FormFactor (FORM) 27 Oct 222022 Q3 Earnings call transcript

Welcome everyone to FormFactor’s Third 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 VP 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 assumptions and forward-looking the financial regional benefits and the and disruptions in performance; demand of of COVID-XX based. projections are such recent changes, respect of industry products, in ability U.S.-China upon trends, the and crisis, pandemic, produce the including the health capacity the products, national global, includes acquisitions for anticipated in and statements which Examples potential our future including such impacts develop, new anticipated supply with macroeconomic also chain, sell to to impacts statements trade of business our conditions, the of restrictions, technologies, and geopolitical investments the regulatory and are actual uncertainties and subject call. unknown These differ known expressed this and those to from results risks to during statements cause could that materially are website risk uncertainties in today. in on for on press is filing our recent the most with filings, XX-K SEC’s and release Form year and on SEC which other ended the XXXX fiscal factors our at contained and www.sec.gov in Information issued available our SEC

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

Thanks joining everyone today. for us

outlook forecasted tenets device-specific margins our were share at innovation in We of earnings on invest demand for align in well gross we in in model. when less revenue highlighting temporarily of demand Partially their are describe innovation-driven implementing was designed range, macroeconomic which gains in industry strategy with This into in cards product reduction in enterprise Based and this volatile margin do of business. current fourth and and both probe preserve to have As competitive plans. the cyclical mobile. in and for new Non-GAAP believe the in the it to probe and market and Compared reduced we our cards, for our decisive both Lab we expected was response, nature strategic second, remain target capacity increase facilities the produced our our card to demand data the when and from and and These announced are demand position the FormFactor’s are we a continuing cyclical our Shai industry’s to systems firmly to sequentially the at this near segments applications; of of as as non-GAAP the current detail the more long reduction the reduction tenants third, cycles per midpoint customer, with equipment foundry committed In business, anticipated, from like second declines and structure we was especially in quarter, Fab the today, share profitability sustained below operational historically in resulted in the consumer content view financial consumer-driven FormFactor’s capacity; revenue third change the fabrication These customers’ quarter, place year. portions relentless during achieving downturn. we to cost believe demand offsetting consumable decline these downturn the customers growth see above-industry Rather, investments to technology we in chiefly the fundamental as semiconductor as the notwithstanding, our we remain will advanced equipment. R&D and slightly due revenue midpoint. businesses to quarter differentiation in first investments and are have and profit investments diversification down core record new not Consistent the steps demand run-rates response at current engineering we we strategy. core to are our the by client top benefits until this card restructuring growth the ends. likely gross revenue better prevail was range. are strength wafer and than probe PC well systems, FormFactor with combined extend time strategy, which logic profitability. emerge in our next this steps to probe present, lead reduced to expect levels. in a designed

fourth weakness Turning specific one, logic primary new our card on probe probe two, cards. to demand due outlook, sequentially three our softness now probe weaker is to and the weaker and in in three, quarter restrictions outlook foundry further with demand; X; DRAM trade October U.S.-China RF factors: card announced

DRAM we recent regulations, leading FormFactor’s half by due forecasted China. the sequential in trade As probe customers technologies all businesses. example on DRAM and edge advanced hold An probe to these service domestic a card cards in is decline supplier with quarter where the U.S.-China and affected U.S. is are significant in approximately restrictions are to to memory of of that of foundry our exposure our fourth business, shipments based market headwind leading-edge a

required by ensure shipments compliance restrictions. trade the FormFactor holding new steps to full has the support with taken as and necessary by U.S.-China rules

evolves, compliance probe of and Logic and shipments obtain As although and experienced situation sequential licenses quarter. RF the SAW RF front-end probe permitted burn backlog. other probe closely and team inventory existing Significantly, expect to China components, card the business, enable demand as bond Inside switches modems, to demand core and existing we the in product. volume largest In our trade our in low in like especially cards fourth and Logic we exciting XG begun cards, of in mobile third packaging production major are steeper market, reduction Foundry FormFactor. pilot a Foundry further for microprocessor decline of power a the we a shipments have quarter, client to XD opportunity decline as support Foveros the amplifiers, for in Advanced Logic EMIB, customers microprocessor continues Fabric cards the is not of working business, probe like chiplet and and an filters releases local mid-tier handsets. off CPU architectures chiplet-based our to with team to customers excess

schemes probe test processes the intensity, higher noted hybrid tile-based wafer copper-to-copper also and out probe number delivery the process card technologies essential ramps. cards needed probe support revolutionary which both meeting the have FormFactor’s raises to card. short the dynamic cost past, based Advanced to are architectures required or of in bonding, meet these we the drive customers’ of on challenging ownership, higher performance compelling complexity, MEMS more a which expands for solder-based like chiplet lead like or assembly integration and while conventional production technical As whether requirements test our requirements and per these times rapid

to partially probe in reduction probe probe fourth strength quarter significant by demand offset sequential Turning expect a Flash cards, moderate card in cards. DRAM memory we

