FormFactor (FORM) 28 Jul 222022 Q2 Earnings call transcript

Thank you and welcome everyone to FormFactor's Second Quarter 2022 Earnings Conference Call. On today's call are Chief Executive Officer, Mike Slessor; and Chief Financial Officer, Shai Shahar.

Before we begin, Stan Finkelstein, the company's Vice President of Investor Relations, will remind you of some important information.

Thank you. Today, the company will be discussing GAAP P&L results and some important non-GAAP results intended to supplement your understanding of the company's financials. section non-GAAP press other the release on Investor to available information company GAAP the the website. in issued Relations of measures financial and are and Reconciliations our of today by discussion laws. securities forward-looking the within meaning the Today's of contains federal statements industry and forward-looking disruptions our the anticipated sell financial benefits and the supply and in performance; develop, of of which the projections such respect anticipated in are our the and capacity pandemic; the the the COVID-XX includes acquisitions statements Examples future impacts new such and with changes; macroeconomic impact trends; based. upon demand chain; in products; also to the produce of of ability business assumptions regulatory statements and conditions; of products; for technologies; geopolitical investments to to subject from differ to and known actual and this unknown materially cause could uncertainties call. are statements These that results those during expressed risks is XX-K fiscal recent factors the most issued contained SEC's available and our on on XXXX ended website filings year the Information with other which and in are www.sec.gov press in uncertainties release risk our SEC in today. and our Form SEC at on filing for

obligation July that, call are of statements as assume them. FormFactor's CEO, XXXX to we over update today, made we and no will Forward-looking now the to With XX, turn Mike Slessor.

for everyone, us joining Thanks, today.

our earnings non-GAAP at again Together the second environment, expense high the model. produced per highest second operating in exceeding in margin target delivering range. history of in the quarter, current again, control posted strong and the share inflationary good end results FormFactor, quarterly revenue of this outlook with company the financial gross our

to quarter's customers driving strong overall new results similar themes financial meet to results demand continued the quarter products, as first and were our in card their to designs second probe ramp for and photonics major release also maps like and with transistors, advanced DRAM. their development & silicon both invested and systems packaging, gate-all-around solid in business. driving Customers in results business innovations of Foundry our in quantum Logic computing, technology The road

operation we our a but market, quarter, of emerging of the products the ultra-low enabling key tooling qubits required a second refrigerator augment quantum refrigerator small to commercial sub-XX as are the key acquisition infrastructure quantum dilution to of dilution the States, refrigerators quantum computers position important for now This Dilution the for a as customers key in supplier line During United millikelvin our product FormFactor but buying made operation being the capable enabler JanisULT. temperatures acquisition also supplier superconducting in for computing the makes capabilities the computers. of and leading just quantum test-and-measurement supplier computing. expanding with not strengthening largest of

outlook. now our Turning to third quarter

outlook from customers weaker & both applications. and sequentially major is compute reduced for mobile due several probe demand Foundry primarily Our cards Logic to in

chip designs these and, cases, adapt global to macroeconomic the As design for reducing new already inflation, conditions maps releases by selected customers ramp release their and by specific their in production. plans changing volume changing uncertainty short-term delaying road in driven end start-and-design wafer their some in markets, they're

As the change a designs new required number that to so specific of a cards production cards chip design. manufacture to consumable each and chip of reminder, changes are individual also volumes to probe probe specific design

change not margins customers end to this plans across quarter. industry their by customers match like view less markets several their universally have a segments significant profile. & quarter production not reduction our and years gross uncommon been remain a cards in as markets, in and growing And Shai probe demand We and end short-term in earnings. for times characterized reduction changing robust adapt Foundry rapidly although in demand & conditions Foundry these probe forecasted card anticipated third our by in of to discuss in probe in customers Logic times product-specific reduction past to -- changing As our response Lead results fluctuations than demand demand in will business. short-term this their Logic structural conditions detail, and as changes are a the card all in a

evident to fabric. & equipment exciting view architectures packaging wafer EMIB, in Foundry continue Foveros an leading-edge growth Logic driver capacity fab FormFactor. investing innovative both early-stage advanced Customers and and spending; XD We as for long-term are continued like as from

complexity these performance test architectures test As which schemes chiplet past, integration the wafer both drive raises card. to out; required of requirements MEMS we've expands needed are delivery cost per support intensity short our rapid at Advanced customers' ownership were tile-based production for number a with the requirements probe cards a noted in higher these which the and the FormFactor's like technical of compelling dynamic probe ramps. time technology and meet essential card lead probe challenging to

