FormFactor (FORM) 8 Feb 232022 Q4 Earnings call transcript

Thank you. And welcome everyone to FormFactor’s Fourth 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. be intended P&L of to financials. will important and the company results non-GAAP supplement the discussing results GAAP some company’s Today, your understanding of website. the company financial on the and the Reconciliations section release and non-GAAP of Relations available our press by are in other today issued Investor to GAAP information measures

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

as Forward-looking and February update of them. we assume statements XXXX no obligation to are X, made today,

turn over call Slessor. Mike now FormFactor’s let that to CEO, me With the

joining everyone for today. Thanks us

The earnings profitability exceeded quarter above your per and revenue outlook larger range anticipated fourth from was Gross of non-GAAP than revenue in charges. driven expected which margin which drove inventory the new said and probe customers to by to and certain China compliance to the DRAM third end October the below stronger quarter. outlook obsolete midpoint. due than our controls, the were That ship sequentially As share down with FormFactor’s midpoint in and the upside excess products our were domestic also cards export systems expected primarily revenue to ability quarter. compared revenues

Logic and we're to As at the XXXX, with probe experiencing Systems to moderately we fourth weaker probe for our cards both levels. record demand DRAM first and business demand continues by the start the quarter stronger time, quarter, run cards. of overall offset for same At Foundry similar memory demand Flash

in in improvement from fourth We by factors. the margin expect to a two profitability significant gross on first similar quarter the levels revenue increase quarter driven

steady with like customers. unit and are semiconductor markets like end in innovations advanced serving volume weakened industry new in chip invest handsets and These PCs customer high investments China's restrictions customers wide products demand, as quarter producing benefit visibility the restructuring are With the times returns obsolete for October lead our and very we First, of quarter, of our typically first inventory our costs. encouraged demand and probe stabilization than a full second less But quarter excess by to designs client mobile packaging. of domestic in limited. remains along typical face the even cards export

all headwind and significant customers leading-edge regulations based to exposure technologies As controls. China US foundry businesses. memory a by affected our in the a we are export supplier, the are of US These and recent

and to by continues take to ensure rules steps all shipments required. support the full FormFactor necessary with new compliance as holding

like domestic permitted local ship expected we customers of to shipments and recognize these team to worked our customers. team trade regarding with than closely has China information emerged compliance enable their to the I'd initially us outstanding customers team enabled work China additional which scope this the regulations, more quarter. in to As our to for has certain fourth

We activity first the expect level domestic to in of quarter. China this shipment continue

we foreign for of this time China not This continuity. do supply will believe base a to as their and FormFactor headwind China strong course, export persist like to over semiconductor anticipate any advanced business trade we provides of US, Overall, their customers controls. ensure relaxation domestic incentive onshore deemphasize suppliers

believe we of place. These navigate strategy tenets and both we enterprise remain in as FormFactor’s firmly long and strategic current the term cyclical this semiconductor core tenets through trade industry's Even the growth first, content issue, consumer applications. sustained weakness, in core are

and long our as surpass to in innovation third, as remain And positioning in industry's growth volatile lead competitive product cards, to for share target are consumable the the both with when emerge investment probe R&D driven cyclical we to model. revenue plans. and financial capacity historically time differentiation, invest the designed market specific of which device produce and demand resulted systems, innovation less profit model continue FormFactor levels of customers’ These combined wafer and capacity. gains current we the committed investments portions from equipment Second, and when engineering relentless in the new nature achieve in Consequently, and our financial technology industry than investments new in target downturn, even current of achieving facilities have fabrication increase advanced well our equipment. cycles and to our above

designs, moderate application segment stronger Foundry cards, first driven details. the our new production business. we and our together largest demand Logic ramps microprocessor to see quarter, probe primarily with now by pilot business, level In in strengthening mobile in processor Turning for

new designs at of a early ramp design. these are consumed. Although, activity new in see into probe they're upturn. channel, consumable to chip characteristics chip device innovative each of demand. probe in off card level cards Since investing for for This are early This albeit overall specific modems production in will is inventory the a new this we'd to insight is production volume expect probe still cards and the also processors, demand unique designs provides the excess RF chip driving cyclical that lower burning specific customer once customers inventory chips that than a individual is in

As example, despite cards client support the to a continue an chiplet end ship because market documented of we production product based to innovate well differentiate PC future in weakness their CPU roadmaps. customers pilot major product, continue probe to client demand, to

probe the exciting raises card requirements complexity like these support architectures based technology intensity, at to required integration MEMS and out probe delivery are time probe needed for As processes ownership, per requirements rapid we cost ramps. tire dynamic FormFactor. essential to the card. compelling the XD which FormFactor’s cards while chiplet probe number like These performance our packaging meet in customers past, an schemes lead meeting short for of a are drive fabric Advanced wafer test of production noted also both the and expands opportunity which higher test advanced the challenging technical and

high DDR to new market softness, release and Flash expect product our weakness both extremely causing driven market magnitude speed to like both first end card probe chips density DRAM sequential forward. to RAMS. customers continues quarter of probe Flash memory XDRAM by chip demand, that DRAM the Turning we reduce for in and memory are this designs, each to cards, weakened drive customers our and the conditions of validate roadmap new Despite and their

memory As is major each each demand cards chip new by at specific new levels in the one customers. and announced aligned with these low design Foundry driving designs, our activity of of new for memory this but probe Logic, output levels to reduced

