenses. Further, if we are determined to have or believe there is a high likelihood that we have infringed upon a third party’s intellectual property rights, we may be required to cease making, selling or incorporating certain components or intellectual property into the goods and services we offer, to pay substantial damages and/or license royalties, to redesign our products and services and/or to establish and maintain alternative branding for our products and services. In the event that we are required to take one or more such actions, our brand, business, financial condition and operating results may be harmed. Data privacy, identity protection and information security compliance may require significant resources and presents certain risks. We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary business information, customer data, personal data or other information that is subject to privacy and security laws, regulations and/or customer-imposed controls. We continue to monitor global privacy laws and legislation to determine its impact on our business. We do not process individual credit card information, but we do maintain certain personally identifiable information on our employees. Such employee information may be subject to the EU General Data Protection Regulation and/or the California Consumer Protection Act. We believe that we have implemented reasonable procedures and internal controls in compliance with these laws, but should such actions be insufficient, we may be subject to regulatory investigations, fines and legal costs. In addition, we operate in an environment in which there are different and potentially conflicting data privacy laws in effect in the various U.S. states and foreign jurisdictions in which we operate and we must understand and comply with each law and standard in each of these jurisdictions while ensuring the data is secure. Government enforcement actions can be costly and interrupt the regular operation of our business, and violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements. We could face negative consequences in the future if we, our suppliers, channel partners, customers or other third parties experience the actual or perceived risk of theft, loss, fraudulent use or misuse of data. Such an event could lead customers to select the products and services of our competitors. An incident could harm our reputation, cause unfavorable publicity or otherwise adversely affect certain potential customers’ perception of the security and reliability of our services as well as our credibility and reputation, which could result in the loss of sales or curtailed growth. While we maintain general liability and cybersecurity insurance coverage, such coverage might not be adequate or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, that such coverage will continue to be available to us on acceptable terms or at all, or that such coverage will pay future claims. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. 29 Table of Contents We currently are, and in the future may be, subject to litigation or regulatory proceedings that could have an adverse effect on our business. From time to time, we may be subject to litigation or other administrative, regulatory or governmental proceedings, including tax audits and resulting claims that could require significant management time and resources and cause us to incur expenses and, in the event of an adverse decision, pay damages or incur costs in an amount that could have a material adverse effect on our financial position or results of operations. Item 1B. Unresolved Staff Comments. None. Item 1C. Cybersecurity. Risk Management and Strategy We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our intellectual property and data. We maintain policies and procedures designed to allow management to assess, identify, and manage material risks from cybersecurity threats. We integrate our cybersecurity policies and procedures into our overall enterprise risk management program, which is implemented by management and overseen by the Board of Directors (the “Board”) through its Audit Committee. We utilize the Center for Internet Security (“CIS”) Critical Security Controls as a framework for managing our cybersecurity program. The CIS framework outlines 18 critical control areas relating to organizational security and provides effective methodologies, guidelines, and industry standard best practices to develop and manage a comprehensive cybersecurity program. Additionally, we align our controls to various international security certifications and standards and have adopted best practices from industry leading frameworks. Our cybersecurity program includes policies and procedures relating to encryption, data loss prevention technology, authentication technology, access control, anti-malware software, third-party risk monitoring, insider risk management and identity management. We engage third-party services to conduct evaluations of our security controls, whether through penetration testing, independent audits, or consulting on best practices to address new challenges. These evaluations include testing both the design and operational effectiveness of security controls. We also regularly obtain system and organization control (“SOC”) reports from our service providers (“SOC 2”). Members of our corporate information security organization receive information exchanges from their professional networks and attend training, webinars, and conferences to stay up to date on both trends and system-specific updates. In addition, all Cohu employees are required to complete continuous security awareness training including annual training, weekly testing and frequent notifications regarding updates on trends or types of attacks, each of which are designed to promote a company-wide culture of cybersecurity risk awareness and management. In the last three fiscal years, we have not experienced any material cybersecurity incidents and the expenses we have incurred from cybersecurity incidents, including penalties and settlements, were immaterial. As a result, we do not believe that risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected us, our results of operations or financial condition. Notwithstanding the measures we take to assess, identify, and manage cybersecurity risks, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us and we may experience such incidents in the future and the scope and impact of any such future incidents cannot be predicted. For a discussion of how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, may materially affect or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition, see the risk factor entitled “Our business and operations could suffer in the event of cybersecurity breaches within our operational systems or products”. Governance Role of the Board of Directors and the Audit Committee As part of the Board’s role in overseeing our enterprise risk management program, which includes our cybersecurity risk management, the Board is responsible for exercising oversight of management’s identification and management of, and planning for, material cybersecurity risks that may reasonably be expected to have an adverse effect on us. While the full Board has overall responsibility for risk oversight, the Board has delegated oversight responsibility related to risks from cybersecurity threats to the Audit Committee. The Audit Committee is informed of the Company’s cybersecurity risk management and receives an overview of its cybersecurity program from management at least annually, which typically includes a table top simulation and covers topics including, among others, recent cybersecurity risk landscape and trends, data security posture, results from third-party assessments, training and vulnerability testing, our incident response plan, material cybersecurity risks, whether developing or actual, as well as the steps management has taken to respond to such risks, emerging cybersecurity regulations, technologies and best practices. This review helps in identifying areas for improvement and in aligning cybersecurity efforts with the overall risk management framework and promotion of our business objective and operational needs. In addition to our scheduled meetings, the Audit Committee maintains an ongoing dialogue with management, including regarding emerging or potential cybersecurity risks. Role of Management Our corporate information security organization, led by our Chief Information Security Officer (“CISO”), is responsible for our overall information security strategy, policy, security engineering, operations and cyber threat detection and response. Our CISO has over 35 years of experience in various roles in information technology and information security, including serving as SVP and CIO or VP and CIO at various defense, aerospace and semiconductor supplier companies. He holds a bachelor’s degree in Computer Science, an MBA, and holds several relevant certifications, including Information Technology Infrastructure Library (ITIL) Certification. The corporate information security organization manages and regularly enhances our enterprise security structure with the goal of preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience in an effort to minimize the business impact should an incident occur. Central to this organization is our cybersecurity incident response team (“CIRT”), which is responsible for the protection, detection and response capabilities used in the defense of Cohu’s data and enterprise computing networks. In the event of an incident, we intend to follow our incident response plan, which outlines the steps to be followed from incident detection to mitigation, mitigation or eradication, recovery and notification, including notifying key functional areas, as well as the CISO, General Counsel, CEO, Chairperson of the Board and Chairperson of the Audit Committee and other members of the Board, as appropriate. 30 Table of Contents Item 2. Properties. Certain information concerning our principal properties at December 28, 2024, is set forth below: Major Approx. Location Activities Sq. Ft. Ownership Poway, California 1, 2, 3, 4, 5 147,000 Leased Melaka, Malaysia (1) 2, 3, 4, 5 117,000 Leased Calamba City, Laguna, Philippines 2, 3, 4, 5 92,000 Owned Kolbermoor, Germany 2, 3, 4, 5 83,000 Owned Osaka, Japan 2, 3, 4, 5 67,000 Owned Norwood, Massachusetts 2, 4, 5 56,000 Leased La Chaux-de-Fonds, Switzerland 2, 4, 5 33,000 Leased Milpitas, California 2, 4, 5 31,000 Leased Singapore 2, 3, 4, 5 27,000 Leased Lincoln, Rhode Island 2, 3, 4, 5 22,000 Leased St. Paul, Minnesota 2, 3, 4, 5 17,000 Leased (1) On December 30, 2024, we completed the purchase of our leased facility in Melaka, Malaysia. Major activities have been separated into the following categories: 1. Corporate Administration/Principal Executive Offices and Global Headquarters, 2. Sales, Service and Customer Support, 3. Manufacturing, 4. Engineering and Product Development, and 5. Marketing, Finance and General Administration In addition to the locations listed above, we lease other properties primarily for sales and service, engineering, and general administration in various locations. We believe our facilities are suitable for their respective uses and are adequate for our present needs. Item 3. Legal Proceedings. See Note 13, “Commitments and Contingencies” in Part IV, Item 15(a) of this Form 10-K for information regarding legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 31 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (a) Market Information Cohu, Inc. stock is traded on the Nasdaq Global Select Market under the symbol “COHU”. Holders At February 5, 2025, Cohu had 427 stockholders of record. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividends We are proactively managing cash flow and Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May 5, 2020. The dividend suspension has resulted in approximately $10 million of annualized cash savings, which we are utilizing to deleverage and strengthen our balance sheet. Future reinstatement of our dividend policy may be affected by, among other items, our views on potential future capital requirements, including those related to debt service requirements, research and development, investments and acquisitions, legal risks and stock repurchases. Recent Sales of Unregistered Securities During fiscal 2024, we did not issue any securities that were not registered under the Securities Act of 1933, as amended. Issuer Purchases of Equity Securities 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. All such repurchased shares and related costs are held as treasury stock and accounted for at trade date using the cost method. The total number of shares of common stock we purchased during the fiscal year ended December 28, 2024 was 915,504 shares. We did not repurchase any shares of our stock during the three months ended December 28, 2024. Equity Compensation Plan Information The information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in Part III, Item 12 of this Annual Report on Form 10-K. 32 Table of Contents Comparative Stock Performance Graph The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act except to the extent that Cohu specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act. The graph below compares the cumulative total stockholder return on the common stock of Cohu for the last five fiscal years with the cumulative total return on custom Peer Group Indexes and a Nasdaq Global Select Market Index over the same period (assuming the investment of $100 in Cohu’s common stock, Peer Group Index and Nasdaq Global Select Market Index on December 28, 2019, and reinvestment of all dividends). The custom Peer Group Indexes are comprised of companies within our industry and are utilized in our executive compensation planning process. This peer group is revised annually to reflect acquisitions and to include comparable companies in the semiconductor equipment market to ensure a sufficient number of companies in the peer group composition to enable a meaningful comparison and benchmarking. The custom peer group in fiscal 2024 was comprised of Advanced Energy Industries, Inc., Alpha & Omega Semiconductor Limited, Axcelis Technologies, Inc., Badger Meter, Inc., Cirrus Logic, Inc., FormFactor, Inc., Harmonic Inc., Ichor Holdings Ltd., Kulicke and Soffa Industries, Inc., MACOM Technology Solutions Holdings, Inc., MaxLinear, Inc., Novanta, Inc., Onto Innovation, OSI Systems, Inc., Photronics, Inc., Penguin Solutions, Inc., Ultra Clean Holdings, Inc. and Veeco Instruments, Inc. The only change from the custom peer group used in fiscal 2023 was that Smart Global Holdings, Inc. announced the completion of its brand transition to Penguin Solutions, Inc. on October 14, 2024. In selecting our peer group, the Compensation Committee of our Board of Directors considered competitive market data and an analysis prepared by Compensia and identified companies headquartered in the U.S. in the semiconductor capital equipment and electronic capital equipment and instrumentation sectors that were comparable to us based on revenue, our market capitalization, and that had similar scope of operations. 2019 2020 2021 2022 2023 2024 Cohu, Inc. $ 100 $ 174 $ 171 $ 144 $ 159 $ 121 NASDAQ Index $ 100 $ 145 $ 177 $ 119 $ 173 $ 224 Russell 2000 $ 100 $ 120 $ 138 $ 110 $ 128 $ 143 Peer Group $ 100 $ 128 $ 183 $ 138 $ 191 $ 207 Item 6. Reserved. We have adopted the amendments to Items 301 and 302 of Regulation S-K contained in SEC Release No. 33-10890. As a result, the disclosure previously provided in Part II, Item 6 is no longer required. There were no retrospective changes to the consolidated statements of operations for any quarters in the two most recent fiscal years that would require disclosure under Item 302, as amended. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. OVERVIEW Cohu is a leading supplier of test and inspection metrology automation systems, MEMS test modules, test contactors, thermal subsystems, data analytics software to optimize manufacturing yield and productivity, and automated test equipment (ATE) used by global semiconductor manufacturers and test subcontractors. We offer a wide range of products and services and our revenue from capital equipment products is driven by the capital expenditure and operating budgets of our customers, who often abruptly delay or accelerate purchases in reaction to variations in their business. The level of expenditure by these companies depends on the current and anticipated market demand for semiconductor devices and the products that incorporate them. Our recurring products are driven by the number of semiconductor devices that are tested and by the continuous introduction of new products and new technologies by our customers. As a result, our recurring products provide a more stable recurring source of revenue and generally do not have the same degree of cyclicality as our capital equipment products. 33 Table of Contents On January 30, 2023, we completed the acquisition of MCT, a U.S.-based company. MCT provides automated solutions for the semiconductor industry and designs, manufactures, markets, services and distributes strip test handlers, film frame handlers and laser mark handlers. On October 2, 2023, we acquired EQT, a Singapore-based company. EQT is a provider of semiconductor test contactors and other test consumables. MCT and EQT are included in Cohu’s consolidated results of operations as of each date of acquisition. During fiscal 2023 and 2024, global macroeconomic and geopolitical factors impacted the semiconductor industry. In response to the higher cost of capital and slowing demand, and above targeted inventory levels, many chip companies have been cutting costs, reducing employee headcount, and pushing out capital expenditures for additional capacity. For the fiscal year ended December 28, 2024, our net sales decreased 36.9%, year-over-year, to $401.8 million due to lower demand in automotive, industrial, and mobile applications, driven by these global economic conditions. Despite weakness in the semiconductor industry based on our ongoing assessment of business conditions and the results from our operations, we continued to take actions to reduce outstanding principal debt under our Term Loan Credit Facility through voluntary prepayments. 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 and during fiscal 2024 we repurchased 915,504 shares of our common stock for approximately $27.0 million. We continue to focus on building a well-balanced and resilient business model, executing on customer design-wins and in developing innovative products. Our long-term market drivers and market strategy remain intact, and we are encouraged by increased use of semiconductors including the most recent developments in artificial intelligence (“AI”), along with customer traction with our new products. We continue to capture new customers and new opportunities and remain optimistic about the long-term prospects for our business due to the increasing ubiquity of semiconductors, increasing semiconductor complexity, increasing quality demands from semiconductor customers, increasing test intensity, increasing focus on automation and Industry 4.0 initiatives, and continued proliferation of electronics in a variety of products across the automotive, mobile, industrial, computing, and consumer markets. Application of Critical Accounting Estimates and Policies 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 include: ● revenue recognition, including the deferral of revenue on sales to customers, which impacts our results of operations; ● estimation of valuation allowances and accrued liabilities, specifically inventory reserves, which impact gross margin or operating expenses; ● the recognition and measurement of current and deferred income tax assets and liabilities, unrecognized tax benefits, the valuation allowance on deferred tax assets and accounting for the impact of the change to U.S. tax law as described herein, which impact our tax provision; and ● the assessment of recoverability of goodwill, which primarily impacts gross margin or operating expenses if we are required to record impairments of assets or accelerate their depreciation. Below, we discuss these policies further, as well as the estimates and judgments involved. We also have other policies that we consider key accounting policies; however, these policies typically do not require us to make estimates or judgments that are difficult or subjective. 34 Table of Contents 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, contactor and kit revenue is 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. At December 28, 2024, and December 30, 2023, we had $5.6 million and $6.2 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 that are 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 includes 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. Accounts Receivable: We maintain an allowance for estimated credit losses resulting from the inability of our customers to make required payments. If the financial condition of our customers deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be required. Our customers include semiconductor manufacturers and semiconductor test subcontractors throughout many areas of the world. While we believe that our allowance for credit losses is adequate and represents our best estimate of future losses we will continue to monitor customer liquidity and other economic conditions, which may result in changes to our estimates. Inventory: The valuation of inventory requires us to estimate obsolete or excess inventory as well as inventory that is not of saleable quality. The determination of obsolete or excess inventory requires us to estimate the future demand for our products. The demand forecast is a direct input in the development of our short-term manufacturing plans. We record valuation reserves on our inventory for estimated excess and obsolete inventory and lower of cost or net realizable value concerns equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future product demand, market conditions and product selling prices. If future product demand, market conditions or product selling prices are less than those projected by management or if continued modifications to products are required to meet specifications or other customer requirements, increases to inventory reserves may be required which would have a negative impact on our gross margin. 35 Table of Contents Income Taxes: We estimate our liability for income taxes based on the various jurisdictions where we conduct business. This requires us to estimate our (i) current taxes; (ii) temporary differences that result from differing treatment of certain items for tax and accounting purposes; and (iii) unrecognized tax benefits. Temporary differences result in deferred tax assets and liabilities that are reflected in the consolidated balance sheet. The deferred tax assets are reduced by a valuation allowance if, based upon all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Establishing, reducing or increasing a valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the statement of operations. We must make significant judgments to determine the provision for income taxes, deferred tax assets and liabilities, unrecognized tax benefits and any valuation allowance to be recorded against deferred tax assets. Our gross deferred tax asset balance as of December 28, 2024, was approximately $138.2 million, with a valuation allowance of approximately $114.5 million. On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation with varying effective dates. We are currently not subject to Pillar Two but is continuously evaluating the potential impact of the Pillar Two Framework to ensure we are compliant in the future. Segment Information: We applied 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 (“THG”), Semiconductor Tester Group (“STG”) and Interface Solutions Group (“ISG”). Our THG, STG and ISG 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, which requires management to make estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, we use the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance metrics of the reporting unit being tested, in order to obtain an indication of value. We then apply a 50/50 weighting to the indicated values from the income and market approaches to derive the fair values of the 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. We conduct our annual impairment test as of October 1 each year and have determined there was no impairment as of October 1, 2024, as we determined that the estimated fair values of our reporting units exceeded their carrying values on that date. Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates. As of December 28, 2024, we do not believe that there were indicators of impairment requiring additional testing. Should we determine that an interim goodwill impairment review is required in a future period, the review may result in an impairment charge, which would have a negative impact on our results of operations. 36 Table of Contents Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted future cash flows. We measure the impairment loss based on the difference between the carrying amount and estimated fair value. As of December 28, 2024, no events or conditions occurred suggesting an impairment in our long-lived assets. Warranty: We provide for the estimated costs of product warranties in the period sales are recognized. Our warranty obligation estimates are affected by historical product shipment levels, product performance and material and labor costs incurred in correcting product performance problems. Should product performance, material usage or labor repair costs differ from our estimates, revisions to the estimated warranty liability would be required. Contingencies: We are subject to certain contingencies that arise in the ordinary course of our businesses which require us to assess the likelihood that future events will confirm the existence of a loss or an impairment of an asset. If a loss or asset impairment is probable and the amount of the loss or impairment is reasonably estimable, we accrue a charge to operations in the period such conditions become known. Share-based Compensation: Share-based compensation expense related to restricted stock unit awards is calculated based on the market price of our common stock on the grant date, reduced by the present value of dividends expected to be paid on our common stock prior to vesting of the restricted stock unit. Share- based compensation on performance stock units with market-based goals is calculated using a Monte Carlo simulation model on the date of the grant. When granted, share-based compensation expense related to stock options is recorded based on the fair value of the award on its grant date, which we estimate using the Black-Scholes valuation model. Recent Accounting Pronouncements: For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 1, “Recent Accounting Pronouncements” in Part IV, Item 15(a) of this Form 10-K. RESULTS OF OPERATIONS Recent Transactions Impacting Results of Operations On January 30, 2023, we completed the acquisition of MCT, a U.S. based company that provides automated solutions for the semiconductor industry and designs, manufactures, markets, services and distributes strip test handlers, film frame handlers and laser mark handlers. On October 2, 2023, we acquired EQT, a Singapore-based company that is a provider of semiconductor test contactors and other test consumables. MCT and EQT are included in Cohu’s consolidated results from operations as of the date they were acquired by Cohu. 37 Table of Contents The following table summarizes certain operating data as a percentage of net sales: 2024 2023 2022 Net sales 100.0% 100.0% 100.0% Cost of sales (55.1) (52.4) (52.8) Gross margin 44.9 47.6 47.2 Research and development (21.1) (13.9) (11.4) Selling, general and administrative (31.9) (20.8) (16.2) Amortization of purchased intangible assets (9.7) (5.7) (4.1) Restructuring charges (0.0) (0.4) (0.1) Income (loss) from operations (17.8)% 6.8% 15.4% Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 2023 Annual Report on Form 10-K, filed with the SEC on February 16, 2024, for comparative discussion of our fiscal years ended December 30, 2023 and December 31, 2022. 