5/1/2025

speaker
Operator
Conference Operator

there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jeff Jones, Chief Financial Officer. Please go ahead.

speaker
Jeff Jones
Chief Financial Officer

Good afternoon, and welcome to our conference call to discuss CoHUE's first quarter 2025 results and second quarter 2025 outlook. I'm joined today by our president and CEO, Luis Mueller. If you need a copy of our earnings release, you may access it from our website at cohue.com or by contacting CoHUE Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed on COHU's website in the investor relations section. Replays of this call will be available via the same page after the call concludes. Now to the safe harbor. During today's call, we will make forward-looking statements reflecting management's current expectations concerning COHU's future business. These statements are based on current information that we have assessed, but which by its nature is subject to rapid and even abrupt changes. We encourage you to review the forward-looking statement section of the slide presentation and the earnings release, as well as co-use filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments speak only as of today, May 1st, 2025, And CoHUE assumes no obligation to update these statements for developments occurring after this call. Finally, during this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Mueller, CoHUE's president and CEO. Luis?

speaker
Luis Mueller
President and Chief Executive Officer

Hello, and welcome to your quarterly earnings call. First quarter 2025 results were in line with guidance, with revenue approximately $97 million and non-GAAP gross margin approximately 44%. As previously announced, we implemented a restructuring program in late February to reduce manufacturing and operating expenses through this year. This program includes some incremental manufacturing transfers to our Asia factories, and related expense reductions in the U.S. and Europe. The majority of these will start benefiting the second quarter onwards. Jeff will provide more details as part of our financial results later. Quarter revenue was split 63% recurring in the balanced systems. Systems revenue increased sequentially in automotive and consumer segments, although offset by declines in computing, industrial, and mobile. Estimated test cell utilization at the end of March was down one point quarter over quarter to 72%. I won't comment further on utilization at this time as we plan to implement changes going forward that we anticipate will increase accuracy when segmenting utilization by market. On a positive note, recurring orders increased 28% quarter over quarter, demonstrating the value of Cohue's non-capital equipment revenue streams and indicating the possibility of utilization picking up in the coming quarters. Although Cohue factories in Malaysia and the Philippines have been running below nominal capacity, we are starting to selectively add resources to support recent customer requests for fast turn-on kits and contactors. On the customer design wins, In the first quarter, we landed three new opportunities for our handlers, including a leading package and test subcontractor in China supporting the local automotive industry. We also won a selection with our DiamondX tester at a European Fabless supplier of communications ICs. This DiamondX will ship for production to a test subcontractor in Asia. Additionally, We qualified and received the initial orders for Cohuse power probe cards from a leading European semiconductor company testing silicon carbide IGBT products. On customer expansion, we received a repeat multi-unit order for HBM inspection systems in the first quarter, continuing to increase our penetration in the memory market. We're excited about this opportunity to reposition and expand our vision inspection technology aligned with the growing data center market. Two customers expanded DiamondX application in the quarter, one targeting RF IoT devices and the other gallium nitride high voltage device test. Several customers expanded the use of our contactors, notably with Cohue's icon interface supporting tests of high-performance network switches. On the software front, this was our first quarter combining the recently acquired Tignes and Cohue's DI-Core predictive maintenance solutions. We have signed three new demonstration opportunities in the quarter to prove the value of our AI process monitoring platform, including with a front-end equipment company, a semiconductor materials supplier, and a U.S. Defense Military Research Group. The team has been asked to evaluate multiple applications for AI process monitoring in the back-end semiconductor manufacturing, which is an encouraging validation of our strategy to support and expand Cohu's own DI core solutions. We are optimistic about the business prospects of our design wins, pickup and recurring orders, and expansion into new market segments. The second quarter started with positive momentum from growing customer interest in our systems. And at this moment, we have not seen any meaningful change in customer buying patterns due to tariffs. Let me now turn it over to Jeff for further details on last quarter results and next quarter guidance. Jeff?