In we computing. with nitride, in as the highlighting the high to with Systems strategy. business, fourth quarters lab R&D quantum like we significant, first record and electrification also partner our the state-of-the-art customers of We're of working industry. fab to business, Gate-All-Around quarters the packaging, the also benefits key like the advanced revenue of both their strategic third as and on in diversification advance are enables some silicon expect applications silicon industry labs of leading photonics strong widespread probe automotive carbide The gallium innovations of guard and The partially financial power in the XXXX. customers semiconductor with sustain industry transistors, to the the the advancing business production softness produce the driven the strength which downturn momentum systems benefits offset

Finally, current longer confident industry notified And of for position to team. he Link, and the reiterating term, has his FormFactor Ray non-GAAP technology term, emerge that per well the of where Meeting target in from valuable all on revenue. in fundamental to future products model achieve content us million Annual been will by year's one well the enabling the of first semiconductor overall, nearly and close and we're wish demand and stronger endeavors. I'd innovations FormFactor trends like and this to provided stabilization our capacity the at over of you. of prospects both commitment Ray driven that member remain to we by are downturn, and earnings service management him has us to like resilience that for will to of our thank trends stockholders. and as and FormFactor board, packaging. the a directors useful we're seven reelection growth, is and R&D competitor, not growth Ray delivers the the me personally for in leaner share our $X to our FormFactor $XXX in in insights our These advanced quarter. invest to positioned an of In stand I'd industry like our his has short Shai, to for confident of encouraged by years leader. a that many

and good afternoon. Thank you, Mike,

As of end was of revenues the was ‘XX revenues press the quarter as non-GAAP sequential Fourth and a range. in $XXX the the XX% gross margin third revenues, the and our low at EPS quarter end X.X% decrease exceeded decrease high end QX high our at Mike outlook an you record year-over-year from our mentioned, of million, revenues. from our QX release, of range, were range. Non-GAAP and saw

logic range, revenues revenues foundry and million, card XX.X% million $XX high to decreased QX. quarter As and the our Mike mentioned, our to decrease ship lower revenues. to the of outlook mainly DRAM domestic The or customers. fourth were to and driven from QX segment certain Probe in due ability was above $XXX.X mainly by China end were

$XX.X the Systems segment in quarter in increase a from revenues from $X.X of QX. up record XX% total QX, million company and comprise third XX% record were million revenues

segment, revenues million, $XX.X decrease million revenues Logic were million revenues comprise of third to higher million the probe items, and outlined Flash than included was to reconciliation XX% total higher quarter, third $XX.X than XX% QX today. in DRAM X% in available third release in and gross XX.X% of were of total margin $X.X as in And quarter. $X.X quarter. of the to quarterly X% the revenues of the were QX, quarter were for Cost $X.X slightly of QX. revenues XX% table than compared in we QX million Foundry our fourth GAAP card in press logic in QX, QX. as in the in the in of of our in non-GAAP similar from section quarter. $XX to Within the and million, or website. compared company XX.X%, revenues total GAAP QX. issued XX.X% reconciling the And which Relations Investor of revenues revenues funding the revenues a or lower X.X% revenues third

with of reconciling margin for non-GAAP XX% charge basis, systems restructuring in a margin million was to items non-GAAP the lower cards $X.X probe XX.X%, than margin announced gross and the quarter we gross XXXX. lower X.X fourth margin points included gross percentage QX On related October the QX segment. gross in the both in the the

The gross segment XX.X% margin X.X a factors. to card to is percentage of in two XX.X% fourth QX. mainly points the due decrease probe Our decrease compared quarter, was in

overall which two lower segment and excess factory revenues points. approximately second, which reserve accounted percentage and First, six inventory points utilization, for higher and accounted lower for usual obsolete percentage than

a reduction the reminder, ‘XX. at of our were cost end implemented As measures October

expected overall the from benefited partially saving. only QX So

margin XX.X% XX.X%, points gross quarter, mix. in margin was QX the less a segment Systems XXX product Our the reflecting favorable lower third than gross basis

higher the QX. during revenues, of week took impact QX, lower million million mainly is the stock-based GAAP operating savings quarter, cost relates the $XX.X partially million quarter implemented the $XX.X we were the offset implemented and $X.X restructuring The third we quarter week PTO performance-based in compensation, higher to one higher by QX, costs of third million fourth annual higher quarter, in The compensation decrease to related for with measures Company quarter. from operating million, during increase Our for and expenses in $XX third result were the of to the million quarter. in third compensation the restructuring QX fourth Non-GAAP than as to during $X.X than for similar the $X.X a working non-cash as or intangibles we plan the vesting XX.X% of compared for due revenues stock-based grants, $X expenses taken. million quarter. one $X.X reduction the expenses the amortization and included in or additional $X.X the in XX.X% million QX, of fourth attributable of for timing quarter million, of $X.X the than higher acquisition of depreciation million

