FormFactor (FORM) 7 Feb 242023 Q4 Earnings call transcript

Thank you, and welcome, everyone, to FormFactor's Fourth Quarter 2023 Earnings Conference Call. On today's call are Chief Executive Officer, Michael 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 the GAAP P&L results and some important non-GAAP results intended to supplement your understanding of the company's financials. section non-GAAP press other the release on Investor to available information company GAAP the the website. in issued Relations of measures financial and are and Reconciliations our of today by discussion laws. securities forward-looking the within meaning the Today's of contains federal statements assumptions and forward-looking the financial regional benefits and the and disruptions in performance; demand of of COVID-XX based. projections are such recent changes, respect of industry products in ability U.S.-China upon trends; the and crisis, pandemic; reduce the including the health capacity the products; national global, includes acquisitions for anticipated in and statements which Examples potential our future including such impacts develop, new anticipated supply with macroeconomic those chain; sell to to impacts statements trade of business our conditions; the of restrictions; technologies; and geopolitical investments the regulatory and

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

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

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

today fourth earnings FormFactor's quarter on Thanks, joining us everyone, for call.

gross midpoint range. outlook, non-GAAP tax last were moderately with EPS by a producing November. that higher to we margins at results outlook offset line provided quarter fourth the the in were FormFactor's higher of revenue and rate, Compared the

combined we that we similar and the XXXX, direct our the . The a to to we of relatively served remains sets our recent environment FormFactor's benefit across stable an to demand and past continue similar experienced year, first diversification aggregate competitors. demand achieved quarters. be in expect in quarter from during strategy As markets to levels operate those is overall apart us results enter we

lab-to-fab portfolio DRAM the and cards, compete us as diverse for system This logic, a segment unique Flash for across all product foundry enables current portfolio quarter. X and demand quarters, we products. has our results in with business major demonstrated to top FormFactor consistent broad expect at together pools line producing customers, again across the past we've probe which relatively and

our memory co-packaged investments entering helping those areas cyclically and Customer growing to and applications in generative differentiation, industrial. and The handsets packaging optics. and is road areas are downturns that in cyclical investing silicon co-packaged offset enables R&D like chiplets like the and in photonics also driven product keep impact low automotive stability especially and like high-bandwidth advanced innovation competitive of PCs product at new AI, like tiles, for map and for by FormFactor mobile memory levels, presently high-bandwidth

prolonged can our strong strength current softness. portfolio, protecting the profit sheet and capacity investments enables designed periods model. market to growth product the enable of profitability industry financial gains which industry will make of then when other quarterly our share above initiatives of and stability of maximizing also balanced invest and produce industry target to to growth, and levels Because in while revenue and us we balance It our surpass to throughout the returns and achieve strategic FormFactor these

driven strength strength, area an X levels DRAM of Turning expect now experienced by quarter revenue to are probe DRAM is in cards current DRAM we first peak factors. details. to approach and segment-level being the XXXX.

the unique upturn we're generated production DRAM when arrives. customers as insight probe designs of demand. for prepare new surprisingly, perhaps by the characteristics strong into demand card DRAM eventual and First, high-volume experiencing This DDRX provides

Since driving greater production is with probe early in cyclical DDRX for activity probe device-specific than to we these cards, designs new for cards short-term to a full-scale volatility expect new design, and overall customized demand somewhat levels chip see might consumable, individual upturn. albeit a each are at lower

strong The is second customers with HBM headline-grabbing in business nearly forecasting outlook sequential factor is in for probe growth we are AI, or multiple first behind enabler probe in our to HBM. the card GPUs, key the our high for DRAM bandwidth memory from demand acceleration continuing quarter. cards and test generative the HBM XX% Together a

great advanced offers is how of HBM example a results. packaging driving FormFactor's

test die HBM the packaging for and XX out Each packaging or card. required raises chip each higher even requirements intensity, we produce test like and which such applications advanced advanced number HBM in a XX As probe the X, as complexity, higher the assembled expands both of probe cards mentioned individual with past, vias is good for hybrid DRAM stack processes die bonding. through-silicon performance which

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

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

performance generative continues share probe providing for SmartMatrix HBM We our accelerating customers and driven significant the card FormFactor. as of adoption drive these profitability will differentiation to and architecture superior our grow, believe requirements, both by gains MEMS-based value capabilities AI. advanced meets FormFactor's to market