it. target the a our the tenet and and steady semiconductor electronics continuing model, to For made broader this planned supplier expanding strategy industry committed with progress these financial diversified and equipment market target underpins segments. of serving our investments the strategy consumables remain leadership in to and anticipated towards the model pause The that multiple defensible is main our position we've position as gradual third reasons, and financial our capital we're despite quarter

and unlikely been every has of multiple Over set the market a and segments while past quarter. segments diversified robust in are belief with each markets growth these with growth, we've delivered years, in our demand demand to our consistent deliver of robust infrastructure. markets, offering Operating cyclical each customers and global few that manufacturing overhead, broadest allows in amortize and structure, set customer of our to for our served advantage better drivers manufacturing significant value provides FormFactor. us cost ban our capabilities technology the to fixed support competitive also This segment's including facilities

all and shifts in on to demand in proof anticipate lines Systems & and market both confident continued per our growth point leader that target to share growth committed multiple reduction improvement agility we content of cards. we effective the you. the advanced non-GAAP diversification by and be product the so Shai, over revenue to well to with progresses as of mix third will partially confident offset flash close as product Our steady where and the earnings resilience in overall remain impact share that fundamental prospects for delivers outlook growth revenue that semiconductor $XXX We the an by Logic These driven trends of affirming is long-term million expected and as the and we're of in are positioned growth I'd DRAM gains technology offers industry profitability. value industry quarter drive like on of in this $X that segments mitigating and a these that towards FormFactor FormFactor segment serving strategy Foundry our demand fully probe is by the trends gross will and margin our model remain beyond. for of packaging.

good you, Mike Thank and afternoon.

you and our press the ranges, posted As release in non-GAAP of outlook results, again, strong again gross quarterly company mentioned, quarter the end midpoint in saw EPS the highest gross history our second revenues Mike of with second model. range and exceeding delivering margin above as the high financial target our at margin and FormFactor, revenues

from the and X.X% a from million quarter revenues were second increase by from first revenues X.X% quarter. driven QX, & of million Second were were of sequential first decrease mainly quarter $X.X The revenues. our $XX million, X.X% $X Logic segment in or QX. million Systems the a increase Foundry was $XXX.X revenues $XXX increase quarter, in record higher of increase Probe X.X% an revenues an million card segment a year-over-year. or

XX% X% & revenues Foundry press QX. XX.X% XX.X% quarter. gross revenues lower our non-GAAP in outlined higher increase quarter basis reconciliation GAAP revenues of DRAM as available total of to the than section of issued total GAAP company for million the Card and first total we $X the gross was lower website. margin the Probe revenues were Flash non-GAAP than the revenues than both $XX XX% from to comprising a $X in the a with of today and the and QX the markets. $XXX in million basis, quarter of XX% segment, lower million which quarter revenues, a million, were XX% first record revenues revenues QX Logic than margin release quarter. in our $X.X in higher gross compared Within points X% margin our first the over in million Investor first to slightly revenues $X.X of QX. in XXX second gross or items margin million QX, XX% lower QX, of of X.X% On the of for Cost included XX.X%, in quarterly reconciling X% non-GAAP in in QX, were Relations were table on quarter the the compared QX was in than as in second

margin XX.X% decrease and headcount mainly segment was in QX. card a higher to manufacturing second spending. due Our less mix, The probe the points decrease basis in to of XXX is a XX.X% favorable compared gross quarter,

and mix. lower segment lower is a Systems product XX.X%, the favorable gross QX decrease XXX Our margin revenue quarter. the less XX.X% in to margin was due than points basis gross first The

in than with million, in $XX.X the for record of spend. second million for for effective $X compared income million QX. tax the or $X.X of or was GAAP quarter; lower $X.X effective the million, quarter's The compensation, of an points $XX.X The was QX. in than was non-GAAP million quarter to our $XX.X quarter operating XX.X% amortization quarter annual $X.X Non-GAAP and first million income than depreciation XX.X%, XX.X% mainly higher as higher Non-GAAP the salary for quarter; non-GAAP annual Our fully as previous share, XX%. million million the by R&D the $X.X rate than and the quarter. operating the relates same XX second the higher for million were of million were first $XX slightly second than $X.X quarter GAAP $X.X rate higher XX% XX.X% of first included in second estimated quarter quarter, for income per noncash second lower to revenues the tax QX below compared operating $XX.X million $XX increase, million for expenses quarter. than the was expenses basis for for or acquisition-related net as higher Company first GAAP and record expenses $XX.X in intangibles, stock-based the in quarter. $X.XX second the $X.X increase higher QX last operating with million million. the headcount million $X.X a diluted million revenues, in project in

required first as benefits effective income vastly the intangible during reminder, rate. foreign-derived higher in R&D capitalization a lower also resulting quarter, the and changed, of As known expenses FDII tax