$X.XX of rate basis for to At the XX.X%, rate higher fourth annual $X.X our operating tax income million or XX% third quarter. XX.X%. per the compared the for was GAAP The qX. the end net share, with Non-GAAP GAAP quarter fully loss was of per was non-GAAP fourth GAAP tax tax $XX points compared or operating $X.XX net effective to XX% the income in non-GAAP of for in loss and The low all $X for was compared million with estimated quarter diluted the XX%. in income QX $X.X QX. million than rate fully share million, ‘XX non-GAAP fourth $XX effective previous GAAP effective the of $XX.X diluted a million, in for fiscal million was quarter. XXX operating quarter

For goal XXXX, our cash advanced tax fully rate. reduce diluted to to to fourth took tax benefits or important current lower net similar the a share for we costs levels our QX profitability contribute manufacturing compared of quarter credits Maintaining AMIC $XX.X non-GAAP to digits per in or approximately to our an diluted or we high non-GAAP to rate of $X.X million QX. actions expect income new to the And reduced investment demand X%, annual $X.XX at effective fully the per mid is us. million to during $X.XX single the X% share

the million to the $X.X The and We to related cash cash between flow investments of Moving negative during as a of net $XXX of balance in capital made total payments increase in million flows. free compared QX severance by sorry, and decrease $XX.X operations, provided million fourth in free cash an in QX. $XX had $XX mainly to were quarter a sheet expenditures. result $X to related restructuring flow positive the difference million end, cash of At cash and quarter million million.

the with in quarter, fourth million. term We fourth to in capital $XX.X million balance of the $X.X quarter remaining compared loan we end million had during totaling expenditures $XX.X of a QX. As one the invested

in With outpace slower continue rate significantly placing to time equipment does demand. our long on the ensure we albeit our at service underpinning core capacity stay lead increase capacity in increasing our drivers not strategy facilities place, equipment portions of to and plans, execute a

XXXX midpoint the million we previously Capital range the of $XX.X expenditures totaled at estimated communicated. in

expect million For range. XXXX to than $XX million XXXX, CapEx midpoint and $XX lower of $XX range this in between at the we million,

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

first the to Turning quarter non-GAAP outlook.

QX million million. in revenue with QX. mentioned, As higher demand revenues or minus comparable to foundry outlook segment similar DRAM we and Flash QX This by Systems Mike of revenue with a plus $X be expect logic revenues lower QX and revenues results $XXX offset to to

improve full saving. largely QX to business. that And the in have and our costs efficiency this reduce reflects and of of we announced outlook QX the impact effectiveness the restructuring completed We

million As our benefiting basis, a reminder, thirds the OpEx. structure these third one of cost of an reduce and two we by estimated cost that savings $XX $XX will actions to with annual sale million approximately on benefiting

website, as the is section per taken and output our in of Investor Accordingly, excess less QX. expect of press of earnings minus similar million the due a plus and $X or QX QX reset QX, non-GAAP to points. compared issued basis plus quarter increase expect to share in and million, release midpoint available $X.XX, increase expected inventory don't $XX we to benefits charge or a these PTO ranges, to margin in to annual $X to is Reconciliation plus fully or mainly on reserve our is expected operating million be Non-GAAP And expenses gross minus for we $X.XX. to QX diluted our GAAP addition, XXX In first today. obsolete be QX. outlook Relations minus with XX%, non-GAAP

open for questions. With call let's the Operator? that,

[Operator Instructions]

Our first of the Chin from line Brian question Stifel. comes with

us some afternoon. excluded team. first a piece it's some from size revenue good quarter. but initially few Maybe nothing the Can the parameters could of represent? guidance, the of the for Thanks you you Hi, first would put China ship ask you and questions. domestic in that Can Mike letting what maybe ultimately, you on you that that

going we Yes, than we for the headwind million helped we more and paperwork, the call to to. originally once clarifications recovered sure We high a said appropriate October but momentum about little regulations, in set $XX do Brian, above certainly get talked shipments thought bit revenue had of didn't be prepared outside able making range. of the better QX. were ways to of in these perhaps expectations other end did a it the customers, I in million quarter. than documentation we as we talked were some about $XX job domestic on the We of There some the more business it in we to recover get the of the in all China the to remarks, when appropriate pieces us effective probably customers that, that the it. But being got a half

Got it.