Foundry Logic major customers high-performance for quarter of designs compute major probe design probe tile-based foundry client sequential shipments cards significant business, the and space. X the Shifting expected our in quarter the third the a key fourth PC cards, to in digested and we largest experienced as reduction

mobile. logic and PC stabilized now expect levels demand We closely have similar volume for to inventories customers manage their high the healthy unit as like continue output current in and foundry levels that probe markets at in cards end quarter client

of as they their the accelerate to advance customers processes to face of maps tiles and the Moore's law. in adoption seek ahead, slowing further and logic advanced major road chiplets continues like a foundry packaging Looking by

higher logic test of at handsets the foundry complexity. compute for trend, again to support market. high-bandwidth potential test increased and and edge AI foundry will memory, logic power this impact both higher the demands As advanced and applications PCs significant card and in together positive The probe the with and and packaging growth intensity drive in

directly mainly As anticipated, systems driven measurement business. sale we FRT quarter, by experienced business to quantum revenue products for segment is spending strong systems and The market-leading our the is and early for continues of our in development diversification to fourth a important our by with production metrology an and demand of innovation is broadly, customer applications sequential as computing. like strategy co-packaged in silicon element budgets Systems activity. this semiconductor test and reduction segment in the More driven of due be correlated not R&D photonics primarily

important to enabled foundry remains from an and of system for exciting as FormFactor's as a systems photonic serve CMXXX well high-volume of optics for production low-volume leading co-package enhancements silicon photonics we co-development platform the optical electrical by for as needed silicon support of low-volume Co-package current production test a and silicon have probe to early The the future the photonics optics. at and and now world's driver continues, R&D businesses. transition card installed

improve As roadmap seamlessly to cards [ to and enabling and systems production ] consumable test delivers years, probe electrooptical both volumes our from the the increased over product devices customers the these lab fab. transition next yields, our several to

in and quarters. today, distribution together we subsidiaries agreement. caused that partnership Finally, with several exclusive is to region in the divest of transaction to have earlier Junction Grand the light revenues announced a to over agreement adjust designed export long-term our operational China Semiconductor an in strategy decline our China our to past controls This

excited as and from growth and Longer a and photonics. current to and and FormFactor the you. for relatively competitor, innovations an $X trends efficiently target leader, content closing, we and demand like operate silicon on prudently continue overall, per of that fundamental technology stable of downturn over chiplets industry capacity achieve delivers by earnings across as we FormFactor and what our confident term, in non-GAAP the growth These driven and investments to the and we portfolio. semiconductor co-packaged are revenue. and enabling diversified HBM, exciting the to in prospects industry R&D a In technology environment we're product see Shai, stronger our trends share well in leaner position model FormFactor that to confident us $XXX of emerge where is our cyclical positioned million remain

Mike, afternoon. Thank and you, good

and X.X% revenues. X% million card our revenues XXXX a in range. and of release, segment the in and decrease offset $XXX.X at the a increase of million, X.X% gross at by the Fourth our saw press non-GAAP sequential in of fourth and EPS million increase driven As outlook $XXX.X range from quarter QX quarter, end of Probe logic or margin year-over-year an the from were by was third decrease from and lower the from our third The a revenues of X.X%. midpoint revenues. and a foundry QX our was revenues, quarter partially were revenues $X.X revenues DRAM high flash decrease QX year-over-year revenues non-GAAP increase quarter you were

revenues closed the decrease FRT, from due Systems of XX.X% comprised is segment XX. slightly flat a revenues total on revenues third revenues, the in were Systems from quarter and the million quarter third third to quarter. $X XX.X% million decrease down segment year-over-year. $XX.X QX, October in of The record essentially company which mainly from sale

revenues. the XX.X% were to XX.X% to decrease quarter the third third and foundry quarter. revenues in card Foundry segment, total from company a million, QX the logic revenues and Within compared $XX.X decreased probe XX.X% of revenues logic

XX.X%, Gross QX. press $X.X in Investor which in gross quarter total non-GAAP margin or in section of website. to compared higher QX in in over third third quarterly in as were were available and items, Cost revenues in compared $X.X GAAP in revenues margin our an reconciliation of we X.X% as X.X% QX, million XX.X% million included sorry, of in of the fourth of in the GAAP revenues than in fourth the same million $XX.X XX% issued table our QX. QX quarter. to than Relations million reconciling of today $X.X the Flash release higher third quarter outlined revenues total was quarter, as XX% the to revenues to $X.X for increase for and the million DRAM --