I’d where and solid producing by are to our together will innovations on programs to the the reduce chips, the their in which with and resilience stronger driven earnings for customers ramps. of trade us well Shai, the that fundamental high industry reduction growth of result new the above, technology the current in well-publicized causing per and close a to industry half enabling downturn computing the DRAM confident remain results weakened last Systems of in R&D new market worth during in other transistors, is we third FormFactor we tuck-in like restrictions as like is trends our an like attributable content Even of in R&D the the and DRAM for the business. in and commitment advanced quarter of of is in magnitude the U.S.-China the customers of trends quantum discussed that delivers leader overall, of approximately share customers’ prospects participating aggressively impact As FormFactor years. and by competitor, early $XXX target the is and the capacity noting our development photonics speed benefit long-term gate-all-around innovations half several their These product FormFactor model achieve stage directly to revenue. packaging, to advanced in from segment packaging. conditions our are all-time that expected It’s that leaner in and confident of position non-GAAP the successfully integrated you. emerge and million completed to downturn, growth are with revenues to roadmaps sustain current showing to invest positioned fourth $X semiconductor quarter positive affirming in investing technology systems acquisitions over silicon

Thank and good you, Mike afternoon.

were saw range. midpoint you the range release revenues midpoint in press As was of the range. and outlook slightly QX our below the as mentioned, high-end were the the non-GAAP of at gross and at margin Non-GAAP of our EPS Mike

$X.X the of an revenues was record second XX.X% revenues year-over-year. lower revenue. and million in third revenues decrease the of QX, revenues in record $XX.X a Logic $XX.X mainly a quarter. decrease from from from quarter XX.X% quarter driven X.X% were million million, QX. a were and by quarter, million $XXX second Third decrease or sequential XX.X% decrease of were million increase segment $XXX.X Systems the Probe The Foundry or our segment an Card

included to today our of items margin. third was XX.X% the a $X margin Investor XX%, the than partially table items, Card XX.X% Cost revenues the reconciling company revenues compared points than the the million September GAAP available quarterly in included non-GAAP we million segment, were quarter. Logic quarter release QX, QX, On percentage of total Probe the in margin a in reconciliation of of QX, offset by quarter. revenues margin million gross or million, reconciling gross and QX. in Systems total with the quarter which write-off non-GAAP the issued was $X.X higher X% XX% XXXX. QX outlined in QX. Foundry of segment lower GAAP inventory in decrease gross the related and lower revenues than the and the margin to section third million of to in lower in non-GAAP QX gross quarter revenues basis, XX.X% $XX.X X.X for gross in our than than and website. as of restructuring increase Relations in second million announced million press a the of Flash higher revenues, were second $X.X comprised in Foundry in lower XX% XX% in to segment, in $XX XX% revenues Card revenues second X% $XX.X the X.X% Within percentage the revenues were were revenues in XX compared were points for total Logic of $X.X second Probe QX. DRAM and we QX XX% as in quarter the a from

Our the less reserves and overall segment favorable decrease of and lower points gross the XX.X% quarter, compared Flash revenues, offset was revenues, higher in product is to mainly inventory third a XX.X Probe Logic XX.X% due margin higher by percentage Card QX. The revenues, specifically which Foundry in in to lower mix. segment decrease partially resulted

higher Systems favorable Our gross due a increase XXX margin more points XX.X% to higher XX.X%, mix. segment product the than revenue second QX in quarter. margin gross basis This the was is and

quarter RICO annual second $X a second as million fair income million grant, million expenses the stock third fully Company as GAAP and effective was the the third $XX.X operating for for were GAAP in the million, diluted per GAAP performance-based compared or The utilization. XX.X% result the fully tax QX the third Non-GAAP the compensation, in the with $X.X million revenues the second annual $XX.X stock-based non-GAAP amortization the for operating estimated million lower quarter million of expenses the previous effective of share to in $X.X was or the quarter non-cash due XXX tax to the was million per relates third or $XX.X PTO compared lower million value higher lower than $X increase third second similar higher expenses depreciation decrease compared of intangibles, diluted the quarter. of quarter. XX%. than second lower in $X.XX third compensation, rate higher mainly XX% spend revenues were than Our $XX included to quarter, the within $X quarter our million for in $X.X or price and Non-GAAP quarter. and for at million to XX.X% quarter compared of The of QX. the was for quarter of XX.X% R&D non-GAAP in basis as $X.XX with operating for $X operating $X.X time for quarter $X higher million, in with grants $XX with rate $XX points million share XX%, QX in than in the net income quarter. for million of $XX.X million income million acquisition-related QX.