2024 Compared to 2023 Net Sales Cohu’s consolidated net sales decreased 36.9% from $636.3 million in fiscal 2023 to $401.8 million in fiscal 2024. The decrease in our net sales was due to the current global macroeconomic environment, which is driving lower demand for automotive, industrial, consumer, and mobile applications. Our consolidated net sales include the net sales of EQT, which Cohu acquired in October of fiscal 2023. EQT sales totaled $14.1 million and $3.6 million, in fiscal 2024 and 2023, respectively. 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 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, 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, decreased to 44.9% in fiscal 2024 from 47.6% in fiscal 2023. During fiscal 2024, our gross margin has declined due to lower business volume which has 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 adjustments related to acquired inventories in the acquisitions of MCT and EQT. We compute the majority of our excess and obsolete inventory reserve requirements using inventory usage forecasts. During fiscal 2024, we recorded net charges to cost of sales of approximately $5.4 million for excess and obsolete inventory. In fiscal 2023, net charges to cost of sales for excess and obsolete inventory were $4.5 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, 2024. Reductions in customer forecasts, continued modifications to products, 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. 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 2024 was $84.8 million, or 21.1% of net sales, compared to $88.6 million, or 13.9% of net sales in fiscal 2023. R&D expenses decreased during fiscal 2024 due to lower spending on material costs associated with new product development and lower incentive compensation due to current business conditions. Fiscal 2024 and 2023 included $1.6 million and $0.3 million of incremental costs from EQT, respectively. 38 Table of Contents Selling, General and Administrative Expense (“SG&A Expense”) 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 as a percentage of net sales increased to 31.9% in fiscal 2024, from 20.8% in fiscal 2023, decreasing from $132.2 million in fiscal 2023 to $128.0 million in fiscal 2024. SG&A expense during fiscal 2024 was down on a year-over-year basis due to the implementation of cost control measures and lower incentive compensation in response to current business conditions. For fiscal 2024, SG&A expense includes $3.5 million of one-time severance and other costs resulting from transitioning certain manufacturing to Asia related to the expansion of our factories in the Philippines and Malaysia, $2.8 million of incremental SG&A costs from the operations of EQT, $0.9 million from the impairment of our investment in Fraes-und Technologiezentrum GmbH Frasdorf and $0.6 million of professional fees and other costs related to acquisitions of EQT and Tignis. Fiscal 2023 included $0.8 million of incremental SG&A costs from the operations of EQT and $1.6 million of transaction related costs incurred specifically related to the acquisitions of MCT and EQT and $1.1 million of one-time severance and other costs resulting from transitioning certain manufacturing to Asia. Amortization of Purchased Intangible Assets 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 million and $36.4 million for fiscal 2024 and 2023, respectively. The increase in expenses recorded during the current year was a result of the amortization of acquired intangible assets from EQT. Restructuring Charges During fiscal 2023, we began a strategic restructuring and integration program in connection with our acquisition of MCT to reposition our organization and improve our cost structure as part of our integration plan. In connection with our integration plan, we recorded restructuring charges totaling $2.4 million in fiscal 2023. Restructuring charges were not material in fiscal 2024. See Note 4, “Restructuring Charges” in Part IV, Item 15(a) of this Form 10-K for additional information with respect to restructuring charges. Interest Expense and Income Interest expense was $0.6 million in fiscal 2024 compared to $3.4 million in fiscal 2023. The year-over-year decrease in interest expense resulted from a reduction in the outstanding balance of our Term Loan Credit Facility which was paid off in February of 2024. Interest income was $10.0 million and $11.5 million in fiscal 2024 and 2023, respectively. The decrease in interest income year-over-year is a result of lower cash and investment balances and lower interest rates. Foreign Transaction Gain (Loss) and Other 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 2024 we recognized losses of $2.4 million, net of $7.5 million in losses generated by our foreign currency forward contracts. In fiscal 2023, the U.S. Dollar weakened against foreign currencies we operate in resulting in recognized losses of $5.2 million, net of $2.1 million of gains generated by our foreign currency forward contracts. See Note 8 “Derivative Financial Instruments” in Part IV, Item 15(a) of this Form 10-K for additional information with respect to our foreign currency forward contracts. Income Taxes The income tax provision expressed as a percentage of pre-tax income or loss in fiscal 2024 and 2023 was (7.5)% and 38.6%, respectively. The provision for income taxes decreased from $17.7 million in fiscal 2023 to $4.9 million in fiscal 2024 primarily due to the reduction in pre-tax income from operations. Companies are required to assess whether a valuation allowance should be recorded against their deferred tax assets (“DTAs”) based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether DTAs will be realized are, (1) future reversals of existing taxable temporary differences (i.e. offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards. 39 Table of Contents In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. We have evaluated our DTAs at each reporting period, including an assessment of our cumulative income or loss over the prior three-year period and future periods, to determine if a valuation allowance was required. 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 of our net deferred tax assets in the United States is still required. If a change in judgement regarding this valuation allowance were to occur in the future, we will record a potentially material deferred tax benefit, which could result in a favorable impact on the effective tax rate in that period. Our valuation allowance on our DTAs at December 28, 2024, and December 30, 2023, was approximately $114.5 million and $99.9 million, respectively. The remaining gross DTAs for which a valuation allowance was not recorded are realizable primarily through future reversals of existing taxable temporary differences and to a lesser extent future taxable income in certain jurisdictions exclusive of reversing temporary differences and carryforwards. For a full reconciliation of our effective tax rate to the U.S. federal statutory rate and further explanation of our provision for income taxes, see Note 10, “Income Taxes”, included in Part IV, Item 15(a) of this Form 10-K, which is incorporated herein by reference. Net (Loss) Income As a result of the factors set forth above, our net loss was $69.8 million in fiscal 2024 and our net income was $28.2 million in fiscal 2023. LIQUIDITY AND CAPITAL RESOURCES Our business is dependent on capital expenditures by semiconductor manufacturers and test subcontractors that are, in turn, dependent on the current and anticipated market demand for semiconductors. The cyclical, seasonal and volatile nature of demand for semiconductor equipment, our primary industry, makes estimates of future revenues, results of operations and net cash flows difficult. 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 December 28, 2024, $123.9 million or 60.0% 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 December 28, 2024, our total indebtedness was $8.8 million, which included $1.7 million outstanding under Kita’s term loans, $6.5 million outstanding under Cohu GmbH’s construction loans and $0.6 million outstanding under Kita’s lines of credit. 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. In fiscal 2024 and 2023, we repurchased 915,504 shares and 700,270 shares of our outstanding common stock for $27.0 million and $23.6 million, respectively, to be held as treasury stock. We believe that our sources of liquidity will be sufficient to satisfy our anticipated cash requirements through at least the next 12 months. Our liquidity could be negatively affected by a decrease in demand for our products. In addition, we may make acquisitions or increase our capital expenditures and may need to raise additional capital through debt or equity financing to provide for greater flexibility to fund these activities. Additional financing may not be available or not available on terms favorable to us. A discussion of cash flows for the year ended December 31, 2022 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 30, 2023, filed with the SEC on February 16, 2024, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov. 40 Table of Contents Liquidity Working Capital: The following summarizes our cash, cash equivalents, short-term investments and working capital at December 28, 2024 and December 30, 2023: (in thousands) 2024 2023 Decrease Percentage Change Cash, cash equivalents and short-term investments $ 262,092 $ 335,698 $ (73,606) (21.9)% Working capital $ 449,123 $ 535,397 $ (86,274) (16.1)% Cash Flows 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 2024 totaled $2.8 million compared to $101.5 million in fiscal 2023. The decrease in cash provided by operating activities in the current year was a result of weaker business conditions, which drove a net loss in the current fiscal year. Cash provided by operating activities was also impacted by changes in current assets and liabilities which included decreases in accounts receivable and accounts payable. Net sales in the fourth quarter of fiscal 2024 and the timing of the resulting cash conversion cycle drove the $34.9 million decrease in accounts receivable, and the timing of payments to our suppliers resulted in the $3.6 million decrease in accounts payable. Accrued compensation, warranty and other liabilities decreased $15.5 million due to lower business volume resulting in lower rates of accrual. Cash provided by operating activities was also impacted by decreases in income taxes payable of $2.2 million because of payments made. During fiscal 2024, other current assets increased $16.1 million due to an increase in income taxes receivable and prepaid vendor deposits, and inventories decreased $6.4 million due to lower business volume and strict inventory management. 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 provided by investing activities in fiscal 2024 totaled $21.9 million. In fiscal 2024 we used $78.6 million in cash for purchases of short-term investments and generated $114.2 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 2024 were $10.6 million and were made to support our operating and development activities. Cash paid for the settlement of net investment hedges totaled $3.2 million in fiscal 2024. Our net cash used in investing activities in fiscal 2023 totaled $30.2 million. In fiscal 2023 we used $97.3 million in cash for purchases of short-term investments and generated $152.6 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 2023 of $16.1 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 2024, our cash used in financing activities totaled $59.0 million. In fiscal 2023, our cash used in financing activities totaled $68.1 million. Repayments of short-term borrowings and long-term debt during fiscal 2024 totaled $31.3 million, which includes $29.3 million of cash prepayments of our Term Loan Credit Facility. During fiscal 2023 our repayments totaled $38.8 million and included $34.1 million of cash prepayments of our Term Loan Credit Facility. During fiscal 2024 and 2023, we made payments totaling $27.0 million and $23.6 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, 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 million. In fiscal 2023, net cash used to settle the minimum statutory tax withholding requirements on behalf of our employees totaled $5.7 million. The decrease in cash used to settle tax withholding requirements between fiscal 2024 and 2023 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. 41 Table of Contents Share Repurchase Program 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 year ended December 28, 2024, we repurchased 915,504 shares of our common stock for $27.0 million to be held as treasury stock. As of December 28, 2024, $31.4 million remained available for us to repurchase shares of our common stock under our share repurchase program. Capital Resources We have access to credit facilities and other borrowings provided by financial institutions to finance acquisitions, capital expenditures and our operations if needed. A summary of our borrowings and available credit is as follows. Credit Agreement 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 amortize 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. Kita Term Loans 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%, and expire at various dates through 2034. At December 28, 2024, the outstanding loan balance was $1.7 million 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, 2023, the outstanding loan balance was $2.1 million 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. 42 Table of Contents Construction Loans In July 2019 and June 2020, one of our wholly owned subsidiaries located in Germany entered into a series of construction loans (“Loan Facilities”) with a German financial institution providing it with total borrowings of up to €10.1 million. The Loan Facilities were utilized to finance the expansion of our facility in Kolbermoor, Germany and are secured by the land and the existing building on the site. The Loan Facilities bear interest at agreed upon rates based on the facility amounts as discussed below. The first facility totaling €3.4 million has been fully drawn and is payable over 10 years at a fixed annual interest rate of 0.8%. Principal and interest payments are due each quarter over the duration of the facility ending in September 2029. The second facility totaling €5.2 million has been fully drawn and is payable over 15 years at an annual interest rate of 1.05%, which is fixed until April 2027. Principal and interest payments are due each month over the duration of the facility ending in January 2034. The third facility totaling €0.9 million has been fully drawn and is payable over 10 years at an annual interest rate of 1.2%. Principal and interest payments are due each month over the duration of the facility ending in May 2030. At December 28, 2024, total outstanding borrowings under the Loan Facilities was $6.5 million with $0.9 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets. At December 30, 2023, total outstanding borrowings under the Loan Facilities was $7.7 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our 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 December 28, 2024. Lines of Credit As a result of our acquisition of Kita, we assumed a series of revolving credit facilities with various financial institutions in Japan. The credit facilities renew monthly and provide Kita with access to working capital totaling up to 960 million Japanese Yen of which 100 million Japanese Yen is drawn. At December 28, 2024, total borrowings outstanding under the revolving lines of credit were $0.6 million. As these credit facility agreements renew monthly, they have been included in short-term borrowings in our consolidated balance sheets. The revolving lines of credit are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates. Our wholly owned subsidiary in Switzerland has one available line of credit which provides it with borrowings of up to a total of 2.0 million Swiss Francs, a portion of which is reserved for tax guarantees. At December 28, 2024 and December 30, 2023, no amounts were outstanding under this line of credit. We also have a letter of credit facility (“LC Facility”) under which Bank of America, N.A., has agreed to administer the issuance of letters of credit on our behalf. The LC Facility requires us to maintain deposits of cash or other approved investments in amounts that approximate our outstanding letters of credit and contains customary restrictive covenants. In addition, our wholly owned subsidiary, Xcerra, has arrangements with various financial institutions for the issuance of letters of credit and bank guarantees. As of December 28, 2024, $0.4 million was outstanding under standby letters of credit and bank guarantees. We expect that we will continue to make capital expenditures to support our business and we anticipate that present working capital will be sufficient to meet our operating requirements for at least the next twelve months. 43 Table of Contents Contractual Obligations The following table summarizes our significant contractual obligations at December 28, 2024, and the effect such obligations are expected to have on our liquidity and cash flows in future periods. Amounts excluded are our liability for unrecognized tax benefits that totaled approximately $33.8 million at December 28, 2024. We are currently unable to provide a reasonably reliable estimate of the amount or period(s) the cash settlement of this liability may occur. Fiscal year-end (in thousands) Total 2025 2026-2027 2028-2029 Thereafter Operating leases (1) $ 18,308 $ 6,064 $ 5,167 $ 2,646 $ 4,431 Finance leases (2) 8,428 8,425 3 - - Bank term loans principal and interest (3) 8,509 1,184 2,356 2,276 2,693 Revolving credit facilities 633 633 - - - Total contractual obligations $ 35,878 $ 16,306 $ 7,526 $ 4,922 $ 7,124 (1) Excludes an insignificant amount of short-term lease obligations. (2) On December 30, 2024, we purchased our leased facility in Malaysia, decreasing our financing lease liability by $8.4 million. The transaction was financed with proceeds from a revolving credit facility that our Malaysian subsidiary entered into. (3) 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. The table above does not include pension, post-retirement benefit and warranty obligations because it is not certain when these liabilities will be funded. For additional information regarding our pension and post-retirement benefits obligations see Note 6, “Employee Benefit Plans” and for more information on our contractual obligations, see Note 14, “Guarantees” in Part IV, Item 15(a) of this Form 10-K. Commitments to contract manufacturers and suppliers. From time to time, we enter into commitments with our vendors and outsourcing partners to purchase inventory at fixed prices or in guaranteed quantities. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current manufacturing needs and are fulfilled by our vendors within relatively short time horizons. We typically do not have significant agreements for the purchase of raw materials or other goods specifying minimum quantities or set prices that exceed our expected requirements for the next three months. Off-Balance Sheet Arrangements. During the ordinary course of business, we provide standby letters of credit instruments to certain parties as required. As of December 28, 2024, $0.3 million was outstanding under standby letters of credit. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Investment and Interest Rate Risk. At December 28, 2024, our investment portfolio included short-term, fixed-income investment securities with a fair value of approximately $55.7 million, and we did not hold or issue financial instruments for trading purposes. These securities are subject to interest rate risk and will likely decline in value if interest rates increase. Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. As we classify our short-term securities as available-for-sale, no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be credit- related. Due to the relatively short duration of our investment portfolio, an immediate ten percent change in interest rates would have no material impact on our financial condition or results of operations. We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and our ability and intent to hold the investment for a period of time sufficient for anticipated recovery of market value. As of December 28, 2024, the cost and fair value of investments we held with loss positions were approximately $20.5 million and $20.4 million, respectively. We evaluated the nature of these investments, credit worthiness of the issuer and the duration of these impairments and concluded that these losses were temporary and we have the ability and intent to hold these investments to maturity. 44 Table of Contents Our long-term debt is carried at amortized cost, and fluctuations in interest rates do not impact our consolidated financial statements. However, the fair value of our debt will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest. As of December 30, 2023, we had approximately $29.3 million of long-term debt due under a Term Loan Credit Facility that was subject to quarterly interest payments that were based on either a base rate plus a margin of up to 2.0% per annum, or SOFR plus a margin of up to 3.0% per annum. Prior to the discontinuation of LIBOR and the amendment of our Term Loan Credit Facility on June 30, 2023, our quarterly interest payments were based on either a base rate plus a margin of up to 2.0% per annum, or LIBOR plus a margin of up to 3.0% per annum. The selection of the interest rate formula was at our discretion. The interest rate otherwise payable under the Term Loan Credit Facility would be subject to increase by 2.0% per annum during the continuance of a payment default and could have been subject to increase by 2.0% per annum with respect to the overdue principal amount of any loans outstanding and overdue interest payments and other overdue fees and amounts. 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. Foreign Currency Exchange Risk. We have operations in several foreign countries and conduct business in the local currency in these countries. As a result, we have risk associated with currency fluctuations as the value of foreign currencies fluctuate against the U.S. dollar, in particular the Swiss Franc, Euro, Malaysian Ringgit, Chinese Yuan, Philippine Peso and Japanese Yen. These fluctuations can impact our reported earnings. We enter into foreign currency forward contracts with a financial institution to hedge against future movements in foreign exchange rates that affect certain existing U.S. Dollar denominated assets and liabilities at our subsidiaries whose functional currency is the local currency. Under this program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts in order to reduce the risks and volatility associated with foreign currency transaction gains or losses. Fluctuations in currency exchange rates also impact the U.S. Dollar amount of our net investment in foreign operations and in the third quarter of fiscal 2024 we began hedging foreign currency risk associated with net investment positions in certain of our foreign subsidiaries by entering foreign currency forward contracts that are designated as hedges of net investment. Fluctuations in currency exchange rates also impact the U.S. Dollar amount of our net investment in foreign operations. The assets and liabilities of our foreign subsidiaries are translated into U.S. Dollars at the exchange rates in effect at the fiscal year-end balance sheet date. Income and expense accounts are translated at an average exchange rate during the year which approximates the rates in effect at the transaction dates. The resulting translation adjustments are recorded in stockholders’ equity as a component of accumulated other comprehensive loss. As a result of fluctuations in certain foreign currency exchange rates in relation to the U.S. Dollar as of December 28, 2024 compared to December 30, 2023, our stockholders’ equity decreased by $16.8 million as a result of the foreign currency translation. Based upon the current levels of net foreign assets, a hypothetical 10% devaluation of the U.S. dollar as compared to these currencies as of December 28, 2024 would result in an approximate $28.3 million positive translation adjustment recorded in other comprehensive income within stockholders’ equity. Conversely, a hypothetical 10% appreciation of the U.S. dollar as compared to these currencies as of December 28, 2024 would result in an approximate $28.3 million negative translation adjustment recorded in other comprehensive income within stockholders’ equity. 45 Table of Contents Item 8. Financial Statements and Supplementary Data. The information required by this Item is included in Part IV, Item 15(a). Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures - Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of December 28, 2024, the end of the period covered by this annual report. Changes in Internal Control over Financial Reporting - There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 28, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management’s Annual Report on Internal Control Over Financial Reporting - Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 28, 2024. Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, has also audited the effectiveness of our internal control over financial reporting as of December 28, 2024, as stated in their report which is included herein. 46 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Cohu, Inc. Opinion on Internal Control Over Financial Reporting We have audited Cohu, Inc.’