Mike, awful. I on stay Okay. let’s question one just more think That's topic. And, that

about I China think pretty domestic of business been sort the time. transitioning how potentially clear you of that you've some business, see over

be more think of restrictions. And phase there's it sort of would gradual You US nothing a gradual nothing about out? guess I

of based put you you're even in But have engagement, now now maybe any So seeing customers uncertainties now. later there's year side. your that feel of pull sort or the the terms right happening the just longer from and of maybe the some local horizons do and right in to into that in on just activity

Yes, facets I think there's several question. that to

tried we as Over have as assumptions But We zero trajectory long-term we is as that be China not that really clear over like. to we're a question going the business it. expect that say, if you as to our time, a to and challenged domestic would with non-China looks go US supplier. can about market there what to serve close people of to to time, be

As wouldn't we now, look I much say right pull at there's in. what's happening

Now, our are nicely, probe that's probably because is is although again, the which consumable. the cards, designed performing Systems business, bulk specific of business

have that, really pull it's restrictions headwinds, So fix, for impossible that so pull don't one or of for seeing structural typically demand in in design to not them any unless we're math of front customers here. kind see anticipated to fix like set and conditions out other we in

Okay, makes that sense.

as that inventory half, reductions point, rates there's in sense of your the in foundries there's some utilization this here the has and Do of a foundry, logic terms in situation up as commentary into on tie second effect last inventory tied see half. the this that. had your, seeing when in utilization management the memory, we at what's back first of, some of question least you discussions come terms around In optimism at maybe your stabilization well obviously reductions, with sort like logic where fab into

the And your being so are in view business way of of you now. the discussed half, any into characterizing second are right how that some those dynamics

different but the different Flash that have dynamics and in lead both through. anybody Obviously, that, well, on turn in who a time obviously, appear that still of of quarter half that and approaching DRAM comments to with Foundry significant ways. very are does to look time, we length there's on starts in back on. times the first inventory probe and segments. within into intelligent really make PCs very second amount that Logic areas be and utilization production recovery wafer is almost has client different in inventory a we're think real consumption visibility, stronger, be customers going all, short memory of backlog have happen times business, like lead there's covers I burn top in tremendous something the to a the don't are seeing the different understands that customers to Yes, of just card to the to any with lead segment, Compounded when

of Our comes Schwab line the next question Craig-Hallum. from from Christian

On thanks you taking it's us that for of zero, So questions. you assume good talk exposure. time China in a over execution my China tell to the going on Chinese Can environment. Hey, not when people revenue? domestic our I China all expectation? congrats the that And of China? bracket mix revenue but can XXX% challenging domestic you about manufacturing other manufacturers, just inside

at of of operate quarters two But quarters region. a in region, to that the three about $XX million But past Sure, thirds to into is the and that the between been Christian, majority done in And shipped good revenue think yes. have two we've into the times the the way different this multinationals past. China. shipped

customers there. DRAM big have We

many as facility customers assembly memory the multinationals this, Flash well. very run in microprocessor don't know have We China a test one but by there. large And people there's and of

that So $XX quarterly bulk of China multinationals. million really is revenue, the the

somewhere between bit customer running little It's $XX million nice is continues a perform domestic Systems that's remainder. Our $XX China, revenue, of a a in China We've the lumpy. well. million the And out DRAM seen business obviously, quarter. then to been to activity

an quarter for $XX you, go size up does think way appropriate the I about it So million $XX Business. a to think is between down. But it domestic million and to China and were if somewhere I

Great, you clarity. that for thank

I what the as guys of about area be carbide, there about wonder business? that of talk is of as thinking starts portion about it talked a the kind if, customers expand? business. Systems should you business, Systems On to obviously, of silicon a And and the means opportunities revenue number number can strong you wafers we growth expand How the which your

Yes.

So business a the mix applications. Systems overall is of diverse pretty

As we've of talked running about from way working right in mainstream on and past silicon to CMOS, all kind the through photonics, computing, power applications silicon Gate-All-Around nanometer quantum trajectory things now like really carbide, remember about it's to R&D which right important But Systems is is focused. one obviously on the now. the growth a business great is the things of it

silicon of early improvement, we us R&D associated production for the involved of ramp where right from to, in have with in There but carbide production is inch some do we're promising a are are that with we silicon enabling activity, development the proxy using on accelerate of six their have yield carbide sort to four initial ton exposure improvement wafers, of eight-inch these leverage things as because like early most associated now, I'd as Silicon to carbide. they starts, customers we're probably areas silicon us moving continue inch as and leverage, us. people caution to really for a applications expected in the Photonics So there and don't yield wafer some

Needham. And our next Charles from line question from comes Shi Dr. the of

level? like SOC as moderately my upcoming And get rate business, your DRAM, and listened on things of remarks. probably I good side Mike your taking based and as Mike, question. want it last how process and the includes probably gets. Shai. But kind do it I for in prepared mobile you stabilization RF to the quarter, ask decline. Hey, sense both of to which may are afternoon, in the I of seems But that I be Hey, be from contribution, quarter, think, xXX that the thank of the where I Oh, December to think commentary particular the And strengthening, but your the it's on bad from based do you. terms looks customer customer, the customer, based probably microprocessor that let's any side, number OS stabilization stripping will on out I forward, of see arm that quarter, things from terms you going the on And strengths two some see but ago. demand. your microprocessor more you of prematurely one Mac you caught the have do demand? quarter particular March quarters you say bottom in I bottom see out the Thank mean, believe they and will side,