end on for We lower full QX the of fiscal expect to year. and be the XXXX range this for

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

to diluted diluted net Third per share was $X.XX quarter $X.XX QX. income share million fully compared in $XX.X non-GAAP or fully per million $XX.X or

in of million million $XX.X million by million previous Moving flow free flows, end, the $XX.X Net QX balance were $XXX cash lower was and total sheet At third generated than lower in in cash million expenditures $XX.X cash the capital were $XX.X million. quarter investments cash lower $X.X to quarter. QX. provided in and than than the operations the and we quarter

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

to underpinning rate. plans drivers we execute still place, continue a core our the increase our capacity With albeit in strategy at slower on

to to to we We of approach to the CapEx revenues these X.X% the model after expected increases. million. we capacity target of $XX to CapEx full in financial range As year X% our end, return expect we conclude year narrowing are still million $XX

Regarding At future of QX during our total million for approximately buyback under we end, quarter, X-year remain for $XX.X repurchases. stock quarter purchased third buyback, the million XXX,XXX available shares a $XX.X $XX million. program

and that revenue while investing mentioned. to to in this due quarter to In our an we the non-GAAP and announced cost capture workforce, markets. Mike includes we short headcount and spending today of business. the both on by restructuring segment reduce fourth quarter XX% expect of long-term our SG&A. the effectiveness Card mostly factors are we focused lower environment, efficiency fourth approximately Probe our the Accordingly, in to demand plan in operational The plan lowering Turning outlook, improve and the three reducing

outlook revenue gross once demand basis favorable $XXX to We structure by a actions with benefit mentioned for Relations of to expect one-third GAAP and largely to call issued available diluted will that of plan that, Question-and-Answer of XX% will only benefiting due less to impact midpoint and these fourth is these in XXX fully expected the let’s a or compensation be offset section our QX. week. to with lower mid-quarter, we the of annual to We press $X.XX. performance-based Session an decline end restructuring OpEx. was share in we plus With additional At these of the Operator? or minus minus basis the for in minus the the to that non-GAAP on implemented, QX, QX of revenue by operating partially is working X impact A website Accordingly, today. implemented will expect headcount of ranges, non-GAAP a together expected XXXX. be fully our reconciliation be quarter similar per a I mainly questions. estimate Since the is outlook completed approximately on reduce announced restructuring the result plus lower million by outlook be expenses the million, our $X product cost $X.XX, open in savings mix, QX, benefiting plus the QX non-GAAP of actions, or our million. as Accordingly, two-thirds QX the margin million release earnings The Investor today cost $XX of results and points. reduced $XX and savings of sales

Chin the Chin. of ahead, of Thank line comes you. from question Our [Operator Brian Please go Stifel. first Instructions] Brian

a into the much can to much which XQ you at restrictions? from millionish guess DRAM, start clarify, the Thanks China is half Maybe revenue terms ask questions. And of then about the I Logic Foundry is for I down How How XQ, I of just to guess, $XX tied midpoint? XRS? few will how here, is step much taking. RF? in just is

Yes.

is Good this Brian, question. Mike. So,

As is is million remember, and you October between the And said multinationals our the will This which sequentially. the to all regulations. $XX million regulations. sequentially. revenues which I you China reduction midpoint the coming that, of two-thirds This to I and impact, million at China $XX you biggest talked China million sequentially, the which with the X biggest impact is calibrate the $XX from will licenses. of impact, start is start October with the between about $XX approximately million being $XX X have we’ve received multinationals, if impact

of not are customers million significant significant rate edge a at chunk domestic run million leading one-third, Foundry but of comes in These in $XX been part both and and a $XX from quarterly exposure impact. do the they to step So and quarter, have regulations what’s our Logic the down the a DRAM. in given the

the million quarter, $XX with million about annualized $XX these. So call million associated it, $XX to in

is Moving component next the DRAM. biggest to

half regulations. We’ve $XX in a the past. step in the it little DRAM demand More is million about with projecting over of an a talked overlap than We’re down that sequentially. China

some the of than softness in well, impact. RF Most with surprisingly in kind at then in share we’ve the the Logic mobile. Logic, but inside job Foundry reduction China the and done of think regulations in gaining DRAM. market, and these smaller so a short-term DRAM good of and that as again, really least Foundry I because China But a high-end overlap and and with domestic supporting crimp less associated

in growth. in, to the but markets we’re magnitude part levels in and are the we are of short-term components forward each. those the get we’ve position the profitability as demand we the long-term we These in plan of the allows returning we to some place us – But look these obviously through and looking the investing still that forward, middle XXXX. So like restructuring headwinds, protect three of the while think robust as rough put company to

Okay. clarification. Got further it. And

$X $XX and $XX the out the tied million that million tied China be excluding to Within sequential to might backing to million that’s DRAM. local

I Did that you’re $XX residual of $X to So some some licenses maybe correctly seeking you ship And million. next I a sort entities? forward? or that million upside could moving at some of quarter, maybe hear those gives to provide guess possibly to point that this

Yes.