On partially range compared outlook margin. gross probe the higher ] card margin lower percentage the outlook mostly QX a upside fourth result were X.X [ of gross in by as margin gross our points points the midpoint margin gross the segment, for increase than quarter a our XX.X%, of to Systems X.X versus QX midpoint above non-GAAP was offset The of the the and non-GAAP XX.X% range. higher basis, and in percentage segment

in the of excess X.X QX. quarter, XX.X% XX.X% The was lower probe and in improved to inventory Our margin fourth an less mix from by card compared expense, to due obsolete gross QX segment increase factory percentage volume. lower a partially points offset increase mainly is and and favorable utilization

segment third adjustments related quarter. Systems XX.X% FRT margin points quarter, the to gross lower transaction less close. than The QX the sale to decrease XX.X%, gross the in Our favorable during the mix XXX of the in a which mainly was inventory margin resulted basis relates and

operating higher GAAP for to by quarter X of similar compared expenses offset expenses. XX.X% Non-GAAP quarter decrease million the $XX.X of main the operating revenues the the month XX.X% nonrecurring as the and decrease I quarter QX. the expenses were compared Our of GAAP quarter, regarding expenses FRT in operating million The performance-based reasons OpEx revenues fourth The were M&A with $XX.X million $XX.X compensation or were in or versus only reason QX for relates in third third in QX. to for as mentioned million $XX.X quarter. partially fourth in fourth

million $X.X quarter from to quarter the gain for $XX.X stock-based similar million compared million GAAP of $X.X in million fourth operating third timing and of in to QX in amortization $X.X of income acquisition-related $X.X of of and sale the FRT been quarter intangibles, depreciation gain $X.X has a $XX includes for The Company noncash quarter. results. for was our FRT for due of QX million third the with expenses sale included lower million income the GAAP the grants. than from $X.X non-GAAP the compensation, operating fourth million excluded lower million QX. from than

compared income per of for or the fourth income compared with XX.X%. diluted in million for share was usual income FRT. the in quarter XX.X% rate the $X.X third versus the million non-GAAP fully operating in taxable effective is $XX.X quarter, the of share XX.X% million $X.XX GAAP as net an Non-GAAP reason fully in the previous quarter. fourth quarter and for The the increase adjustments of or was million $X.XX $XX.X The the with GAAP or third of year-end $X.X for per quarter fourth compared on tax diluted increase domestic mainly to main foreign was sale the gain million mix quarter, a due income. $XX.X changes net with

per rate for or income and was share QX. within was or XXXX per XX% communicated For to in the full non-GAAP to previously the XX%. million effective compared $X.XX tax will XX% diluted $XX.X the XX.X% net million non-GAAP diluted $X.XX be fiscal non-GAAP XX.X%, Fourth XX% $XX.X between of to in and our annual fully that quarter effective tax estimate share XXXX, fully the We XXXX. rate range similar

annual fourth $X.X million The main free change during shipments and compared were expenditures generating to expenditures. We within $X.X the collections of range in reasons timing our the This cash higher the $XX.X during the compared quarter for communicated. and XXXX to brings sheet from the million used in capital QX. to in fourth invested $X.X million, million Moving and $XX capital flow in million capital We previously to flows. fourth QX. the customers quarter quarter in cash expenditures to balance

by reach to compared time investment million CapEx the long as financial CapEx in invested amount from was XXXX of mainly million. received The sale the just target million to result I the cash completing At to due equipment as second we of required of described as is and to offset XXXX $XX stock FRT, capital and buyback $XX.X in and of first an and model. QX. by XXXX $XXX be quarter investments of expect $XX million end, approximately million majority our of decrease and million, $X.X half The million. $XXX in total compared the a lead partially in were increase Accordingly, half the $XX from facilities the between and of increase the expenditures million in $XX the with

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

$XX approved in quarter, that shares started during was XXXX, fourth X-year we plan X-year the of utilizing I the stock as buyback, $XX $XX mentioned, utilize fully program Regarding approved that million buyback the and purchased to million our May worth XXXX. new million in was October

this remain quarter QX plan. for of $XX.X As available repurchases under end, million future

As from offset a the main the reminder, of share program repurchase purpose is to dilution stock-based compensation.