XX% this remainder XX% of expect end year. range for the to the We on be to the lower of

previously remaining fully mid- communicated, R&D rate annual expected digits our tax remain is utilize of non-GAAP to pretax U.S.-based until credit. cash our As around single high to we income

income was record Second fully per quarter $XX.X share, $XX.X million diluted million non-GAAP set quarter per or the $X.XX net first in the share. to fully $X.XX or of second diluted

to $XXX Net cash and provided cash and of million Moving cash the and previous generated million cash the at to level similar quarter, in million were Total of second to end investments $XX.X by the flow quarter. quarter. operations were We expenditures balance QX. record flows. $XX.X capital the a free at similar the sheet the in

capital We As invested loans to QX. million remaining our balance quarter, term two during $XX.X in second of the of quarter in million. totaling we sheet, end on the million second compared $XX.X had $XX expenditures the

executing mentioned, CapEx million to between and continue $XX we Mike to be on million. As our and $XX expansion year capacity are full expect

the conclude to As a we to in return expansion. after model we our of revenues capacity target to reminder, X.X% X% financial expect CapEx this

Regarding stock buyback.

remained year second quarter, an million our repurchase of available these for buyback shares. programs quarter million end, X.X during total this QX approved shares quarter we purchased $XX of million the through under million Board under and our X.X repurchases During existing two for program. our of utilized We programs end two future $XX stock $XX.X the the program two repurchases. second these Directors At to brings a $XX million million fully additional and

the Turning quarter non-GAAP third to outlook.

expected by $XXX offset the less minus to steady or Mike to expect These well favorable XXX reflecting Logic decline a about Systems or minus outlook result probe the in in revenues, plus million. XX%, in in with QX for segment mix mentioned, midpoint favorable is markets revenues X/X At a of As other relates margin gross factors for a decrease of points. in and basis be Foundry the we of non-GAAP the Foundry serve. outlook plus gross quarter margin revenue expected as mix, range, the card. flash a partially we the product in decrease Non-GAAP million, as $X less & Logic demand our DRAM & third growth expected

release Another to than higher lower lower our earnings $X.XX. $X expenses outlook in partially today. or of revenue the to expected outlook A QX relates open of reconciliation the $X and midpoint to Relations is available the attributable QX performance-based per million issued call expect similar third let's impact offset non-GAAP benefit At be be questions. the these fully lower to for diluted X/X fixed due Operator? press minus hires. is levels to is to ranges, by of the expenses, on section the for approximately that, the our other we share and of the to QX of million, non-GAAP costs expected decrease Investor plus manufacturing website and by new overall and compensation With mainly operating Accordingly, $X.XX, last costs. employee-related GAAP

first Instructions] comes [Operator Our from Craig Ellis. line of the question

Appreciate go of on to were and foundry give your happening ahead to wanted logic we your customers on million-plus this managing work degree for compute back compute levels what's through of you team. potentially what's when is the third third as back they're the the at issue rebound Mike, seeing the dynamics with I look in play. work in as you issue? quarter, color all what to you you sense the Can company? $XXX issues in mobility I mobility the to And actually we're think us which for sense some cycles, identified the business comments to quarter and a or those a product some your as revenue

Craig. Thanks, Yes.

different compute puts start designs some their are changing we're their reduced end within changing they times, I do since customers volatility Logic cards it's of parallel, there the exactly back I there's I know prepared but coming we similar & release demand road to but seeing the lead and product maps a you remarks, in multiple design, say are both to well would their takes and XXXX probe profile. want a market specific are and while of demand our know, result each sequential of said quarter, in cards customers And the quarter conditions. to as a are as each a the in As in of lot specific and there's components probe in from sources nature short-term that. well ago the on multiple in Foundry in of we mobile with reverse. to dynamic fourth draw adapt wafer I where saw the same dealing plans

on business inside short we're these of drove the If demand Foundry guided customers up you customers, remember, fourth many Logic we Logic up and responded & our as stronger times. to similar seeing quarter & Foundry now, them lead

about the and on investments, have test & I dynamics before. said driving node for WFE packaging, FormFactor the have I an call. as cards opportunity Advanced these exciting excited Logic, So here. probe despite We growth up worked remain see on short-term Foundry think we and volatility intensity we spending seen still advanced

