FormFactor (FORM) 2 Aug 232023 Q2 Earnings call transcript

Thank you and welcome everyone to FormFactor’s Second Quarter 2023 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

and new of discussion capacity future laws. of the respect and anticipated U.S.-China macroeconomic national upon assumptions of to chain; conditions; Securities technologies; COVID-XX to and to anticipated forward-looking health statements sell the regulatory those financial and of such benefits crisis including statements Examples within meaning which produce, geopolitical products; such the restrictions; Today’s global, impact trade of industry acquisitions our based. contains products the pandemic; of for and the recent and in Federal disruptions trends; ability regional, demand projections include in potential forward-looking and investments with the the are statements impact the business changes including the our supply performance, develop,

XX-K for year December other in our the XXXX today. filing the known risks risk recent factors from issued is to ended the this our on on are SEC and those Information at subject fiscal in available which www.sec.gov and materially with are in XX, our call. filings, contained and expressed on differ that statements Form and could and actual to unknown These website during results cause most SEC uncertainties SEC’s press uncertainties release

of today them. made XXXX as update no statements Forward-looking to we are AugustX, and assume obligations

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

joining for Thanks us today. everyone

due range our outs. revenue push quarter second FormFactor’s below shipment outlook was to

at range. top non-GAAP good and end earnings margin of gross per expense operating expected outlook than control higher our produced the share However,

environment an This to overall relatively our from that continue stable. We third quarter outlook. in remains operate evident is demand

from and DRAM product we lab probe current and across downturn, Foundry cards together with direct which diversification FormFactor’s strategy, system to the Logic, segment differentiates portfolio navigate broad to we As fab from with our our benefit us competitors continue cyclical a flash products.

for compete results across we the at have systems. growing in relatively and DRAM major This that all unique top quarters, probe photonics line as demonstrated customers areas for demand silicon third like several pools the business expect again diverse quarter we and we to exploit high bandwidth enables portfolio producing the past and and us cards stable co-pack memory

offset that are of presently like to Helping probe Foundry in Logic the areas and handsets mobile and soft, impact CPUs cards.

client, unit the quarterly persisted in maximizes quarters markets end that like results demand mobile, cost discipline we and of are balancing carefully volume has several sheet. for PC continues important most protects our that some strong investments balance softness control and high While our and with long-term profitability short-term

long share market of trough financial surpass when profit gains and from FormFactor components produce continue then enabling as as above our and to and the capacity to the revenue model. current cyclical we are equipment growth levels to designed invest for our new competitive differentiation, in We time product and plans. well increase of facilities and in target innovation R&D lead achieve the current emerge investments These industry

tile three Foundry second the segment for based performance demand in first production quarter high quarter moderation and and as cards, compute our digested we level microprocessors mobile shipments and the nanometer of In application expected business, client chips. Turning ramps now to largest details. in nanometer five Logic customers experienced probe initial processors,

markets, and quarter, client as Foundry in PC we sequential expect XD third primarily both mobile see adoption Logic growth we Foveros the of advanced In and by processes driven modest deliver packaging strengthening in like to and Fabric.

in packaging a Industry with variety Show suppliers morph front front-end reaccelerating leading face highlighted advanced of increasing the in of recent where at industry featured Trade slowing chiplets driven West prominently innovation along the were law. customers, playing are the and role innovations chiplet and major packaging the of Advanced Semicon backend and

drive diode intensity, probe the integration requirements As complexity, past, packaging advanced higher higher card. both which required the test good and per each in which performance we test of for expands noted raises have schemes probe the cards number

Probe MEMS a card essential cost these architectures lead short requirements ownership. FormFactor’s of technology like performance are times form to meeting on at challenging compelling

high memory, almost DRAM sequential designs are was that second bandwidth while growth stronger enabling the entirely as third weak. In rapid for by DRAM in cards, remained Generative The expected, DDRX demand driven Intelligence. in we quarter experienced increase probe and flash generation Artificial memory

in DDRX helping and memory that reductions of the memory like each HBM together designs inventory the manufacturer’s than from high DDRX. older are softness consume starts the wafer offset more of

and yet is is innovation another is enabling XX industry’s stack Chip or one XX since die. long-term individual the packaging HBM example DRAM HBM of a even of growth advanced eight, how

DRAM stacking out. and To ensure card yields DRAM stack the die chip die component. this each test in overall high good DRAM stack the points the customers various test to process an at probe to of for increase stacking during multi and probe probe and prior intensity leading die

technical DRAM test tests more and challenging feeds significantly involving for more thermal scaling products requirements are than for higher In addition, the specifications. advanced HBM standard unstacked

card entire of remain few microns position wafer. As target XXX one their the example an millimeter on across probes XXX,XXX a complexity, within test single probe of MEMS must increased HBM a

almost by degrees. a wafer As varies temperature the hundred

wafer MEMS architecture of as DRAM will believe Street our projected as article. capabilities profitability XX% matrix share We market smart a XXXX Journal superior gains, our FormFactor. these starts and card to meets value advanced in requirements providing differentiation a Wall to single-digit both from drive and performance probe recent HBM grows FormFactor’s for by percentage based customers DRAM significant current

near were issues business to expected revenue shortfalls. levels caused results quarter. by yield push due continues and readiness deliver strong a some with delivery facilities, first-pass our internal These delays, single supplier point Shifting now record our outs in in of to second at however, again we the than systems, systems combination less to outlook levels customer

expect current we strong and segment shipped We in deliver system expect in to quarter quarter. third to the revenues again the these systems be

computing, The co-pack, like silicon our measurement development and photonics, of packaging driven market by applications strength leading and quantum products metrology. is advanced early test for