non-GAAP Turning to outlook. the first quarter

million. in revenues that partially not logic mainly to impact expect Chinese first announced $X in our QX subsidiaries it we we And by of due expect card of At XXXX, to quarter, midpoint sale outlook lower close have QX. We our revenues or a revenues. and segment $XXX expected the The The offset million QX revenues, decrease is approximately the expected FRT half lower of in $X the sale than our segment, to QX. revenues plus range, expected relates in flat be expected the and of million, probe minus increase to first and is foundry results. in is the to the significant on in DRAM financial Flash of lower today Systems

compared as quarter this the minus revenues. The margin to product in a revenues points. increase mix, at in is segment and of gross margin the midpoint of decrease XX%, XXX result 'XX favorable decrease to range be First basis a expected DRAM expected the Systems mainly is or non-GAAP expected plus less gross QX

margin DRAM to lower we has non-HBM grow which gross to the revenues, also grow. first is profile revenues expected a expect in Although HBM quarter,

operating as we Investor our available $XX our diluted $X and expect annual The be Relations press or QX plus expected is on today. minus release midpoint benefits QX the is $X.XX $X.XX. expenses share QX per to A is of earnings QX of of website to the the to to issued these increase or million, compared of reconciliation in GAAP outlook fully non-GAAP as result minus our ranges, section for plus be At Non-GAAP million. outlook mainly a reset.

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

[Operator first Stifel. from line Instructions] question Chin Our of Brian comes the from

Maybe a A cost be that sheet. Shai Can half, hurdles said investor just bit even kind hurdles think implications of or the it -- maybe some said other and and first, I on I upon down no the the has in cash I few break some China transaction? know there to margins, you And that as expectations mean you terms first whatever closure in cleared mentioned need revenue also balance relates questions. to -- more? to impact, the that of are financial maybe some little but either consummate you regulatory

Sure.

So were it a the transaction details. it's it deal again, disclosed, our will the relationship the to maintain more since expect maintained P&L, the as appropriate direct multinational to we When details significant comes immaterial. I a in When closes, balance said, region. not impact with continue we to we that material to since results. concluded have you But not of financial comes with we we it customers imagine once sheet, can the the the the don't impact on make the -- disclosure

to the impact. and our agreement, distribution this have And and the material expect customers, And you new to have refer to the local grow conclusion. hope regulatory? to do want China We And Mike, business it that's we will with we China respect we as expect that continue move don't the to forward. a

Brian, where there doing significant a already. don't in divesting this what we're has are regulatory we Basically, required. is approvals believe in structured way China been what's

the focus region, control. export significant strategy channel to of the is we've no had in our with shift operational challenges licensing. given transfer, and technology a It And customer a the so technology no and some there's really

domestic our past seen to over quarters, revenue China this is and a response You've the several that. contract

can We help through distribution channel, for Grand us. those grow some bring that and are our to more the and focus business hopeful China business Junction resources domestic

intensity Okay. And been quarter, can around it's some QX? do road Do intensity your increase of was broadly, leveling operating maybe manufacturing also card stack my a die yield probe alongside That's $XX improves? more and guess and off test et wafer but quantify helpful. see at customers' you more bonding, the for cetera. And continuing I hybrid kind customers maps on what HBM test you maybe based for million $XX to million efficiency in then -- see point follow-up, DRAM contribution as you to the

Yes, I on the of timing think it's one. a question second

think a the up HBM medium curve. for are learning and I through term, with pretty yield into customers certainly XXXX significant [ writing still XXXX ]

early the we've we're I ramp. advanced so confident XX% And intensity with here of is to part of pretty that XX%. to And associated we the through as HBMX increase about the talked the into and packaging in go think test HBMX die-stacking and going hold

with we this well. as using reducing customers like ours, products new time, the anything, intensity, Over in overall as accomplish yields. their improving learning the see test yield nodes

But to as in time. different the or -- associated work space would modes it as yield with well. think yields down through HBM we're in and die intensity And in we go I increased logic expect stacking the so over test all confident pretty reduction

expect revenue. of numbers, the we approximately said XX% said, DRAM that increase the of sequentially. around the as million little the we On quarter maybe prepared bit And as remarks, $XX more to a fourth in million, in was $XX you

up QX the, So outlook. it, mid-teens in into call the

from next David [Operator from Instructions] Duley our line Steelhead. And comes Instructions] the of [Operator question