speaker
Jeff Jones
Chief Financial Officer

Thanks, Luis. Before I walk through the Q1 results and Q2 guidance, please note that my comments that follow all refer to non-GAAP figures. Information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures, are included in the accompanying earnings release and investor presentation, which are located on the investor page of our website. Now turning to the Q1 financial results. Revenue for the quarter was within guidance at 96.8 million. Recurring revenue, which is largely consumable driven and more stable than systems revenue, represented 63% of total revenue in Q1. During the first quarter, one customer in the automotive and industrial market accounted for more than 10% of sales. Q1 gross margin was 44.2% and in line with guidance. Operating expenses for Q1 were slightly lower than guidance at $48.6 million, driven by lower labor costs due to the initial restructuring actions announced in late February. Q1 interest income, net of interest expense, and a small foreign currency loss was $1.4 million. In Q1, we recorded a tax benefit of $3.6 million, yielding a non-GAAP net loss of approximately $800,000. Non-GAAP EPS for the first quarter was a $0.02 loss. Now moving to the balance sheet. Overall, cash and investments decreased by $61 million during Q1 to $201 million due primarily to $35 million used to acquire Tignes, approximately $9 million used to repurchase 432,000 shares of Cohue common stock, and $10 million used in operations. From inception of our share repurchase plan through Q1 2025, We've repurchased approximately 4 million shares for approximately $117 million, leaving approximately $23 million available for us to repurchase additional shares in the future. Total debt increased in the first quarter by approximately $9 million due to a revolving credit facility used to finance the purchase of our Malacca, Malaysia facility. CapEx of $11 million in Q1. is driven primarily by the Malacca facility purchase of approximately $9 million. Overall, Cohue's balance sheet remains strong, supporting investment opportunities to expand our served markets and technology portfolio in line with our growth strategy and returning capital to shareholders through our share repurchase program. Now moving to our Q2 outlook. Recent increases in recurring revenue orders and HBM inspection systems are driving a 10% increase in revenue quarter over quarter. We're guiding Q2 revenue to be approximately $106 million plus or minus $7 million. Second quarter gross margin is forecasted to be approximately 45%. Benefiting from COHUE's differentiated products and our stable high margin recurring business, which adds resilience to profitability and provides consistent cash flow through industry cycles. Based on our internal analysis, we do not expect the recently announced tariffs will create a measurable and direct increase in cost of goods sold. Under COHU's standard shipping terms, the customer is the importer of record and responsible for tariff costs, if any. Additionally, the COHU supply chain and manufacturing operations are primarily Asia-based and shipping to Asia-based customer facilities, completing the product manufacturing and delivery cycle outside of the U.S. Looking back to 2024, with assumptions that U.S. suppliers are sourcing components and parts offshore, we estimate a possible tariff impact to 2024 cost of goods sold could have been approximately $3 million for the entire year. And lastly, our efforts to transition supply chain to minimize impacts of revised UF tariff scheme is ongoing. Q2 operating expenses are forecasted to be approximately $48 million, about $500,000 lower than Q1, realizing increasing cost savings from the mid-Q1 restructuring actions. Once the full impact of the restructuring plan has taken effect in the beginning of 2026, We expect quarterly operating expenses to be approximately $47 million per quarter when revenue is approximately $100 million. We're projecting Q2 interest income, net of interest expense and foreign currency impacts to be approximately $900,000 at current interest rates. The Q2 non-GAAP tax provision is expected to be approximately $1.6 million. The basic share count for Q2 is expected to be approximately 46.7 million shares. That concludes our prepared remarks, and now we'll open the call to questions.

speaker
Operator
Conference Operator

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Brian Chin with Stifel.