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cohu, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 28, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 28, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 20, 2025, expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP San Diego, California February 20, 2025 47 Table of Contents Item 9B. Other Information. Rule 10b5-1 Trading Plans Our directors and executive officers may purchase or sell shares of our common stock in the market from time to time, including pursuant to equity trading plans adopted in accordance with Rule 10b5-1 under the Exchange Act and in compliance with guidelines specified by our insider trading policy. In accordance with Rule 10b5-1 and our insider trading policy, directors, officers and certain employees who, at such time, are not in possession of material non- public information are permitted to enter into written plans that pre-establish amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of our stock, including shares acquired pursuant to our equity incentive plans. Under a Rule 10b5-1 trading plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them. The use of these trading plans permits asset diversification as well as personal financial and tax planning. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, subject to compliance with SEC rules, the terms of our insider trading policy and certain minimum holding requirements. During the fourth quarter of fiscal 2024, none of our directors or executive officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each term as defined in Item 408 of Regulation S-K). Transactions by Section 16 directors and officers will be disclosed publicly through Form 144 and Form 4 filings with the SEC to the extent required by law. Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. The information under the heading “Information About Our Executive Officers” in Part I, Item 1 of this Form 10-K is incorporated by reference in this section. The other information required by this item is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2024. Code of Business Conduct and Code of Ethics Cohu has adopted a code of business conduct and ethics for directors, officers and employees. The code is available on the Investor Relations section of our website at www.cohu.com. We intend to make all required disclosures concerning any amendments to, or waivers from, our code of ethics on our website, within four business days of such amendment or waiver. Corporate Governance Guidelines and Certain Committee Charters Cohu has adopted Corporate Governance Guidelines as well as charters for its Audit, Compensation and Nominating and Governance Committees. These documents are available on the Investor Relations section of our website at www.cohu.com. Insider Trading Policy We have adopted an Insider Trading Policy governing transactions in our securities by our directors, officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations and Nasdaq listing standards. A copy of the Insider Trading Policy is filed as Exhibit 19 to this Annual Report on Form 10-K. The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K. Item 11. Executive Compensation. Information regarding Executive Compensation is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2024. 48 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2024. Item 13. Certain Relationships and Related Transactions, and Director Independence. Information regarding Certain Relationships and Related Transactions, and Director Independence is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2024. Item 14. Principal Accounting Fees and Services. Information regarding the Principal Accounting Fees and Services is hereby incorporated by reference to Cohu’s definitive proxy statement, which will be filed with the SEC within 120 days after the close of fiscal 2024. 49 Table of Contents PART IV Item 15. Exhibits, Financial Statement Schedules. (a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. (1) Financial Statements The following consolidated financial statements of Cohu, Inc., including the report thereon of Ernst & Young LLP, are included in this Annual Report on Form 10-K beginning on page 51: Form 10-K Description Page Number Consolidated Balance Sheets at December 28, 2024 and December 30, 2023 51 Consolidated Statements of Operations for each of the three years in the period ended December 28, 2024 52 Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the period ended December 28, 2024 53 Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 28, 2024 54 Consolidated Statements of Cash Flows for each of the three years in the period ended December 28, 2024 55 Notes to Consolidated Financial Statements 56 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 89 (2) Financial Statement Schedule Schedule II – Valuation and Qualifying Accounts 96 All other financial statement schedules have been omitted because the required information is not applicable or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto. (3) Exhibits The exhibits listed under Item 15(b) hereof are filed with, or incorporated by reference into, this Annual Report on Form 10-K. 50 Table of Contents COHU, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par value) December 28, December 30, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 206,407 $ 245,524 Short-term investments 55,685 90,174 Accounts receivable, net 91,619 124,624 Inventories 141,861 155,793 Prepaid expenses 19,293 17,696 Other current assets 19,442 5,007 Total current assets 534,307 638,818 Property, plant and equipment, net 74,786 69,085 Goodwill 234,639 241,658 Intangible assets, net 110,717 151,770 Other assets 31,058 32,243 Operating lease right of use assets 13,908 16,778 $ 999,415 $ 1,150,352 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 633 $ 1,773 Current installments of long-term debt 1,115 4,551 Accounts payable 30,554 33,600 Customer advances 2,764 4,748 Accrued compensation and benefits 20,023 31,897 Accrued warranty 2,971 4,653 Deferred profit 3,589 3,586 Income taxes payable 2,394 4,024 Other accrued liabilities 21,141 14,589 Total current liabilities 85,184 103,421 Other accrued liabilities 6,821 8,262 Noncurrent income tax liabilities 5,691 7,065 Accrued retirement benefits 8,481 10,802 Deferred income taxes 19,402 23,154 Long-term debt 7,052 34,303 Long-term lease liabilities 9,893 13,175 Stockholders' equity: Preferred stock, $1 par value; 1,000 shares authorized, none issued - - Common stock, $1 par value; 90,000 shares authorized, 49,601 shares issued and outstanding in 2024 and 49,429 shares in 2023 49,601 49,429 Paid-in capital 697,489 686,146 Treasury stock, at cost; 2,891 shares in 2024 and 2,253 shares in 2023 (87,784) (69,184) Retained earnings 248,740 318,558 Accumulated other comprehensive loss (51,155) (34,779) Total stockholders' equity 856,891 950,170 $ 999,415 $ 1,150,352 The accompanying notes are an integral part of these statements. 51 Table of Contents COHU, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years ended December 28, December 30, December 31, 2024 2023 2022 Net sales $ 401,779 $ 636,322 $ 812,775 Cost and expenses: Cost of sales (1) 221,485 333,454 429,449 Research and development 84,797 88,571 92,589 Selling, general and administrative 128,037 132,249 131,390 Amortization of purchased intangible assets 39,087 36,355 33,185 Restructuring charges (Note 4) 41 2,421 605 473,447 593,050 687,218 Income (loss) from operations (71,668) 43,272 125,557 Other (expense) income: Interest expense (618) (3,382) (4,177) Interest income 9,976 11,504 4,012 Foreign transaction gain (loss) (2,395) (5,209) 1,635 Loss on extinguishment of debt (241) (369) (312) Income (loss) before taxes (64,946) 45,816 126,715 Income tax provision 4,872 17,660 29,868 Net income (loss) $ (69,818) $ 28,156 $ 96,847 Income (loss) per share: Basic: $ (1.49) $ 0.59 $ 2.01 Diluted: $ (1.49) $ 0.59 $ 1.98 Weighted average shares used in computing income (loss) per share: Basic 46,908 47,486 48,178 Diluted 46,908 48,025 48,799 (1) Excludes amortization of $30,008, $28,418, and $26,023 for the years ended December 28, 2024, December 30, 2023, and December 31, 2022, respectively. The accompanying notes are an integral part of these statements. 52 Table of Contents COHU, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years ended December 28, December 30, December 31, 2024 2023 2022 Net income (loss) $ (69,818) $ 28,156 $ 96,847 Other comprehensive income (loss), net of tax Foreign currency translation adjustments (16,839) 6,815 (17,950) Adjustments related to postretirement benefits 518 (2,375) 5,894 Change in unrealized gain/loss on investments (55) 793 (694) Other comprehensive income (loss), net of tax (16,376) 5,233 (12,750) Comprehensive income (loss) $ (86,194) $ 33,389 $ 84,097 The accompanying notes are an integral part of these statements. 53 Table of Contents COHU, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except par value and per share amounts) Accumulated Common other stock Paid-in Retained comprehensive Treasury $1 par value capital earnings loss Stock Total Balance at December 25, 2021 $ 48,756 $ 674,777 $ 193,555 $ (27,262) $ (7,324) $ 882,502 Common stock repurchases - - - - (50,719) (50,719) Net income - - 96,847 - - 96,847 Changes in cumulative translation adjustment - - - (17,950) - (17,950) Adjustments related to postretirement benefits, net of tax - - - 5,894 - 5,894 Changes in unrealized gains and losses on investments, net of tax - - - (694) - (694) Exercise of stock options 12 105 - - - 117 Shares issued under ESPP 161 3,470 - - - 3,631 Shares issued for restricted stock units vested 529 (529) - - - - Repurchase and retirement of stock (182) (5,523) - - - (5,705) Share-based compensation expense - 14,918 - - - 14,918 Balance at December 31, 2022 49,276 687,218 290,402 (40,012) (58,043) 928,841 Common stock repurchases - - - - (23,641) (23,641) Net income - - 28,156 - - 28,156 Changes in cumulative translation adjustment - - - 6,815 - 6,815 Adjustments related to postretirement benefits, net of tax - - - (2,375) - (2,375) Changes in unrealized gains and losses on investments, net of tax - - - 793 - 793 Shares issued under ESPP 147 3,785 - - - 3,932 Shares issued for restricted stock units vested 6 (20,174) - - 20,168 - Repurchase and retirement of stock - (1,920) - - (7,668) (9,588) Share-based compensation expense - 17,237 - - - 17,237 Balance at December 30, 2023 49,429 686,146 318,558 (34,779) (69,184) 950,170 Common stock repurchases - - - - (27,123) (27,123) Net loss - - (69,818) - - (69,818) Changes in cumulative translation adjustment - - - (16,839) - (16,839) Adjustments related to postretirement benefits, net of tax - - - 518 - 518 Changes in unrealized gains and losses on investments, net of tax - - - (55) - (55) Shares issued under ESPP 172 3,814 - - - 3,986 Shares issued for restricted stock units vested - (13,154) - - 13,154 - Repurchase and retirement of stock - (57) - - (4,631) (4,688) Share-based compensation expense - 20,740 - - - 20,740 Balance at December 28, 2024 $ 49,601 $ 697,489 $ 248,740 $ (51,155) $ (87,784) $ 856,891 The accompanying notes are an integral part of these statements. 54 Table of Contents COHU, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 28, December 30, December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ (69,818) $ 28,156 $ 96,847 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Interest capitalized associated with cloud computing implementation - - (199) Net accretion on investments (1,254) (1,364) (859) Loss on extinguishment of debt 241 369 312 Depreciation and amortization 52,487 49,744 46,016 Share-based compensation expense 20,740 17,237 14,918 Inventory related charges 4,977 5,619 6,725 Amortization of debt discounts and issuance costs 8 146 315 Accrued retiree benefits (1,589) (540) (1,589) Deferred income taxes (3,722) (4,774) (3,504) Impairment charge related to equity investment 903 - - Changes in other assets (3,831) (13,286) (3,230) Amortization of cloud-based software implementation costs 2,836 2,800 2,060 (Gain) loss from sale of property, plant and equipment 176 (4) (203) Changes in other accrued liabilities (1,309) (702) (943) Operating lease right-of-use assets 5,812 7,656 5,139 Changes in current assets and liabilities: Customer advances (1,835) (2,309) (184) Accounts receivable 34,850 61,899 12,451 Inventories 6,374 12,839 (18,508) Accrued compensation, warranty and other liabilities (15,449) (14,897) (4,007) Accounts payable (3,560) (21,356) (33,130) Deferred profit 26 (4,447) (5,014) Other current assets (16,148) 10,920 (16,202) Income taxes payable (2,234) (24,782) 20,908 Current and long-term operating lease liabilities (5,903) (7,454) (5,258) Net cash provided by operating activities 2,778 101,470 112,861 Cash flows from investing activities: Purchases of property, plant and equipment (10,634) (16,053) (14,770) Net cash received from sale of land, facility and assets 107 216 349 Purchases of short-term investments (78,573) (97,290) (208,856) Sales and maturities of short-term investments 114,228 152,649 155,406 Settlement of net investment hedge (3,212) - - Payment for purchase of MCT, net of cash received - (26,331) - Payment for purchase of EQT, net of cash received - (43,401) - Net cash provided by (used in) investing activities 21,916 (30,210) (67,871) Cash flows from financing activities: Repayments of long-term debt (31,324) (38,788) (38,226) Net issuance (repurchases) of stock, including awards settled in cash (701) (5,656) (1,957) Payments on current and long-term finance lease liabilities (24) (52) (167) Acquisition of treasury stock (26,986) (23,641) (50,719) Net cash used in financing activities (59,035) (68,137) (91,069) Effect of exchange rate changes on cash and cash equivalents (4,776) 60 (1,781) Net increase (decrease) in cash and cash equivalents (39,117) 3,183 (47,860) Cash and cash equivalents at beginning of year 245,524 242,341 290,201 Cash and cash equivalents at end of year $ 206,407 $ 245,524 $ 242,341 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 24,926 $ 44,276 $ 23,123 Cash paid for interest $ 803 $ 3,424 $ 3,443 Property, plant and equipment purchases included in accounts payable $ 454 $ 124 $ 152 Inventory capitalized as capital assets $ 1,765 $ 1,215 $ 2,529 The accompanying notes are an integral part of these statements. 55 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation – Cohu, Inc. (“Cohu”, “we”, “our”, “us” and the “Company”), through our wholly owned subsidiaries, is a provider of semiconductor test equipment and services. Our consolidated financial statements include the accounts of Cohu and our wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. We evaluate the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. Our fiscal years are based on a 52- or 53-week period ending on the last Saturday in December. Our fiscal years ended on December 28, 2024 and December 30, 2023, each consisted of 52 weeks. Our fiscal year ended on December 31, 2022 consisted of 53 weeks. Income (Loss) Per Share – Basic income (loss) per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted income per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of outstanding restricted stock and performance stock units and issuance of stock under our employee stock purchase plan using the treasury stock method. In loss periods, potentially dilutive securities are excluded from the per share computations due to their anti-dilutive effect. For purposes of computing diluted income per share, certain restricted and performance stock units and stock options with exercise prices that exceed the average fair market value of our common stock for the period are excluded. For the years ended December 28, 2024, December 30, 2023 and December 31, 2022, approximately 248,000, 193,000, and 261,000 shares, respectively, of potentially issuable shares of our common stock were excluded from the computation. The following table reconciles the denominators used in computing basic and diluted income per share: (in thousands) 2024 2023 2022 Weighted average common shares outstanding 46,908 47,486 48,178 Effect of dilutive stock options and restricted stock units - 539 621 46,908 48,025 48,799 Cash, Cash Equivalents and Short-term Investments – Highly liquid investments with insignificant interest rate risk and original maturities of three months or less are classified as cash and cash equivalents. Investments with maturities greater than three months are classified as short-term investments. All of our short-term investments in debt securities are classified as available-for-sale and are reported at fair value, with any unrealized gains and losses, net of tax, recorded in the statement of comprehensive income (loss). We manage our cash equivalents and short-term investments as a single portfolio of highly marketable securities. We have the ability and intent, if necessary, to liquidate any of our investments in order to meet the liquidity needs of our current operations during the next 12 months. Accordingly, investments with contractual maturities greater than one year have been classified as current assets in the accompanying consolidated balance sheets. Fair Value of Financial Instruments – The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturities of these financial instruments. Concentration of Credit Risk – Financial instruments that potentially subject us to significant credit risk consist principally of cash equivalents, short- term investments and trade accounts receivable. We invest in a variety of financial instruments and, by policy, limit the amount of credit exposure with any one issuer. Our trade accounts receivable are presented net of an allowance for credit losses, which is determined in accordance with the guidance provided by ASC Topic 326, Financial Instruments-Credit Losses (“ASC 326”). Our customers include semiconductor manufacturers and semiconductor test subcontractors throughout many areas of the world. While we believe that our allowance for credit losses is adequate and represents our best estimate at December 28, 2024, we will continue to monitor customer liquidity and other economic conditions, which may result in changes to our estimates regarding expected credit losses. 56 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Inventories – Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value. Cost includes labor, material and overhead costs. Determining the net realizable value of inventories involves numerous estimates and judgments including projecting average selling prices and sales volumes for future periods. As a result of these analyses, we record a charge to cost of sales in advance of the period when the inventory is sold, which occurs when estimated market values are below our costs. Charges to cost of sales for excess and obsolete inventories totaled $5.4 million, $4.5 million and $7.2 million in fiscal 2024, 2023 and 2022, respectively. Inventories by category were as follows (in thousands): December 28, December 30, 2024 2023 Raw materials and purchased parts $ 94,970 $ 103,118 Work in process 25,833 26,820 Finished goods 21,058 25,855 Total inventories $ 141,861 $ 155,793 Property, Plant and Equipment – Depreciation and amortization of property, plant and equipment, both owned and under financing lease, is calculated principally on the straight‑line method based on estimated useful lives of thirty to forty years for buildings, five to fifteen years for building improvements, three to ten years for machinery, equipment and software and the lease life for financing leases. Land is not depreciated. Property, plant and equipment, at cost, consisted of the following (in thousands): December 28, December 30, 2024 2023 Land and land improvements $ 6,941 $ 7,301 Buildings and building improvements 47,733 39,677 Machinery and equipment 104,767 108,831 159,441 155,809 Less accumulated depreciation and amortization (84,655) (86,724) Property, plant and equipment, net $ 74,786 $ 69,085 Depreciation expense was $13.4 million in fiscal 2024, $13.4 million in fiscal 2023 and $12.8 million in fiscal 2022. Cloud Computing Implementation Costs – We have capitalized certain costs associated with the implementation of our cloud-based Enterprise Resource Planning (“ERP”) system in accordance with ASC Topic 350, Intangibles—Goodwill and Other (“ASC 350”). Capitalized costs include only external direct costs of materials and services consumed in developing the system and interest costs incurred, when material, while developing the system. Total unamortized capitalized cloud computing implementation costs totaled $9.3 million and $12.2 million at December 28, 2024 and December 30, 2023, respectively. These amounts are recorded within other current assets and other assets in our consolidated balance sheets. Implementation costs are amortized using the straight-line method over seven years and we recorded amortization expense totaling $2.8 million in each of the years ended December 28, 2024 and December 30, 2023. Segment Information – We applied 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 CODM and for which discrete financial information is available. We have determined that our three identified operating segments are: THG, STG and ISG. Our THG, STG and ISG 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. 57 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, not to exceed the carrying value of goodwill. We estimated 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, which requires management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, we use the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that are applied to the operating performance metrics of the reporting unit being tested, to obtain an indication of value. We then apply a 50/50 weighting to the indicated values from the income and market approaches to derive the fair values of the 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. We conduct our annual impairment test as of October 1st of each year, and have determined there was no impairment as of October 1, 2024, as we determined that the estimated fair values of our reporting units exceeded their carrying values on that date. Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates. As of December 28, 2024, there were no indicators of impairment requiring additional testing. Should we determine that an interim goodwill impairment review is required in a future period, the review may result in an impairment charge, which would have a negative impact on our results of operations. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted future cash flows. We measure the impairment loss based on the difference between the carrying amount and estimated fair value. As of December 28, 2024, no events or conditions occurred suggesting an impairment in our long-lived assets. Product Warranty – Product warranty costs are accrued in the period sales are recognized. Our products are generally sold with standard warranty periods, which differ by product, ranging from 12 to 36 months. Parts and labor are typically covered under the terms of the warranty agreement. Our warranty expense accruals are based on historical and estimated costs by product and configuration. From time to time we offer customers extended warranties beyond the standard warranty period. In those situations, the revenue relating to the extended warranty is deferred at its estimated fair value and recognized on a straight-line basis over the contract period. Costs associated with our extended warranty contracts are expensed as incurred. Income Taxes – We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting dates. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated interest and penalties have also been recognized and recorded, net of federal and state tax benefits, in income tax expense. 58 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We recognized deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established for those jurisdictions when necessary to reduce deferred tax assets to the amounts that are more likely than not to be realized in the future. Contingencies and Litigation – We assess the probability of adverse judgments in connection with current and threatened litigation. We would accrue the cost of an adverse judgment if, in our estimation, the adverse outcome is probable, and we can reasonably estimate the ultimate cost. Leases – We determine if a contract contains a lease at inception. Operating leases are included in operating lease right of use (“ROU”) assets, current other accrued liabilities, and long-term lease liabilities on our consolidated balance sheets. Finance leases are included in property, plant and equipment, other current accrued liabilities, and long-term lease liabilities on our consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at January 1, 2019, the adoption date of Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), or the commencement date for leases entered into after the adoption date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rates for the remaining lease terms based on the information available at the adoption date or commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made, lease incentives, favorable and unfavorable lease terms recognized in business acquisitions and excludes initial direct costs incurred and variable lease payments. Variable lease payments include estimated payments that are subject to reconciliations throughout the lease term, increases or decreases in the contractual rent payments, as a result of changes in indices or interest rates and tax payments that are based on prevailing rates. Our lease terms may include renewal options to extend the lease when it is reasonably certain that we will exercise those options. In addition, we include purchase option amounts in our calculations when it is reasonably certain that we will exercise those options. Rent expense for minimum payments under operating leases is recognized on a straight-line basis over the term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet but recognized in our consolidated statements of operations on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease component and include both in our calculation of the ROU assets and lease liabilities. We sublease certain leased assets to third parties, mainly as a result of unused space in our facilities. None of our subleases contain extension options. Variable lease payments in our subleases include tax payments that are based on prevailing rates. We account for lease and non-lease components as a single lease component. 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 we transfer control to our customer for the related contract or upon completion of the services if they are short-term in nature. Spares, contactor and kit revenue is generally recognized upon shipment. 59 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Certain of our equipment sales have 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. At December 28, 2024 and December 30, 2023, we had $5.6 million and $6.2 million of revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) for contracts with original expected durations of over one year, respectively. 