be stuff And us Does MEMS-based mentioned I that. really question going of foundry what make you more since we if memory could the remind out you in logic of the is right. question. down. and to provider? is market DRAM kind cards? my overall of you're you MEMS. And high-bandwidth that [indiscernible] high-bandwidth decline second guys I elaborate some could on the similar you benefits growth geographic the of revenue about you're in a Yes, was just lot comments percentage MEMS-based first saw that That's the think probe region memory all uses my a wondering Taiwan. I was revenue the noticed

contacts our The probe high-end take technology. I'll almost the at entirely a Japanese Yes. and them. second entire competitor DRAM in on these once, DRAM, do high XXX,XXX, speed the performance MEMS way the MEMS-based. that and first. . Us one The to and cards, have which way deliver probe only high-quality approximately wafer to market build with is only really wafer XXX,XXX way cost-effective power in test performance, the primary individual and the is the

and itself as so in talked tailwind But already a DRAM. view requirements, for the headwind we considering in don't more stringent. and with remarks I we're or as And a the MEMS adopted MEMS of HBM prepared largely adoption are about

increases value one, differentiation to competitive so high-speed like increases scaling. and also it It on thermal performance our things And the our customers.

bit. story, commented a HBM, And the segment margins card Shai of raising in little which as so adoption existing MEMS probe not a of really it's purely a but MEMS helped for our the bar the gross

compute On are you probe And the strong in the high-performance a observation, for in high-performance projects. previous of had quarter some volumes logic foundry our third -- Foundry call, with cards on delivered now. X mode of right recall those and and And foundry high customers. major our Logic a back particular, space, in very if we digestion

ties now the expectations said QX. and It inference go on drawn call through we as to also foundry digestion about the you've we correct. in previous some the So QX the is space

that as specific associated my strong think, unusually comment? Is that elaborate just prepared you with just just maybe particular demand talked comments, you place about a in in end further Or in about -- your on some could And market? follow-on, you I just saw DDRX.

said, the of middle we're in DRAM we we is the outlook Sure. going The XXXX. approach that to that guidance, part levels as our overall approached

revenue. somewhere million composed. of So the $XX DRAM that's low quarterly in And

from the do can question-and-answer the math session. You previous

associated HBM, you You which solid can do is with growth the that some math of leaves pretty memory. much on non-HBM with how

in server I and be our mostly both upturn be a first calling it's we're of is interesting a and going to point. that and cyclical, point. customers one couple new on know DRAM we an quarter. for at to some DRAM in at of PC turn beginning invest to at seeing designs clear strong we want indication designs know applications pretty customer, not mobile because It's this the concentrated pretty We're but it is

So this turn. ready in them it represents does some investments the for getting ramp when

[Operator question Instructions] from line from Krish And TD next the of our comes Sankar Cowen.

have of X I them.

kind your First percentage ] one, the [ look approaching is I peak DRAM in of if looks guidance, too [ $XX math, HBM December quarter. or of is curious, million QX levels flat; like in Mike is you we 'XX, is and Shai, I'm the revenues if a at But growth, just overall said Foundry DRAM revenue Logic and versus higher which in DDRX going be to do revenue March HBM growing as it ]. of XX%;

than why then? shouldn't still So better is gross margin gross be lower, December margin

is to segment, Systems historically forget talk We right? the down did our call And margin you in expected Systems I is as higher. did segment Systems recall, segment gross not about let's go -- that the Well, QX.

less we're margin a going to that QX. another pushes and have lower than and systems little So probes, mix gross favorable driver between that's

just so have or done year share, in Got momentum to X do we [ X. when XE versus HBMX other expect we it. of X continue and clearly curious, the had questions. I just I'm kind and next beyond? great you look quick your then Got and HBM you at get into job HBM Mike, it. a And HBM X if ]

there move we I X competitive to Krish, the really towards see same Yes. progression from HBM of X. shifts as test advantage think we complexity, us

being it's we as said look not prepared the obvious I they of die, more as that die I in strategies, component customers' clearly, just it And they're probing higher think as remarks, individual up. each is stack at test build the probing but one a ones -- stacked. they're the

higher complexity, intensity so probably HBM less move mean but yield, test to And we as probably X. higher higher also stacks mean test

the go speeds up, clock go the obviously, up. addition, densities In

the And drive a all of And so budget sure are forward fraction road continue R&D capability of in some one on from nominally complexity I that spending X initial comment I between DRAM in things regular map to the advantage it. serve was we're back think derive mix QX. HBM to those same where and good and the answered, of low can If making it's as it go your trends. good we XXs Shai DRAM our actually, and the competitive increased the that HBM is

of So why with a reasons not DRAM. associated that's seeing you're one the margin uplift

And it. Got quick clarification. a it. Got then

asked I go going is China, from is divestment. China in it The Brian ops multinationals it the to on be still think the to this directly Junction through going Grand [indiscernible]? Or Form?