Yes, question. things so a couple in of that different

Let's start last with one. the

quarters. pretty in we've a microprocessor within overall of First, incrementally just about a the quarter. the well be first have given couple probe stronger the the volatile space, business here xXX demand not seeing in space, in last probe card beyond seen market, lead quarter. microprocessor times making we And are the the comment over Again we card is but anything short that overall the extremely card difficult probe in

right in the mobile driven in know in as are and clearly also, the I it xXX foundry some now, a stabilization by we space, the again, microprocessor So our you strength overall think by revenue logic what's encouraged business. and both

is seeing not mobile shifting any mobile to second, strengthening for the significant we are isolated really a to processors, business gears it Now in application RF.

cards to due in that between later later that's the shipping the are straight year the we're year. times. of in Some probe expected product you major think the And different for processor application a now. or pretty releases handset for launch mobile mobile But draw scheduled can cycle I line

a ask I very that XXXX, was historical Mike. I prior a you Maybe was Thanks, want appreciate Maybe I bit side. in a perspective, from That ask little I more it. to Got think that. DRAM clear. should on industry back downturn. the

same may bad the was drivers business DRAM this year starting exist bit earlier think covered XXXX. downturn first probe this or little recover as bit quarter. in [inaudible] condition in I people DRAM to think may exactly the DRAM compared time probe than are with we do you in we cards go be thought from not for know different business the may card with as a little Your second the But your same you quarter, into start folks. a but the ’XX your that the at

short. my depth of being businesses, lead being the very of times of is Yes. dynamic the answer cards. will this What environment caveat including And probe usual I’ll our DRAM with this DRAM I say downturn. understanding across a all very

a at doing, are behaving XXXX they're than in look market XXXX. other certainly DRAM from you pullback behaving to our a XXXX. differently, consequence, differently differently differently difficult spot behaving as are much very from pricing, more a and XXXX. draw each They're what the customers This behaving although to parallel and is If our it's severe than customers

but I for think quarters, inventory, relatively aggressively, pretty chip a new and I term what's unhealthy end we that's devices, in high significant and in like a any don't we inventories here. density, anticipate as long some ramp mobile, a through those get could market XXXX recovery DRAM more parallel this customers you persists, these So as DDRX overhang as of think things go take short see of consumed if a of handful

of our question Craig B. from comes line And next Riley. Ellis from the

with I Yes, to follow thanks just wanted for taking the start a up. question. And few

going in you of give just year. are which second could few quarter current been in a us to the and color what's the talked customer. about contributing your get they've coming an logic which to you how have the front, I product, helpful early On trends looking to degree better in largest and update the on there, on of Can in revenues on foundry quarters? And to that's some and with very Mike, what's the that in So for tile-based the them launches past a happening shipments think public. the sense half

about And a know CPU the because drives CPU architecture. other for industry in this volumes client-based are And the very think because a on chiplet for little trend entire people, significant the important it's the talked as client-based really along remarks, the I FormFactor Yes, I the of we a event supply with tile prepared the continuing or significant certainly, chain. in industry, throughout view in for to bit for and ship a first overall. what's we volume I

lot good in volume really they of and through year a it's to new foundry the with consumption advanced through really have on ramp the that DRAM. the seeing there, in product PC example we opportunity, that to decisions in do for do product. how magnitude customer high think pipe all to their and Obviously, then aggressively there, general. our market, going we're that the is an a inventory though, I channel. interesting So packaging of tile of client our customers drive presumably for on willingness that'll stabilization And go for cleaner will be, if architectures logic the you'd the and depend as the chiplets makes like structures, the inventory and

the optimistic half requiring volumes pretty activity. very levels, down to the probe would in it. designs, card, returns That in leaves so this to us new are doing XXXX. and differentiated, But of seeing volumes a obviously inventory they overall upturn. are Each done when not of that peak with their are new design in the invest we continuing industry roadmaps growth volumes had about they're correction the from first these gets growth, Although healthy cyclical we it the of customers at are

Got and it. and a That's helpful. wanted bit. just to in dig try And on little DRAM follow up then I

DRAM party, you'd at the was stability Is starting look up same? is signs of business, at bottom. hearing market are is the now an the in year? which your our in in for what team are market there, as and is optics that production, it might an first application oftentimes, server possible But to quarter. coming parameters correction areas? bit in acting of But mobile would collapse DRAM just why into us it the talked et to as So latest the to like I about to server How all when use starting to question from about application all we progress I we're the we're cetera. the seeing checks DDRX, DDRX, on talk, of in find talk DDRX, we look you'd little if wanted generations the you you because think is of frame inventory half be And a PCs you things some those and basis as what's DRAM or the obviously, from first has relative that the the seems the DRAM

imbalance earlier, are I'll dynamic of the DRAM why QX the that markets a as end Different in and to Yes. overall you obviously, seeing QX, the part going demand revenues QX about all going say are terms times, make there's lead That's how we company from and What a corrections. to us encouraged QX we've with are go But within different sequential questions industry it's relative DRAM as the cadence slightly and well stability same remarks on in we're design pretty for a to health some our for the coherent seeing, are know, somebody, in sub revenue the applications difficult given year short difficult how lead of activity. to for demand anything back of for things markets. those although going. the the answered revenue. of we're are that's supply, the end takes we reduction seeing the levels inventory us and puts for to drive corrections end that's it's of inventory on projected normally times some pretty different our any for reason are operating in coherent segment those quarter, company,