Co-packaged by growth to current high-speed, devices exciting in to enabled silicon future This data communication industry factor’s forecasts several with photonics the and is significantly XX% driving next an optics revolutionize continues business. chip-to-chip center silicon be driver power poised at the over important years. form for plus technology and consumption reduced for of rates photonics

probers R&D PI. partners production, to In like the Keysight built subsystems from FormFactor’s electro-optical transition deploying our engineering early measurement on volume customers are SummitXXX turnkey low CMXXX with leading and and Technologies systems from

several transition to our product the both revolutionary delivers next and lab electro-optical As to roadmap our for improve these demand and devices. test from chips, optics the volumes to consumable of probe systems photonics and co-package customers devices meet production over years, their seamlessly the silicon to volumes to high fab. enabling cards innovative the Ramping increase yields quickly

to want I share customer quarter. Finally, highlight important an from second the

six the FormFactor the their improvement, was supplier past recognizes one outstanding to This year. suppliers only Program inclusion Intel quality performance, over award continuous collaboration, for performers Intel award dedication XXXX. to Epic receive and supply the for exclusive in top chain of the absolute

for and tier congratulate from I’m team. the extremely take proud top and And world recognition dedication Intel. would resulted in to our class global I team to this this the FormFactor thank performance that like of opportunity

in encouraged reiterate the product we to technology that me closing, across of our the stabilization the by portfolio progress short-term, and challenges of demand In we as XXXX. through be continue diversified let cyclical

like industry the the prospects driven overall, the longer fundamental confident for and chiplets the FormFactor and in semiconductor and in photonics. Over innovations term, growth excited trends silicon of we growth remain by content

are and model FormFactor we where our to current emerge confident stronger capacity non-GAAP leaner earnings per as will competitor invest position achieve of million an These to enabling well from leader, that technology the on R&D FormFactor are commitment downturn, us of and $X our trends in to positioned delivers share $XXX cyclical target is revenue. a industry and and

Shai over to you.

and you, afternoon. Thank good Mike,

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

from a segment. of from range revenues near were and of of XX.X% $XXX our quarter $X sequential QX push revenues revenue. decrease low million below quarter outlook quarterly Second due first were XX record million, outs over decrease revenues year our system QX, end our our year X.X% to in a the shipments

The Probe card second X.X% offset decrease revenues segment by by in lower driven revenues. DRAM quarter, and increase the was of revenues decrease million flash were a Foundry in Logic $XX QX. and from partially an $XXX.X or million

of $X.X the total million million XX% near continues system levels first in record and at revenues, comprised quarter XX% to QX, segment up and in slightly The from QX. increase a from revenues were company $XX.X operate

and XX% Foundry million the revenues Within decrease QX probe Logic were segment, $XX.X from card QX. a

of revenues $XX.X total in or as and the X% of XX% increased the X% Flash in million in $XX.X QX. in first revenues decreased revenues to million in revenues lower XX% quarter. $X.X compared first first revenues QX, quarter, than compared were quarterly of DRAM XX% compared Foundry than to quarter QX in the to and XX% total higher to of million were the QX and to million $X revenues in as were Logic company first in total quarter. XX%

of included $X to was margin the table gross release QX. of today GAAP relations million reconciling quarter available which to in XX.X% GAAP investor compared XX.X% for issued items, section in the the we in revenues as in non-GAAP of and our website. press Cost outlined reconciliation our second

was and higher probe outlook segments in the forecasted the of than for gross end the QX margins a basis gross margin margins and high points than above second higher XX.X% non-gap XX.X%, non-GAAP upside with more quarter the significant QX points in margin gross Both a On range. X.X gross basis, segment. card our percentage higher XXX were than

net the main to card to margin factors. was X.X due from compared gross segment QX quarter, probe XX.X% of XX.X% increase an in QX. effect is second three of points increase The the in percentage Our

manufacturing levels utilization, utilization relates near improved to relates basis the end higher the the lower factor XXX points spending. of First, manufacturing of at increase and revenue even improved The activity to factor quarter. lower

product lower points obsolete with revenues. memory and offsetting two favorable these was positive to reduced Partially Foundry mix to Logic and lower relates inventory points a related and Second, excess XX revenues factors reserve. basis XXX basis less higher and the of increase revenue mainly

points XX.X% gross system more mix. first quarter, the was XX%, QX the margin higher favorable and revenue segment slightly than the reflecting in XX Our gross basis margin higher product

quarter GAAP the expenses first operating compared $XX quarter. as the second to were million Our for million $XX.X in

offset of revenues in of million, XX.X% $X.X by million to Non-GAAP lower the revenues expenses increase or as compared second compensation. were partially G&A based QX. for to operating relates $XX.X performance or quarter expenses with specific The QX $XX.X XX.X% million