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 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 that are 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 includes 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 in 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. Variable consideration that does not meet revenue recognition criteria is deferred. For contracts that are less than one year in duration and we have elected to use the practical expedient available in ASC 606 to expense cost to obtain contracts as they are incurred because they would be amortized over less than one year. Accounts receivable represent our unconditional right to receive consideration from our customers. Payment 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 recorded as deferred profit in our consolidated balance sheet representing the difference between the receivable recorded and the inventory shipped. In certain instances where customer payments are received prior to product shipment, the customer’s payments are recorded as customer advances. At December 28, 2024, we had deferred revenue totaling approximately $8.6 million, current deferred profit of $3.6 million and deferred profit expected to be recognized after one year included in noncurrent other accrued liabilities of $4.3 million. At December 30, 2023, we had deferred revenue totaling approximately $8.8 million, current deferred profit of $3.6 million and deferred profit expected to be recognized after one year included in noncurrent other accrued liabilities of $4.9 million. Disaggregated net sales are as follows: (in thousands) 2024 2023 2022 Systems-Semiconductor Test & Inspection $ 139,133 $ 326,448 $ 474,655 Non-systems-Semiconductor Test & Inspection 262,646 309,874 338,120 Net sales $ 401,779 $ 636,322 $ 812,775 Advertising Costs – Advertising costs are expensed as incurred and were not material for all periods presented. 60 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restructuring Costs – We record restructuring activities including costs for one-time termination benefits in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). The timing of recognition for severance costs accounted for under ASC 420 depends on whether employees are required to render service until they are terminated in order to receive the termination benefits. If employees are required to render service until they are terminated in order to receive the termination benefits, a liability is recognized ratably over the future service period. Otherwise, a liability is recognized when management has committed to a restructuring plan and has communicated those actions to employees. Employee termination benefits covered by existing benefit arrangements are recorded in accordance with ASC Topic 712, Nonretirement Postemployment Benefits. These costs are recognized when management has committed to a restructuring plan and the severance costs are probable and estimable. Debt Issuance Costs – We defer costs related to the issuance of debt. Debt issuance costs directly related to our Term Loan Credit Facility were presented within noncurrent liabilities as a reduction of long-term debt in our consolidated balance sheets. The amortization of such costs was recognized as interest expense using the effective interest method over the term of the respective debt issue. Amortization related to deferred debt issuance costs and original discount costs was $0.1 million and $0.3 million for the years ended December 30, 2023 and December 31, 2022, respectively. Amortization related to deferred debt issuance costs and original discount costs was not material for the year ended December 28, 2024 Share-based Compensation – We measure and recognize all share-based compensation under the fair value method. Our estimate of share-based compensation expense requires a number of assumptions including our stock price volatility, employee exercise patterns (expected life of the options) and related tax effects. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. Although we believe the assumptions and estimates we have made are reasonable and appropriate, changes in assumptions could materially impact our reported financial results. Foreign Remeasurement and Currency Translation – Assets and liabilities of our wholly owned foreign subsidiaries that use the U.S. Dollar as their functional currency are re-measured using exchange rates in effect at the end of the period, except for nonmonetary assets, such as inventories and property, plant and equipment, which are re-measured using historical exchange rates. Revenues and costs are re-measured using average exchange rates for the period, except for costs related to those balance sheet items that are re-measured using historical exchange rates. Gains and losses on foreign currency transactions are recognized as incurred. During the years ended December 28, 2024 and December 30, 2023, in our consolidated statement of operations we recognized foreign exchange losses, net of hedging activity, of $2.4 million and $5.2 million, respectively. During the year ended December 31, 2022, we recognized a foreign exchange gain totaling $1.6 million. Certain of our foreign subsidiaries have designated the local currency as their functional currency and, as a result, their assets and liabilities are translated at the rate of exchange at the balance sheet date, while revenue and expenses are translated using the average exchange rate for the period. Cumulative translation adjustments resulting from the translation of the financial statements are included as a separate component of stockholders’ equity. Foreign Exchange Derivative Contracts – We operate and sell our products in various global markets. As a result, we are exposed to changes in foreign currency exchange rates. To minimize foreign exchange volatility, we enter into foreign currency forward contracts with a financial institution to hedge against future movements in foreign exchange rates. We do not use derivative financial instruments for speculative or trading purposes. The accounting for changes in the fair value of our derivatives depends on the intended use of the derivative and whether we have elected to designate a derivative as a hedging relationship and apply hedge accounting. All derivative instruments are recognized at fair value on our consolidated balance sheets and all changes in fair value are recognized in net earnings or statement of consolidated stockholders’ equity through accumulated other comprehensive loss (AOCI). For contracts that qualify for hedge accounting treatment, the hedge contracts must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Hedge effectiveness is assessed periodically. For accounting purposes, certain of our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our consolidated balance sheets with changes in fair value recorded within foreign transaction gain (loss) in our consolidated statements of operations for both realized and unrealized gains and losses. 61 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Additional information related to our foreign exchange derivative contracts is included in Note 8, “Derivative Financial Instruments”. Accumulated Other Comprehensive Loss – Our accumulated other comprehensive loss totaled approximately $51.2 million at December 28, 2024, and $34.8 million at December 30, 2023, and was attributed to, net of income taxes where applicable, foreign currency adjustments resulting from the translation of certain accounts into U.S. Dollars, changes in unrealized gains and losses on investments and adjustments to accumulated postretirement benefit obligations. The U.S. Dollar strengthened relative to certain foreign currencies in countries where we have operations as of December 28, 2024 and consequently, our accumulated other comprehensive loss attributed to foreign currency translation adjustments increased by $16.8 million during the year ended December 28, 2024. The U.S. Dollar weakened relative to certain foreign currencies in countries where we have operations as of December 30, 2023 and consequently, our accumulated other comprehensive loss attributed to foreign currency translation adjustments decreased by $6.8 million during the year ended December 30, 2023. Reclassification adjustments from accumulated other comprehensive loss during 2024 and 2023 were not significant. Additional information related to accumulated other comprehensive loss, on an after-tax basis is included in Note 15, “Accumulated Other Comprehensive Income”. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements – In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity's CODM and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Effective December 28, 2024, we adopted the new standard. The primary change as a result of adoption was the inclusion of additional disclosures related to our single reportable segment. See Note 11, “Segment and Geographic Information” for further information. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASC 848”). ASC 848 provides temporary optional expedients and exceptions to certain U.S. GAAP contract modification requirements for contracts affected by reference rate reform as entities transition away from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 to defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the optional expedients in ASC 848. Effective June 16, 2023, we adopted ASC 848. Our Term Loan B Credit and Guaranty Agreement dated as of October 1, 2018, as amended, is our only contract where interest expense is based on LIBOR. The ICE Benchmark Administration Limited, LIBOR’s administrator, has ceased publishing certain LIBOR settings and stopped publishing the Overnight, 1-month, 3-month, 6-month, and 12-month USD LIBOR U.S. dollar settings in fiscal 2023. As a result, we commenced the transition of our LIBOR-based contract to SOFR. The optional expedients under ASC 848 have allowed and will allow us to account for contract modifications as continuations of the existing contract without further reassessments or remeasurements that would otherwise be required under the applicable U.S. GAAP. 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. Recently Issued Accounting Pronouncements – In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2024-03. 62 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 and we are currently preparing to adopt this standard in the first quarter of fiscal 2025. All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable. 2. Goodwill and Purchased Intangible Assets Changes in the carrying value of our goodwill during the years ended December 28, 2024, and December 30, 2023, were as follows (in thousands): Total Goodwill Balance December 31, 2022 $ 213,539 Additions 24,132 Impact of currency exchange 3,987 Balance December 30, 2023 241,658 Impact of currency exchange (7,019) Balance December 28, 2024 $ 234,639 Purchased intangible assets, subject to amortization, are as follows (in thousands): December 28, 2024 December 30, 2023 Remaining Gross Carrying Accumulated Useful Life Gross Carrying Accumulated Amount Amortization (years) Amount Amortization Developed technology $ 228,789 $ 163,453 3.7 $ 233,623 $ 137,168 Customer relationships 72,570 35,229 6.2 73,759 28,932 Trade names 20,926 12,930 4.6 21,569 11,231 Backlog 100 100 - 100 25 Covenant not-to-compete 223 179 2.0 250 175 $ 322,608 $ 211,891 $ 329,301 $ 177,531 Changes in the carrying values of purchased intangible assets presented above are a result of the impact of fluctuations in currency exchange rates. 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 completed our required annual goodwill impairment testing as of October 1, 2024 and concluded there were no impairments of goodwill within our reporting units at that time. Other events and changes in circumstances may also require goodwill to be tested for impairment between annual measurement dates. Amortization expense related to purchased intangible assets was approximately $39.1 million in fiscal 2024, $36.4 million in fiscal 2023 and $33.2 million in fiscal 2022. As of December 28, 2024, we expect amortization expense in future periods to be as follows: fiscal 2025 - $35.5 million; fiscal 2026 - $24.9 million; fiscal 2027 - $16.9 million; fiscal 2028 - $11.6 million fiscal 2029 - $7.7 million; and thereafter $14.1 million. 63 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. Borrowings and Credit Agreements The following table is a summary of our borrowings as of December 28, 2024 and December 30, 2023: Fiscal year ended (in thousands) December 28, 2024 December 30, 2023 Bank term loan under credit agreement $ - $ 29,327 Bank term loans-Kita 1,694 2,095 Construction loan-Cohu GmbH 6,473 7,681 Lines of credit 633 1,773 Total debt 8,800 40,876 Less: financing fees and discount - (249) Less: current portion (1,748) (6,324) Total long-term debt $ 7,052 $ 34,303 The debt principal payments, excluding financing lease obligations, for the next five years and thereafter are as follows (in thousands): 2025 $ 1,748 2026 1,120 2027 1,125 2028 1,187 2029 1,015 Thereafter 2,605 Total $ 8,800 Credit Agreement 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 amortize 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 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 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 at that date. 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 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. Kita Term Loans 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%, and expire at various dates through 2034. At December 28, 2024, the outstanding loan balance was $1.7 million 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, 2023, the outstanding loan balance was $2.1 million and $0.2 million of the outstanding balance is presented as current installments of long-term debt in our consolidated balance sheets. The fair value of the debt approximates the carrying value at December 28, 2024. 64 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The term loans are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates. Construction Loans In July 2019 and June 2020, one of our wholly owned subsidiaries located in Germany entered into a series of Loan Facilities with a German financial institution providing it with total borrowings of up to €10.1 million. The Loan Facilities were utilized to finance the expansion of our facility in Kolbermoor, Germany and are secured by the land and the existing building on the site. The Loan Facilities bear interest at agreed upon rates based on the facility amounts as discussed below. The first facility totaling €3.4 million has been fully drawn and is payable over 10 years at a fixed annual interest rate of 0.8%. Principal and interest payments are due each quarter over the duration of the facility ending in September 2029. The second facility totaling €5.2 million has been fully drawn and is payable over 15 years at an annual interest rate of 1.05%, which is fixed until April 2027. Principal and interest payments are due each month over the duration of the facility ending in January 2034. The third facility totaling €0.9 million has been fully drawn and is payable over 10 years at an annual interest rate of 1.2%. Principal and interest payments are due each month over the duration of the facility ending in May 2030. At December 28, 2024, total outstanding borrowings under the Loan Facilities was $6.5 million with $0.9 million of the total outstanding balance being presented as current installments of long-term debt in our consolidated balance sheets. At December 30, 2023, total outstanding borrowings under the Loan Facilities was $7.7 million with $1.0 million of the total outstanding balance being presented as current installments of long-term debt in our 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 December 28, 2024. Lines of Credit As a result of our acquisition of Kita, we assumed a series of revolving credit facilities with various financial institutions in Japan. The credit facilities renew monthly and provide Kita with access to working capital totaling up to 960 million Japanese Yen of which 100 million Japanese Yen is drawn. At December 28, 2024, total borrowings outstanding under the revolving lines of credit were $0.6 million. As these credit facility agreements renew monthly, they have been included in short-term borrowings in our consolidated balance sheets. The revolving lines of credit are denominated in Japanese Yen and, as a result, amounts disclosed herein will fluctuate because of changes in currency exchange rates. Our wholly owned subsidiary in Switzerland has one available line of credit which provides borrowings of up to a total of 2.0 million Swiss Francs, a portion of which is reserved for tax guarantees. At December 28, 2024, and December 30, 2023, no amounts were outstanding under this line of credit. 4. Restructuring Charges Poway Volume Manufacturing Transition During the fourth quarter of fiscal 2024, we made the decision to transition all remaining volume manufacturing out of Poway, CA, and consolidate it into our factories in Asia. This change will allow us to better utilize our corporate infrastructure, drive improvements in inventory management, optimize our warehousing and better support our long-term goals. Total pretax charges related to the Poway volume manufacturing transition for the twelve months ended December 28, 2024 were not material. MCT Integration Program During fiscal 2023, we began a strategic restructuring and integration program in connection with the acquisition of MCT (“MCT Integration Program”). As part of the MCT Integration Program, we consolidated MCT’s Penang, Malaysia manufacturing operations into Cohu’s Melaka, Malaysia manufacturing operations by the end of fiscal 2023. Relating to the facility consolidation actions, we notified certain impacted employees of a reduction in force program and the facility consolidation and reduction in force programs are being implemented as part of a comprehensive review of our operations and are intended to reduce our operating cost structure and capitalize on acquisition synergies. 65 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As a result of the activities described above, we recognized total pretax charges of $2.4 million during the twelve months ended December 30, 2023, that are within the scope of ASC 420. Total pretax charges during the twelve months ended December 28, 2024 were not material. Charges related to the MCT Integration Program for the year ended December 30, 2023, were as follows: (in thousands) 2023 Employee severance costs $ 2,159 Other restructuring costs 262 Total $ 2,421 Costs associated with restructuring activities are presented in our consolidated statements of operations as restructuring charges. Other restructuring costs include facility closure and manufacturing software integration costs. The following table summarizes the activity within the restructuring related accounts for the MCT Integration Program during the year ended December 30, 2023 (in thousands): Employee Severance Other Exit Costs Total Balance, December 31, 2022 $ - $ - $ - Costs accrued 2,159 262 2,421 Amounts paid or charged (2,091) (262) (2,353) Balance, December 30, 2023 $ 68 $ - $ 68 Xcerra Integration Program Subsequent to the acquisition of Xcerra, during the fourth quarter of 2018, we began a strategic restructuring program designed to reposition our organization and improve our cost structure as part of our targeted integration plan regarding the recently acquired Xcerra (“Xcerra Integration Program”). As part of the Xcerra Integration Program we consolidated our global handler and contactor manufacturing operations and closed our manufacturing operations in Penang, Malaysia and Fontana, California in 2019. In 2019, we began the Xcerra Integration Program of our German operations and entered a social plan with the German labor organization representing certain of the employees of our wholly owned subsidiary, Multitest elektronische Systeme GmbH. During the fourth quarter of 2020 we implemented a voluntary program and termination agreements with certain employees of our wholly owned subsidiary, Cohu GmbH. These programs collectively reduced headcount, enabled us to consolidate the facilities of our multiple operations located near Kolbermoor and Rosenheim, Germany, as well as transitioned certain manufacturing to other lower cost regions. The facility consolidations and reduction in force programs were implemented as part of a comprehensive review of our operations and are intended to streamline and reduce our operating cost structure and capitalize on acquisition synergies. As of December 31, 2022, restructuring activities associated with the Xcerra Integration Program were materially complete. Certain end of life inventory adjustments have continued during the fiscal years 2023 and 2024. As a result of the activities described above, we recognized total pretax (credits)/charges of $(0.1) million and $0.2 million for the years ended December 30, 2023 and December 31, 2022, respectively, that are within the scope of ASC 420. Total pretax charges during the twelve months ended December 28, 2024 were not material. All costs of the Xcerra Integration Program were incurred by our Semiconductor Test & Inspection segment. 66 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Charges related to the Xcerra Integration Program for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, were as follows (in thousands): (in thousands) 2024 2023 2022 Employee severance costs $ - $ - $ (8) Inventory related charges (adjustments) (465) (62) (454) Other restructuring costs - - 613 Total $ (465) $ (62) $ 151 Costs associated with restructuring activities were presented in our consolidated statements of operations as restructuring charges, except for certain costs associated with inventory charges related to the decision to end manufacturing of certain of Xcerra’s semiconductor test handler products, which were classified within cost of sales. During the twelve-month period December 28, 2024, our restructuring activities included the reversal of certain inventory related charges taken in prior periods. Other restructuring costs include expenses for professional fees associated with employee severance, impairments of fixed assets and facility closure costs. The following table summarizes the activity within the restructuring related accounts for the Xcerra Integration Program during the year ended December 31, 2022 (in thousands): Employee Severance Other Exit Costs Total Balance, December 25, 2021 348 - 348 Costs accrued (8) 613 605 Amounts paid or charged (331) (613) (944) Impact of currency exchange (9) - (9) Balance, December 31, 2022 $ - $ - $ - At December 28, 2024, our total accrual for restructuring related items for the Poway volume manufacturing transition, MCT and Xcerra integration programs is reflected within current liabilities in our consolidated balance sheets as these amounts are expected to be paid out in fiscal 2025. The estimated costs associated with the employee severance and facility consolidation actions are not material and will be paid predominantly in cash. 5. Financial Instruments Measured at Fair Value Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities. We do not hold investment securities for trading purposes. All short-term investments in debt securities are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification. We assess whether unrealized loss positions on available-for-sale debt securities are due to credit-related factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in earnings through an allowance account. Unrealized gains and losses that are not due to credit- related factors are included in accumulated other comprehensive income (loss). Factors that could indicate an impairment exists include, but are not limited to earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset. Gross realized gains and losses on sales of short-term investments are included in interest income. Realized gains and losses for the periods presented were not significant. 67 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Investments that we have classified as short-term, by security type, are as follows (in thousands): At December 28, 2024 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses (1) Value Corporate debt securities (2) $ 32,040 $ 37 $ 25 $ 32,052 U.S. treasury securities 11,964 12 15 11,961 Bank certificates of deposit 6,971 4 3 6,972 Asset-backed securities 3,647 6 - 3,653 Foreign government security 714 - - 714 Municipal securities 330 3 - 333 $ 55,666 $ 62 $ 43 $ 55,685 At December 30, 2023 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses (1) Value Corporate debt securities (2) $ 45,105 $ 147 $ 15 $ 45,237 U.S. treasury securities 20,439 26 116 20,349 Bank certificates of deposit 15,468 20 - 15,488 Asset-backed securities 8,017 17 10 8,024 Foreign government security 741 - - 741 Municipal securities 330 5 - 335 $ 90,100 $ 215 $ 141 $ 90,174 (1) As of December 28, 2024, the cost and fair value of investments with loss positions were approximately $20.5 million and $20.4 million, respectively. As of December 30, 2023, the cost and fair value of investments with loss positions was approximately $38.5 million and $38.4 million, respectively. We evaluated the nature of these investments, credit worthiness of the issuer and the duration of these impairments to determine if an other-than-temporary decline in fair value had occurred and concluded that these losses were temporary and we have the ability and intent to hold these investments to maturity. (2) Corporate debt securities include investments in financial and other corporate institutions. No single issuer represents a significant portion of the total corporate debt securities portfolio. Effective maturities of short-term investments at December 28, 2024, were as follows: Amortized Estimated (in thousands) Cost Fair Value Due in 1 year or less $ 47,819 $ 47,855 Due after 1 year through 5 years 7,847 7,830 $ 55,666 $ 55,685 Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1. When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information. 