Got it.

into would you color the can I those us any million I ‘XX, three talked expect Okay. that would and last in top for that before back the the or calendar can in about two in. deploy Thanks, just be Shai, just then should you CapEx round appreciated. $XX sneak we in guys. And if hop give thing buckets

we're million to investment we open manufacturing year and to manufacturing, capacity, in a be Sure. then are in we The that lead to $XX new majority started populating what depreciation, as doing putting starting capacity online much we lead with possible in do down slow process purchasing because align tools, in long slow want investing items the more it to with customers. in in time Shell long this this want to But our demand -- time, since of is don't coming center because with than QX service Livermore and continue of the the we the we tools ago, a them will million these down as we increase have from equipment our $XX process. the are required tools right,

the Hans And D.A. question of our next from Chung line Davidson. from comes

for Hi. taking Good afternoon. my Thank you question.

to first, So commentary. up I the on mobile want follow

a rent, quarter, then was give customer? out XQ, give maybe customer partner we since started idea like like of idea yet. for rents So process that and be me can RF new me in from terms will this strongest that general just that cycle you And XQ, not typical revenue see mobile application is for the the an to which like then quarter third a like and with

Yes.

the I project mobile in although about primarily think I visibility historically, application pretty where that a session, processor So Hans, that Q&A earlier headed. activity. in QX piece, QX, gave That some been the decent has

the contribution more of where mostly interests But now, of half out. one kind little of in as maybe but thing. is, year spread think QX, first of see we other a industry a being sits the it the I Given perhaps it think so some

dominated are the project processor big also other processors, application into other mobile to Android the interesting one in mobile new I the processors other releasing the go thing We handsets see activity, although new going it's is think customers in the do apps by ecosystem. application industry. that

all the activity in So continue theme roadmaps their innovate the to grow. release our to downturn differentiate resumed of there. this things demand some to interesting, ready the industry, ready designs, back when overall for That so new and that product customers they're and goes upturn to multifaceted despite

quarter so? a later the application RF then, Got it. than And coming is processor or like by

typically than it cycle has shorter shorter lead shorter the has has it times, Because times lead cycle. processor it overall the apps times. RF times It so cycle probe is for our Yes, has fab in shorter cards. later assembly

apps more it's like and handset more complicated to So compressed just than launch the the actual silicone, closer the processor.

that a Now, is from at our the level keeping there. we're like bonds still customers eye a inventory component there of the an in thing is very obviously pretty heard one filters, RF, correction still there's things inventory good on or you've build and close things ongoing

but on it expected design be the So that, year year of handset the middle would late keeping again, go new to we our the support part launches. through, eye call activity as

helpful. it is it, Got very

is question gross next about So margin. the

we restructuring help the have we think that and driven and probably normal And strength make And and so mainly do reserve back effort. just should QX, just it inventory seems like how in about the year? throughout given the maybe the we to then of Like et improvement foundry by a the in rest in the of we ‘XX? gain And QX, or memory. in weakness also for how level terms then course marketing some logic, about then or makes, the cetera the efficiency thing trends think the

in DRAM, are Yes, and gross factors from benefits, like special so QX, factors XX to I basis benefits the plus the main logic quarter reserve, minus taking expected And be the increase and you that think you back QX, us that mentioned, listed and QX a the full these in margin foundry and main more three favorable finally points. mix. XX% E&O to or restructuring no impact exactly excess the the

sure between high them. at are perform there we demonstrate QX we depending a don't Mike it's As And revenue for to customers XXs. times encouraged our we and as the really revenue, depends And few and lot I the supply visibility. capacity the on think mentioned, historically on have ability our of stabilization the we this of rest to during of QX, ready make But Q&A, by and to that still to ramp, as mix. when are year, adding and we are be

If exceeded close our even were you QX margins million, $XXX when XXXX, around the achieve QX back of or we go to able model. revenues were and around our target gross to

go revenue we and still, recover achieve model, target confident ability as as there as are going to trend along that the well. our still line. our fluctuate to increase, we up industry our margin it's And gross So we in

our question Shankar the of from comes And Kris next from line Cowen.