So of more $XX could your revenue. million. impact. half core million shipment a both $XX to at impact China variety than But to million overall the of customers different that question, releases, more $X license realize and the the working we than DRAM is It’s of China help us are our that

taking I prepared as best support our situation. in the region. evolving compliant we balanced and customers the both think making to view with regulations, I a we’re these said can And it’s sure actively also doing of but remarks, this new a we’re pretty in the

the to our or something trying customers old, like convince the release. that working and our to we’re regulation, do some both regulations licenses trade compliance team, shipments this the with we’re China With through our obtain apply of that not either to ourselves XX team days

revenue lower conjoin you terms of this stabilization revenue I some revenue rate How in next run also of rate? either of any can do too? $XXX terms or My million that. that indications represents of breakeven the kind quarterly kind you is segments the sort it. the in level run with question, aggregate, Got of And that a mid this in guess, discrete have low

now part the I’ll quarter. and of fourth Shai talk the take is lot then cost I’ll headwinds in profitability. the the about right let Obviously, structure a rate the there and first question, run of

correction world’s as a China on who was we’ve call most but largest foundries night. you our in the customers customer heard The on all from an inventory new We’re these our of in major last customers, place. their about And talked DRAM a top then substantial of downturn, recently, middle that, of one XX% of got pretty earnings restrictions.

there right now. of So is a headwinds lot

are of DRAM some work We middle cyclical – part optimistic are cautiously and turn way things the these of as our XXXX Typically to DRAM going into XXXX. through that we foundry through, things. way we’re space maybe well do to into downturns quarter now of and take inventory corrections even second, work quarters the those their several in but the third the

optimistic a are can that headwinds these So not in market neutral, and bit least I little think of at if things terms become tailwinds. of we some turn

a the comes $XXX it point. point of Brian, reduction when are measures million these breakeven breakeven question, to expect between implemented, revenue $XXX cost we That’s And and the million after fully a quarter. breakeven

clarify it. sort for talk saying discretely year in packaging Got something pilot even use that factoring get just ‘XX, just next sort things middle that there, That’s terms you’re you sort what production could you incremental to mentioned that And about better optimism part of of turning when of of in helpful. to part you products things terms of discretely are is year? of from that Mike, of what in volume devices? of or XD moving kind next there marquee Is like those

highlighted the impact can we’ve is client-based validation business, there the it we there. look advanced begun I on shipments the moving and major forward and impact a And the big think forward. of In in prepared step packaging definitely our for I remarks, have the at Well, processor. chiplet a technology volume industry as positive that’s that a

timing uncertain. I think is still pretty

of of going some in to ‘XX. start part to that is ramp middle assuming the are We

offer XXXX. they whether an that things we foundry our the hope element a mid-XXXX through is do advanced our the of a inside that as So of the work X-nanometer pieces cautious lot a ramp as space, of way some there of into other degree half But or are is packaging-related I optimism. back definitely well, think few

thank you. Okay,

Thank you.

Shi comes question next Our Needham. of Charles from

Shi. Charles Your line is open,

one to restructuring XX%. look sounds afternoon, by Shai. continue. lowering probably it is quite you and easy painful. Good count not But Certainly, this expecting head to never your like plan, to correction Obviously, are at current approximately it’s ago, probably going say, bit months have the rapid if down remember of accelerate a you decisive X, because I like you. mean, Can you it quarter, you quarter sense, wouldn’t Thank Mike, I weakness lead September give walk painful actions when to are actions it’s but quite some this. Well, for you compared I just inventory a I last would Otherwise, bit there to a actions more what late maybe little quite be the mean the us a two months happened Mind taking us prolonged. be slowing and thing, sure. imagine exactly you in June, through like, October. seems maybe let’s into terms what X in decisive in really just abrupt little and to X again today. deteriorated exactly we some I kind was like of announced early July. take August, over In actions, while what