Company first at $X.X for non-cash levels $X.X quartering stock second waste depreciation amortization for million million, $X.X the of compensation, quarter. similar million to intangibles all the acquisition expenses related included of for demo and

GAAP for operating GAAP million $XX.X operating loss was the $X.X second compared the quarter. QX $X.X $XX.X in operating income million was with of income in with million for QX. first quarter Non-GAAP million compared

Gap diluted was second share net of $X.XX for a compared with diluted or $X.X fully fully the quarter per $X.XX in million quarter. per income income the $X.X previous million net chair or GAAP

second first annual The between XX%. quarter, be expect effective non-GAAP to tax our the to for in and the quarter non-GAAP effective rate the similar was XX.X% tax XX% rate XX.X%, we

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

than cash million free cash QX. working Moving reason million, higher was million QX $X.X quarter of in million cash The increase by compared management. QX. provided main in in by and activities Cash operating the the to to capital is the million free $XX.X flow in we the flow operating activities flows, in negative second generated $XX.X $XX.X cash of balance for a improved provided sheet $X.X

$XX rate does capacity equipment significantly between $XX.X ensure our continue still the invested updating execute compared increase capacity long at we million, expected range. the million plans, demand. to and lead million of outpace $XX.X million core and strategy in previously during in than facilities albeit our are a equipment drivers range QX to $X slower quarter $XX our We increasing for time placing CapEx communicated on capital in the portions second service XXXX in Accordingly, expenditures our place, underpinning higher to not we to with

to similar Overall investments at and QX. total million end quarter $XXX cash were

As of remaining quarter, balance second had the term end of we $XX a totaling loan the with million. one

available QX the under million program. for stock additional At million future second Regarding buyback did quarter, not during we $XX.X purchase our repurchases. buyback remained end, quarter two-year $XX shares

revenue and Turning of with than systems to Foundry to revenues or outlook, a QX $XXX Logic the third we results expect higher QX in revenues. plus and This quarter higher QX minus million. non-GAAP in million be $X outlook

minus margin expected million. gross we be points. non-GAAP million $XX $X midpoint XX% to expect be quarter to minus is XXX these the Third outlook plus QX operating of plus basis At ranges, or expenses or

non-GAAP for relation is of is or our earnings QX be QX our available per fully on of section The diluted plus the non-GAAP minus reconciliation issued and our in $X.XX. outlook to expected release share investor GAAP to website today. press $X.XX

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

comes the of Sankar Krish from question of first Our Cowen. line Instructions] [Operator

has there in still Mike. logic towards a I First going to seems queuing seems one growth is it the Kind than what for going I’m the Shai, like on foundry thought quarter, more logic flattish. like better Foundry of DRAM. for mix margin gross up add margin follow the because September but is

Sure. Thanks, the I talked current level. at before to the start expecting with want revenue gross have we XXs high - Krish. margin about

obviously So results by are the gross QX the outlook. we of encouraged around at this margin XX% the of and midpoint outlook by QX

to gross we the our a as make along of the on of XXs trend as $XXX million, to achieved to ago, to way our XXX demonstrated margin margin once So expect target model million, quarterly $XXX progress. low increase million we XX% around with year And we gross revenues we of about levels right, record line revenue. fluctuate this we revenue expect

offset level the gross compared margin go once mix the to by strong in some return factor and one the to you Now, QX. to impact cost quarter higher quarter is second expect impact expect for versus revenue actually we QX, as to flat, shipments. to activity QX QX QX during compared the utilization a segment after normal be material is the QX below be of to higher for of revenue down expected as Also, second specifically the manufacturing

picture And like looks you color it need for use at COAS at bigger a historically they legacy to seems then for use technology, MEMS. the with and Thanks When look HBM. I Mike. Lean card but question on probe AI like GPUs,

we card technology when based Thank set curious, kind revenue of into is MEMS it of you much. for FormFactor So to kind and I’m to of very if, see expecting true like just so, benefit opportunity kind the how you are the as COAS? go quantify probe for

non needed I agree with Yes, underlying and Historically, the probe thank, GPU and MEMS card from in manufacturer Krish. hasn’t or it. major Good leading assumptions question, probe the advanced has competitor. a us card used technologies legacy our

As both packaging. note, COAS the middle packages COAS based technologies in us the adoption for technologies. and of these with changing that MEMS And these for qualifying are is of advanced you advanced of

think modest relatively is a It stage you which starts at of number wafer I this know.

significant as really certainly that this is and in for a to hopefully COAS AI the and that we growth able takes more XXXX see revenue as the with this in continues MEMS technology expected associated be of will significant part GPUs adoption hold see volume. ramp we continue, more So trend to our

you. Thank

of from next [indiscernible] comes Our question the of line Jefferies.