the also head to taking start business. end improvement behalf any and opposed And and trailing call first I versus as on do guess, edge from it like on market in products, totally logic perspective? Mike, on to questions. nanometer this the on way a the But smaller QX of a geometry Kris. breaking you Hi, perspective, XX in improved products have sequential from question across demand/ is calling versus Thanks perspective a my how all? want its Steven ask out the foundry larger leading had to calling geometry on different for edge demand of

of exposure most it's nodes. Steve, question an on because is for us edge our Yes, interesting leading

business, customers to business before their you yields advanced what these business, on card out processes. card even chips assembly and improve becoming we're go expensive Systems If think doing they then what screening and probe nodes the the enabling to really bad is about the probe downstream are more

levels. try about nodes that's to customers yields to going and think trying it's on nodes and if on So be up most, sure brand improvement new to where edge focused you and leading entitlement yield deployed to where get, are for on very

a a the It's high of on Our versus edge mix to read exposure parallelism on trailing like high through so we're there's bit like limited. requirements automotive quite more great edge. the trailing restricted leading is edge temperature nodes microcontrollers in not where segment things

some I are much more of at leading nodes on commentary conversely, at go than We trailing can stabilization we stabilization look, edge. really QX the of the look are to least edge nodes. leading our exposed to think edge you a that as So we QX as

currently. given that. business one drive it distinct the the your we're that systems from driving have just all And And driving, for far. demand that you different so and of applications of on Thanks applications pockets expect, from Do Great. the are R&D the business. call been guess then quick that in that one assuming, just strength getting I sort in multitude

customers as of talked forward, we things think their of the diversification. its about business, because that sets the the their right pretty a to nice comfortable I business innovation And it roadmaps past, the rather that one and is R&D feel we strength of applications, as are budgets, primarily continuing customers variety as pretty, broader Well, about past long across about drive optoelectronics, wide diverse, applications. of in semiconductor as of

the warning applications. across customers So all is headwind signs I headwind and has one place anything see those any been in a that's don't flashing of that a The space and I is in think said here But guidance the in China supply in QX view. obviously market. as we QX, reflected our overall that's, domestic ability to largely that into and our

what in Shai, minimums? Okay. also one realization get gross order is one embedded the on revenue need non-GAAP gross the back margins, If for can a would the maybe guide level, to last for to I the And what XX%, margin net? charge to sort to be of that you be drives of it

realization revenue, target saw of our as of it have million and and needed part we revenue. the We and of of in that support we workforce level ramp do revenue, XXXX second down XXX% are the utilization, terms the are in right, components and we levels the so tools we model this of half facilities can support labor required contributing utilization to the basically of took And to you about support enough and Yes, enough to footprint going first repeat question? as think with had future. $XXX we're have larger to and enough if in utilized, tools three With to factories, the restriction labor the to you facilities. of QX, in main to you labor, the

from not Yes, either have what would I to standpoint. the revenue well, you. additional level I and needed guess, that's equipment facility Thank guess, charges, any be

Right.

with basis. go higher gross need to because is $XXX quarterly in growth its margin we we low plus XXs, what to And go to mid-XXs, target model, back previous come the QX, market. the And on logic, reach revenue to million call, to the call from that's order similar So the our around margin we was $XXX the the and to and foundry to need for margin million, let’s in we $XXX levels then, to million, structure, cost new with which XXs. high revenue then that back expect grow a gross since said

Markets. comes of next Capital our question Richard Northland the line from Gus And from

question. the to order which in a taking is could of for going that other or be about I magnitude past. units all. the would changes incremental any larger chiplets, thanks wondering about I'm product Yes, talk microprocessor than believe the using million you opportunity how an XX million chiplet you just of if And per sort And there's for

project in Gus. prepared a We you in Right, this were in little the told remarks. touched we I Q&A. on thanks, prior this And bit active

about of opportunity. think, this we're why is example I a chiplet excited great the

are designs, about stack to together. you chiplets which test each think also temperature things in ranges the test intensity going good that test the sure of speeds chiplet with and like If you But chiplets up, is the complexity broadening. you tile assemble complexity them the make required before because before the you them the are tests intensity, want for

requirements designs the we what for a chiplet to for So technical than are single more have deliver customers capable need die. for to substantially do our probe cards you to

to looked You conclusion. that have to a similar roll a it basis. for a come and and the XX XX% XX% on together, we've all like manufacturers like uplift at It like about of some looks

good moving to when going to XX% associated out, the get end So architecture. probe and XX% the cards chiplet a to more die you're with opportunity

test yields test nonetheless a chiplets chiplets, really more get good our intensive their together better viable. process processes for much right? bad time tile over But ROI with Now methodologies. good chiplet decrease, customers improvement processes, going has at economically that's to to not are are better Packaging at very that customers, going

key And to And a advanced probe businesses, ourselves other innovate opportunity a we too. business packaging the so industry in view and drive great and forward. view as helping strategies we financial enabler card in as the chiplets it like

your is? that could it, the was you on then sort was that quantify Got business your photonics I super wondering production. system And in remarks it In little opportunity either, mentioned, exactly photonics, those follow a of into you color were give you a, on a photonics. on moving prepared on application helpful. of or is on my the cusp if what

Yes.