That's Got helpful, really Mike. it.

go So queue. Shai, and then to I'll follow-up a in ask back the you

be X/X X/X, this, across gross the breakdown, I and much at volume talked to that business? less neutral the higher normalized going the mix that these move the or margin investors Or manufacturing should headwind? higher we're about? in to color X/X, about and revenue not-too-distant through the The mix. a and appreciate a suspect think question what Is for costs. back future, to manufacturing is needed? become and So point and volume does level transitions that's When become tailwind of But cost think how a element that there you about a higher should we to some

Yes. Craig. Thanks,

we our and QX. that and to So QX to inventory of they're most be in QX actually of inventory capitalizing as the expenses in capitalized relates QX additional to going these manufacturing part amortized variances build were

is to to talked again. and calls the it into element XX% our longer-term are cost well. We to. are of -- So don't gross of previous model and committed we which into that higher of There about happen be change, labor as higher materials. cost But these are forecast it I expect target big built some built in margin still

And our line with next question Needham comes of from the Company. Charles & Shi

you card. Can minute. you're us a which -- here? be believe the may to and in want seeing into probe of smartphone dig weakness RF you factor weakness within terms of mobile, the in I tell you one probe you the the for seeing the bigger have I SoC kind in both here card mobile are

mostly like Mike. SoC: Yes, Charles, that. modems, things processors, it's related It's to applications,

part year, moved As that road In we've demand the through individual Logic quarter, as map again, half it moderated in & SoC an we're RF the seeing for cases, in reducing some year, changes, design as the our the volume some in the for off in you of overall narrative impact strength results, strong that third card has mobile sequentially Foundry of we've designs. customers we're coming the you, XXXX, real year. seeing first saw designs release and, certain out the the the the first first told half some pushing and those -- chip down, associated with very But a there. on and probe of around the from business results has general we

sections. primarily to with the mobile I and the demand, up it if say delta I'd So carve QX, reduced compute going SoC QX mobile associated between

That's more the that is question. of related to one compute, On specific it. part Got customer? it. Got one

related release adjustment thinking related of of customer part your that change the other compute to more the Or about ramping? the it's to the more volume The schedule? is is, it is

Yes.

said really mostly real I feel is in now, it the like Right we're release it nearly although in schedules. does dealing prepared changes As this customers. remarks, multiple time, with design

imagine schedules that our my weeks lead your attention much few in with wait can a can question, in start a release and to impact for and to maps, I less opposite revenue. times any to this can has Craig's back response ramp again, the we a quarter, of You times the quarterly And in significant period. release on movement pretty volatility than things out different have QX and have impact plans worked wafer way where been in in design a design sick where [ph] direction, see given drew this 'XX, of there road plans

Got it. question. me Got very Maybe the let it. allow quick me for last

term that you want despite to you proceed maybe consider you little or delay whether to your current CapEx bit should of nature. little this in a CapEx be business. of very of downtick a short year Wonder QX You think in weakness investment seems terms bit probably is the maybe

a You the see you probably of more so V-shaped of terms want like recovery CapEx. to demand in kind with proceed

Yes, that. I'll take

maintain didn't leadership. is ago, XXXX. This in for they mainly expanding $XX our capacity. in So required to started continuing model. remain continue CapEx we we couple both million in our position confident we long-term target investments change for are nature. to that plans believe to the That's investment the year be between expect million headwinds why strategy are years the we of and plan as are and the capital market We and to These $XX we to temporary these industry towards track a

I here. that in adding capture be to are important market growth is need -- think and to to more ready we need will game need will they the which share they understand cards probe means the our it Now customers capacity

Chin And with next from question Stifel. line the comes Brian our of

I But XX% in back I the the margins, freight let unpack the expect would level decline if sort me the that quarter. be implied still XXX revenue to a of understand margin with that's attribution. not necessarily decline there's but effects little of and gross of from but that's and logic of and kind sort basis Q-on-Q XQ, a bucketing even to bit like the the in -- level -- here. yes -- -- appreciate talking it right. going Q-on-Q, gross But little a sort some I want we're revenue to blunt bit what mid-XX% I here. foundry happen Maybe in the about, points say second to