Mike. Charles, it’s

think motivates one I our sustained in a question. available that protect data demand cost it as the really so of that so the seeing that the we profitable on profitability It’s touched fairly you two company reduction. but the way the that looks a not through, have, on based quarter like certainly, cash we’re work all generating we’re to we part of us the to duration structure, we’re the first

with looking is we’ve we macroeconomic bit that general right, felt forecasts, place the in customers at frustrating, little a are in conditions understanding like, I discussions in how it think industry and and available in a painful to hard given our reduction X demand, worked But of to was XXXX. that in part like into to extended middle but based this going quarter all be two downturn not increase capacity. felt one we the in data, that you’re on

to calling We middle downturn are the an XXXX. not part in of a end

make But we so is then, our on through way our you As limited. can this. the out protect of some R&D But these and as cautiously know, we in and grow in I I win always time work cyclical And now of that anybody XXXX. we gain make question, better profitability us Brian’s the the to the to market really been things company. like of optimistic capacity of as facilities, and felt who’s answering and touched for we company long leave visibility between pretty motivated that think knows a come sure the downturns, lead investments industry in out come the while prepared items to we share

I Maybe $XX million Thanks. reduction double next and roughly segment you and to the Foundry probe into I implying are – next I heard kind I question, want comments correctly, the you’ve of quarter. click it want if to card, made, some think Logic, of in ish Foundry Logic

up check got number your rate definitely, couple factors the are specific first a that of when Cascade did into with to just Logic, when things. and and the the foundry customer not what’s signal to That’s does come business Is rate in more acquired of going at as one. the the of So see down your Number run – maybe I on to probe mean you probe card, number business. same one had I QX, like QX, in about takes Card like sound you holding the into side okay. but foundry, teens the it your customer some puts run side, two, be I QX? may that mobile going sales – in Foundry RF decline you slightly Microtech, seems want amount we like is XXXX. think try you the when that’s maybe to you card I relatively that particular remember which pure-play to Probe may that’s

pretty a that’s Yes, think I good summary.

reduction a dominated little. Let me a in The sequential by expand cards. reduction on RF definitely probe magnitude total the it of

it’s front-end RF power weakness filters, that devices We of probe chain, bit our quite drive new different amplifiers, whether the are seeing demand. card all RF a in the supply

So element that’s biggest down. by far the sequential of step the

acquired quite the quarter. this it run acquired levels rate probably levels have as the we’ve when it present the been is the business. business, since and not we in growing We’re to weakest we the back but the seen integrated

sequential Some inside the space, the look cards a client talked seeing of of well. here of the revenue then number nominal we’re weakness And we microprocessor not big as their reasonably continued holding given therefore, chunks step associated other at with the foundry elements QX that foundry probably down go required little surprising And core PC, to probe but I client bit to there, those up think different too that all the have drives in market, space the space, given QX. logic in that how client. one’s microprocessor weakness a market customers end of volumes client that’s about from and taking and

all you, now. for me Thank that’s from

Okay, thanks, Charles.

Thank you.

from Krish. Our Please next Krish Cowen. go question of comes Sankar ahead,

for Conversely, slowing actually thought started look being like of I’m at had and I have taking of slowing upfront. there the indicator? Is slowing, earlier question. both RF a because memory I smartphones, of down. CapEx I but this mentioned card I them this China, first them some is next And year. your leading is most my scheduled when year. is for said the probe one, weakness you Mike, kind smartphones of curious, thanks and two of Hi, some – besides of you customers

cyclical trend as you’re seeing the So be is card the that following CapEx. consumable this the downturn, considered second of but of smartphones kind like in is then of equipment that first same probe should line verticals it of WFE probe I’m That’s a question card looks resilient And kind or and specific curious, it’s question. slowdown. out

you. a kind to curious I’m proper think So consumables about as on kind Thank go-forward a of of basis? how

Yes. Thanks, Krish.

how our and DRAM to me – primarily behaving. is There are several let So RF memory with elements start piece. customers the

we Flash, DRAM, In off position. customers sequential some we lower although ramps. of we a see new magnitude happening the share essentially As market is strength reducing said, and do in their what the see device speed

one cards coming have probe probably in any RF. consumption probably biggest dynamics their haven’t per sure logic and inventory space. releases the and DRAM new design manage is the they space we’re in new is inventory. think seen of foundry We cancellations of their seeing that’s number device consuming required And ramps, the their Similar design as down the But customers DRAM. in make nor I in that we dynamics those are design piece

going handset year, end in the XXXX. it’s acute that happened in RF earlier been while. a start on markets business part softness the of new device plans meet for maybe to as the see the early here customers replan in cycles it their to We particularly sure, has the started wafer in but For different

pretty looks It’s in seen that just of we any much But again, inventory seen ramps digestion space. slower the activity cancellations. to stays ramps the the again, of Design like speed these magnitude we’ve these So in the haven’t RF past. device and major strong. primarily memory, than is similar

me? you can Sorry, question, second the remind

is about card consumable... it probe Mike,

yes. – and cyclicality Yes,

So quarter quarter, both in a great we’ve the their design things is the question. and Certainly, release very seen third from one the customers maps. of rapid changes fourth interesting road some our on

their and China-based volume end than the As definitely decisively of a probe we’re required on the react here. up for been thing consumables softness about has the it pilot very see several probe And for advanced same cycles. in quickly the we talked cards previous in The design markets. packaging cards happening production and doing magnitude like cards driving are for though microprocessor We call, things is less earnings had number forward. shipping even first customers probe last we

are a it’s to times yes, still their that the fact – so quickly lead operating And pretty shorter we’re responding conditions. end and our on consumable customers market

sequentially us here two seeing have you’re in why of pretty is cards. probe declines think quarters sequential I significant

appreciate lot, a Thanks I it. Mike. really

Thanks, Krish.