terms guess volume that, Has now my what Like in compare starting how Intel up I call, about strong can that that changed follow last PC activity? in design So time, And and were recovery design earnings this quarter? to the of are a business? you you and last AMD so. increased back have noting then from I in question, saw significantly seeing contrast after their either just this volumes you guess, first has talked activity and muted. very come

Alright. Okay,

So activity. design and starts design

couple for that the Remember card past probe similar levels quarters. of customer to as seeing are specific is a we design. each chip have We

architecture their robust we And each so specific as have teams very on release got not chip And each design new, they probe meet customers new our we they have units as with that of to new quarters, couple in cards have the very design card where, but for NPI. activity past many noted customize designs, on shipping work closely the test probe the requirements design. to

might ramp. meet In to upturn, to hundreds an we ship or to production the tens even expect

most few, shipping and we adapting inventory that are the really customers Now our this that to on have sheets consume the is has of are that a try as channel and a their they dynamic they of parts. their balance

don’t they overwhelming Obviously, want designs. it to this by inventory with obsolete new

nice these qualified have are where so And that then designs we we are already volume a as the consumed, does inventory get that and to ready will refill ship channel. in seeing setup new

don’t think little on design there. we areas is client turn know, you few rapid well versus I seeing are expect are I bit expect the has substantially in some green do like shoots turn a we don’t previous say as but a there units I changed of But PC, increased positioned a rapid and mobile, I from wouldn’t situation a activity. in quarters.

And business? on much understand largest for HBM in? that it portion half of maybe quarters. is think talked their your to forward or business does in two know, than how, on so, the in DRAM your, about you HBM me Like be you the kind coming of side, the customer that translate doubling help XXXX? is you can so then going How your has now second where Do bigger your would of revenues

as increase to DDR example the the we a in quarter Well, prepared the to strength some was most said well. HBM, saw in of really second remarks, HBM, attributable is the as pretty we of good X

you sorry, QX DRAM QX, to XX%. I’m the grew we to from You by look revenue at from QX, know, QX if about

HBM. that And almost all from of comes growth

do the HBM an quarter, We I digestion. for wouldn’t XXXX. already. go there expect will continued through expect double again example, from it as that perspective. But we third some to seeing in are you there be So strength

But commodity through non right balance to and considering now. an it in or, weak sheets is in HBM great still vector awfully still our are on to DRAM some HBM exposed a significant DRAM be is customer’s how that is channel, working inventories nice relatively growth the

of Charles question next Our of & from Shi Needham comes line the Company.

Want the going the able range, be the and margin QX. margins have maintain in margins has I a will to for are going is and we about XXs? maybe know above few like to - be back in to it ask we gross be been XXs for the After to range of forward for QX forties quarters low XXs see to comfortable to going that gross you behind So, maybe kind really period us call at margin? margin of glad to

go Yes, that influence we levels revenue factors what increase XX%, low to around to the are that XX%, point so said this the and the two order answered question margin need revenue gross mix. to I to before, previous gross repeating up XXX. quarterly call we XX%, to margin main at by it in

in to And target And growth and also XX% to a get this come higher margin XXX year Foundry grow XXX mainly we order million. a to that revenues model like to the to margin Logic. our we did which ago, need from back need gross is we and markets,

talking line. expect if I we do we levels along that at line to continue these call are that XX% we should to I to able XX% now, and remains just about, let’s line mix trend where experience that trend be fluctuations similar, this revenue along and but was Now, trend maintain it this from stays described

are want that, to see is to from question a a going fluctuation this you million some per this the twenties now glad more or expecting sustainable quarter. a question was maybe for not XX quite maybe get Mike. this strength proof seeing of not did range. part this lockdown okay, cautionary it XX provide middle soon. statement plus maybe just other Maybe runway quarterly your get some is you the to us per be we Well, XX% certainly, but XXXX, million although back to going expecting us next DRAM Do were card. I going around, that business quarter it in go is back higher it we will to some Originally, plus but understand is really to to DRAM quarter, to going on think the bounce take forward Maybe not

Charles, from is it and come to maybe it a interesting Yes, different an at question, direction.

One, is the right. remarks DRAM the now prepared strong business and Q&A Our right is HBM here of by touched about which card we very on really talked submarkets. driven AI, have tail is that two in generative in

I think generative with of HBM where semiconductor is key for the everybody understands AI. enabling along a components connection GPU one the

there. are so very strong And seeing growth some we

second third of DRAM business, The weak, estimate the DRAM, in to sort you low really DDRX, was other composed were if very of for DDRX part for the it I And almost power legacy revenue right. HBM. is a quarter

have contribution We before. seen from never of level HBM that kind

to initial a industry-wide an is the is It way over probably that wafer only HBM like on still significantly to little of DRAM there. bit And ramp going grow lumpy projected years. X% starts, couple be next the

can get DRAM and active. both we of If healthy components

the, of on commodity the have some DRAM top on I HBM card you intensity had drive think significantly. probe and DRAM you up way legacy revenues probe to the or then But expect DRAM, for card there. if lumpiness you would got I spending If opportunity like,

roughly was million-ish a in bottom I probably DRAM, QX factors did round that XX it but line was standard business level standard the notice reform Do you numbers. a like over there. the think that cyclical with the DRAM really there? from probably the case was of sounds Because historically, is like DRAM the So kind rate