68 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes, by major security type, our financial instruments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands): Fair value measurements at December 28, 2024 using: Total estimated Level 1 Level 2 Level 3 fair value Cash $ 136,965 $ - $ - $ 136,965 Money market funds - 69,442 - 69,442 Corporate debt securities - 32,052 - 32,052 U.S. treasury securities - 11,961 - 11,961 Bank certificates of deposit - 6,972 - 6,972 Asset-backed securities - 3,653 - 3,653 Foreign government security - 714 - 714 Municipal securities - 333 - 333 $ 136,965 $ 125,127 $ - $ 262,092 Fair value measurements at December 30, 2023 using: Total estimated Level 1 Level 2 Level 3 fair value Cash $ 157,697 $ - $ - $ 157,697 Money market funds - 81,115 - 81,115 Corporate debt securities - 51,949 - 51,949 U.S. treasury securities - 20,349 - 20,349 Bank certificates of deposit - 15,488 - 15,488 Asset-backed securities - 8,024 - 8,024 Municipal securities - 335 - 335 Foreign government security - 741 - 741 $ 157,697 $ 178,001 $ - $ 335,698 6. Employee Benefit Plans Defined Contribution Retirement Plans – Cohu maintains a defined contribution 401(k) retirement savings plan covering all salaried and hourly U.S. employees. Participation is voluntary and participants’ contributions are based on their eligible compensation. Participants in the Cohu plan receive matching contributions of 50% up to 8% of salary contributed, subject to various statutory limits. In fiscal 2024, 2023 and 2022 we made matching contributions to the plan of $2.3 million, $2.5 million and $2.4 million, respectively. Defined Benefit Retirement Plans – Some of our employees located in Europe and Asia participate in defined benefit retirement plans. Our largest defined benefit retirement plan is the Ismeca Europe Semiconductor BVG Pension Plan which covers our employees in Switzerland (“the Swiss Plan”) and the following discussion relates solely to the Swiss Plan, all other plans are not material to our financial statements. Net periodic benefit cost of the Swiss Plan was as follows: (in thousands) 2024 2023 2022 Service cost $ 643 $ 551 $ 954 Interest cost 357 510 56 Expected return on assets (283) (331) (128) Settlements (277) (177) (487) Net periodic costs $ 440 $ 553 $ 395 69 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the projected benefit obligation, the fair value of plan assets, the funded status and the liability we have recorded in our consolidated balance sheets related to the Swiss Plan: (in thousands) 2024 2023 Change in projected benefit obligation: Benefit obligation at beginning of year $ (24,884) $ (21,628) Service cost (643) (551) Interest cost (357) (510) Actuarial gain (loss) 79 (1,391) Participant contributions (988) (1,153) Benefits paid 599 385 Plan change 203 - Settlements 2,820 2,177 Foreign currency exchange adjustment 1,660 (2,213) Benefit obligation at end of year (21,511) (24,884) Change in plan assets: Fair value of plan assets at beginning of year 19,700 18,411 Return on assets, net of actuarial gain/loss 732 52 Employer contributions 783 860 Participant contributions 988 1,153 Benefits paid (599) (385) Settlements (2,820) (2,177) Foreign currency exchange adjustment (1,326) 1,786 Fair value of plan assets at end of year 17,458 19,700 Net liability at end of year $ (4,053) $ (5,184) At December 28, 2024 and December 30, 2023, the Swiss Plan’s net liability is included in noncurrent accrued retirement benefits. Amounts recognized in accumulated other comprehensive loss net of tax related to the Swiss Plan consisted of an unrecognized net actuarial gains totaling $4.0 million and $4.2 million at December 28, 2024 and December 30, 2023, respectively. The actuarial gain of $0.1 million and the actuarial loss of $1.4 million for the years ended December 28, 2024 and December 30, 2023, respectively, were due to assumption changes as well as plan experience. Weighted-average actuarial assumptions used to determine the projected benefit obligation under the Swiss Plan are as follows: 2024 2023 Discount rate 1.1% 1.5% Compensation increase 1.0% 2.0% Weighted-average assumptions used to determine net periodic benefit cost of the Swiss Plan are as follows: 2024 2023 2022 Discount rate 1.1% 1.5% 2.3% Rate of return on assets 1.3% 1.5% 1.8% Compensation increase 1.0% 2.0% 3.0% During 2025 employer and employee contributions to the Swiss Plan are expected to total $0.7 million. Estimated benefit payments are expected to be as follows: 2025 - $0.8 million; 2026 - $1.1 million; 2027 - $1.2 million; 2028 - $1.1 million; 2029 - $1.1 million; and $5.9 million thereafter through 2034. As is customary with Swiss pension plans, the assets of the plan are invested in a collective fund with multiple employers. We have no investment authority over the assets of the plan that are held and invested by a Swiss insurance company. Investment holdings are made with respect to Swiss laws and target allocations for plan assets are 47% debt securities and cash, 25% real estate investments, 15% alternative investments and 13% equity securities. The valuation of the collective fund assets as a whole is a Level 3 measurement; however, the individual investments of the fund are generally Level 1 (equity securities), Level 2 (fixed income) and Level 3 (real estate and alternative) investments. We determine the fair value of the plan assets based on information provided by the collective fund, through review of the collective fund’s annual financial statements. See Note 5, “Financial Instruments Measured at Fair Value” for additional information on the three-tier fair value hierarchy. 70 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We maintain other defined benefit plans for employees located outside the U.S. for which the majority of the obligations and net periodic benefit cost were determined to be immaterial for all periods presented. Retiree Medical Benefits – We provide post-retirement health benefits to certain executives and directors under a noncontributory plan. The net periodic benefit cost was $0.1 million in fiscal 2024, 2023 and 2022. We fund benefits as costs are incurred and as a result there are no plan assets. The weighted average discount rate used in determining the accumulated post-retirement benefit obligation was 5.4% in fiscal 2024, 4.7% in fiscal 2023 and 4.9% in fiscal 2022. The annual rates of increase of the cost of health benefits were assumed to be 9.9% in fiscal 2025 for post-65 participants. This rate was then assumed to decrease 0.61% per year for participants that have reached the age of 65 to 4.4% in fiscal 2034 and remain level thereafter. Contributions to the post-retirement health benefit plan are expected to total $0.1 million in fiscal 2025. Estimated benefit payments are expected to be as follows: fiscal 2025 - $0.1 million; fiscal 2026 - $0.1 million; fiscal 2027 - $0.1 million; fiscal 2028 - $0.1 million; fiscal 2029 - $0.1 million and $0.7 million thereafter through fiscal 2034. The following table sets forth the post-retirement benefit obligation, funded status and the liability we have recorded in our consolidated balance sheets: (in thousands) 2024 2023 Accumulated benefit obligation at beginning of year $ (1,651) $ (1,657) Interest cost (75) (78) Actuarial (gain) loss 25 (6) Benefits paid 109 90 Accumulated benefit obligation at end of year (1,592) (1,651) Plan assets at end of year - - Funded status $ (1,592) $ (1,651) Deferred Compensation – The Cohu, Inc. Deferred Compensation Plan allows certain of our officers to defer a portion of their current compensation. We have purchased life insurance policies on the participants with Cohu as the named beneficiary. Participant contributions, distributions and investment earnings and losses are accumulated in a separate account for each participant. At December 28, 2024, the payroll liability to participants, included in accrued compensation and benefits in the consolidated balance sheet, was approximately $0.6 million and the cash surrender value of the related life insurance policies included in other current assets was approximately $1.4 million. At December 30, 2023, the liability totaled $0.9 million and the corresponding assets were $1.4 million. Employee Stock Benefit Plans – Our 2005 Equity Incentive Plan (“2005 Plan”) and the Cohu, Inc. 1997 Employee Stock Purchase Plan (“ESPP”) are broad-based, long-term retention programs intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. Awards that may be granted under the 2005 Plan include, but are not limited to, non-qualified and incentive stock options, restricted stock units, and performance stock units. We settle employee stock option exercises, employee stock purchase plan purchases, and the vesting of restricted stock units, and performance stock units with newly issued common shares or treasury shares. At December 28, 2024, there were 2,946,601 shares available for future equity grants under the 2005 Plan and 628,316 shares available for purchase under the ESPP. Employee Stock Purchase Plan The ESPP provides for the issuance of a maximum of 3,750,000 shares of our common stock. Under the ESPP, eligible employees may purchase shares of common stock through payroll deductions. The price paid for the common stock is equal to 85% of the fair market value of our common stock on specified dates. During the last three years we issued shares under the ESPP as follows: 2024 - 171,353; 2023 - 146,829 and 2022 - 160,855. 71 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Options Under the 2005 Plan stock options may be granted to employees, consultants and outside directors to purchase a fixed number of shares of our common stock at prices not less than 100% of the fair market value at the date of grant. Options generally vest and become exercisable after one year or in four annual increments beginning one year after the grant date and expire ten years from the grant date. We have historically issued new shares of Cohu common stock upon share option exercise. During 2024, 2023 and 2022 no stock options were granted. The aggregate intrinsic value of options exercised was $0.2 million in fiscal 2022. At December 28, 2024 and December 30, 2023, we had no stock options outstanding. Restricted Stock Units Under our equity incentive plans, restricted stock units (“RSUs”) may be granted to employees, consultants and outside directors. Restricted stock units vest over a one-year, two-year, three-year or a four-year period from the date of grant. Prior to vesting, restricted stock units do not have dividend equivalent rights, do not have voting rights and the shares underlying the restricted stock units are not considered issued and outstanding. New shares of our common stock or treasury shares will be issued on the date the restricted stock units vest net of the statutory tax withholding requirements to be paid by us on behalf of our employees. As a result, the actual number of shares issued will be fewer than the actual number of RSUs outstanding at December 28, 2024. Restricted stock unit activity under our share-based compensation plans was as follows: 2024 2023 2022 Wt. Avg. Wt. Avg. Wt. Avg. (in thousands, except per share data) Units Fair Value Units Fair Value Units Fair Value Outstanding, beginning of year 884 $ 30.52 969 $ 24.55 1,058 $ 21.16 Granted 411 $ 31.76 365 $ 36.66 431 $ 27.74 Released (366) $ 27.33 (428) $ 22.33 (474) $ 19.94 Cancelled (44) $ 31.92 (22) $ 28.62 (46) $ 24.33 Outstanding, end of year 885 $ 32.34 884 $ 30.52 969 $ 24.55 Equity-Based Performance Stock Units We grant performance stock units (“PSUs”) to certain senior executives as a part of our long-term equity compensation program. The number of shares of common stock that will ultimately be issued to settle PSUs granted ranges from 0% to 200% of the number granted and is determined based on certain performance criteria over a three-year measurement period. The performance criteria for the majority of PSUs are based on a combination of our annualized Total Shareholder Return (“TSR”) for the performance period and the relative performance of our TSR compared with the annualized TSR of certain peer companies for the performance period. PSUs granted vest 100% on the third anniversary of their grant, assuming achievement of the applicable performance criteria. We estimated the fair value of the PSUs using a Monte Carlo simulation model on the date of grant. Compensation expense is recognized over the requisite service period. New shares of our common stock or treasury shares will be issued on the date the PSUs vest net of the minimum statutory tax withholding requirements to be paid by us on behalf of our employees. 72 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PSU activity under our share-based compensation plans was as follows: 2024 2023 2022 Wt. Avg. Wt. Avg. Wt. Avg. (in thousands, except per share data) Units Fair Value Units Fair Value Units Fair Value Outstanding, beginning of year 408 $ 45.65 403 $ 28.64 384 $ 22.22 Granted 203 $ 33.78 270 $ 39.97 151 $ 33.22 Released (63) $ 57.39 (258) $ 13.18 (55) $ 14.11 Cancelled (9) $ 57.39 (7) $ 42.52 (77) $ 15.94 Outstanding, end of year 539 $ 39.64 408 $ 45.65 403 $ 28.64 Share-based Compensation – We estimate the fair value of our employee stock purchase plan using the Black-Scholes valuation model. The assumptions for the Black-Scholes model include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award. The estimated fair value of PSUs is determined on the grant date using the Monte Carlo simulation valuation model. The Monte Carlo simulation model incorporates assumptions for the risk-free interest rate, Cohu and the selected peer group price volatility, the correlation between Cohu and the selected index, and dividend yields. Share-based compensation expense related to restricted stock unit awards is calculated based on the market price of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting of the restricted stock unit. Cohu’s Board of Directors authorized suspending our quarterly cash dividend indefinitely, as of May 5, 2020. All awards granted in fiscal 2024, 2023 and 2022 exclude the assumption of dividend payments. The following weighted average assumptions were used to value share-based awards granted: Employee Stock Purchase Plan 2024 2023 2022 Expected volatility 35.5% 36.3% 45.6% Risk-free interest rate 5.3% 4.5% 1.2% Expected term (years) 0.5 0.5 0.5 Weighted-average grant date fair value per share $ 7.49 $ 8.54 $ 8.79 Reported share-based compensation is classified in the consolidated financial statements as follows: (in thousands) 2024 2023 2022 Cost of sales $ 1,049 $ 845 $ 646 Research and development 3,566 3,394 3,100 Selling, general and administrative 16,125 12,998 11,172 Share-based compensation 20,740 17,237 14,918 Income tax benefit (211) (1,770) (4,004) Total share-based compensation, net of tax $ 20,529 $ 15,467 $ 10,914 We account for forfeitures of plan-based awards as they occur. At December 28, 2024, we had approximately $27.5 million of pre-tax unrecognized compensation cost related to unvested restricted stock units and performance stock units which is expected to be recognized over a weighted-average period of approximately 1.9 years. 7. Business Acquisitions MCT On January 30, 2023, we completed the acquisition of all the outstanding membership units of MCT Worldwide, LLC (“MCT”), pursuant to a membership unit purchase agreement dated January 30, 2023, by and among MCT Worldwide, LLC, Arise Acquisition Co., LLC, The Seaport Group LLC Profit Sharing Plan, and Delta Design, Inc., a wholly owned subsidiary of Cohu (“the MCT Acquisition”). MCT is a U.S. based company with a principal manufacturing site in Penang, Malaysia. MCT provides automated solutions for the semiconductor industry and designs, manufactures, markets, services and distributes strip test handlers, film frame handlers and laser mark handlers. On January 30, 2023, we made a cash payment totaling $28.0 million for MCT of which $0.6 million was used to pay the former MCT CFO and CEO and expensed as restructuring severance expense. Taking into consideration the amount expensed as severance and the working capital adjustment receivable resulted in a final net purchase price of approximately $26.8 million. The MCT Acquisition was a cash free debt free transaction and was subject to a working capital adjustment for the difference between the actual and estimated net working capital. The MCT Acquisition was accounted for in conformity with ASC Topic 805, Business Combinations, (“ASC 805”). 73 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The acquired assets and liabilities of MCT were recorded at their respective fair values including an amount for goodwill representing the difference between the consideration paid and the fair value of the identifiable net assets. The purchase price allocation was finalized during the fourth quarter of 2023. The table below summarizes the assets acquired and liabilities assumed as of January 30, 2023 (in thousands): Current assets, including cash received $ 9,505 Property, plant and equipment 197 Other assets 356 Intangible assets 12,000 Goodwill 8,755 Total assets acquired 30,813 Liabilities assumed (4,024) Net assets acquired $ 26,789 The allocation of the intangible assets subject to amortization is as follows (in thousands): Estimated Fair Value Weighted Average Useful Life (years) Developed technology $ 7,500 7.0 Customer relationships 4,000 10.0 Product backlog 500 0.5 Total intangible assets $ 12,000 Acquired intangible assets reported above are being amortized using the straight-line method over their estimated useful lives which approximates the pattern of how the economic benefit is expected to be used. This includes amounts allocated to customer relationships because of anticipated high customer retention rates that are common in the semiconductor capital equipment industry. The value assigned to developed technology was determined by using the relief from royalty method under the income approach, which included assumptions related to revenue growth rates, royalty rates, and discount rates. Developed technology, which comprises products that have reached technological feasibility, includes the products in MCT’s product line. The revenue estimates used to value the developed technology were based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by MCT and competitors. The estimated after-tax cash flows were based on a hypothetical royalty rate applied to the revenues for the developed technology. The discount rate utilized to discount the net cash flows of the developed technology to present value was based on the risk associated with the respective cash flows taking into consideration the perceived risk of the technology relative to the other acquired assets, the weighted average cost of capital, the internal rate of return, and the weighted average return on assets. The value assigned to customer relationships was determined by using the multi-period excess earnings method under the income approach. The estimated cash flows were based on revenues from the existing customers net of operating expenses and net of contributory asset charges. The discount rate utilized to discount the net cash flows of the customer relationships to present value was based on the respective cash flows taking into consideration the perceived risks. The value assigned to backlog acquired was estimated based upon the contractual nature of the backlog as of January 30, 2023, using the multi-period excess earnings method under the income approach to discount back to present value the cash flows attributable to the backlog at a discount rate commensurate with the expected risks of the backlog cash flows. 74 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MCT’s results of operations have been included starting January 30, 2023. The impact of MCT on our consolidated statements of operations and comprehensive income was not material. In connection with the MCT Acquisition, during the twelve months ended December 28, 2024 and December 30, 2023, we incurred acquisition-related costs, which were expensed as selling, general and administrative costs totaling $0.1 million and $0.5 million, respectively. During fiscal 2022 no acquisition-related costs were incurred. EQT On October 2, 2023, we completed the acquisition of Equiptest Engineering Pte. Ltd. (“EQT”), a provider of semiconductor test contactors and other consumables. (“the EQT Acquisition”). EQT is a Singapore based company with a principal manufacturing site located there. EQT provides test interface products including high performance thermal, MEMS, Infrared, Coaxial and Kelvin Contactors that expands our interface products in mid- to high-power contactors. The EQT Acquisition was a cash free debt free transaction and was subject to a working capital adjustment for the difference between the actual and estimated net working capital. We made a cash payment of SGD 66.0 million ($48.3 million) on October 2, 2023, and set up a retention sum liability for potential adjustments to working capital and future tax or insurance claims in the amount of SGD 2.2 million ($1.6 million) resulting in an initial purchase price of SGD 68.3 million ($49.9 million). The working capital adjustment was finalized in January 2024 and an additional cash payment was made to EQT owners of SGD 0.8 million (approximately $0.6 million) resulting in an adjusted purchase price of SGD 68.8 million ($50.3 million). The retention liability for remaining tax, insurance and other claims as of December 28, 2024, was SGD 1.1 million ($0.8 million) and is accrued in long term other liabilities on our consolidated balance sheet. The retention liability for net working capital, remaining tax, insurance and other claims as of December 30, 2023 was SGD 2.2 million ($1.6 million) and $0.3 million and $1.3 million is accrued in short term and long term other liabilities, respectively, on our consolidated balance sheet. The EQT Acquisition has been accounted for in conformity with ASC 805. The acquired assets and liabilities of EQT were recorded at their respective fair values including an amount for goodwill representing the difference between the consideration paid and the fair value of the identifiable net assets. The table below summarizes the assets acquired and liabilities assumed as of October 2, 2023 (in thousands): Current assets, including cash received $ 10,135 Property, plant and equipment 538 Intangible assets 34,500 Goodwill 15,377 Total assets acquired 60,550 Liabilities assumed (10,203) Net assets acquired $ 50,347 The allocation of intangible assets subject to amortization is as follows (in thousands): Estimated Fair Value Weighted Average Useful Life (years) Developed technology $ 20,600 8.0 Customer relationships 12,900 10.0 Product backlog 100 1.0 Trademarks and trade name 900 5.0 Total intangible assets $ 34,500 Acquired intangible assets reported above are being amortized using the straight-line method over their estimated useful lives which approximates the pattern of how the economic benefit is expected to be used. This includes amounts allocated to customer relationships because of anticipated high customer retention rates that are common in the semiconductor capital equipment industry. 75 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The value assigned to developed technology was determined by using the relief from royalty method under the income approach, which included assumptions related to revenue growth rates, royalty rates, and discount rates. Developed technology, which comprises products that have reached technological feasibility, includes the products in EQT’s product line. The revenue estimates used to value the developed technology were based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by EQT and competitors. The estimated after-tax cash flows were based on a hypothetical royalty rate applied to the revenues for the developed technology. The discount rate utilized to discount the net cash flows of the developed technology to present value was based on the risk associated with the respective cash flows taking into consideration the perceived risk of the technology relative to the other acquired assets, the weighted average cost of capital, the internal rate of return, and the weighted average return on assets. The value assigned to customer relationships was determined by using the multi-period excess earnings method under the income approach. The estimated cash flows were based on revenues from the existing customers net of operating expenses and net of contributory asset charges. The discount rate utilized to discount the net cash flows of the customer relationships to present value was based on the respective cash flows taking into consideration the perceived risks. The value assigned to backlog acquired was estimated based upon the contractual nature of the backlog as of October 2, 2023, using the multi-period excess earnings method under the income approach to discount back to present value the cash flows attributable to the backlog at a discount rate commensurate with the expected risks of the backlog cash flows. The value assigned to trademarks and trade names acquired was determined by using the using the relief from royalty method under the income approach, which included assumptions related to revenue growth rates, royalty rates, and discount rates. EQT’s results of operations have been included starting October 2, 2023. The impact of EQT on Cohu’s consolidated statements of operations and comprehensive income were not material. In connection with the acquisition of EQT, during the twelve-month periods ended December 28, 2024 and December 30, 2023 we incurred acquisition- related costs, which were expensed as selling, general and administrative costs totaling $0.1 million and $1.1 million, respectively. No acquisition-related costs were incurred for EQT in fiscal 2022. 8. Derivative Financial Instruments Economic (Non-Designated) Hedges We enter into foreign currency forward contracts to manage our foreign exchange exposure related to intercompany transactions and other balance sheet items that are subject to revaluation. For accounting purposes, our foreign currency forward contracts that are not designated as hedging instruments are recorded at fair value as of the end of our reporting period in our consolidated balance sheets with changes in fair value recorded within foreign transaction gain (loss) in our consolidated statements of operations for both realized and unrealized gains and losses. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability. The location and amount of losses related to non-designated derivative instruments in the consolidated statements of operations were as follows (in thousands): Derivatives Not Designated Location of Gain (Loss) Fiscal Year as Hedging Instruments Recognized on Derivatives 2024 2023 2022 Foreign exchange forward contracts Foreign transaction gain (loss) $ (7,542) $ (2,127) $ (5,356) Net Investment Hedges In the third quarter of fiscal 2024 we began hedging foreign currency risk associated with net investment positions in certain of our foreign subsidiaries. To accomplish this, we enter into foreign currency forward contracts that are designated as hedges of our net investment. 76 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The location and amount of gains from net investment hedges recorded in the foreign currency translation component of accumulated AOCI were as follows (in thousands): Derivatives Designated Location of Gain (Loss) Fiscal Year as Hedging Instruments Recognized on Derivatives 2024 2023 2022 Foreign exchange forward contracts AOCI $ 964 N/A N/A Gains recognized in foreign transaction gain (loss), in the consolidated statements of operations for the portion of the net investment hedges excluded from the assessment of hedge effectiveness was $0.7 million for fiscal 2024. Since our net investment hedge program started in fiscal 2024 there were no amounts recorded in fiscal 2023 or fiscal 2022. Cash flows associated with settlements of our non-designated foreign currency forward contracts are reported in net cash provided by operating activities and our net investment hedges are included in investing activities in our consolidated statements of cash flows. Fair Value The fair value of our foreign currency forward contracts was determined based on current foreign currency exchange rates and forward points. All our foreign currency forward contracts outstanding on December 28, 2024 will mature during the first quarter of fiscal 2025. The following table provides information about our foreign currency forward contracts outstanding as of December 28, 2024 (in thousands): Currency Contract Position Contract Amount (Local Currency) Contract Amount (U.S. Dollars) Euro Buy 27,472 28,700 Swiss Franc Buy 8,716 9,700 South Korean Won Buy 2,208,855 1,500 Japanese Yen Buy 157,380 1,000 Euro Sell 54,250 60,500 Swiss Franc Sell 11,752 14,000 Our foreign currency contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that utilize observable market inputs. The fair value of our foreign currency contracts as of December 28, 2024 was immaterial. 