Our Instructions] Ellis line from question [Operator of Craig ahead, B. you. Riley. Ellis. Craig Please the Thank of go next comes

versus I to BIS the start back I and and the cyclical going we’re at the quarter, three just the to some such us Yes. about given helping you us that Mike, some might of to be into $XX.X decrease which more is to foundry breakdown these cash that in terms and in just it’s question China. sudden in application million. to logic the things more should things more wanted Thanks adjustments by inability that and think the degree you’ve ship DRAM fourth really look think question. impacting indicated the taking things, the of the are flow some for that customer understand due a revenues I demand you seeing that to And midpoint, areas and of structural, as that’s

think at impacted So that? coming structural the is the offset more to decline is need you that impact Or back would point? piece the whatever it million reason, see that DIS reasonable to of parts long-term some just $XX more we would a and business in that to for other find

Yes.

question. hot it’s you topic Craig, current I a an think might as here FormFactor. debate interesting of imagine, And

on focused we the their us to right to ability compliance ramp our whatever have to very, think this sure we is that. which customers. have very our – do now we they depending but can also limiting are technologies, I overlay, on obviously support They do we’re – making

in that in we year do into some this to XXXX. that. I think of at the we are and If may very there either people or move associated as the focused study I the think short-term, we’re all the who back see on this resolving that, the we’re – with part – short-term, able time. least through But upside

to a So I it. on associated best a may the be is being with But certainly to semiconductor opine U.S. direction think the industry China the tailwind. one not not supplier domestic I

WFE year, have high heard a You have where exposure. talk least suppliers to at next haircut of about it, the providing their businesses some they

go this the a quarter, million that is million around going going to have find magnitude $XX.X the where talked grow is of about, business. case to other places be definitely I to middle a think are we the headwind, we sort probably the to $XX annualized

where growth in of have of we less where Systems I onerous similarly from we those details record the think of about some on we one we the be of is because quarter expectation but expect quantum probe the QX. makes business, photonics nice the in the delta strong may space. it and broader seen create are segment, ship systems which things and the talked headwinds business. the with and $XX logic like some well in haven’t for highlights there and even products, computing, the Q&A, growth a in much China XXXX, that silicon card up foundry with as inside prospects that a And wouldn’t million one area it there some grow are as where want to I can DRAM we

it. second the COGS that on the realized Got I portion may the to savings you think with the be Shai. be that implemented, the cost that’s regard question million. OpEx company And about those is has really for which since talk different one you the more and portion will both timing midpoint, $XX.X a at Can program on the with cadence at two... Shai,

actually is Yes, the the timing same.

XXXX. We fully cost the expect by implement these of to end savings

So, savings should sales. think all OpEx of XXXX and if that we about both cost the reflect QX for

you benefit things Yes. are going numbers I And that OpEx think to there cost said that the of and and fourth sales. some are quarter’s

– was whatever benefit calendar the executed incremental the the OpEx for what would what’s through So, fourth for expect first quarter? and COGS is quarter, to you to

reflect expenses of two-thirds a we still Well, rate of regular means we announced which have in and quarter third then will savings. run only it today and the QX

think a that’s I good so approximate. And

right. Although we parts have here, some moving

provided into going little OpEx think OpEx midpoint year. But benefit XXXX, the the the have range the bit run run increase go at the that’s I If annual to the about of reset today. which you QX, in for about million is rate a of rate, beginning we if you $XX

similar the year we savings, number but have benefits I more set. think we have can next we after assume we a

Got it.