speaker
Brian Chin
Analyst, Stifel

Hi there. Good afternoon. Thanks for letting us ask a few questions. Maybe to start off with, when we look at the roughly 9 million revenue increase at the midpoint of the 2Q guidance, how much of that is improvement in recurring revenue versus the shipments for the hbm inspection yeah it turns out it's about half and half so half of that half of that quarter over quarter increase half systems half recurring got it and given the multi unit order for inspection does that increase the prior $7 million target for the full year? Does that give you more visibility shipping either into mid-year, maybe even into the second half? And I understand that's mainly been sort of one lead customer. What's the potential, maybe not this year, but potential to add customers beyond your initial customer for that product and application?

speaker
Luis Mueller
President and Chief Executive Officer

Hi, Brian. This is Luis. Yeah, so we're projecting about $8 million of revenue in HBM this year. That's the best view we have at this time. And we have started discussions with a second customer, but it's still at the exploratory phase, so nothing concrete to put a number on. But we certainly expect that revenue to grow going out to 2026. I just don't have a number to put on that at this time.

speaker
Brian Chin
Analyst, Stifel

Okay, great. Maybe one last question for me here. Some of your customers have been talking more favorably about maybe some inflection in their shipments. And the way this works, that's one part of it, but then there's a matter of absorbing capacity and et cetera, et cetera, in terms of actually materializing into some maybe capacity equipment. that's required from you guys. But you actually made the commentary about some pickups in the recurring revenue. Can you maybe discuss how those things might connect a little bit and kind of what that would, you know, if that suggests any sort of signals around maybe timing on when, you know, you could start to see some improved backlog for maybe the equipment side of the business?

speaker
Luis Mueller
President and Chief Executive Officer

Yeah. I mean, that's the expectation, right? We should see... When we see a pickup in recurring, we should naturally expect to see an improvement in utilization. So I think we'll be watching pretty closely here in the next quarter to see if utilization levels go up, if it matches the segments that we're seeing the pickup in recurring and the magnitude of that pickup in utilization. I think that would be more indicative of the trend or confirmation of the trend for when to expect sort of capital equipment demand increases again. With that said, I think if you look back in history here, this is our first quarter in about three and a half years now that we're guiding the quarter up year over year. So if you look at Q2 of 24 versus Q2 guidance year of 25, Revenue is up sequentially. And the last time that happened was Q1, sorry, Q3 of 21. So, you know, we've got to see a little bit more of utilization pickup, like I said, continuation of recurring pickup to call it a solid trend. But it's a positive sign and certainly a noticeable turn of corner.

speaker
Brian Chin
Analyst, Stifel

Great. Thank you.

speaker
Operator
Conference Operator

Our next question comes from David Dooley with Steelhead Securities.

speaker
David Dooley
Analyst, Steelhead Securities

Oh, thank you for taking my question. I was wondering, in what segments are you seeing the pickup and the reoccurring orders that you mentioned?

speaker
Luis Mueller
President and Chief Executive Officer

Hi, Dave. The recurring order pickup is predominantly in the mobile segment.

speaker
David Dooley
Analyst, Steelhead Securities

Okay. Is it broad-based, or is it just really with one or two customers, or how would you describe the depth of it?

speaker
Luis Mueller
President and Chief Executive Officer

You know, in this case, it's actually fairly concentrated, Dave. It's fairly concentrated. I'm just going to leave it at that. Okay.

speaker
David Dooley
Analyst, Steelhead Securities

And could you just elaborate a little bit more to one of the comments you made on the power probe card design win for SIC and you know, just talk about how you won that business and, you know, what the opportunity for the revenue stream there is this year and next year or what we should expect.

speaker
Luis Mueller
President and Chief Executive Officer

Sure, sure. We have introduced this product in the second half of 24. It's really aimed at very high voltage testing at probe where you have the risk of creating an arc between probe tips. And so we have sort of a unique technology, a patent technology on how to enable multi-site testing of high voltage dye applications, which in this case is silicon carbide. We had a qualification win, I believe it was at the end of 24. This is our second customer win. And there's a third customer that we have right behind this that we're working on at this time. Let me check here on the second part of your question. Hang on a second. I think we're looking at this application having on this customer win that we had here, this opportunity is about a $2 million a year opportunity. How much is that going to happen this year? Just given timing, qualification, production ramp, I would say definitely a fraction of the $2 million on this one customer. But that's about the size on a per-customer base. The other customer that we want, the one that we're working in, they're about similar sizes. So it's sort of a $2 million a year per customer, give or take, opportunity.