9. Equity Share Repurchase Program 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 year ended December 28, 2024, we repurchased 915,504 shares of our common stock for $27.0 million to be held as treasury stock. For the year ended December 30, 2023, we repurchased 700,270 shares of our common stock for $23.6 million. For the year ended December 31, 2022, we repurchased 1,767,070 shares of our common stock for $50.7 million. As of December 28, 2024, $31.4 million remained available for us to repurchase shares of our common stock under our share repurchase program. 77 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Income Taxes Total income tax expense (benefit) was allocated as follows: (in thousands) 2024 2023 2022 Income from operations $ 4,872 $ 17,660 $ 29,868 Other comprehensive income 396 (984) 755 Total $ 5,268 $ 16,676 $ 30,623 Significant components of the provision (benefit) for income taxes are as follows: (in thousands) 2024 2023 2022 Current: U.S. Federal $ 717 $ 694 $ 1,609 U.S. State 36 86 456 Foreign 7,841 21,654 31,307 Total current 8,594 22,434 33,372 Deferred: U.S. Federal (13) 61 (9) Foreign (3,709) (4,835) (3,495) Total deferred (3,722) (4,774) (3,504) $ 4,872 $ 17,660 $ 29,868 Income (loss) before income taxes consisted of the following: (in thousands) 2024 2023 2022 U.S. $ (85,450) $ (37,799) $ 9,180 Foreign 20,504 83,615 117,535 Total $ (64,946) $ 45,816 $ 126,715 78 COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred tax effects Except for working capital requirements in certain foreign jurisdictions, we provide for substantially all taxes, including withholding and other residual taxes, related to unremitted earnings of our foreign subsidiaries. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of our deferred tax assets and liabilities were as follows: (in thousands) 2024 2023 Deferred tax assets: Inventory, receivable and warranty reserves $ 11,034 $ 10,931 Net operating loss carryforwards 39,572 36,602 Tax credit carryforwards 35,788 34,637 Capitalized R&D 35,348 30,485 Accrued employee benefits 3,742 3,348 Stock-based compensation 4,511 3,227 Lease liabilities 2,544 3,222 Uniform capitalization 2,553 1,564 Other 3,064 - Gross deferred tax assets 138,156 124,016 Less valuation allowance (114,517) (99,888) Total deferred tax assets 23,639 24,128 Deferred tax liabilities: Intangible assets and other acquisition basis differences 25,848 34,076 Operating lease right-of-use assets 2,226 2,854 Unremitted earnings of foreign subsidiaries 4,898 4,106 Other 4,986 50 Total deferred tax liabilities 37,958 41,086 Net deferred tax liabilities $ (14,319) $ (16,958) The components of total net deferred tax assets (liabilities), net of valuation allowances, as shown in our consolidated balance sheets are as follows: (in thousands) 2024 2023 Other assets (long-term) $ 5,083 $ 6,196 Long-term deferred income tax liabilities (19,402) (23,154) Net deferred tax liabilities $ (14,319) $ (16,958) Companies are required to assess whether a valuation allowance should be recorded against their deferred tax assets (“DTAs”) based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether DTAs will be realized are, (1) future reversals of existing taxable temporary differences (i.e. offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards. 79 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. We have evaluated our DTAs each reporting period, including an assessment of taxable income in prior carryback years, future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and prudent and feasible tax planning strategies that we would be willing to undertake to prevent a deferred tax asset from otherwise expiring. The assessment regarding whether a valuation allowance is required or whether a change in judgement regarding the valuation allowance has occurred also considers all available positive and negative evidence, including but not limited to: • Nature, frequency, and severity of cumulative losses in recent years • Duration of statutory carryforward and carryback periods • Statutory limitations against utilization of tax attribute carryforwards against taxable income • Historical experience with tax attributes expiring unused • Near- and medium-term financial outlook The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. Accordingly, it is generally difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. We use the actual results for the last two years and current year results as the primary measure of cumulative losses in recent years. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events recognized in the financial statements or tax returns and future profitability. The recognition of deferred tax assets represents our best estimate of those future events. Changes in the current estimates, due to unanticipated events or otherwise, could have a material effect on our results of operations and financial condition. In certain tax jurisdictions, our analysis indicates that it has cumulative losses in recent years. This is considered significant negative evidence, which is objective and veritable and, therefore, difficult to overcome. However, the cumulative loss position is not solely determinative and, accordingly, we consider all other available positive and negative evidence in this analysis. Based on the evidence available, including a lack of sustainable earnings and history of expiring unused net operating losses and tax credits, we continue to maintain the judgement that a previously recorded valuation allowance against substantially all net deferred tax assets in the United States is required. If a change in judgement regarding this valuation allowance were to occur in the future, we will record a potentially material deferred tax benefit, which could result in a favorable impact on the effective tax rate in that period. Our valuation allowance on our DTAs at December 28, 2024, and December 30, 2023, was approximately $114.5 million and $99.9 million, respectively. The remaining gross DTAs for which a valuation allowance was not recorded are realizable primarily through future reversals of existing taxable temporary differences and to a lesser extent future taxable income in certain jurisdictions exclusive of reversing temporary differences and carryforwards. 80 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The reconciliation of income tax computed at the U.S. federal statutory tax rate to the provision for income taxes is as follows: (in thousands) 2024 2023 2022 Tax provision at U.S. 21% statutory rate $ (13,638) $ 9,470 $ 26,610 State income taxes, net of federal tax benefit (2,126) (633) (1,535) Accruals, adjustments and releases from statute expirations (2,372) 579 348 Federal R&D credits (1,103) (1,360) (1,679) Stock-based compensation 502 (1,504) (572) Excess executive compensation 715 1,375 946 Change in valuation allowance 14,844 10,654 13,307 GILTI, net of foreign tax credits 2,613 1,735 3,458 Foreign rate differential 146 2,093 (6,131) Withholding and other foreign taxes, net of foreign tax credit 1,206 254 (3,819) Other, net 4,085 (5,003) (1,065) $ 4,872 $ 17,660 $ 29,868 An accounting policy may be selected to either (i) treat taxes due on future U.S. inclusions in taxable income related to global intangible low-taxed income (“GILTI”) as a current-period expense when incurred or (ii) factor such amounts into a company’s measurement of its deferred taxes. We have elected to account for GILTI as a period cost. At December 28, 2024, we had federal, state and foreign net operating loss carryforwards of approximately $140.3 million, $127.8 million and $1.8 million, respectively, that expire in various tax years beginning in 2025 through 2043 or have no expiration date. We also have federal and state tax credit carryforwards at December 28, 2024 of approximately $3.0 million and $35.4 million, respectively, certain of which expire in various tax years beginning in 2025 through 2043, or have no expiration date. The federal and state loss and credit carryforwards are subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code and applicable state tax laws. We analyzed and determined that there were no ownership changes during the three- year period ending December 28, 2024. We will continue to assess the realizability of these carryforwards in subsequent periods. Future changes in the ownership of Cohu could further limit the utilization of these carryforwards. We have certain tax holidays with respect to our operations in Malaysia and the Philippines. These holidays require compliance with certain conditions and expire at various dates through 2038. The impact of these holidays was an increase in net income of approximately $1.0 million or $0.02 per share in 2024, $3.8 million or $0.08 per share in fiscal 2023 and $4.5 million, or $0.09 per share in fiscal 2022. A reconciliation of our gross unrecognized tax benefits, excluding accrued interest and penalties, is as follows: (in thousands) 2024 2023 2022 Balance at beginning of year $ 35,900 $ 33,368 $ 33,391 Additions for tax positions of current year 858 899 910 Additions/(Reductions) for tax positions of prior years (788) 1,802 (428) Reductions due to lapse of the statute of limitations (2,089) (295) (354) Foreign exchange rate impact (116) 126 (151) Balance at end of year $ 33,765 $ 35,900 $ 33,368 If the unrecognized tax benefits at December 28, 2024 are ultimately recognized, excluding the impact of U.S. tax benefits netted against deferred taxes that are subject to a valuation allowance, approximately $5.2 million ($7.5 million at December 30, 2023 and $5.8 million at December 31, 2022) would result in a reduction in our income tax expense and effective tax rate. It is reasonably possible that unrecognized tax benefits related to transfer pricing and foreign withholding tax will decrease by up to $0.2 million within the next 12 months. 81 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We recognize interest and penalties related to unrecognized tax benefits in income tax expense. Cohu had approximately $0.5 million and $0.7 million accrued for the payment of interest and penalties at December 28, 2024, and December 30, 2023, respectively. Interest expense, net of accrued interest reversed, was $(0.2) million in 2024 and $(0.1) million in 2023 and 2022. Our U.S. federal income tax returns for fiscal 2008 and for years after fiscal 2020 remain open to examination, subject to the statute of limitations. Our U.S. state income tax returns for years after fiscal 2019 remain open to examination, subject to the statute of limitations. Net operating loss and credit carryforwards arising prior to these years are also open to examination if and when utilized. The statute of limitations for the assessment and collection of income taxes related to our foreign tax returns varies by country. In the foreign countries where we have significant operations these time periods generally range from four to ten years after the year for which the tax return is due or the tax is assessed. 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, Singapore, Philippines and the United States. We believe our financial statement accruals for income taxes are appropriate. Tax positions have been reflected in the consolidated financial statements in accordance ASC Topic 740, Income Taxes, (“ASC 740”), Income Taxes. Such tax positions are, based solely on their technical merits, more likely than not to be sustained upon examination by taxing authorities and reflect the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. We have both intent and ability to initiate a claim pursuant to the competent authority (e.g., Mutual Agreement Procedure) for reasonable and prudent situations such as, for example, when the resulting tax benefit exceeds the costs involved to obtain such tax benefit, and the success of prevailing upon pursuing the competent authority is more likely than not achievable. 82 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Segment and Geographic Information We applied the provisions of 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 CODM, which is our Chief Executive Officer, Luis A. Müller and for which discrete financial information is available. We have determined that our three identified operating segments are: THG, STG and ISG. Our THG, STG and ISG 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, which derives revenue from the design and manufacture of equipment and components used in the testing of semiconductors. The CODM assesses performance of the Semiconductor Test & Inspection segment and decides how to allocate resources based on income (loss) before taxes. The table below summarizes selected financial information for our single reportable segment. (in thousands) 2024 2023 2022 Net sales $ 401,779 $ 636,322 $ 812,775 Cost and expenses: Cost of sales 220,436 332,609 428,803 Research and development 81,231 85,178 89,489 Selling 51,584 61,056 60,006 General and administrative 60,328 58,196 60,212 Amortization of purchased intangible assets 39,087 36,355 33,185 Stock-based compensation 20,740 17,237 14,918 Other segment items (1) (6,681) (125) (553) Income (loss) before taxes $ (64,946) $ 45,816 $ 126,715 (1) Other segment items include restructuring charges as well as miscellaneous non-operating items. 83 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the last three years, the following customers comprised 10% or greater of our consolidated net sales: 2024 2023 2022 STMicroelectronics * 12.0% * * Less than 10% of consolidated net sales. Net sales to customers, attributed to countries based on product shipment destination, were as follows: (in thousands) 2024 2023 2022 China $ 59,491 $ 92,408 $ 146,227 United States 56,663 76,995 79,093 Malaysia 54,016 100,949 99,508 Philippines 51,310 92,529 111,647 Singapore 40,827 53,518 67,019 Rest of the world 139,472 219,923 309,281 Total, net $ 401,779 $ 636,322 $ 812,775 84 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. Geographic location of our property, plant and equipment and other long-lived assets was as follows: (in thousands) 2024 2023 Property, plant and equipment: Philippines $ 23,072 $ 22,501 Germany 15,705 15,843 Malaysia 15,264 4,700 United States 13,601 16,093 Japan 6,051 7,810 Rest of the world 1,093 2,138 Total, net $ 74,786 $ 69,085 Goodwill and other intangible assets: Germany $ 128,513 $ 149,592 United States 92,251 111,660 Malaysia 61,252 63,249 Singapore 56,276 60,875 Rest of the world 7,064 8,052 Total, net $ 345,356 $ 393,428 12. Leases We lease certain of our facilities, equipment and vehicles under non-cancelable operating and finance leases. Leases with initial terms with 12 months or less are not recorded in the consolidated balance sheet, but we recognized those lease payments in the consolidated statements of operations on a straight- line basis over the lease term. Lease and non-lease components are included in the calculation of the right of use asset (“ROU”) asset and lease liabilities. Our leases have remaining lease terms ranging from 1 year to 33 years, some of which include one or more options to extend the lease for up to 25 years. Our lease term includes renewal terms when we are reasonably certain that we will exercise the renewal options. We sublease certain leased assets to third parties, mainly as a result of unused space in our facilities. 85 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Supplemental balance sheet information related to leases was as follows: December 28, December 30, (in thousands) Classification 2024 2023 Assets: Operating lease assets Operating lease right-of-use assets $ 13,908 $ 16,778 Finance lease assets Property, plant and equipment, net (1) 9,676 247 Total lease assets $ 23,584 $ 17,025 Liabilities: Current: Operating Other accrued liabilities $ 5,296 $ 5,122 Finance Other accrued liabilities 8,418 11 Noncurrent: Operating Long-term lease liabilities 9,890 13,160 Finance Long-term lease liabilities 3 15 Total lease liabilities $ 23,607 $ 18,308 Weighted-average remaining lease term (years): Operating leases 5.2 5.5 Finance leases - 2.1 Weighted-average discount rate: Operating leases 6.4% 6.4% Finance leases 2.8% 4.0% (1) Finance lease assets are recorded net of accumulated amortization of $0.4 million and $0.3 million in fiscal 2024 and 2023, respectively. During the first quarter of fiscal 2024, we executed an agreement to purchase our leased facility in Malaysia for MYR 41.8 million, with the expectation that the title would transfer during fiscal 2024. We treated this transaction as a lease modification, and changed the classification to a finance lease, reducing our operating lease assets and liabilities by $0.4 million and increasing our finance lease assets and current lease liabilities by $8.8 million and $7.9 million, respectively. Due to a seller-imposed delay during the third quarter of fiscal 2024, the purchase date was delayed until fiscal 2025, triggering a modification of the finance lease resulting in the asset increasing to $9.5 million. At December 28, 2024, the finance lease liability decreased to $8.4 million, as a result of fluctuations in foreign currency exchange rates. On December 30, 2024, we completed the purchase of our leased facility in Melaka Malaysia. The components of lease expense were as follows: December 28, December 30, December 31, (in thousands) 2024 2023 2022 Operating leases $ 6,247 $ 6,691 $ 6,698 Variable lease expense 2,542 2,389 2,220 Short-term operating leases 4 16 4 Finance leases: Amortization of leased assets 66 90 88 Interest on lease liabilities 269 1 1 Sublease income (4) (29) (69) Net lease cost $ 9,124 $ 9,158 $ 8,942 86 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future minimum lease payments at December 28, 2024, are as follows: Operating Finance (in thousands) leases leases Total 2025 $ 6,064 $ 8,425 $ 14,489 2026 3,447 3 3,450 2027 1,720 - 1,720 2028 1,314 - 1,314 2029 1,332 - 1,332 Thereafter 4,431 - 4,431 Total lease payments 18,308 8,428 26,736 Less: Interest (3,122) (7) (3,129) Present value of lease liabilities $ 15,186 $ 8,421 $ 23,607 Supplemental cash flow information related to leases was as follows: December 28, December 30, December 31, (in thousands) 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 6,448 $ 6,756 $ 6,716 Operating cash flows from finance leases $ 263 $ 1 $ 1 Financing cash flows from finance leases $ 24 $ 52 $ 167 Leased assets obtained in exchange for new finance lease liabilities $ 9,543 $ - $ - Leased assets obtained in exchange for new operating lease liabilities $ 2,987 $ 1,415 $ 2,874 Financing lease assets acquired in MCT acquisition $ - $ 19 $ - Operating lease assets acquired in MCT acquisition $ - $ 130 $ - 13. Commitments and Contingencies From time to time we are involved in various legal proceedings, examinations by various tax authorities and claims that have arisen in the ordinary course of our business. The outcome of any litigation is inherently uncertain. While there can be no assurance, we do not believe at the present time that the resolution of these matters will have a material adverse effect on our assets, financial position or results of operations. 14. Guarantees Accrued Warranty Changes in accrued warranty during the three-year period ended December 28, 2024, was as follows: (in thousands) 2024 2023 2022 Beginning balance $ 5,017 $ 6,214 $ 7,691 Warranty accruals 3,480 6,555 8,897 Warranty payments (5,404) (7,862) (10,374) Warranty liability transferred - 110 - Ending balance $ 3,093 $ 5,017 $ 6,214 Accrued warranty amounts expected to be incurred after one year are included in noncurrent other accrued liabilities in the consolidated balance sheet. These amounts totaled $0.1 million and $0.4 million at December 28, 2024 and December 30, 2023, respectively. 87 Table of Contents COHU, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. Accumulated Other Comprehensive Income (Loss) Components of other comprehensive income (loss), on an after-tax basis, were as follows: (in thousands) Before Tax amount Tax (Expense) Benefit Net of Tax Amount Year ended December 31, 2022 Foreign currency translation adjustments $ (17,991) $ 41 $ (17,950) Adjustments related to postretirement benefits 6,690 (796) 5,894 Change in unrealized gain/loss on investments (694) - (694) Other comprehensive loss $ (11,995) $ (755) $ (12,750) Year ended December 30, 2023 Foreign currency translation adjustments $ 6,256 $ 559 $ 6,815 Adjustments related to postretirement benefits (2,800) 425 (2,375) Change in unrealized gain/loss on investments 793 - 793 Other comprehensive loss $ 4,249 $ 984 $ 5,233 Year ended December 28, 2024 Foreign currency translation adjustments $ (16,540) $ (299) $ (16,839) Adjustments related to postretirement benefits 615 (97) 518 Change in unrealized gain/loss on investments (55) - (55) Other comprehensive income $ (15,980) $ (396) $ (16,376) Components of accumulated other comprehensive income (loss), net of tax, at the end of each period are as follows: (in thousands) 2024 2023 Accumulated net currency translation adjustments (1) $ (56,332) $ (39,493) Accumulated net adjustments related to postretirement benefits 5,174 4,656 Accumulated net unrealized gain/loss on investments 3 58 Total accumulated other comprehensive loss $ (51,155) $ (34,779) (1) Includes a gain of $1.0 million from the settlement of net investment hedges in fiscal 2024. 16. Related Party Transactions At December 28, 2024, certain of our cash and short-term investments were held and managed by BlackRock, Inc. which owns 16.0% of our outstanding common stock as reported in its Form 13-G/A filing made with the Securities and Exchange Commission on January 22, 2024. We have an ownership interest in Fraes-und Technologiezentrum GmbH Frasdorf (“FTZ”), a company based in Germany that provides milling services to our wholly owned subsidiaries. This investment was accounted for under the equity method and was not material to our consolidated balance sheet in fiscal 2023. In fiscal 2024, due to the current business conditions we impaired the full value of our investment in FTZ and recorded a charge $0.9 million in SG&A. During fiscal 2024, 2023 and 2022, purchases of products from FTZ were not material. 17. Subsequent Events Purchase of Leased Facility in Malaysia On December 30, 2024, we completed the purchase of our leased facility in Melaka Malaysia. The purchase price of the facility was MYR 41.8 million of which a 10% deposit was paid at initiation of the purchase agreement in January 2024 and the remaining portion MYR 37.6 million was paid upon completion of the transaction on December 30, 2024. The transaction was financed with cash on hand as well as proceeds from our Malaysian subsidiary’s new revolving credit facility. The revolving line of credit provides up to MYR 40 million, bears interest at 4.24% and renews every month. The transaction is a fiscal 2025 event and will result in a reduction in our finance lease assets and current lease liabilities of $9.5 million and $8.4 million, respectively. Acquisition of Tignis, Inc. On January 7, 2025, we completed the acquisition of Tignis, Inc. (“Tignis”), a provider of artificial intelligence (AI) process control and analytics-based monitoring software. The acquisition was not material to our consolidated financial statements. The preliminary cash purchase price was $35.1 million, exclusive of a potential $5.0 million earnout based on achieving certain revenue and expense targets through the period ending December 31, 2025, and is subject to a working capital adjustment and was funded by cash on hand. This strategic acquisition enables us to expand our analytics offerings to the semiconductor process control market targeted by Tignis’ PAICe Monitor and PAICe Maker solutions. Tignis is also expected to deepen Cohu’s expertise in data science while adding advanced analytics to our DI-Core software. 2025 Strategic Restructuring On February 19, 2025, we approved and began executing a strategic restructuring program designed to reposition our organization and improve our cost structure (“2025 Restructuring Program”). As part of the 2025 Restructuring Program we plan on consolidating certain operations that are currently based in La Chaux-de-Fonds, Switzerland, and in Kolbermoor, Germany, respectively, into other lower cost locations owned by the Company. As part of the 2025 Restructuring Program, we also anticipate making headcount reductions in the U.S. and throughout Asia. Relating to the operations consolidation actions, we notified certain impacted employees of the corresponding reduction in force program at those locations which will require negotiation with the microtechnology and Swiss watch trade union and the German labor organization which represent certain of the employees at their respective locations. The 2025 Restructuring Program will reduce headcount, enable us to optimize the facilities of our operations, as well as transition certain manufacturing to other lower cost regions. The 2025 Restructuring Program is being implemented as part of a comprehensive review of our operations with the goal of reducing costs during the extended downturn in the semiconductor test and inspection equipment industry. As a result of the activities described above, we expect to recognize total pretax charges, consisting primarily of severance and other termination benefits, to be in the range of $6.1 million to $7.2 million, that are within the scope of ASC 420 and will be paid predominantly in cash. We anticipate that these charges will be recognized throughout fiscal 2025 and all costs will be incurred by our Semiconductor Test & Inspection segment. 88 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Cohu, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Cohu, Inc. (the Company) as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 28, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 20, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 89 Table of Contents Valuation of inventories Description of the Matter As of December 28, 2024, the Company’s consolidated inventories balance was $141.9 million. As described in Note 1 to the consolidated financial statements, the Company values its inventories at lower of cost, determined on a first-in, first-out basis, or net realizable value. Obsolete inventory or inventory in excess of management's estimated usage requirement is written down to its estimated net realizable value. Auditing management's estimates for excess and obsolete inventory involved subjective auditor judgment because the estimates rely on a number of factors that are affected by market and economic conditions outside the Company's control. In particular, the excess and obsolete inventory calculations are sensitive to the determination of expected future product demand. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s excess and obsolete inventory valuation process, including management’s assessment of the expected future product demand and data underlying the excess and obsolete inventory valuation. To test the valuation of inventories, our audit procedures included, among others, evaluating expected future product demand and testing the completeness and accuracy of the underlying data used by management in the analysis of excess and obsolete inventory. We evaluated adjustments to inventory reserves for specific product expectations, compared the balance of on-hand inventories to demand assumptions, and assessed the historical accuracy of management’s estimates by comparing prior period forecasted demand to actual consumption. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1956. San Diego, California February 20, 2025 90 Table of Contents Index to Exhibits 15. (b) The following exhibits are filed as part of, or incorporated into, the 2024 Cohu, Inc. Annual Report on Form 10-K: Exhibit No. Description 3.1 Amended and Restated Certificate of Incorporation of Cohu, Inc. incorporated herein by reference to Exhibit 3.1 from the Cohu, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2024 3.2 Amended and Restated Bylaws of Cohu, Inc. incorporated herein by reference to Exhibit 3.1 from the Cohu, Inc. Form 8-K filed with the Securities and Exchange Commission on May 12, 2023 4.1 Description of Capital Stock incorporated herein by reference to Exhibit 4.1 from the Cohu, Inc. Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2023 10.1 Credit and Guaranty Agreement dated as of October 1, 2018, by and among Cohu, Inc., Certain Subsidiaries of Cohu, Inc. and Deutsche Bank AG New York Branch, incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Form 10-Q filed with the Securities and Exchange Commission on November 7, 2018 10.2 Pledge and Security Agreement dated as of October 1, 2018, by and among Cohu, Inc., Certain Subsidiaries of Cohu, Inc. and Deutsche Bank AG New York Branch, incorporated herein by reference to Exhibit 10.2 from the Cohu, Inc. Form 10-Q filed with the Securities and Exchange Commission on November 7, 2018 10.3 Cohu, Inc. 2005 Equity Incentive Plan, as amended May 10, 2023, incorporated herein by reference to Appendix B from the Cohu, Inc. Form DEF 14A filed with the Securities and Exchange Commission on March 28, 2023* 10.4 Cohu, Inc. 1997 Employee Stock Purchase Plan, as amended May 10, 2023, incorporated herein by reference to Appendix C from the Cohu, Inc. Form DEF 14A filed with the Securities and Exchange Commission on March 28, 2023* 10.5 Cohu, Inc. Deferred Compensation Plan (as amended and restated) incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2008* 10.6 Form of executive employee restricted stock unit agreement for use with restricted stock units granted pursuant to the Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Form 10-Q filed with the Securities and Exchange Commission on May 5, 2023* 10.7 Form of non-employee director restricted stock unit agreement for use with restricted stock units granted pursuant to the Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by reference to Exhibit 10.2 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015* 10.8 Form of non-employee director restricted stock unit deferral election form for use with restricted stock units granted pursuant to the Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by reference to Exhibit 10.3 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015* 91 Table of Contents 10.9 Non-employee director fee deferral election form incorporated herein by reference to Exhibit 10.4 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015* 10.10 Form of deferred stock agreement for shares granted pursuant to the Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by reference to Exhibit 10.5 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015* 10.11 Form of stock option agreement for use with stock options granted pursuant to the Cohu, Inc. 2005 Equity Incentive Plan incorporated herein by reference to Exhibit 10.6 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2015* 10.12 Form of Indemnification Agreement, incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Current Report on Form 8-K filed December 13, 2018* 10.13 Cohu, Inc. Retiree Health Benefits Agreement (as amended) incorporated herein by reference to Exhibit 10.2 from the Cohu, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2008* 10.14 Lease agreement dated December 4, 2015 by and between CT Crosthwaite I, LLC and Cohu, Inc. incorporated herein by reference to Exhibit 10.14 from the Cohu, Inc. Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2016 10.15 Severance Agreement, dated September 8, 2020, between the Company and Christopher G. Bohrson incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 10.16 Severance Agreement, dated September 8, 2020, between the Company and Jeffrey D. Jones incorporated herein by reference to Exhibit 10.2 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 10.17 Severance Agreement, dated September 8, 2020, between the Company and Thomas D. Kampfer incorporated herein by reference to Exhibit 10.3 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 10.18 Severance Agreement, dated September 8, 2020, between the Company and Luis A. Müller incorporated herein by reference to Exhibit 10.4 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 10.19 Change in Control Agreement, dated September 8, 2020, between the Company and Christopher G. Bohrson incorporated herein by reference to Exhibit 10.5 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 10.20 Change in Control Agreement, dated September 8, 2020, between the Company and Jeffrey D. Jones incorporated herein by reference to Exhibit 10.6 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 10.21 Change in Control Agreement, dated September 8, 2020, between the Company and Thomas D. Kampfer incorporated herein by reference to Exhibit 10.7 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 10.22 Change in Control Agreement, dated September 8, 2020, between the Company and Luis A. Müller incorporated herein by reference to Exhibit 10.8 from the Cohu, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2020 * 92 Table of Contents 10.23 First Amendment to Credit and Guaranty Agreement, dated as of June 16, 2023, between Cohu, Inc. and Deutsche Bank AG New York Branch, as administrative agent incorporated herein by reference to Exhibit 10.1 from the Cohu, Inc. Form 8-K filed with the Securities and Exchange Commission on June 23, 2023 19 Cohu, Inc. Insider Trading Policy 21 Subsidiaries of Cohu, Inc. 23 Consent of Independent Registered Public Accounting Firm 31.1 Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 for Luis A. Müller 31.2 Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 for Jeffrey D. Jones 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Luis A. Müller 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Jeffrey D. Jones 97 Cohu, Inc. Policy for Recovery of Erroneously Awarded Incentive Compensation 101.INS Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Management contract or compensatory plan or arrangement 93 Table of Contents Item 16. Form 10-K Summary. None. 94 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COHU, INC. Date: February 20, 2025 By: /s/ Luis A. Müller Luis A. Müller President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ James A. Donahue Chairperson of the Board, February 20, 2025 James A. Donahue Director /s/ Luis A. Müller President and Chief Executive Officer, Director February 20, 2025 Luis A. Müller (Principal Executive Officer) /s/ Jeffrey D. Jones Senior Vice President, Finance and CFO February 20, 2025 Jeffrey D. Jones (Principal Financial and Accounting Officer) /s/ William E. Bendush Director February 20, 2025 William E. Bendush /s/ Steven J. Bilodeau Director February 20, 2025 Steven J. Bilodeau /s/ Andrew M. Caggia Director February 20, 2025 Andrew M. Caggia /s/ Yon Y. Jorden Director February 20, 2025 Yon Y. Jorden /s/ Andreas W. Mattes Director February 20, 2025 Andreas W. Mattes /s/ Karen M. Rapp Director February 20, 2025 Karen M. Rapp /s/ Nina L. Richardson Director February 20, 2025 Nina L. Richardson 95 Table of Contents COHU, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands) Additions (Reductions) Balance at Not Additions Balance Beginning Charged Charged Deductions/ at End Description of Year to Expense (1) to Expense Write-offs of Year Allowance for doubtful accounts: Year ended December 31, 2022 $ 290 $ (8) $ 122 $ 205 $ 199 Year ended December 30, 2023 $ 199 $ 5 $ 140 $ 4 $ 340 Year ended December 28, 2024 $ 340 $ (14) $ 15 $ 151 $ 190 Reserve for excess and obsolete inventories: Year ended December 31, 2022 $ 23,012 $ 698 $ 7,179 $ 4,018 $ 26,871 Year ended December 30, 2023 $ 26,871 $ 648 $ 4,540 $ 11,641 $ 20,418 Year ended December 28, 2024 $ 20,418 $ 6,203 $ 5,442 $ 3,886 $ 28,177 (1) Changes in reserve balances resulting from foreign currency impact and reclassifications from other reserves. 96 Exhibit 19 Cohu, Inc. INSIDER TRADING POLICY (Version March 12, 2024) I. Prohibitions Applicable While in Possession of Material Nonpublic Information The purchase or sale of securities by any person who possesses material nonpublic information may violate federal and state securities laws. Furthermore, it is important that any appearance of trading on the basis of material nonpublic information also be avoided. Therefore, it is the policy of Cohu, Inc. (the “Company”) that any person subject to this Policy who possesses material nonpublic information pertaining to the Company may not trade in the Company’s securities, advise anyone else to do so, or tip the information to anyone else until that information has been disseminated to the public. Specifically, no director, officer or employee of the Company or other person subject to this Policy who is aware of material nonpublic information relating to the Company may directly or through family members or other persons or entities: ● Buy, sell or otherwise transact in securities of the Company, other than pursuant to a trading plan that complies with Rule 10b5-1 promulgated by the Securities and Exchange Commission (“SEC”), ● pass that information on to others outside the Company, including friends and family (a practice referred to as “tipping”), or ● make recommendations or express opinions as to trading in the Company’s securities, except such person may advise others not to trade in the Company’s securities if such trading might violate the law or this Policy. In addition, it is the policy of the Company that no person subject to this Policy who, in the course of working for the Company, learns of material nonpublic information of another company, such as a customer or supplier, may trade in that company’s securities (or tip or make recommendations to others) until that information becomes public or is no longer material. II. Persons Subject to this Policy This Policy applies to all directors, officers and employees of the Company and entities (such as trusts, limited partnerships and corporations) over which such individuals have or share voting or investment control. For the purposes of this Policy, persons subject to this Policy are included within the term “employee.” This Policy also applies to any other persons, including consultants, whom the Company’s Insider Trading Compliance Officer (the “Compliance Officer”) may designate because they have access to material nonpublic information concerning the Company, as well as any person who receives material nonpublic information from any Company insider. Persons subject to this Policy are responsible for ensuring compliance by family members and members of their households and by entities over which they exercise voting or investment control. 1 of 13 III. Executive Officers, Directors and Certain Designated Employees Are Subject to Additional Restrictions Because Section 16 Insiders (i.e., the Company’s executive officers and members of the Company’s Board of Directors (“Section 16 Insiders”)), who are subject to the reporting provisions and trading restrictions of Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) and Insider Employees (i.e., those employees that the Company has designated as employees who have frequent access to material nonpublic information concerning the Company) are more likely than other employees to possess material nonpublic information about the Company, and in light of the reporting requirements to which Section 16 Insiders are subject under Section 16 of the Exchange Act, Section 16 Insiders and Insider Employees are subject to the additional restrictions set forth in Appendix I hereto. For purposes of this Policy, Section 16 Insiders and Insider Employees are each referred to as “Insiders.” IV. Applicability of This Policy to Transactions in Company Securities A. General Rule. This Policy applies to all transactions in the Company’s securities, including common stock and any other securities the Company may issue from time to time, such as preferred stock, warrants and convertible debentures, as well as to derivative securities relating to the Company’s stock, whether or not issued by the Company, such as exchange-traded options. For purposes of this Policy, the term “trade” includes any transaction in the Company’s securities, including gifts and pledges. B. Employee Benefit Plans Stock Option Plans. The trading prohibitions and restrictions set forth in this Policy do not apply to the exercise of stock options for cash, but do apply to all sales of securities acquired through the exercise of stock options. Thus, this Policy does apply to the “same-day sale” or cashless exercise of Company stock options. Employee Stock Purchase and Benefit Plans. The trading prohibitions and restrictions set forth in this Policy do not apply to periodic contributions by the Company or employees to employee stock purchase plans or employee benefit plans (e.g., a pension or 401(k) plan) which are used to purchase Company securities pursuant to the employee’s advance instructions. However, no officers or employees may alter their instructions regarding the level of withholding or the purchase of Company securities in such plans while in the possession of material nonpublic information. Any sale of securities acquired under such plans is subject to the prohibitions and restrictions of this Policy. C. Tax Withholding Transactions. This policy does not apply to the surrender of shares directly to the Company to satisfy tax withholding obligations as a result of the issuance of shares upon vesting or exercise of restricted stock units, options or other equity awards granted under the Company’s equity compensation plans. However, any market sale of the stock received upon exercise or vesting of any such equity awards remains subject to all provisions of this Policy whether or not for the purpose of generating the cash needed to pay the exercise price or pay taxes. 2 of 13 V. Definition of “Material Nonpublic Information” A. “Material.” Information about the Company is “material” if it would be expected to affect the investment or voting decisions of a reasonable shareholder or investor, or if the disclosure of the information would be expected to significantly alter the total mix of the information in the marketplace about the Company. In simple terms, material information is any type of information which could reasonably be expected to affect the market price of the Company’s securities. Both positive and negative information may be material. While it is not possible to identify all information that would be deemed material, the following types of information ordinarily would be considered material: ● Financial performance, especially quarterly and year-end earnings, and significant changes in financial performance or liquidity. ● Company projections and strategic plans. ● Potential mergers or acquisitions, the sale of Company assets or subsidiaries or major partnering agreements. ● New major contracts, orders, suppliers, customers or finance sources or the loss thereof. ● Major discoveries or significant changes or developments in products or product lines, research or technologies. ● Significant changes or developments in supplies or inventory, including significant product defects, recalls or product returns. ● Significant pricing changes. ● Stock splits, public or private securities/debt offerings, or changes in Company dividend policies or amounts. ● Significant changes in senior management or membership of the Board of Directors. ● Significant labor disputes or negotiations. ● Actual or threatened major litigation, or the resolution of such litigation. ● Receipt or denial of regulatory approval for products. B. “Nonpublic.” Material information is “nonpublic” if it has not been widely disseminated to the general public through a report filed with the SEC or through major newswire services, national news services or financial news services. For the purpose of this Policy, information will be considered public after the close of trading on the second full trading day following the Company’s widespread public release of the information. C. Consult the Compliance Officer When in Doubt. Any employees who are unsure whether the information that they possess is material or nonpublic must consult the Compliance Officer for guidance before trading in any Company securities. 3 of 13 VI. Employees May Not Participate in Chat Rooms Employees are prohibited from participating in chat room discussions or other social media or Internet forums regarding Company confidential information and from making disparaging statements relating to the Company’s operations or regarding its customers, suppliers, vendors or stockholders. VII. Only Designated Company Spokespersons Are Authorized to Disclose Material Nonpublic Information The Company is required under the federal securities laws to avoid the selective disclosure of material nonpublic information. The Company has established procedures for releasing material information in a manner that is designed to achieve broad dissemination of the information immediately upon its release. Employees may not, therefore, disclose material information to anyone outside the Company, including family members and friends, other than in accordance with those established procedures. Any inquiries from outsiders regarding material nonpublic information about the Company should be forwarded to the Compliance Officer, the Chief Executive Officer or the Chief Financial Officer. VIII. Certain Types of Transactions Are Prohibited A. Short Sales. Short sales of the Company’s securities evidence an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller has no confidence in the Company or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s performance. For these reasons, short sales of the Company’s securities are prohibited by this Policy. In addition, Section 16(c) of the Exchange Act expressly prohibits executive officers and directors from engaging in short sales. B. Publicly Traded Options. A transaction in options is, in effect, a bet on the short-term movement of the Company’s stock and therefore creates the appearance that the employee is trading based on inside information. Transactions in options also may focus the employee’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in puts, calls or other derivative securities involving the Company’s stock, on an exchange or in any other organized market, are prohibited by this Policy. C. Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow an employee to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the employee to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the employee may no longer have the same objectives as the Company’s other shareholders. Therefore, such transactions involving the Company’s securities are prohibited by this Policy. D. Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company securities, directors, officers and other employees are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan. 4 of 13 E. Short-Swing Trading, Control Stock and Section 16 Reports. Officers and directors subject to the reporting obligations under Section 16 of the Exchange Act should take care to avoid short-swing transactions (within the meaning of Section 16(b) of the Exchange Act) and the restrictions on sales by control persons (Rule144 under the Securities Act of 1933, as amended), and should file all appropriate Section 16(a) reports (Forms 3, 4 and 5) and any notices of sale required by Rule 144. IX. The Company May Suspend All Trading Activities by Employees In order to avoid any questions and to protect both employees and the Company from any potential liability, from time to time the Company may impose a “blackout” period during which some or all of the Company’s employees may not trade the Company’s securities. The Compliance Officer will impose such a blackout period if, in his or her judgment, there exists nonpublic information that would make trades by the Company’s employees (or certain of the Company’s employees) inappropriate in light of the risk that such trades could be viewed as violating applicable securities laws. X. Violations of Insider Trading Laws or This Policy Can Result in Severe Consequences A. Civil and Criminal Penalties. The consequences of prohibited insider trading or tipping can be severe. Persons violating insider trading or tipping rules may be required to disgorge the profit made or the loss avoided by the trading, pay civil penalties up to three times the profit made or loss avoided, face private action for damages, as well as being subject to criminal penalties, including up to 20 years in prison and fines of up to $5 million or three times the gain from the offense or loss avoided. The Company and/or the supervisors of the person violating the rules may also be required to pay major civil or criminal penalties. B. Company Discipline. Violation of this Policy or federal or state insider trading laws may subject persons subject to the Policy to disciplinary action by the Company, including termination for cause (or, in the case of directors, removal proceedings). C. Reporting Violations. Any person who violates this Policy or any federal or state laws governing insider trading, or knows of any such violation by any other person, must report the violation immediately to the Compliance Officer or the Audit Committee of the Company’s Board of Directors. Upon learning of any such violation, the Compliance Officer or Audit Committee, in consultation with the Company’s legal counsel, will determine whether the Company should release any material nonpublic information or whether the Company should report the violation to the SEC or other appropriate governmental authority. 5 of 13 XI. Insider Trading Compliance Officer A. The Company’s Chief Financial Officer shall act as the Company’s Insider Trading Compliance Officer; provided, however, that if the Chief Financial Officer is a party to a proposed trade, transaction or inquiry relating to this Policy, the Company’s Chief Executive Officer and General Counsel shall jointly act as the Compliance Officer with respect to such proposed trade, transaction or inquiry. The Compliance Officer may delegate his or her authority to act as the Compliance Officer as he or she deems necessary or appropriate in his or her sole discretion. The duties and powers of the Compliance Officer and his or her delegees may include the following: ● Administering, monitoring and enforcing compliance with this Policy. ● Responding to all inquiries relating to this Policy. ● Designating and announcing special trading blackout periods during which specified persons may trade in Company securities. ● Providing copies of this Policy and other appropriate materials to all current and new directors, officers and employees, and such other persons as the Compliance Officer determines to have access to material nonpublic information concerning the Company. ● Administering, monitoring and enforcing compliance with federal and state insider trading laws and regulations. ● Maintaining as Company records originals or copies of all documents required by the provisions of this Policy, and copies of all required SEC reports relating to insider trading, including Forms 3, 4, 5 and 144 and Schedules 13D and 13G. ● Recommending revisions to this Policy for consideration by the Nominating and Governance Committee of the Board of Directors (the “Board”). ● Maintaining the accuracy of the list of roles/titles of Insiders and updating such list periodically as necessary to reflect additions or deletions. ● Designing and requiring training about the obligations of this Policy as the Compliance Officer considers appropriate. XII. Every Individual Is Responsible Every employee has the individual responsibility to comply with this Policy against illegal insider trading. An employee may, from time to time, must forego a proposed transaction in the Company’s securities even if he or she planned to make the transaction before learning of the material nonpublic information and even though the employee believes that he or she may suffer an economic loss or forego anticipated profit by waiting. XIII. Application Following Termination of Employment If an employee is in possession of material nonpublic information when his or her employment terminates, he or she may not trade in the Company’s securities until that information has become public or is no longer material. XIV. The Compliance Officer Is Available to Answer Questions about this Policy Please direct all inquiries regarding any of the provisions or procedures of this Policy to the Compliance Officer, who can be reached by email at insidertrading@cohu.com. 6 of 13 XV. This Policy Is Subject to Revision The Company may change the terms of this Policy from time to time to respond to developments in law and practice. The Company will take steps to inform all affected persons of any material change to this Policy. XVI. All Employees Must Acknowledge Their Agreement to Comply with This Policy The Policy will be delivered to all employees upon its adoption by the Company, and to all new other employees at the start of their employment or relationship with the Company. Upon first receiving a copy of the Policy or any revised versions, each employee must sign an acknowledgment that he or she has received a copy and agrees to comply with the Policy’s terms. This acknowledgment and agreement will constitute consent for the Company to impose sanctions for violation of this Policy and to issue any necessary stop-transfer orders to the Company’s transfer agent to enforce compliance with this Policy. 