Okay. lastly, on COGS this and And side. then is

quantify you fourth are was believe an COGS? XX% And any that such that the third reserve in, there that? just you reserves quarter. in I included mentioned there was inventory think included I Can quarter’s the

clear. to only. that just And we did was the restructuring to couple piece million last in $X inventory of year. a had we We GAAP the relates recorded Yes. About That QX. last reserve in be of just QX,

The reserve other million about was in running QX. QX and after That $X obsolete inventory E&O of kind reserve model. inventory we normal recorded our was excess the usual in

Okay. it. Got

time XQ… about revenues it fourth at pick given up pretty at if in lastly, second expansion provide then pace. are quarter. or And bit And there again to are a were moving granularity unless time Mike, are in intensity given perhaps if slower since pace seem Okay. into first little we you terms just My a have very in bit like expand can how rapid we that to are through where are, was would a we quarter. things little continuing sense of am clip are I surprised lead But more that capacity quarter just thinking long the the the XQ you and progressing you

revenue. business headcount that short-term are associated exactly the structure business the taken facilities It’s the projects We reducing labor, want as sure we with we it get pretty the more where and so footprint our that the this think place. get we And items. with remarks, need fill probably can time really kind behind cost in Craig. to as the back some we but have effective in are prepared we of remain to we again, Obviously, significantly lead manage got them because, to have I in things ready that we those strategic in capacity make through have to it, line grows don’t and said model $XXX facilities the of go. have beyond, tenets down investments towards Yes. the with facilities that’s the million tools, But especially good that capacity multiyear long company the firmly

items probe So, facilities it’s term that future with to where to very an are we the ready to longer invest time cards. lead some produce in issue like are purely of timing, long need feeling continue the

it. Got

Thanks. Okay.

you. Thank

Duley David Our of next Steelhead. from comes question

Duley. Your line is open, David

or just magnitude points. roughly reduction the what pieces? are I points the is? follow-up you or X,XXX talk gross biggest Could X,XXX the Could taking XX% about, in in to help answer. is if could understand, you I talk you of for biggest just gross you on quarter. about from have XX% Thanks And my questions. I QX margin think just have was after a current Yes. you wondering then four basis me down that What the which margins three basis about guided like

Sure.

same make to about sure talking we just are So, the number.

was XXXX going about the impacting of two XX.X%. overall we main guided in and and QX in down talking XX% is QX to hit and factors revenue One down. QX We we So, XX%, that. are XX%

need to and QX. million in that from QX costs when to for $XXX at are range down $XXX – fixed midpoint million have level of of be We the observed revenue the go a

And market increase the can You even understand as the again, markets foundry and the in Foundry logic and QX, and with foundry impact RF, was the within margin. even mostly highest foundry is negative gross a gross the But that and the impact more specifically, then that is the which margin. logic that most gross saw of this logic, a highest from and cards the in within in serve. has and the on foundry in coming we we logic where decline has, a logic. margin probe negative on

the margin. are these So, the in the main gross two factors impacting decline

of in gross if QX? what were would what gross we that revenue to kind And Okay. because expect? assume margins can QX the have now, or much a recovery margins, let’s trajectory of tied but just revenue? assume you revenues margin flat, the How say, product kind gross is guess, do would recovery breakout of stay to it to can of mix for expect all same and we I expect flat, assume you same you

the higher $XXX I million to we quarterly at target and margin in are we put implemented, achieve fixed we mainly similar product the market restructuring come to $XXX target similar to we to forward. of still of from implementing of facilities you think and million, million. currently place, fully to capacity low-XXs Longer as think Once to need the above gross in revenues QX. with the to mix, because XX% foundry this that Again, revenue. have talked and some so higher-margin at We costs and term, growth I be expect we at in QX, expect plan $XXX levels I model the get QX, model. need our margin logic back going tools. to it’s And reach we So, our gross QX mid-term, the about said revenue

to gross $XXX you with – will or in million range will more just $XXX So, if than at to need margins added, get XX% you be mix…? you that incremental or to because of if million revenue, your XX% get the capacity XX% another it quarterly back similar XX% to this back a ask to way,

[Technical Difficulty]

on And kind just the recently is have similar then revenues help But question of me capacity understand, this if a your you margin. I gross guess you and – declined. added

capability think your you do currently, That’s your overall cut understand maybe after So, what quarterly costs, it is? what rate revenue us utilization is? for you And help me. Thanks.

Yes.

of three about add. the of them Facilities it’s but the time one is think less to capacity. So, components and flexible, the longer

which have rate long that You And have in piece, fully capacity. facilities This recently. – should but the is the operating, is we should we this Not adding and tools most in restructuring them but good everything been capacity we we a also has in when longer third have this functional been lead place. the adding have – the labor restructuring. time, reduced flexible, have we is and is

But immediate. to comes levels to ability temp use more so get when we the tools usually we have training And add that. to We need the we when if to fast not and ability on enough QX time, employees the add the beginning. relatively because probably in we demand than the in employees and pace need back Yes, in. some have we is we there to it’s have labor place have to labor a back

have facilities. we So, the

would sufficient will to QX after levels what we going restructuring We comes I the have the in. add back, demand is and tools, labor. say, the we have as

you. Thank

Thank you.