I were a if of sometimes would on, guidance revenue, just segmentation in of yes, kind scenario foundry. customers and are margins -- right? terms normalize from your this I so flat -- not kick revenues say of a gross But late And were in a sort of even of just revenues is guess And margins in in for of And mean just like this kind on did these get -- if math of you what but QX away? then guidance where of not going sort my is impingements we I terms bit know of QX? QX out flat, QX gross but a some that sort a to your flat if

Yes.

and So on revenue been similar On similar $XXX-and-something would gross profile XX%. of a target have to revenues QX, gross million. that estimate model to QX, we margins mix margin product our level

I amortize QX, them higher fixed well. and level think a higher now don't manufacturing in cost labor So if revenue, about, and margins -- of materials. revenue some in to half similar them of QX take lower understand, is we that timing as the was of so so QX part I manufacturing expenses answered -- repeat. and before components we costs in first And that I of of QX. cost I it capitalized when the of and or gross the level of expect But some going we're level about it the is in cost mainly similar year to This that I think addressed additional we -- three over for mix, the the you talking talked I big

gross and committed all into margin. taking so as And into with we that feel consideration, getting earlier, XX% confident our said are I

the as -- in in the of still sold with stay goods capitalized well? then XQ That cost does cost

on into will QX level But depends to all you're inventory not it of QX, plus, going going Well, depends accounting. million to that into and build XX%. you similar be much go QX at in in if I'm going the end. will and all amortized QX go drag to is to a But most be inventory my remark. how not revenue of amortized, profile it of revenue product $XXX I'll we first much on of estimate have a margin On how similar mix, back gross it

quarter, in terms surprised of long Okay. understanding of of duration my this understanding, by I'm your business. not sort And relative adjustment It how customers. or to you the phase sense What for of adjustment kind some think of do this makes will could history, a discussions? could based understanding on once future it the through Because on products your wafer cards here probe and this they're starts adjustment period. two but against that be is release period take be they'll based it

having our view expansions, capacity in as expectations some times remain I bit and lead a in to But seem make some structural R&D., we to to to QX. it's things look about And these invest right logic continuing continuing the the imagine, right like I'm The very event. not within might I well understand change a with what want create visibility, now as customers early good excited indicators detailed long-term we're snapback given for that conversations Foundry their little don't in as quarter. a profile we of Brian, like think, business now, sure & is like. short-term this Mike. there's prospects growth market. be, going But what Yes, I'll Foundry always in sure this that Logic. pretty pretty We it are rescheduling does right & timing, demand the uncertain take you us that a scenarios are with a now, these that.

their are in little Maybe ramp-ups this intertwine, needs your strategy test could customers it's terms -- but would wafer about integration if decided. next I in do like the envision this and what I their -- some of the to something have half heterogeneous based Mike, that say response, for guess, of you -- business? maybe I a And being you ask more QX? sort mobile I know Could that know happening you now. was of But yes that envision do Is just a is guess it's was being readjustments that key and it guess, year? just talked one still a happen more right determined upcoming when first on that I I bit meaningful you of maybe contributor your,

Yes.

the or still mostly think different phase development integration I chiplet or with customers. the in different tile-based heterogeneous strategies,

to adapt there contributions conditions, for expect advanced cards And ramp for an probe up setting delivering past, in heterogeneous we of But major are XXXX the as certainly, maps some a customers in well. We is to think changes product associated and packaging, everything and be plans to now market there terms their pilot year right customers we see volumes end revenue adoption to pretty products. might their early release major event, with But to chiplets those integration. as those those I in said probably, it's our XXXX are ramps. pilot as again, road

of with Our the comes Duley next line question David from Securities. Steelhead

couple. guess I have I Yes. a

seven going things, will When clarify to nanometer think nanometers? to start year. I nanometer customers or one your of Just nanometers that five from to from the to big demand? three three impact see in demand will card start are increase to probe you sometime moving grasp three an next When

& the time Logic card given you're ramps the business, Foundry pretty Again, the probe wafer Mike. characteristics it's of David, start associated close to lead with those.