speaker
David Dooley
Analyst, Steelhead Securities

Okay. And then finally for me is one of your other prepared remarks about winning some handler business in China. Could you elaborate, you know, what that represents and is that market share wins or, or how would you describe this and what's the application? Thanks.

speaker
Luis Mueller
President and Chief Executive Officer

Sure. Yeah. It's a fabulous, it's a fabulous customer in China. Um, in the automotive space. They're outsourcing it, obviously, to a test house also in China. We have, over time, actually captured a small number of startup fabless companies in China. This is viewed as small at this time. But if I extract And I go beyond this particular customer. The collection of all design wins I talked about for Q1, we tally it as a $6.5 million of orders that we got that we expect to ship throughout this year with a potential total revenue of $18 million a year. That's estimated, obviously. That's not in-hand PO. The in-hand POs are the $6.5 million. And that's the collection of all design wins. This is not the China-specific customer that you have asked.

speaker
Operator
Conference Operator

All right, thank you. Our next question comes from Craig Ellis with B. Reilly Securities.

speaker
Craig Ellis
Analyst, B. Riley Securities

Yeah, thanks for taking the question. Guys, congratulations on seeing the nice upturn in recurring orders. Luis, I was hoping we could just spend a little time looking beyond 2Q and what is a nice guidance, your point, the first in a long time that's up here on your, as you talk to your customers across your different end markets on both the systems and the recurring side of the business, how are they thinking about their needs for systems and recurring products in the back half of the calendar year? Are they thinking that that we'll need to see a step up in system deployment as we go into 3Q and recurring in 4Q with a more seasonal 4Q off of that? Or what kind of indication are they giving you and what are they telling you to get ready for in your production facilities beyond the current 2Q?

speaker
Luis Mueller
President and Chief Executive Officer

Yeah, great question, Craig. I'd say two things. First of all, and I said this in my prepared remarks, We started the second quarter with a positive momentum. We have seen really a pickup in interest in systems, in our systems and system orders. With that said, I think we're all in this space a little cautious right now in trying to understand, look, we haven't really seen any meaningful change in customer buying pattern due to tariffs. With that said, I think we're cautious and we want to remain cautious and not get ahead of ourselves. So we're not going to say a ton about third quarter and beyond other than to say we still expect this to be a year-over-year growth year for Cohue. And at this point, we feel that consensus estimates for us are in a good place for the second half of the year. And we're going to leave it at that until we we gain more visibility into what's happening.

speaker
Jeff Jones
Chief Financial Officer

I might also add that our lead times for our systems are still, except for the exception of a couple of specific configurations, are within a quarter. And so customers generally aren't showing their hand more or less, more than one quarter at a time here.

speaker
Craig Ellis
Analyst, B. Riley Securities

That's helpful, guys. And then the follow-up question goes back to the point you made about monitoring industry utilization, Louise, and I won't ask you for numbers, but what I would appreciate better understanding is when you look at the system that was in place that you had, what did you think that was missing? What are you trying to fix and what are you trying to get to in the future? Just help us understand the to and from without all the numbers in between.

speaker
Luis Mueller
President and Chief Executive Officer

Okay, and I'll give you a couple more data points here, Craig. So as I said, utilization closed the quarter at about 72%. IDMs were about 70%, and OSATs about 73%. What we're trying to refine is the distribution of utilization now down to auto and industrial, computing, mobile, consumer applications. We have... A methodology to do it, I think it's a little coarse, and we intend to refine it. We have the means to refine that a little bit better. I don't know how that's going to be comparable to the prior methodology. We haven't ran that through yet entirely. So I'm avoiding breaking down utilization by end market at this time until we get a better handle on the new methodology. But that's not going to affect the total utilization nor utilization by IDMs and OSETs. So I'm comfortable stating that as it is at the end of Q1, and we'll see where that is at the end of Q2. Those are going to be, you know, comparable quarter over quarter still.