FormFactor, multinationals of Yes. are No. for not the the are in Because agreement. customers region that global they operate part this distribution

you which can local be by FormFactor vast those the things revenue China our part contract But been of the managed multinationals, will historically FormFactor think majority continue continue to are need resources, not support of of we arrangement. those customers in a out. where global to way the we'll have and and distribution

question next Tom our comes And line Davidson. Instructions] D.A. from Diffely from of [Operator the

at memory segment, the about of side, flash talked look you anything seeing on designs? chips any next-generation next-generation some flash you DRAM chips, that require all, new guess, I are when you the first

because things die like derive built-in chips, of of we sizes, because DRAM. speeds, requirements Tom, as to density where is I really strong self-test not perspective, of where we're test hard think are Flash because competitive market minimal competitive and you know, pretty advantage It's from the flash revenue challenging market flash DRAM. in why that share speed advantage. or compared is a the to consequently, to really drive which our a our a and

there. from flash the have it's don't not some DRAM. of market But share of share, about significant. allow do us can designs, do given that we new some broad market the have our view the observations our statement we So you to results, kind historical in tell we but financial would We as my make see can same

an be speed flash is going inventories probably and continuing in talk differentiate trail opportunistic said pricing it terms when with of are can view, not should the that But to the capability, general is recovery, Having drive suppliers, we upturn. be think and to and I where we still high where market we and/or is customers to flash are advantage other in taking of that, that. to DRAM that we're

a you given for Okay. in over time, the there? or range up made years And your go acquisition of bit? some Or kind is of share would expect in it flash segment to of technology this this ago you couple a

Yes.

bit. I think a it's for range in this

acquired about, So We Advantest's primarily will it market it in did test now perspective, share few that talking our flash road ago or we And ago. platform, card final overall the stages with it a we probe few if Flash least DRAM remember, platform. that, map although card elements at you're years acquisition key primarily a a at a a the years customer. at customer. is you of business businesses that help from we're That qualification feeds because did an probe us

in up DRAM being at complexity engaged help flash a lower you work although acquired capability, again, we, out does for bugs So the the more level.

from of some model where from to when at that like need follow-up, going Great. that absorption? to programs were of improvement. we XXX Shai, the place? points And margin coming the Is target Or there look as you take most basis just model in target reduction XXXX a are cost overhead

adding out, have and improve so fully to absorption capacity, things. you One as to and capacity been would we go utilize this Yes, utilization. we X say volume. need up is I volume pointed

The second element is mix.

logic, higher area growth component the we from the reductions. today is come third And margin. We the model foundry to mostly to where and that an which cost from a target our are is gross has expect

have to automation like gross things production. of company, some few focusing across reach the improve on vertical margin, contribute target way a things more And costs, initiatives on efficient task these expect the We forces our and to integration, model to XX%. also

that ] you biggest would over But absorption factor? is the . Okay. say [

between of it's equally I distributed would X the say kind components.

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

the with that growth, second the DRAM your expansion revenue customer? the is Or sequential that to -- sorry, current driven business on Mike, ramp customer? XX% and lead is by

increase, customer, market also Yes. down break HBM share. is the leads When you our it HBM who and really lead driven overall the by

expect driver. So in in say but DRAM all from I prepared X the probably I HBM. subtlety, -- it's that's the manufacturers we a primary remarks did that revenue major did

the when for it's much manufacturers. some capitalize we strategic think all And engagements at we're by objective lead I about very HBM that there's think to us a that. So on our customer. QX pretty we with major make sure But driven making It's DRAM step-up, good progress growth those. key XXXX for

portion business be? of big you X, high could Once have all the the memory bandwidth how

quarterly the a I'm right double Yes, XXXX. rate a our the from Yes, I that it's forecasting is how on between idea sort customers. little out the terms quarterly for we'll stick And different counting difficult of now is going HBM the reason suppliers DRAM, to think it's question. And double that that much so in revenue a of in XXXX our could we run basis -- with good in on HBM had

you -- in if out I there's together, back the assumptions the forecast, double add there. some and counting growth the probably are all them growth think

from -- expectation back So gone our to conferences the we've and some through that start and year the of of right the see towards part call we quarterly HBM communicated I the it on you And XXXX think as expectation. we've doubling last run investor the good rate some through XXXX. the in can then And on of made that. the steps QX, was a basis where in