to probably you. as Logic market wafer the front ramp, confidence we've continue the So for invest these of were maybe the advanced one terms new nodes, equipment it's quarter for Again, by three estimate wafer three to those And to in wafer not dynamics in it added starts and if designs and talked it's or to -- in others. that's going of about node for whether that past in quarter lead confident quarter again, but they they're those a still like the we'll & fab then lead of outs designs one to utilize to our like some it two one in quarter be a Foundry wafer that front I new in goes customers of three ramp nano. nanometer We're pretty us. a

be the starts year, start in QX? to three ramp to you'd So just in QX to next if see wafer up it of clear, nanometer

Yes, I fair a think ballpark of kind estimate. that's

slow idea And you as in is near improve. Okay. lowering when the given, expense are mentioned, you But demand going of levels reductions near-term of have the lowering in lead contemplating currently contemplating you term? are have you expenses because operating some you times? demand, to So

that. take I'll Yes,

example, from expenses and sales our regarding for million target to down overall, as maintaining QX in OpEx, compensation towards are higher OpEx, revenue both cost outlook progress today, we cost variable, provided designed right? support our reflected stronger QX. model. to going costs and seeing we structure performance-based time. $XX.X the over it be are are million But the $XX financial to capacity We is we and of and make And some around of like quarters So in and demand

We'll continue if structural changes structural this the to So OpEx that to future. adjustments significant look into no needed and point. -- in make at

it business. guess reduction going $XXX business memory from there you expect one in Final vast me think the other seen that as to the absorbing weakness all to & next market can reduction be from you players feel the DRAM that that QX. sequentially was in without Logic is in you markets difficulties is, to we've well make $XXX a in like you weakness kind Okay. the a demand? and given that suggests I Would in DRAM Or from space few PCs? that Foundry of over coming majority described I quarters million flat are the for in and be revenue million the for of

here. most demand announcements At CapEx this keeping seeing of night. more on It's shifting stage I Part up the as that, close mobile new are between end is I'll SK DDRX, caveat of customers memory eye and holding last so think, obviously our DRAM are Hynix the are The think up well continuing is But I of very our card given be we're game, segments. of you designs, & lead from probe far, relatively we latter. some to and as hold Foundry a our and demand it's different Logic one flash that server. customers, the card are probe definitely remind But short. customers recently David, of business reasonably around both to again well. seems that market DDRX mix the times They're something release

decent lead memory continued within demand first design But year. the approximately levels seen So probe quarter strong of activity, do now, for we well at half we've as a see the cards, times well. the in

our Cowen. next line from And with of question the Robert comes Mertens

of Krish of This Robert behalf on Mertens Cowen. Sankar is

from mobile when current were quarter Just this the more be. the into September And the mentioned of then both able if foundry to cuts markets. the a out logic see pause looking to better trying guidance, down push you'd the you of have and maybe to demand demand is what Just get slowdown follow-up. break the function would one turn in a on of compute I able you to a or in when slow the then and sense or Are duration bit down started start unit designs?

what We've to the changing vantage ramps plausible our reduction and things PCs. it's call least of their changing pinpoint industry like point I some on of design But and we've to root a customers, products & market to Mike. this exactly the it, is. Foundry conditions tied the This on that handsets Logic releases, with Yes, at end it's demand. pretty and is in spending I'll consumer it's different for Robert, difficult It's us again, rapidly, seen situation. think seen volatility different, in cause obviously reacting

We of short-term the WFE investments given in to awfully prospects see we advanced see in And the volatility. $X I'll per in packaging nodes. point back So here. duration, continued to increase shift and commitment remain growth million our continued Logic, to change earnings don't the of capacity, Foundry at again, $XXX say revenue. node some especially share terms bullish right advanced to advanced our at our plan all those structural about We now. a the to difficult But non-GAAP model &

the peers cuts WFEs. hasn't two. seeing then of There's like doesn't helpful. definitely whether function times And sort are weakness just if lead opinion varying sort but had back other about any between disconnect There major manufacturers. to guidance the any that. a of That's discrepancy you from a of think the it end, into from same just real a a on seem in quick on demand like Great. year I to way the wanted back-end just the recent of between front half and second thing similar front-end the it's see the been or end with

This front-end my seen, their that test-and-assembly dynamic conversation cancel long be although to lead here, we opinion, and not the with customers be to shorter the times of may lead times bulk responsive the I this to end associated necessarily other in be the think have clear, customer lose mean historically, line. have more very but closer Yes. back-end, obviously, priority investments equipment but demand, to a be a just And of to deliveries. is terms the going of longer are

the so pretty to those their with think of over I probably the been associated years, past customers in claw to change think the up, couple has circumstances given plans. lead where WFE I trying everybody capacity with investment longer industry times are And the reluctant

