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Note 2 - Business Acquisitions, Goodwill and Purchased Intangible Assets | 9 Months Ended
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Sep. 27, 2025
Notes to Financial Statements |
Business Combination, Goodwill, and Intangible Assets Disclosure [Text Block] |
2. | Business Acquisitions, Goodwill and Purchased Intangible Assets
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. 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 is a debt free transaction and was subject to a working capital adjustment which we finalized in the third quarter of fiscal 2025. We made a cash payment totaling approximately $34.9 million, net of cash received, for Tignis which was paid out of cash on hand. In addition to the initial consideration paid, the Tignis shareholders have the right to receive an additional $5.0 million of consideration which is based on Tignis achieving certain sales and expense targets through December 2025. The contingent consideration payable has been classified as level 3 in the fair value hierarchy. See Note 5 “Financial Instruments Measured at Fair Value” for additional information on the three-tier fair value hierarchy. Contingent consideration is recorded in our condensed consolidated balance sheets in other accrued liabilities. Adjustments to the fair value of contingent consideration are reflected in selling, general, and administrative expense in our condensed consolidated statements of operations. In the first quarter of 2025, we updated the fair value of contingent consideration based on management’s current estimates at that date which differed from those used as of January 7, 2025. The following table presents the fair value of contingent consideration from the date of acquisition through September 27, 2025, (in thousands):
Fair Value of |  |  |  |  |  |  | Mark-to-Market |  |  | Fair Value of |
Consideration |  |  |  |  |  |  | Adjustment |  |  | Consideration at |
Recognized at |  |  |  |  |  |  | Charged to |  |  | September 27, |
Acquisition Date |  |  | Settlements |  |  | SG&A |  |  | 2025 |
$ | 1,700 |  |  | $ | - |  |  | $ | (1,700 | ) |  | $ | - |
Including cash paid, the impact of our working capital adjustment and the fair value of the contingent consideration, the purchase price for Tignis is $36.6 million. During the nine months ending September 27, 2025, we incurred acquisition-related costs totaling approximately $0.4 million, which were expensed as selling, general and administrative costs. Costs incurred during the three months ending September 27, 2025, were not significant. The acquisition of Tignis has been accounted for in conformity with ASC Topic 805, Business Combinations (“ASC 805”). The acquired assets and liabilities of Tignis 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 third quarter of 2025. The table below summarizes the assets acquired and liabilities assumed as of January 7, 2025 (in thousands):
Current assets, including cash received |  | $ | 293 |
Property, plant and equipment |  |  | 19 |
Other assets |  |  | 56 |
Intangible assets |  |  | 2,900 |
Goodwill |  |  | 33,688 |
Total assets acquired |  |  | 36,956 |
Liabilities assumed |  |  | (349 | )
Net assets acquired |  | $ | 36,607 |
The allocation of the intangible assets subject to amortization is as follows (in thousands):
|  | Estimated Fair Value |  |  | Weighted Average Useful Life (years) |
Developed technology |  | $ | 2,300 |  |  |  | 3.0 |
Customer relationships |  |  | 500 |  |  |  | 6.0 |
Trademarks and trade names |  |  | 100 |  |  |  | 4.0 |
Total intangible assets |  | $ | 2,900 |  |  |  |  |
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. While high customer retention rates are common in the semiconductor capital equipment industry, amounts allocated to customer relationships are being amortized on an accelerated basis over their estimated useful lives due to the early-stage nature of Tignis’ business and historical customer turnover. 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 Tignis’ 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 Tignis 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 flow was 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 earnout agreement was measured at fair value in accordance with the guidance provided by ASC Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions, and risk of nonperformance. Tignis’ results of operations have been included starting January 7, 2025. The impact of Tignis on our condensed consolidated statements of operations and comprehensive loss was not material. Goodwill and Intangible Assets Changes in the carrying value of goodwill during the year ended December 28, 2024, and the nine-month period ended September 27, 2025, were as follows (in thousands):
|  | Goodwill |
Balance December 30, 2023 |  | $ | 241,658 |
Impact of currency exchange |  |  | (7,019 | )
Balance, December 28, 2024 |  |  | 234,639 |
Additions |  |  | 33,688 |
Impact of currency exchange |  |  | 13,966 |
Balance, September 27, 2025 |  | $ | 282,293 |
Purchased intangible assets subject to amortization are as follows (in thousands):
|  | September 27, 2025 |  | December 28, 2024 |
|  |  |  |  |  |  |  |  | Remaining |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  | Weighted |  |  |  |  |  |  |  |
|  | Gross |  |  |  |  |  | Average |  | Gross |  |  |  |  |
|  | Carrying |  |  | Accum. |  | Amort. |  | Carrying |  |  | Accum. |
|  | Amount |  |  | Amort. |  | Period (years) |  | Amount |  |  | Amort. |
Developed technology |  | $ | 240,479 |  |  | $ | 194,355 |  | 3.6 |  | $ | 228,789 |  |  | $ | 163,453 |
Customer relationships |  |  | 75,538 |  |  |  | 42,275 |  | 5.5 |  |  | 72,570 |  |  |  | 35,229 |
Trade names |  |  | 22,279 |  |  |  | 15,253 |  | 4.2 |  |  | 20,926 |  |  |  | 12,930 |
Covenant not-to-compete |  |  | 235 |  |  |  | 206 |  | 1.3 |  |  | 223 |  |  |  | 179 |
Total intangible assets |  | $ | 338,531 |  |  | $ | 252,089 |  |  |  | $ | 322,508 |  |  | $ | 211,791 |
Changes in the carrying values of purchased intangible assets presented above are a result of the impact of fluctuations in currency exchange rates and the acquisition of Tignis. Amortization expense related to intangible assets was approximately $10.2 million in the third quarter of fiscal 2025 and $30.2 million in the first nine months of fiscal 2025. Amortization expense related to intangible assets was approximately $9.8 million in the third quarter of fiscal 2024 and $29.3 million in the first nine months of fiscal 2024.

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