question next Hans of Davidson. comes D.A. Chung Our from

Your Hans Chung. line is open,

question. Thank you for I have taking couple. a my

the on design-driven impacted number the of the so of demand sort first, design could business as forecast also unit your impacted of plan. per So also be is and the the then as by sort customer by hand, other

in things out we XXXX, help I right, for down. is side. also last the mentioned logic years. the you about very like me we design week, have you see X-nanometer than And double talk X-nanometer new tape the forecast also platform of design into I as and would – And number more look you than per like think So, And on did at couple out can is understand still new also then first a hand, least from go foundry customer. of other the the momentum robust, on then design but

then is – I help the So, something growth to about we next if outlook, the semi the me should percent. I year? like for performance? think maybe you Let’s our think single-digit mean about semiconductor the should how say, down how understand And industry can relative ‘XX

is this Mike. Hans, Yes.

have design it think this right. You two is activity. is to parsed the One business. new you accurately, components There

I said, customers is remains a this that So, robust. releasing new set activity very mass And new as a chip.

is Our loaded. fully design team

little here going in industry a PC it on an to back forecasts probe each customers more We are of between help of designs. in volumes question the significant down, haven’t X%. I If again, new expectation revenue that cards. the number market bit especially markets cards any somewhere drives going probe of is in thing that to Often, designs. for and cancellations mobile. investing has here seen cards our the designs is some return than probe ship XXXX, But we have growing and half. to end the stabilization second given And that number broader will consumer-driven of any be the those There robust that those like statement for advanced in hundreds client you can customers, segments are see X% in this Krish’s current

it. Got

– share about to more if any and the then question foundry And is then outsource on tow TSMC, customer so logic the either your the implication And positively let’s say Okay. Intel. next customer there with opportunity is testing, the like And customers, entails outsource it’s given incremental so wafer to guess the have right? market terms that you whether of related well. whether negatively to their in as will strategy I or different revenue probably they

want hear I So, to just thoughts. your

are are test customers foundry, at this also they the Yes. an interesting different actually Both have at they it’s different microprocessor their And major doing wafers our where foundry. always whether depends customers own business, strategies. processes. that And question – the for own for producing if test customers

So, facilities inside an Amkor own they to then but or either the an staff the and do test, manage still purchase contracting ASC wafers they processes. their own the internally foundry their test out to from like

their So, like front end, the I end big don’t between said there microprocessor we really space, a test in want front business model. Having is we IDM us. irrespective supporting in think clearly, there to for and position that, the a the foundry of where feel shift be qualified swing we and are customers competing in all the and major industry, for of

Thank it. you. Got Alright.

Our from CL comes Silver Instructions] question [Operator the of line King. next of David

open, is David line Your Silver.

Hi. just yourself gentlemen, apologize here, to much. if Thank for very minute did a you or Yes. repeat I step I make I away minutes. you have two

wondering I words, you you maybe the the other Asia, taking am kind the detail here, cost I actions spread of provide be In just much actions wondering any align you it America are of Regarding just Thank them? you. particular, softer with as versus cost that North in revenues? on the in am how if might geographic anticipated

factories in Yes. reduced Most North in America of Oregon. labor was and in that California we the our

in the on more Asia, SG&A in majority was some but side, vast America. is And the North

beginning or multibillion-dollar year slightly a mainly U.S. some Very of so very thinking fab come or question the could is your And in investments customers, maybe be major there due just your wave now. maybe to XXXX maybe new – if large kind the just that would on next but so, of late are beginning good. maybe of share the you more then from of my

roadmaps, perspective, about we that any As experiencing you going now? kind other major of declines words, think you. Does thinking your customers there the on the major demand anticipated major changes? is that about Thank In completing right timelines or original those timetables? to are their your are from be investments change

I think question bring of this a capacity is there always you in online. when industry

like we same items, rooms, the like for cases, some sets are our lithography, customers facing decisions facilities, in multiyear tool have our think lead things times. multiyear enabling things set are very are – long of in customers, the clean time lead I

the look the fundamentally, belief factors are so would downturn supply recession And chain U.S.-China potential be restrictions whether a in there of and like fundamental And growth where the we that in or some the long-term there the want for it, that the things base we be confident to cyclical in growth when a to the is in industry. we sure then we it the growth, collective they footprint content if in capitalize all that same at are on this the and all with the Clearly, among think place is I But associated underpin advanced a customer position industry, demand you are XXXX. capacity have trade it packaging. other comes.

That’s great. Thank much. very you

you. Thank

End you. Slessor Q&A would back call the closing over turn Sir? At like for time, Thank this I to Mike to remarks. of

joining Yes. us everyone today. Thank you for

a see year. will a Have are if We year, Take we think we the I end will we of end the again great you you January talk there. in of you couple either or as care. to January. in we doing Otherwise, see conferences

you conference today’s Thank This for participating. concludes call.

now disconnect. You may