7 of 13 APPENDIX I Additional Restrictions on Transactions in Company Securities by Section 16 Insiders and Insider Employees I. Overview To minimize the risk of apparent or actual violations of the rules governing insider trading, we have adopted these additional restrictions relating to transactions in Company securities by Insiders. As with the other provisions of this Policy, Insiders are responsible for ensuring compliance with this Appendix I, including restrictions on all trading during certain periods, by family members and members of their households and by entities over which they exercise voting or investment control. Insiders should make each of these persons or entities aware of the requirements of this Policy. II. Trading Window In addition to the restrictions that are applicable to all employees, any trade by an Insider that is subject to the Insider Trading Policy will be permitted only during an open “trading window.” The trading window generally opens following the close of trading on the second full trading day following the public issuance of the Company’s earnings release for the most recent fiscal quarter (which generally occurs approximately 5 weeks following the close of each of the first three quarters or approximately 7 weeks following the close of the fourth quarter) and closes at the close of trading on the last day of the month preceding the last month of a fiscal quarter. In addition to the times when the trading window is scheduled to be closed, the Company may impose a “special blackout period” at its discretion due to the existence of material nonpublic information, such as a pending acquisition. Following termination of employment or other service, Insiders will be subject to the trading window, as well as any special blackout period in effect at the time of termination, for one full fiscal quarter thereafter. Even when the window is open, Insiders and other Company personnel are prohibited from trading in the Company’s securities while in possession of material nonpublic information. III. Hardship Exemptions The Compliance Officer may, on a case-by-case basis, authorize a transaction in the Company’s securities outside of the trading window (but in no event during a special blackout period) due to financial or other hardship. Any request for a hardship exemption must be in writing and must describe the amount and nature of the proposed transaction and the circumstances of the hardship. The request may be made as part of a pre-clearance request, so long as it is in writing. The Insider requesting the hardship exemption must also certify to the Compliance Officer that he or she is not in possession of material nonpublic information concerning the Company. The existence of the foregoing procedure does not in any way obligate the Compliance Officer to approve any hardship exemption requested by an Insider. 8 of 13 IV. Individual Account Plan Blackout Periods Certain trading restrictions apply during a pension-related blackout period applicable to any Company individual account plan in which participants may hold Company stock. For the purpose of such restrictions, a “blackout period” is a period in which the plan participants are temporarily restricted from making trades in Company stock. During any blackout period, directors and executive officers are prohibited from trading in shares of the Company’s stock that were acquired in connection with such director's or executive officer's service or employment with the Company. Such trading restriction is required by law, and no hardship exemptions are available. The Company will notify directors and executive officers in the event of any blackout period. V. Pre-Clearance of Trades As part of the Company’s Insider Trading Policy, all transactions involving equity securities of the Company by Section 16 Insiders, other than transactions that are not subject to the Policy or transactions pursuant to a Rule 10b5-1 trading plan, must be pre-cleared by the Compliance Officer. Requests for pre-clearance must be submitted to the Compliance Officer in writing or email at least two business days in advance of each proposed transaction. If the Insider leaves a voicemail message or submits the request by email and does not receive a response from the Compliance Officer within 24 hours, the Insider will be responsible for following up to ensure that the message was received. Each Insider’s request for pre-clearance should include the following information: ● The nature of the proposed transaction. ● The date of the expected transaction. ● The number of shares involved. ● If the transaction involves a stock option exercise, the specific option to be exercised. ● Contact information for the broker who will execute the transaction. ● A confirmation that the Insider has carefully considered whether he or she may be aware of any material nonpublic information relating to the Company (describing any borderline matters or items of potential concern) and has concluded that he or she does not. ● Confirmation that, to the Insider’s knowledge, the transaction complies with all SEC rules and regulations applicable to securities transactions by the Insider. ● Any other information that is material to the Compliance Officer’s consideration of the proposed transaction. Once the proposed transaction is pre-cleared, the Section 16 Insider may proceed with it on the approved terms, provided that he or she complies with all other securities law requirements, such as Rule 144 and prohibitions regarding trading on the basis of inside information, and with any special trading blackout imposed by the Company prior to the time of the transaction. Even if a transaction has been pre-cleared, the transaction may not proceed if you become aware of material non-public information prior to the time of the transaction. 9 of 13 Any transactions by the Compliance Officer shall be subject to pre-clearance by the Chief Executive Officer or, in the event of his or her unavailability, the Company’s General Counsel. VI. Pre-Clearance of Rule 10b5-1 Trading Plans In addition, pre-clearance is required for the establishment of a Rule 10b5-1 trading plan (“10b5-1 Trading Plan”) pursuant to the procedures set forth in Section IX, below. However, pre-clearance will not be required for individual transactions effected pursuant to a pre-cleared 10b5-1 Trading Plan. VII. Designated Brokers Each market transaction in the Company’s stock by a Section 16 Insider, or any person whose trades must be reported by that Insider on Form 4 (such as a member of the Insider’s immediate family who lives in the Insider’s household), must be executed by a broker designated by the Company. VIII. Reporting of Transactions To facilitate timely reporting under Section 16 of the Exchange Act, Section 16 Insiders are required to on the same day as the trade date, or, with respect to transactions effected pursuant to a 10b5-1 Trading Plan, on the day the Insider is advised of the terms of the transaction, (a) report the details of each transaction to the Compliance Officer and (b) arrange with persons whose trades must be reported by the Insider under Section 16 (such as immediate family members living in the Insider’s household) to immediately report directly to the Company and to the Insider the following transaction details: ● Transaction date (trade date). ● Number of shares involved. ● Price per share at which the transaction was executed (before addition or deduction of brokerage commission and other transaction fees). ● For stock option exercises, the specific option exercised. ● Confirmation that the trade was made the Company’s designated broker. ● Specific representation that the Insider is not in possession of material non-public information. ● For a Section 16 Insider, a specific representation whether the transaction was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The transaction details must be reported to the Compliance Officer, with copies to Company personnel (if any) who assist Section 16 Insiders in preparing his or her Form 4. 10 of 13 IX. Special Guidelines for 10b5-1 Trading Plans Notwithstanding the foregoing, an Insider will not be deemed to have violated this Policy for transactions pursuant to a 10b5-1 Trading Plan that has been pre-cleared by the Compliance Officer. The Compliance Officer may withhold or condition pre-clearance of any proposed 10b5-1 Plan (each, a “Proposed Plan”) for any reason, in his or her sole discretion. A. The Compliance Officer will not pre-clear a Proposed Plan if he or she concludes that the Proposed Plan: ● Fails to comply with the requirements of Rule 10b5-1, as amended from time to time; ● Would permit a transaction to occur before the later of (i) 90 days after adoption (including deemed adoption) of the Proposed Plan or (ii) two business days after disclosure of the issuer’s financial results in a Form 10-Q or Form 10-K for the quarter in which the Proposed Plan was adopted (subject to a maximum of 120 days after adoption of the Proposed Plan); ● Is established during a “closed” window period or a special “blackout” period, or the Insider is unable to represent to the satisfaction of the Compliance Officer that the Insider is not in possession of material nonpublic information regarding the Company; ● Lacks appropriate mechanisms to ensure that the Insider complies with all rules and regulations, including Rule 144, Rule 701, Form S-8, and Section 16 of the Exchange Act, applicable to securities transactions by the Insider; ● Does not provide the Company the right to suspend all transactions under the Proposed Plan if the Compliance Officer, in his or her sole discretion, deems such suspension necessary or advisable, including suspensions to comply with any “lock-up” agreement the Company agrees to in connection with a financing or other similar events; ● Exposes the Company to liability under any other applicable state or federal rule, regulation or law; or ● Fails to meet other guidelines established by the Company. B. Each Proposed Plan must be approved prior to the effective time of any transactions under such Proposed Plan by the Company’s Rule 10b5-1 Trading Plan Review Committee, which shall be composed of persons selected by and serving at the discretion of the Company’s Chief Executive Officer (the “10b5-1 Committee”). C. Any modifications to or deviations from a 10b5-1 Trading Plan are deemed to be the Insider entering into a new 10b5-1 Trading Plan and, accordingly, require pre-clearance of such modification or deviation pursuant to the procedures set forth herein. A 10b5-1 Trading Plan may be amended by an Insider only during a period when such Insider can sell Cohu stock pursuant to Cohu’s Insider Trading Policy and Insider is not aware of any material, nonpublic information concerning Cohu or its securities. 11 of 13 D. Any termination of a 10b5-1 Trading Plan must be immediately reported to the Compliance Officer. If an Insider has pre-cleared a new 10b5-1 Trading Plan (the “Second Plan”) intended to succeed an earlier pre-cleared 10b5-1 Trading Plan (the “First Plan”), the Insider may not affirmatively terminate the First Plan without pre-clearance pursuant to the procedures set forth herein, because such termination is deemed to be entering into the Second Plan. E. Each 10b5-1 Trading Plan must be established at a time when the trading window is open and provide that no trades under the 10b5-1 Trading Plan may occur until the later of (i) 90 days after adoption (including deemed adoption) of the 10b5-1 Trading Plan or (ii) two business days after disclosure of the issuer’s financial results in a Form 10-Q or Form 10-K for the quarter in which the 10B5-1 Trading Plan was adopted (subject to a maximum of 120 days after adoption of the 10B5-1 Trading Plan) (the “waiting period"). Once the waiting period is met the 10b5-1 Trading Plan may provide for trading to occur during Cohu’s designated “blackout periods.” F. Each 10b5-1 Trading Plan must provide appropriate mechanisms to ensure that the Insider complies with all rules and regulations, including Rule 144, Rule 701 and Section 16(b), applicable to securities transactions under the 10b5-1 Trading Plan by the Insider. G. Each 10b5-1 Trading Plan must provide for the suspension of all transactions under such 10b5-1 Trading Plan in the event that the Company, in its sole discretion, deems such suspension necessary and advisable, including suspensions necessary to comply with trading restrictions imposed in connection with any lock-up agreement required in connection with a securities issuance transaction or other similar events. H. None of the Company, the 10b5-1 Committee nor any of the Company’s officers, employees or other representatives shall be deemed, solely by their approval of an Insider’s 10b5-1 Trading Plan, to have represented that any 10b5-1 Trading Plan complies with the Rule or to have assumed any liability or responsibility to the Insider or any other party if such 10b5-1 Trading Plan fails to comply with the Rule. I. Upon entering into or amending a 10b5-1 Trading Plan, the director or officer must promptly provide a copy of the 10b5-1 Trading Plan to the Company and, upon request, confirm the Company’s planned disclosure regarding the entry into or termination of a 10b5-1 Trading Plan (including the date of adoption or termination of the 10b5-1 Trading Plan, duration of the 10b5-1 Trading Plan, and aggregate number of securities to be sold or purchased under the 10b5-1 Trading Plan. J. 10b5-1 Trading Plan are generally expected to have a term of no less than six (6) months nor longer than two (2) years. Multiple 10b5-1 Trading Plans with overlapping terms are not permitted. * * * * * * 12 of 13 To: Cohu, Inc. Designated Insiders From: Insider Trading Compliance Officer Re: Insider Trading Policy Enclosed is a copy of the Insider Trading Policy, as adopted by Cohu, Inc. (the “Company”). PLEASE READ IT VERY CAREFULLY. As it indicates, the consequences of improper insider trading can be drastic to both you and the Company. The securities laws and rules governing Insider Trading are extremely complex. If you have any questions concerning this policy or Insider Trading please contact insidertrading@cohu.com. To ensure that you have read the policy and agree to be bound by it, please sign and return the attached copy of this letter to the Company’s Insider Trading Compliance Officer, as soon as possible. CERTIFICATION The undersigned certifies that the undersigned has read, understands and agrees to comply with the Insider Trading Policy of Cohu, Inc. (the “Company”). The undersigned agrees that he/she will be subject to sanctions, including, as to employees of the Company, termination of employment, that may be imposed by the Company, in its discretion, for violation of the Company’s policy, and that the Company may give stop-transfer and other instructions to the Company’s transfer agent against the transfer of Company securities by the undersigned in a transaction that the Company considers to be in contravention of its policy. Employee or Insider: Signature Printed Name Date 13 of 13 Exhibit 21 SUBSIDIARIES OF COHU, INC. PLACE OF LEGAL ENTITY NAME INCORPORATION ------------------------------------------ ------------------------------ Delta Design, Inc. (1) Delaware Cohu Foreign Sales Ltd Barbados Xcerra Corporation (4) Massachusetts ------------------ (1) Delta Design, Inc. owns the following subsidiaries: Delta Design Singapore PTE LTD (2) Singapore Cohu S.A. Costa Rica Xcerra Corporation (Partial ownership 14.46%) (4) Massachusetts Rosenheim Automation Systems Corporation California Ismeca Semiconductor Holding SA (3) Switzerland MCT Asia (Penang) SDN BHD Malaysia MCT Worldwide, LLC Delaware (2) Delta Design Singapore PTE LTD owns the following subsidiaries: Delta Design Philippines LLC (14) Delaware Delta Design Singapore PTE LTD, Taiwan Branch Taiwan (3) Ismeca Semiconductor Holding SA owns the following subsidiaries: Ismeca Europe Semiconductor SA (5) Switzerland Cohu Malaysia Sdn. Bhd. Malaysia Ismeca Semiconductor (Suzhou) Co Ltd China (4) Xcerra Corporation owns the following subsidiaries: LTX-Credence France S.A.S. France LTX-Credence Italia S.r.l. Italy LTX Asia International, Inc. (15) Delaware LTX-Credence Sdn BhD. (10) Malaysia LTX LLC Delaware Cohu Interface Solutions LLC (FKA: Everett Charles Technologies LLC) (9) Delaware Credence Capital Corporation California Xcerra International Inc. (12) Delaware Credence International Ltd. (13) British Virgin Islands LTX-Credence KK Japan Xcerra (Thailand) Company Limited Thailand Credence Systems (UK) Limited (16) United Kingdom Cohu Semiconductor Test GmbH (FKA: Delta Design Europe GmbH) (6) Germany (5) Ismeca Europe Semiconductor SA owns the following subsidiaries: Ismeca Europe Semiconductor SA, Korean Branch South Korea (6) Cohu Semiconductor Test GmbH owns the following subsidiaries: Multitest GmbH (7) Germany (7) Multitest GmbH owns the following subsidiaries: Cohu GmbH (FKA: Rasco GmbH) (8) Germany (8) Cohu GmbH owns the following subsidiaries: Kita Manufacturing Co., LTD Japan FTZ Fraes-und Techologiezentrum GmbH Frasdorf (39% Ownership) Germany (9) Cohu Interface Solutions LLC owns the following subsidiaries: Everett Charles Tech, Inc. (FKA: Kita USA, Inc.) Massachusetts Equiptest Engineering Pte. Ltd. Singapore (10) LTX-Credence Sdn BhD. owns the following subsidiaries: LTX Corporation Philippine Branch (11) Philippines Multitest Electronic Systems (Penang) Sdn. Bhd. Malaysia (11) LTX Corporation Philippine Branch owns the following subsidiaries: Multitest Electronic Systems (Philippines) Corporation Philippines (12) Xcerra International Inc. owns the following subsidiaries: Credence Systems Korea Ltd. South Korea Xcerra International Inc., Taiwan Branch Taiwan (13) Credence International Ltd. owns the following subsidiaries: Credence Malta Limited Malta LTX-Credence Singapore Pte Ltd. Singapore NPTest de Costa Rica SA. Costa Rica Cohu Semiconductor (Shenzhen) Co., Ltd (FKA: Everett Charles Technologies (Shenzhen) Limited) (17) China (14) Delta Design Philippines LLC owns the following subsidiaries: Delta Design Philippines LLC, Philippines Branch Philippines (15) LTX Asia International, Inc. owns the following subsidiaries: LTX Asia International, Inc., Taiwan Branch Taiwan (16) Credence Systems (UK) Limited owns the following subsidiaries: Credence Systems (UK) Limited, Belgium Branch Belgium (17) Cohu Semiconductor (Shenzhen) Co., Ltd owns the following subsidiaries: Cohu Semiconductor (Shenzhen) Co., Ltd, Suzhou Branch China Cohu Semiconductor (Shenzhen) Co., Ltd, Shanghai Branch China Exhibit 23 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form S-3 No. 333-270586) of Cohu, Inc, and (2) Registration Statements (Form S-8 Nos. 333-233080, 333-207016, 333-27663, 333-40610, 333-66466, 333-97449, 333-117554, 333-132605, 333- 142579, 333-160760, 333-177453, 333-186973 and 333-273711) pertaining to the 1996 and 1998 Stock Option Plans, 1996 Outside Directors Stock Option Plan, 1997 Employee Stock Purchase Plan, and 2005 Equity Incentive Plan of Cohu, Inc.; of our reports dated February 20, 2025, with respect to the consolidated financial statements and schedule of Cohu, Inc., and the effectiveness of internal control over financial reporting of Cohu, Inc., included in this Annual Report (Form 10-K) of Cohu, Inc. for the year ended December 28, 2024. /s/ Ernst & Young LLP San Diego, California February 20, 2025 Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, Luis A. Müller, certify that: 1. I have reviewed this Form 10-K of Cohu, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 20, 2025 /s/ Luis A. Müller Luis A. Müller, President and Chief Executive Officer Exhibit 31.2 CERTIFICATION PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey D. Jones, certify that: 1. I have reviewed this Form 10-K of Cohu, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 20, 2025 /s/ Jeffrey D. Jones Jeffrey D. Jones, Vice President Finance and Chief Financial Officer Exhibit 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the accompanying Annual Report of Cohu, Inc. (the "Company") on Form 10-K for the fiscal year ended December 28, 2024 (the "Report"), I, Luis A. Müller, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 20, 2025 /s/ Luis A. Müller Luis A. Müller, President and Chief Executive Officer Exhibit 32.2 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the accompanying Annual Report of Cohu, Inc. (the "Company") on Form 10-K for the fiscal year ended December 28, 2024 (the "Report"), I, Jeffrey D. Jones, Vice President Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 20, 2025 /s/ Jeffrey D. Jones Jeffrey D. Jones, Vice President Finance and Chief Financial Officer Exhibit 97 COHU, INC. POLICY FOR RECOVERY OF ERRONEOUSLY AWARDED INCENTIVE COMPENSATION (Adopted as of October 2, 2023) 1. INTRODUCTION Cohu, Inc. (the “Company”) is adopting this policy (this “Policy”) to provide for the Company’s recovery of certain Incentive Compensation (as defined below) erroneously awarded to Affected Officers (as defined below) under certain circumstances. This Policy is administered by the Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”). The Committee shall have full and final authority to make any and all determinations required or permitted under this Policy. Any determination by the Committee with respect to this Policy shall be final, conclusive and binding on all parties. The Board may amend or terminate this Policy at any time. This Policy is intended to comply with Section 10D of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), Rule 10D-1 thereunder and the applicable rules of any national securities exchange on which the Company’s securities are listed (the “Exchange”) and will be interpreted and administered consistent with that intent. 2. EFFECTIVE DATE This Policy shall apply to all Incentive Compensation paid or awarded on or after the date of adoption of this Policy, and to the extent permitted or required by applicable law, and in such cases shall govern and supersede the prior Cohu, Inc. Executive Incentive Compensation Recoupment Policy. 3. DEFINITIONS For purposes of this Policy, the following terms shall have the meanings set forth below: “Affected Officer” means any current or former “officer” as defined in Exchange Act Rule 16a-1, and any other senior executives as determined by the Committee. “Erroneously Awarded Compensation” means the amount of Incentive Compensation received that exceeds the amount of Incentive Compensation that otherwise would have been received had it been determined based on the Restatement, computed without regard to any taxes paid. In the case of Incentive Compensation based on stock price, total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the Restatement, the amount shall reflect a reasonable estimate of the effect of the Restatement on the stock price or total shareholder return upon which the Incentive Compensation was received, as determined by the Committee in its sole discretion. The Committee may determine the form and amount of Erroneously Awarded Compensation in its sole discretion to the extent permitted by law. “Financial Reporting Measure” means any measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures, whether or not such measure is presented within the financial statements or included in a filing with the Securities and Exchange Commission. Stock price, total shareholder return or another measurement metric adopted or designed by the Exchange that impacts the determination of Incentive Compensation are Financial Reporting Measures. 1 “Incentive Compensation” means any compensation that is granted, earned or vested based in whole or in part on the attainment of a Financial Reporting Measure. For purposes of clarity, base salaries, bonuses or equity awards paid solely upon satisfying one or more subjective standards, strategic or operational measures, or continued employment are not considered Incentive Compensation, unless such awards were granted, paid or vested based in part on a Financial Reporting Measure. “Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (i.e., a “Big R” restatement), or that would result in a material misstatement if the error was corrected in the current period or left uncorrected in the current period (i.e., a “little r” restatement). 4. RECOVERY If the Company is required to prepare a Restatement, the Company shall seek to recover and claw back from any Affected Officer reasonably promptly the Erroneously Awarded Compensation that is received by the Affected Officer: (i) after the person begins service as an Affected Officer; (ii) who serves as an Affected Officer at any time during the performance period for that Incentive Compensation; (iii) while the Company has a class of securities listed on the Exchange; and (iv) during the three completed fiscal years immediately preceding the date on which the Company was required to prepare the Restatement (including any transition period within or immediately following those years that results from a change in the Company’s fiscal year, provided that a transition period of nine to 12 months will be deemed to be a completed fiscal year). For purposes of this Policy: ● Erroneously Awarded Compensation is deemed to be received in the Company’s fiscal year during which the Financial Reporting Measure specified in the Incentive Compensation is attained, even if the payment or grant of the Incentive Compensation occurs after the end of that period; and ● the date the Company is required to prepare a Restatement is the earlier of (x) the date the Board, the Committee or any officer of the Company authorized to take such action concludes, or reasonably should have concluded, that the Company is required to prepare the Restatement, or (y) the date a court, regulator, or other legally authorized body directs the Company to prepare the Restatement. For purposes of clarity, in no event shall the Company be required to award any Affected Officers an additional payment or other compensation if the Restatement would have resulted in the grant, payment or vesting of Incentive Compensation that is greater than the Incentive Compensation actually received by the Affected Officer. The recovery of Erroneously Awarded Compensation is not dependent on if or when the Restatement is filed. 2 5. SOURCES OF RECOUPMENT To the extent permitted by applicable law, the Committee may, in its discretion, seek recoupment from the Affected Officer(s) through any means it determines, which may include, but not limited to, any of the following sources: (i) prior Incentive Compensation payments; (ii) future payments of Incentive Compensation; (iii) cancellation of outstanding Incentive Compensation; (iv) direct repayment; and (v) non-Incentive Compensation or securities held by the Affected Officer. To the extent permitted by applicable law, the Company may offset such amount against any compensation or other amounts owed by the Company to the Affected Officer. 6. LIMITED EXCEPTIONS TO RECOVERY Notwithstanding the foregoing, the Committee, in its discretion, may choose to forgo recovery of Erroneously Awarded Compensation under the following circumstances, provided that the Committee (or a majority of the independent members of the Board) has made a determination that recovery would be impracticable because: (i) The direct expense paid to a third party to assist in enforcing this Policy would exceed the recoverable amounts; provided that the Company has made a reasonable attempt to recover such Erroneously Awarded Compensation, has documented such attempt and has (to the extent required) provided that documentation to the Exchange; (ii) Recovery would violate home country law where the law was adopted prior to November 28, 2022, and the Company provides an opinion of home country counsel to that effect to the Exchange that is acceptable to the Exchange; or (iii) Recovery would likely cause an otherwise tax-qualified retirement plan to fail to meet the requirements of the Internal Revenue Code of 1986, as amended. 7. NO INDEMNIFICATION OR INSURANCE The Company will not indemnify, insure or otherwise reimburse any Affected Officer against the recovery of Erroneously Awarded Compensation. 8. NO IMPAIRMENT OF OTHER REMEDIES This Policy does not preclude the Company from taking any other action to enforce an Affected Officer’s obligations to the Company, including termination of employment, institution of civil proceedings, or reporting of any misconduct to appropriate government authorities. This Policy is in addition to the requirements of Section 304 of the Sarbanes-Oxley Act of 2002 that are applicable to the Company’s Chief Executive Officer and Chief Financial Officer. 3