speaker
Craig Ellis
Analyst, B. Riley Securities

That's helpful. And then if I could sneak in one more before I go back in the queue. It sounds like the TINGDIS acquisition is integrating well and and that that's on track with your expectations, Luis. Anything else you'd like to say about that and how we should think about, you know, the coming next couple quarters and then what might be possible for that business in 2026? Thank you.

speaker
Luis Mueller
President and Chief Executive Officer

Sure. Yeah. I mean, so far, only one quarter or less than a quarter behind us, right? We basically have, I think, 10 or 11 weeks of integration at the quarter end because we closed it at mid-January. Yeah, it's pretty interesting to see the level of interest from our customers. That business was not necessarily focused on the back end. So what they booked in the first quarter was still things that were in play at the time of the acquisition, so to speak, a front-end company, a material supplier to semiconductor manufacturing, and a research group within the U.S. military. But at the same time, in the last quarter, there has been a flurry of requests for meetings all over the globe here. So people have been traveling and holding up interactions with customers in various countries. The activity level has picked up a lot, and we've got to be careful now how much we buy all at once. What do you expect for 2026? Well, if this momentum continues, I'm pretty excited about it, but we don't have a number to say. We have to take these activities down to paper plans, specifics, business plans by customer, and then see what we're going to embrace to create numbers that we can tag in more precisely for 2026. So I don't want to get ahead of myself, but it is pretty exciting.

speaker
Craig Ellis
Analyst, B. Riley Securities

Do you think you'd be at that point when we talk again at the end of July or early August, Luis, or would it take longer than that?

speaker
Luis Mueller
President and Chief Executive Officer

I would give it about another six months, Craig. I'm expecting more towards the Q3 earnings timeframe to be discussing numbers for software.

speaker
Craig Ellis
Analyst, B. Riley Securities

Okay. So maybe around Semicon West. Okay. Thank you very much, guys.

speaker
Luis Mueller
President and Chief Executive Officer

You're welcome.

speaker
Operator
Conference Operator

Our next question comes from Charles Shi with Needham.

speaker
Charles Shi
Analyst, Needham & Company

Hey, good afternoon, Louis and Jeff. I want to go back to the recurring order, the pickup. Sounds like it's predominantly mobile and fairly concentrated to a small number of customers. I want to ask you how you think about the sustainability of the recurring revenue or order going from here and let's say going another few quarters. Because if I think if this were in a normal environment, we would definitely look at this as possibly a leading indicator of a very, very, very positive, maybe cyclical recovery for at least the mobile. segment, but we're not quite in a kind of environment right now. There has been lots of debate on whether the demand is real or is it the tariff-related pull-ins. I know for you guys, as an equipment supplier, multiple degrees away from the end market, it's probably hard for you guys to really find evidence one way or the other. But I want to get your thoughts on how do you think about the sustainability and what this actually means and maybe at a more micro level, what do you think this mobile customer is trying to do here? Thank you.

speaker
Luis Mueller
President and Chief Executive Officer

Okay. Well, multiple answers or multiple questions here, Charles. The sustainability, right? In mobile, what I would expect here to happen is once we ship these recurring orders that we would see a pickup in mobile market utilization, quarter over quarter. That's my expectation. Following that, I would expect an increasing system orders in mobile that would probably translate into revenue here in the coming quarter, say Q3 and beyond. that would be sort of a trend of sustainability in the mobile market. And I feel like that's actually quite doable. If you talk recurring more broadly, we would have to see the same happen across auto, industrial, consumer segments to be able to speak to the same trend. I don't see that quite yet. Charles, I see it more in mobile. And we have been talking here for the last couple of quarters that we would expect mobile to be the leading market for us and the general volume market, followed by industrial, and then later on followed by automotive. Still believe that that's the sequence. And what we're seeing right now is in mobile. As far as tariff pull-in, your question about tariff pull-in, I really don't believe this is a tariff pull-in because if you just look at the window of time that everybody has against the current exemptions and tariff rates to supposedly change back up again to a higher level and the timing of shipments of these recurrings, I have a hard time believing that they can actually make any meaningful change until until sort of mid-summer time.