Craig-Hallum. the And our of line next Schwab with from question Christian comes

demand most basis right? Being seven out few prolonged the year-over-year But at replacement demand than down five a units a pre-COVID, you as back, less semiconductors, on it are of bigger markets are volume PC cycles and years? of into are pronounced far a level kind just we've important your Foundry be maybe that of the extended. going as We're seeing for four years what years of normalization could the when of was Logic PC thoughts wondering & I'm kind of shrank and picture kind come smartphones' demand. pretty smartphone last could in seen concerned, as two all this fearful

don't Christian, I to on but think, questions, watching I'd it's the I think of all And certainly way that. describe right, this fear said think, I in lower consumer back this therefore lower materially does of slow probe macro PCs, for handsets for for result down time, drivers. and period previous comes demand. the it If one card demand Mike. a I as like falls, we're and chip to demand has long to

seen in to is of differentiate try to more of market new their our innovation start like things customers maps though, road and the One for them. have in and conditions historically, designs that, many tough positions release accelerate times their we

that's continuing segments watching again, this as in the continued still Logic the situation, and meet sure well. Again, demand & seem in in Foundry invest for now, make to is. pretty growth to everyone to structurally So But can that I'm in capacity on industry. sure as why we're be call things our we strong in other

for needed then in a assumption about on additional three where was you share one investment capacity. there on or there Or chips anything you've future number you behind versus gains of make scenes When there you customers the an you square market determined or And silicon other Great. follow-up that, starts that that of to the largest opportunity decided investments? the players to inches guys that talked previously, do space? an wafer that was in is million of any these your believe

led and make. been we've are set making to and expenditures a significant the commit different There's variables Yes. us to of capital that to additions capacity continuing

advanced and intensity Simply needs their advanced both a the reduce not overall associated and start each that. test cost. Some more cards put, nodes the increasing tends is investing it proxy But nodes test to probe because of and million both of wafer is industry wafer bad before, to with we silicon more in be in yields are the and brought square advanced other packaging. this for up wafer customers to inches starts on improve

So customers when very ago. together, key years the increases embark that's our you capacity us to put some along couple detailed things with needs, conversations long-term and what all a their on capacity of with specific those about led

we can that leadership So even our leadership Shai serve. in markets increase as said, the position and retain our position we

more if I could just And squeak last one Great. in question.

today earlier degree? with an M&A some end? end slowdown think there is increased significant think scale things that's do where in back interest you happening the Teradyne create normalizing the an echoed a by for Do in With of well, kind we're activity back you still in in as kind to now opportunity do where think the Or to you opportunity there's that? of

path to now, the a when do probe executing this and to those customers results business, something strength in public that businesses that against where interested that hopeful systems their consistent been a consolidation to diversification, right conversations guess very little to We for staying becomes value. sure the remain continued continued stabilize I perhaps everybody headed. sure close We on We've them. resume growth end deliver focused to need able to and things catalyst the we're of a understands our adapt we cards making in continued we're start. you in scale I'm memory here that. tell solid can make about are is and our bit on But demand. changing very of the view drive start back have we a I and Well, their schedules bit wafer

David line And our of with King. next Silver from question comes the CL

things But customers regarding question lot a I'd My schedules. ramp-up of medium-term guess, to of a new your releases by fab significant, timetable customers I by effort discussion the is to align just says like and I capacities first those the XXXX major Can in that design capacity in CapEx same assume like fab country There's, XXXX by the to your those it new this wafer new wave sign maintaining -- customers. to additions remains it the that, think that add that lot kind capacity next longer-term U.S. kind would things just clarify and longer-term I development, of of decision-making you're a kind major trying beyond on bit. for your to be with little And it's -- of track. it of hence, for that is, a of a timeframe.