DRAM as for think DRAM. long have that Yes, reasonable is a They’ve continues, continues end healthy level be million-ish all XX assumption the as I a heard the customers as low you it is our this through way that think wafer get to their managing perspective, are they inventory taken starts, about I cyclical talk consumed. as starting down from market to an long

with build market share. HBM market up overall growth it from and with We should put our on another and DRAM strong leg continued AI will see hopefully associated the see there, we that will

extrapolate growth and I into think FormFactor’s results. can you those

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

there as attention a in long As with surge, few go high will I given on bandwidth is memory its more.

shipment we can are on about high is Clearly, or against we where will Form about diversity is product from now two and is coming how bandwidth respect happen them think to in and another out. market customers First probe customer the you should historically, Mike, supply, there your within aspires that customer OEM that is are an player now? getting interested been with quarters and talk cards, memory? where to memory? to to shipments one another where four tight deliver how and there But standpoint related need we bandwidth right what Given on being able when led

Yes.

customer think of that equation, on share. So pretty we market you follow this one market, it of have the there the understand of high of HBM. one current is FormFactor, relatively leader significant is where out relationship share side you who and market those historical do that terms that HBM in for turns very that with strong And has a customer a I

So that is now. helping us right

they the about up well think the think engagements you If line I other reasonably with DRAM manufacturers, major with two shared our dynamics.

each with now. memories if them, each I heavily is current the engaged it active right But leading about profile, the them. shipment with think HBM we of towards provider biased are We of of are

help the on secondarily of some far which tools, shape as and don’t overall is constraints, yields other pretty HBM we think feel areas If good ramp. in us, process There right. I you a about probably sit, constraint like we are we are as

get A lower of up needs that test yield probe going intensity is to part diode a certain in and go more situation. to number cards

think are resolve I that, we those helping problems. currently yield and enjoying

those production on the if we and we of imagine ready and you meet on constraint have to we the need we we deployed, turn think CapEx are And HBM given few the current associated to made that demand, don’t that. with that I investments at So do this a elements can the to are HBM ramp have capacity the things.

over quarters. the Logic. supplement dropping revenue I customer, of lowest just to year you When it trough into would shows largest I in do and feel your this four Intel about, up, last takes at XXXX And back see there? and levels, Charles is or lowest look the it Do in I then how and customer following half the percent gives look DRAM. and sales spin we a about like and the we be asked at know, Foundry do as the mix you dollar believe sales, will trough think to that of by we

Yes, I good observation’s your one. a think

are to think to I components edge two Foundry know, on and largest packaging designs important you some our is there is leading those of packaging XD there kind and customer One enabling is, generally Logic this. that chiplets, beginning ramp advanced technologies. technologies,

customer. of just And transition that in and we are with ramp that the middle

memory. I business pretty think is you in that, PC top the client analogous layered to what on of know, you happened have seen some significant weakness in

wafer recovering, now through the to really end new those refresh buy it probe starts. to where market is these be cards going cycles for rationalizing growth, of also and start consumer to and inventory significantly, to starts customers some going pull but products looks PC It wafer take ramp are to

see think products new I currently I stable need coming the relatively things as back the stay in probably up and into get probe end, things new consume inventory, situation and have, long to So think that we from cards will channel to turn this that here. we to as test start

I that see with market. is the And consistent in do And we narratives remarks PC. weeks prepared client that and of I of think with and a areas comment customers strength sequentially that over Foundry Logic couple associated one made our the is their of in past the

in we systems a the out, Shai out was quarter. levels an You for systems that at and not push the adjust where if in noted record push have would but for been was there that area significant if business, that

the where shift, your capacity are starting higher natural the that trends systems that you can revenue, business, new to into in if of is about question feeling move levels talk the demand And are for how given you remarks? of given not we earlier so a and talked about generative the is, some you about trajectory of

the Yes, we about systems very are business. excited

push We in are the disappointed outs.

you, to extrapolate, you those that to are know, million $X planning $X You ship midpoint the our know, if in systems we outlook, million in again, to QX. here reiterating gap in

So you it demand, might not infer. relatively high ASPs perishable but is as

tools an continue really other in where generation I customers and ones some systems that in is whether there photonics of the metrology is innovation. measurement And, to it you driver, highlighted That have semiconductor inspection are silicon invest. where but preparing capabilities, and next test co-package we be real enabling and computing cryogenic the quantum area optics a It remarks. for packaging. is unique for advanced know,

our Semiconductor to the customers segment continues that our that. record these and are by on continuing R&D levels exciting continue at system And spend innovate customers in as to tools to in really they enabling aggressively all areas. be spending

FormFactor’s in the in cyclical And some so diversified production the where overall have of of strategy because Elise systems business helping that a business is strength in good business, good partially example some downturn. momentum probe the the we the softness systems got offset card of