speaker
Charles Shi
Analyst, Needham & Company

Got it. So it sounds like for other verticals, you have auto-industrial or consumer computing. Similar behavior hasn't really been seen by you guys so far. So maybe let me ask another from the other way. For the remainder of the year, I mean, you kind of gave some color about the Q2, right? That the incremental dollar, revenue dollar, half of that is from system, half of that is from recurring. Sounds like you're holding maybe shift, the mix of recurring will come down slightly, mix of system come up slightly. But for the remainder of the year, what's your best guess based on the trend right now, where the system versus recurring revenue percentage, the mix, could be as we go into the second half of the year?

speaker
Brian Chin
Analyst, Stifel

Thank you.

speaker
Jeff Jones
Chief Financial Officer

At this point, hard to tell, but as we go into the second half of the year, it's likely to be close to the 60-40 relationship where it's It's not too far from that today, 63, 37, 63% being recurring. So it's probably going to maintain somewhere close to that 64, give or take a couple hundred basis points.

speaker
Brian Chin
Analyst, Stifel

Thanks, Jeff.

speaker
Operator
Conference Operator

Our next question comes from Robert Mertens with TD Cowan.

speaker
Robert Mertens
Analyst, TD Cowen

Hi, this is Robert Mertens on for Chris Ankar. Thanks for taking my questions. I guess the first one that I don't want to get too hung up on it because we've touched upon it, but in terms of test cell utilization rates, do you typically see different order patterns between OSATs and IDM customers from a test cell utilization perspective? Does one be their uptake in demand earlier in the cycle? Or is it sort of based on these end markets that you're exploring and provide more information next quarter?

speaker
Luis Mueller
President and Chief Executive Officer

Hi, Robert. No, uptick in buying is usually dictated by utilization, regardless if you're an OSAT or IDM. Nevertheless, through different cycles of the industry, we've noticed that the OSATs tend to... drop utilization, start the down cycle, but they also tend to start the up cycle. That's sort of the general observable trend of past cycles. So the OSATs tend to lead, and that's more because of the sort of the end market exposure that fabulous companies are leveraging the OSATs versus the more traditional industrial automotives that have their own factories and tend to be the segments that lag both in a recovery as well as in a downside.

speaker
Robert Mertens
Analyst, TD Cowen

Okay. That's helpful. And then automotive was up substantially in the March quarter after maybe a year or so of digestion. How should we think about the turnaround in that market? Are you expecting similar strength to continue into the June quarter or really need to see mobility turn around and then auto might trail after that?

speaker
Luis Mueller
President and Chief Executive Officer

Yeah, there's no hard set rule that Mobile has to go first and then somebody second, somebody third. That's not a hard, fast rule, but I still expect that should be the case here where auto is going to trail. If you look at our customers, the large automotive semiconductor manufacturers, their earnings release, some have called the trough as Q3 of 24. Others just called the trough as being this past quarter Q1 of 25. So There is a general theme here that they're calling somewhere between the last three quarters the trough of the cycle. So I would expect utilization to start creeping up, recurring orders to start picking up as well. The question is at what pace, right? Inventory levels have corrected, although some customers have had an increase to quarter over quarter in Q1 and talking about keeping that flat going over to the next quarter. So I think the auto space has turned the corner, but I don't know yet at what pace it's going to recovery. And I would bet at this moment slowly for now. So that's our expectation, at least for the next quarter or two.

speaker
Robert Mertens
Analyst, TD Cowen

Okay, got it. Thank you. That's helpful. Appreciate it.

speaker
Operator
Conference Operator

Our next question comes from Christian Schwab with Craig Hallam.