business systems categories. two seeing Photonics, falls the So into the Silicon we're most in activity in of

optics, things more predominant one co applications an but components is detectors, These optical probably working electrical and an chip we're on. its are datacenter for packaging of where exciting are applications together that package chip. like Some LiDAR, taking them the with the

for in the Silicon been labs. Now, engaged systems systems again, is in R&D we've several business business years in the Photonics

customers engaged, really as with moving some few a something Now they're of we value interesting where in package full but these now pilot and a roadmap, and to appear ramping we're have in test customers production, area that our high to is still optics changes co pretty evaluate play the whether to applications. requires combination production electrical right our test optical volume significant products technologies probably we're working have for a

just I tip links I'll optical are me, stop, a am for that what getting clarification correct? And to is working and that is on, tip folks

Yes.

that Got it. production And you expect or seeing years? few visibility the to going you're into within next

customers where we're the working with exciting right optical pilot work lot a electrical it forward. Yes, But bugs this area, of fusion to early now and technologies is an to on push industry out. help and of

question comes line of [inaudible] Jefferies. our the And next from from

Hi.

you right, But was XX% you'd to was actually to so simplified I chiplets, talked four earlier cards. architectures, you way that four one wanted about had So different a in of some looking that if the need questions I understand regarding have test you touch chiplet XX% the increase me, intensity. probe for upon this at I the

increase? guess So what being some that versus requirement card times you high? are it your are like four XX% And as why could isn't help that to I used that understand XX% is just strategies increase if so a me of the probe

Right.

SRAM, do can if If So coverage, a is be outputs, buses, the But chiplets of die think are suite individual partitioning to customers you that need I'm to fairly long four less to test end because four need chiplets, test all the entire through yes, the how which the to of an the number of the complexity, the used not imagine, go need the product, you microprocessor, probe those you electrical get a reason do test substantially the into to that's have you it's of test tests different about going a times, die, all broad right. things. imagine you single for composite those tests inputs, time than for to each cards. you or you can

and chiplets. You now coverage also individual break into chiplets, into test you're it up up the breaking the

yes, times of quarter of on also need So chiplets. these transistors number but of I I'm put, each testing simply four the probe a cards, the

That's why XX% to the test not uplift. it's a four are shorter. So times uplift, times XX% a it's

for my follow Got it, And thank This is you very up. helpful.

So losses your one you had foundry to competitor share logic. XXXX, number of in market in one

So how hanging low going should we reverse kind the share? think you about into Are there any XXXX? that fruits this help of market

Yes.

FormFactor you've on area, key of So an hit focus right now. that's for area

But of for sure One You're I a to reasons look now founder for primary our very couple things holistic different that new at is it, customers. aggressively and early customers we're and share on. focused did on. at those We delivering it making logic technologies right. that lose different a very engaging take market competitor involves them different if we're

to lost technology. cases deliver some in think their competitor our because was market share we I faster

than is where on things pretty working hard share, those look well. the at wide industry at other entitlement customers gaining if lower lower you the of some of we're have one benchmark we or basis, think share market I an than as on

competitor, -- two a to you good viable very in we're very are competitor, there's going need industry suppliers. So we a an and where

getting better, think we're are into sharper on we've more some these guys for being and very us made sure hands leading focused a changes, We've So competitor on changes, focus stronger organizational a our executing area and against some logic. us making are now. I aggressive in made customers' technology and us key that founder incentive

of sort where share an Does that that gains? it area market you. Thank --? the pricing a competes? Is Is drive

not No, really.

for two premium I execution, us things lead be understand supplier way there's not on us the on gains. think your is able price critical to about depend this of product business share talked market short. right. markets, means and times real they being of a really in you're Customers to to One all are That We've going ramps.

compelling. the ramp Our cards. if our probe the us value they have customers that pretty is us don't all provide of can't technology And the competitors of

set price it's not And cost got sure, we win you're so the And be competitive, you about on going to as not price. to but of a suppliers, lowest winning.

Thank you. squeeze if That's more. one Helpful. And may I in

million. being to talked China being, domestic I about know $XX $XX So million you China

color Could able portion DRAM. of to much systems sort how that a of China revenues. Are on think bulk is you of is ship customers give systems I it. for some into you domestic

exposure able and trade is the be what wouldn't can ship dominated manufacturer, pretty that we're actually, is to the found And systems it. be by opportunity up, it’s pretty revenues systems Again, domestic a to China. understand quarter that by the do to We implications. have that at good domestic going given DRAM I and Yes, a that we is going way China in be pretty chunk it's significant to we've to least DRAM lumpy revenue compliance just really a say DRAM major understand ramping large of China DRAM. we're booking, whether China quarter.

our So, business. the systems for at are headwinds least baked sorry, our I'm into in again, business term, over. the systems into these short outlook

probably the question China Over industry. a do when That's able and a business event. we is to term, of support zero. chain to a its again, to question go longer expect supply eventually and that continue to is decline when The multiyear local

any does you. Mike program. today's for Slessor program Thank hand to remarks. the like the question-and-answer of to I'd conclude This further back session

earnings you, April, see stay either you our conferences some on about thank upcoming safe. I for Take questions. everybody, call. the early we'll a participation. for time, so at Thanks May think at And we're late or care and your

in for and the gentlemen, does you, your program. conclude Thank participation This today’s ladies conference.

now Good disconnect. You day. may