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

further just asked I but I like have this Mike, of past, bit would question a elaboration. in little the

more more more how You two is the bandwidth know, high packages, talked the of is themselves there is reasons. and are is intensive for because packaged test you in complex. chips then have and memory One it also probe about and steps stack

you more intensive high versus think - how those up, do add probe standard things bandwidth we when two memory memory? these So is much

get now, intensity somewhere with like-for-like the call bump, XX% we as these HBM it test as bits out technology are of door. most let’s ramps, any and to are going advanced basis, on low. more technologies early intensive XX% because packaging an yields in it you see between Yes, a

technologies problems associated dye, at ramp allows and the stacking areas fix working are with through volume yields. Customers customers things the speed really is these improvement in like where of can yield new high challenges and higher the aggressively them to all tests that then offer we factor with of so detect then form associated they that unique tests, one at yield provides fidelity value,

somewhere it spaces. XX% around like we more on HBM, most So to I out we rule of test technologies XX% in thumb, intensive it for like, see think a chiplet in see

Logic as second Foundry question, and my declined. Then business was the

now weakness XX% do I at just a as five Are GPU what just then that seven nodes you kind question three, the technology switching behind talk, MEMS bit what similar other over drop? MEMS little of of sequentially. or use and using a you a that this is such or point? so there are nanometer percentage think you as key think Can big segments don’t mentioned about for XX% the was that segment And elaborate Probe?

down in was So Foundry quarter. the Logic and

go expectation there. We back saw. we the you had is strong what we an what a that digestion and had expected Logic, for founder was to said decline. on QX some call, a If QX we exactly and a quite in That

in hard quarter sure rebounding to continue outlook, our driven as in one and PC. largest make some, compete an see increases now, top all business, But third engaged We Logic modest and our that are client continue Foundry the by we both this with in customers. and we some important strength mobile to is

unserved are underserved areas the that that If we a very probe or call have need we really still large footprint that they MEMS probes, has. density think because are talked already by this is that about and and don’t the of about on GPUs, MEMS market

with a So customers quite bit the lower utilize still probably can cost. older technologies

rational is so for a them. decision that And

some they have use As MEMS probe. advanced technologies, to of you to X-nanometer, X-nanometer like COAS at really move these a and

in us. front of is in And -- in the MEMS Logic. so of that and probe suppliers is primary an that front Foundry two opportunity And

the GPUs whole We really adoption of high-performance application of see is at probably widespread this real NPUs, MEMS most of any compute, processors, advanced hole node probes. kind adoption in point. That the across is the last

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

So up how following a MEMS to it the movement three-years on could business of in GPU currently? I mean, that be last node two the bigger advanced is adoption, than big in

Yes.

have GPU I complex understood bear are think units large high These it AI low. the generative products the dynamics in think and people very relatively who is, ASPs to the customer. are cautious and that thing one extremely that be about is for adoption most somewhat I

of COAS. thousand associated The probably needle adoption. not with cards there starts talking a about And spent it the so, terms in wafer specifically, intensity, at a initial probe mover boundaries more about think in is few on you dollars there, huge test are least when adding

mobile the the completely high associated those the If dwarf about you that projects contrast with to industry, some of volumes with are talking big and mobile of unit increases we COAS.

in And where creating somewhat it. seeing DRAM are so, around impact while in expectations it capacity and and with is we HBM, adding to planning be it want and area cautious an an we opportunity exciting is its

increased probe dynamics see with like I business in these integration COAS. intensity the see their the intensity MEMS exactly parts also strategies as where try and have both will probes seen of the increased but sale, think card of same we test adapt associated the you as customers advanced adoption to other techniques the, the the we test packaging with value,

then to Foundry last do have Okay, great. two have with Logic. my And and questions pronged,

on market how than Lake, greater First all, it Meteor would your Our Rapids. the be guys previous of largest checks do share customer? you position your view generation suggested by Sapphire

to confirm Intel is edge, want is to about the the chip laptops since bringing bring and is a are AI to introduction, that and they massively going to excited computer. into WiFi the thinks that chip Just personal it is biggest inXXXX, this

part directionally positioned big the That a accurate perspective. So, that, be market if are they are question. that from you if there about a remotely is one of share deal should well

share let’s be ramp had potentially, that could Intel’s material Intel, is, understanding market you CPU it the are to call it of a selling competitor, you guys you my with to previously question two close Part know, A material that is to business. haven’t largest person

those, that a So of give both update if great. would could be you us quick on

sure. Sure,

you has what there our I know, PC to us value it know, their think some design experience. the the client to of a in delivers a customer, reasons. is like couple Lake is think of things, it significant, for innovation customers Meteor largest you does I and One, fantastic couple a with excited all

is it exciting reason unit other stacking. to going advanced The that is is high is volume it product major utilize dye is consumer the packaging first

is client products so have Sapphire Meteor perspectives, Rapids do from like in of better like of different compared some a position a we the And Lake. server couple it chips the exciting share to

so excited And are where that it area an we is about ramp.