speaker
Tyler Burmester
Analyst, Craig Hallum (on behalf of Christian Schwab)

Hey, this is Tyler Burmester on behalf of Christian. Thanks for letting us ask a couple questions here. Maybe first on the restructuring, it looks like after the restructuring, we're kind of to a break even on a quarterly revenue run rate in the low $100 million. I guess the way you think about that at these sort of levels, As we see recovery over time, what kind of revenue levels can these sort of expense levels now support in a recovery situation?

speaker
Jeff Jones
Chief Financial Officer

So you're asking from an OpEx standpoint, Tyler?

speaker
Tyler Burmester
Analyst, Craig Hallum (on behalf of Christian Schwab)

Yeah, essentially from an OpEx standpoint.

speaker
Jeff Jones
Chief Financial Officer

Yeah, so after we see full benefit, of the restructuring. And if revenue is at this $100 million level, we'd expect OpEx to be around $47 million. And then as that revenue grows, and let's just call out $130 million a quarter, we'd expect OpEx to be about $49 million.

speaker
Brian Chin
Analyst, Stifel

Okay. All right. Understood.

speaker
Tyler Burmester
Analyst, Craig Hallum (on behalf of Christian Schwab)

And maybe a little bit of housekeeping on the model, Jeff. On taxes, the benefit in the quarter, I guess a little more color of what that was exactly. And then maybe level set us going forward. You said $1.6 million in Q2. Is that what we should kind of be thinking about as kind of a fixed run rate until we see revenue and profitability accelerate from here?

speaker
Jeff Jones
Chief Financial Officer

Yeah. So in the first quarter, we did have a non-GAAP tax benefit. We had a tax loss. And we did have a tax benefit of $3.6 million. So based on revenue and the guidance, Q2 was looking like a small profit. But our effective tax rate is high at this sort of break-even level, if you will. The effective tax rate was a little bit wacky. So the rate becomes in the 90% range of pre-tax, book pre-tax income. So I would carry that 90% into the second half as well. I'll give a guidance update, obviously, on the next call, but that's what I would run with for now.

speaker
Tyler Burmester
Analyst, Craig Hallum (on behalf of Christian Schwab)

Perfect. Very helpful. And then, you know, last one, maybe on capital allocation, you know, cash did come down in the quarter, you know, but still at a pretty substantial level here, I guess. you know, are we still potentially looking at other, you know, kind of strategic tucking M&A opportunities out there? You know, any thought about an accelerated buyback or raising that given the level of the stock price down here? Any commentary on capital allocation would be great. Thanks.

speaker
Jeff Jones
Chief Financial Officer

Yeah, you bet. Sure. Yeah, you know, the review of the acquisition funnel is sort of within our, it's in our blood. It's part of our normal process. So that process continues. From a buyback standpoint, our stated goal for 2025 was to offset dilution from our equity compensation plans. We were able to do that in the first quarter of the buyback of 432,000 shares. So at least for now, it's a pause on buyback. That obviously could change at a moment's notice. But for now, for Q2 anyway, the posture is pause on the buyback.

speaker
Tyler Burmester
Analyst, Craig Hallum (on behalf of Christian Schwab)

Sounds good. That's all for us. Thanks, guys. Thanks, Tyler.

speaker
Operator
Conference Operator

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

speaker
Jeff Jones
Chief Financial Officer

Thank you. And before we sign off, I'd like to note that we'll be attending the following investor conferences over the next two months. And those conferences are the B. Reilly Securities Institutional Investor Conference, on May 21st in Los Angeles, the TD Cowen TMT Conference on May 28th in New York City, the Stiefel Cross-Sector Conference on June 3rd in Boston, and the Bayard Consumer and Technology Conference on June 4th in New York City. So if you plan on attending any of these conferences, please reach out to your conference contacts or let me know, and we'll arrange for an in-person one-on-one meeting. That's all for today. Thank you again for joining the call and we look forward to speaking with you soon.

speaker
Operator
Conference Operator

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

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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