shorter the right? be There's your XXXX term to then timeframe different, medium-term in are at intact. and XXXX the So what issue view might we're today but in what talking we remains the longer about looking

or of alluded around our customers, about I increases, think And way talked capacity to summarize to they're other good our world. it. that sort pace places when with that's he whether the keeping domestically-based a Shai

a are lead We continue and demand be us associated for needed producing these fabs, the new industry nodes. with capacity global all new investments at forward going to these capture the to fabs to advanced supplier and these are of

in invest business of is always So timing continuing strengthen short yes, this and long to decoupling the the but the almost this to term for term. there adapting company

across the ratings? footprint part, And due area? end then of in published customer was did a from I I had that the that effort out again your that guess in And -- once a your ratings. improvement very increase VLSI in or think The have rating the or when to that. wondering Was building But the kind I FormFactor's would maybe question, board customers. on a -- I particular, in particular companies. multinationals? reflect results a make mostly guess, comments or operations background. this factor or is at of the high China, the of the form are on this scale, look in significant Or from the survey I -- if Chinese of coming survey about was a it. tiny some just results portion maybe bit of through could stood Chinese-headquartered you China-based out couple of China TechInsights your the results, And I just performance what was Got

closely in with them we I'll invest Yes. are But first customer small, share results background that the in industry. our It's so really in customer getting -- can we think strategy and is talk, with of you survey cornerstones reflection I'll all and in a I There very in customers only a that intimacy customer in first, many that. talk so adapt together. really the deliver I'm general. and mute? market about models. relationships and customer of and of expectations relationships one concentrated relationship key culture sure a important our so their and customers of business driving various suppliers to fluctuations along to work This our satisfaction customer about is of making many been generally these lot David, actually, and noise. are

communicated think the different we challenges, exactly there. results, issues, the We through are the know cultivating who the attention know paid revenue mostly survey. respond customers on operate exactly relationships really China I supply is there. where several through results. don't I chain different the the and generally in nurturing I region, the we to pandemic, customer But in don't if our through areas these and still delivery business, factors. who reflected speaking that's responded which Again, in way the multinationals to look at probably through challenges, improvement probably different it But logistical you those score our think driving

in you'd assumption, the survey But it's to some well. share multinationals. So results aligned so fabless of if do, assume are this companies market we have business you and and an in that's reflected make is with there success mostly probably of memory and results the key some purely as that with the we the assumption there have had the manufacturers gaining some the

[Operator Next Hans with of comes Chung Instructions] the D.A. from question Davidson. line

So couple. I a have

end market the around commentary demand, your mobile the compute. -- the regarding and first, So

high-performance do computing? So board? PC end there and the Or like you see more it's is compute any side And smartphone high-end across weakness maybe the side? then low the mobile on on the in the or changes

convey demand had reduced both mobile No, I in broadly have far, questions think the so as pretty in prepared in we the both seen and we've and tried compute. we remarks to

can specific insight of certain difficult That's it's its partition a going or of be sit. destined to but RF from be whether the we true segment this tell to up for chip us the markets handset. a is designs mid-range have for in handset where end able is going also chip components. high-end exactly a be often Now and terms to where exactly We to into obviously end difficult to

multiple it across short-term plans. I and So segments their customers it design call don't are is there release road broad-based multiple changing me, want maps to that but feels to again, start wafer

question margin. And second regarding the then gross it. Got

then we heterogeneous we have integration, the So chiplet. transition, have I enter XXXX, the then have DDRX and think as nanometer we into we three the

all a fair next mix tailwind year, could go $XXX the to for revenue these say, margin the product gross gross quarterly we say it's rebound from be above So the a if level? to then if can And margin so, million see let's to perspective. XX%

it Foundry model gross Logic We too. Shai. most quarter. come mix $XXX this revenue million one. our has take target & always saw growth -- saw Logic. of the we in of margin, in our margin, from Mix and XX% it previous on We So historically gross impact quarter, about a talk is Foundry gross this I'll had should major this When has And a & margin. of higher right?

line in to kind said at growth least higher gross things Foundry some line. margin you that in of the model gross it's get So & the drive Logic the of in with will XX% and us will kind help margin target that of

well, margin As and $XXX our model. revenue will said the it as for XX%, of I example, million, plus, model quarter At margin million estimate earlier is, a and we model before we target in mentioned million, So XX% and for $XXX overall revenue simple QX the it would fluctuate. see progress of quarter the QX. mix, our making been answer product we But profile right? this this with back the similar meaning are yes. to $XXX have bouncing revenue We call to similar target gross in towards it the level,

Thank further showing you. no I'm questions.

for I'll Slessor, CEO, remarks. that, hand closing over Mike any to with call back the So

We're everybody, towards Thanks, several the we're for target to our today. on eager progress of update where conferences summer to scheduled joining the late continued attend you us investor model.

I Take and our talk see call. care. you stay So QX to If we'll you to hope safe on we don't, then. results

gentlemen, may for and you you And thank participating. Ladies now disconnect.