to the in need in races when their given think are like the I definitely to of market. be but not everybody was weakness the the were refreshing to PCs. does still little client bit be appear a PC the It you midst off we we circumspect, pandemic stabilizing improving, and

shifting measurement before part the is, you of received award who only know, the the from we test and supplier supplier. second one point of I make other highest The Intel, would to question suppliers six were we the were and

health that I think share translates that indicator that and of into market the which relationship, strength is as of relationship, the an So presumably well. of robustness

qualifying to not continues then customer. extremely be to at market. friendly think high shifts largest On the share for those FormFactor. one qualified are our understands you be priority occur to them, been have in of whatever MPU I share to exposed other an customer, Clearly it we, only And that shifts everybody

them business we technology, our teams value and develop that unique, have technology, unique be which, working said Having their a built strategy grow many qualified technology we engineering technology to to customers that modify requirements, with you our to our their they there. can and that, test offers are to specific know, know, believe like so modify that test up we our adapt continue are still you customer our

continues us. opportunity getting for it growth represent qualified high there. imperative a for a to of represent strategic understand We priority continues us, So the to

take position then that we, if would would years, take of may would you you doing. you fact But customer? know, the how you on it depending you a your that long at know, to dollars faster you least be or you did, year. When know, could million you three meaningful, verify validate, would know, spend products a it out get there two competitor’s it at and get, is, how assume know, to but they hundred a guess leadership my I these market

a for So the it or is opportunity not ballpark, is right? you kind in of that substantial

spender. to a They are and a little think think about few significant let’s that about you maybe I it ramps. is designs win then in qualified get to takes but high, the are lot. close a you parking that what the call articulated, the When you and just you timing ballpark are

realize this in probe on of significant industry. still a that it of that that very So amount spend us. an imperative in the for to and cards ourselves front is that I FormFactor opportunity strategic share get much want significant is is reiterate to of qualified

of [Operator next line Wally Instructions] DA from question Our of the Linda Davidson. comes

clients some Where is, some product. that was earlier levels think there excess Are your you previously, left to are your industry of or referenced ship kind the gating inventory of still you at So, at clients that? quarters a issues their few new still in the inventory your ability this burn do point? of

it different I is markets. end think different and segments in

is to the heard some amount is of like in bit better a way get they significant that Flash narrative a go. a shape, At several way in probably long there from like little NAND DRAM But a last where least go. something at big turning. weeks manufacturers has DRAM the Flash but of look you feel to Flash, inventory still to has long If through. you

as to go few well. Mobile quarters probably a

Some of like much have the are edge those healthy cleaned things don’t a balance is exposure, relatively nodes, trailing inventory, there we areas demand as little where things pretty still analog, like automotive where supply, pretty and that, up.

here. inventory have get you unit on industry, volumes cards across unit probe of think areas I volumes So significant through there to higher that the gamut whole still designs, new probe us drive but the of new the for cards is got new semiconductor some volumes and

is wondering space if it that the the Mike, big silicon And information a be? think few curious, photonics give how today, it ramp over could years was how you little was more could us you. you big just next on in how opportunity happens I I Maybe and for the

electro-optical measurement area partnerships turnkey PI and Yes, photonics and for Keysight talked tools the a companies so and have system. remarks our we a we optics, like with we about really One, is got co-package strong have silicon prepared on providing position a us. exciting with and because, the

what the hybrid of chips and of together system. test electrically maybe world customers to of the optical can electro to are test optically bring supplier need who those only is in both handful we a that And these do and kind one provide technologies suppliers,

is early this Now, pilot still late in R&D, production.

how now of electro take really on one them on capitalize grows. those technologies we optical is we the focused do things are and silicon photonics So hybrid as

efficiency the optics got power has most compelling a trend odd percent rates firms, just research in market It because the external from of co-package improvement. data growth center XX third-party wonderfully

business revenues business position what right So segment we do ourselves production where is extend production-like XX% card and the XX% take our to maybe years. this to one over is next are more the business. growth environment And now of that we the probably in a advantage into probe that places of really system trying of couple position systems and to a the of the business is of

when of are is execute. of growth with lot in an So are odd we are this of expect we investing the where I is successful of one leading the customers would track reasons XX% the the would expect area It we talking where why it it we in one coupled industry, we industry it. to rate is about keep R&D, the a and areas

or could it couple production that? it meaningful So in if years late at R&D are than this be is from point, we faster a away

they have could ramps reasonable into A timelines late a XXXX, of but that customers that are these I faster couple expectation of think are some that. to than production It is be start. still - for

Our comes Gus of line next Markets. question Northland the of Capital on Richard

many people about us an think photonics, can engaged you you how with? are idea Silicon If you give

Yes.

people really the numbering sold where new have leaders. where to think customers, to many area want you I feel is be this the one going you have but with many, partner the technology are in we you who tools to dozens, So

of a a closely the working are systems, into and their developing go and production. we handful our we And to them making with so we roadmaps focused sure modifying lot making engagement R&D customers, understand the sure systems in on of

couple of a of we most of base again, driver consistent across all numbering a is R&D on of tools a is customers, it dozens, our while, the drive strategy installed have is focused way silicon So that we our the broad in businesses. that fairly photonics really with and that

two mobile And Logic is Now and thinking it if client, you segment a that PC different big and and are I that by you but be of sort how kind of is, about of us then kind how how helpful. it they how the would if of sense know cut categories, are piece can chiplets and business, of chiplets? it give of much much is, say, Foundry say your big client of

timeframe it talking also you Well, are what on depends about. think I

large XG If layered you were very of on a also go was it fire, on had piece back to we the XXXX mobile and when of and client business, PCs that. top

So you the can probably on back of historicals. based some into what are percentages the

difficult chip my the have be often the want head not segmentation. exactly is destined a don’t top where especially really for. speculate can off in tell, It of I on to and mobile to would that

XX%. to So we large the of careful are some very with of and those. north Foundry Logic components business, definitely they be of But well want

is else’s adopting chiplet is it first these part, the somebody client, driven an really in is the client question. cut That PC example in whether think Lake or high volume about early about through it are If and We you because or of consumer architectures. mobile we of just adoption. then smaller Logic, Foundry innings relatively Meteor is in chiplets, the talked that

packaging increases test an and Logic part become test associated complexity bigger of and mid-single reasons we it is in probably low digits And single exciting one an a is so, high the a advanced exciting industry that opportunity were relatively why if chiplets, guess, and to intensity Foundry the as in and Logic, of the are overall chiplets such digits, is percentage. opportunity, hazard growth us. for still Foundry I It with

you. Thank

next question Chin of line Stifel. Our comes of Brian from the

Hi Thanks. Thanks there. everyone.

you well? the to delay in related sort terms million out? just Maybe was to is, recapture XQ those that that million, expect non-demand out sounds the laid there the like know, something, push $X as me so of for Let questions. reasons probe $X it systems you you ask of in of few kind that revenue clarify card entirely any, Or was and a

probe short it we operates know, on in have lead times, you Well the the segment, outlook. because made in card have often from our such we assumptions differences

two now the still right know, You in months got to have go essentially quarter. we

do And and business the so quarter what we we as probe in changes the ship see as card things. and book evolves

existed same quarter, still to turnovers We situation have in here chunk the second and good third the quarter. in go a of the

probe comparisons So more a those card the difficult in little to business. make

backlog gave. you be visibility business, longer what quarter, on in we what at, you It about had that we times quarter. that can a do the $X expected said lead And look But midpoint the in we look a and systems to and million $X the we call, that at delta, we for you of we if second about so shipments the the are have we expected, systems million the is delta level shipping the know, of to we delta ship should that guidance didn’t.

it. Got

been or there you will of And the two time kind moving might forward, kind years a that to say to things to the growth unit think, years, to little IC be It drive on lifting discussed bit industry? bigger you better that question. depressed some past do over the a said, in the heavy upbeat think XX you are growth being the some have the Mike, five complexity I bit strong to expects picture that three Okay. more more midterm, are improvement a and Thank have a maybe similar clearly of do into things But know, already, off everyone specifically currently, but you. ties bottom.

a it question. really Yes, interesting is

about over a we growth, overall, IC three IC timeframe, optimistic growth. I think revenue are year two to

you that it very downs, these very, on gone a is always but If long-term growth the through ups cyclical historically, and look strong at industry imposed trajectory.

value know, And a is is significant, that, degree of of and top confident begin units going emerge to and this that two will Layered complexity timeframe, cyclical the pretty that you, right. growth. these each we in And IC three-year growth from we the unit to so IC industry of dollar are over to downturn. though, you on see

to about part projects about you unit talked growth. on they think those the HBM, projects you whether some in the top complexity they the whether IC the on superimposed revenue they growth and going of the provide we of certainly are the If of know, be call, value Lake, Meteor are is like

Thank you.

Our Jefferies. next question comes [indiscernible] of from

cards so and the as just you as perspective, continues your know, DRAM. is about see of know, guess I that you you steps cards, as levels three margins a as your you remarks, point, like you I complex probe memory from your long-term number the compared probe complexity, given more increase. complexity to talked stacking the be? DRAM what or HBM, line, on stacks four-years that Do down your you could to prepared on these to a and would adding cuts of But there drive think similar mean, HBM similar are more know,

fluctuations the making gross margin underlying of the past by segment gross certainly to about. talked Yes. increasing for do Shai in that helps we it that what market products a in that It that some question margin good differentiated compelling is years. it sure a a challenged the like drives DRAM value HBM like Whether is and we out have things has gross been over several margins new of

of profitability in investing R&D these platforms. improve also to some are and our with We competitiveness

that I kind over at timeframe, see those things that of you timeframe, work. three both think kind or of So can said four-years, you of over

the see towards gross if a that have we confident one margin you us. long-term of the improvement, back is of the in And It evolution, is gross margin, seen for FormFactor’s that are margin reasons XX% very metric the progression that can important target you model. gross

cyclical of in current internal our overcome driving, things and the in and the gross cog margin to line. us margin volume increasing improvement are reductions to increased the but but area efficiency the deliver downturn, HBM Tough structure both having a in gross complexity, like better of we because value also

sir. to closing conference to like turn back the remarks, Mike now for would Slessor I

joining for today. everybody us Thanks

several at as you of here We some usually conferences as the go we time take summer, part lined late investor to those. have of then, the and do up of the at hope see we care. this year, Until through got

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

You disconnect. may now