Okay. That's great.

as given of leading it's that, the in aggregate regarding year, about the we all March. course it And the throughout million of course go I chips market, to of business volume business, exits of coming new whether the Logic is the that design kind they huge it that not unit again? and AMD the they're the of are Foundry and are markets at some mean or and On year. throughout TSM the Intel But new year enthusiastic the rate optimistic pretty PCs smartphones, $XXX-plus run and growth chips, logical ramps manufacturers just of or

Yes.

the for with some PCs the our like part whether of associated extrapolate are the drivers customers what handsets first identified it. conveying, optimism QX volume you I high markets the the of in unit some look guidance there's of and second think Certainly, those you've key year, in kind half. at

X/X. much visibility, remember less within quarter, than have our right, times well Given that lead probe a cards

And probably to now levels That's of at combination resolved. think so and output actual visibility extend But doesn't much our the anywhere close been being at balance the and between that. direct healthier I inventories now a key sell-through. these customers

optimistic in [ think beyond And there. that markets the and beyond topic our beyond standpoint year XXXX. say these part handsets we from second a and and unit is, to So in in compare a I end half here in and should it's demand ago things close to volume were much growth would half, large -- recovery place. What when like that like the an in feel pickup I a some about there's ]. the to shape people But if in later see the I the visibility better puts industry XXXX, PCs some headlamps first of things I is capacity second production a inventory year better

slip Great. I I'll question, just can. And X if more then in

You've with timing better we few feel I any been on there potential potential be a update I that? update for with do that? some where a on think, you guess. qualification time, anyway, feel would that. better you Is working about Do large And a Any sit about Great. quarters customer of

talked GPU markets. in about us and a we not an end update some the share. huge different And this do is fabless especially in hold have large to we important given significant microprocessor where different place and share for a Obviously, but place given markets, have of you, customer don't for strategy our position, past. We their that's the significant have the Yes. leadership qualify a customers, of diversification,

as you -- some made have for We a while. know, at been we've this

we're X is can made good in is has of the one this FormFactor that. really clear have and news them. X-supplier there's We customer strategy, resourcing The that suppliers do some only a changes and how

us really to we're very to significant but for some a the I'm it's important in a least at into XXXX. setting and up and while can people So qualify there. objective groundwork now, will of confident a improve we FormFactor our key revenue position in take share execution to it's that get XXXX. That build and

from Securities. the line [Operator Instructions] Ellis Craig B. Our comes of from Riley next question

DRAM better hard Mike, there be believe more ] was So to questions, wanted to but could understand. there even nuance a I [

at XQ as ramping broadly. of you the here memory X in the which with mix question look going XE, from I the As exposure band think is we in more high first your XQ launches X look which in high-bandwidth on understandable revenue that the in early expect of latter to XXXX, expects I how everybody really System mix X, X not the X to to and generating versus XE out you a memory come would hit? given on what's quarter, commercially this, at But potentially high-bandwidth memory in much when think the and that XQ memory extent high-bandwidth on it's [ really to ], is we're

there little of on revenue is a actually bit Yes, X.

top volume. the the something don't HBMX, probe X third-generation note, guess but X/X R&D then and off early So on my head, have the shipments. cards HBMX but of most volume, is mix sprinkling of you mini in we the some a or HBMX, are X/X I like significant I XE, shipping it's as the production HBM of in step,

part too could change growing in there's chatter from we to Yes. that questions, so I that, I of And know the that on don't don't see offend But side And anything just personal on impact many intensity. card then with a that So-DIMMS [indiscernible]? computer card are the would any format moderator seeing intensity you drive probe up if probe has LPCAMM. PCs,

think don't so, I Craig.

get and think having the the integrated the that's I integration into package don't from format in we, us module. that those and I interact really then ]? die at steps a I -- into -- we changes, anticipate especially of What anticipate the downstream X of when PC unit PC course, volume level. would to cycle that don't refresh with a significant DRAM have [ a is impact. increases wafer the drive they need

wave benefit hear And would first start to everything and in on on sine an [ program track at ] question, a still year, same the large there? for you one. of to half Yes, I think then relative foundry? the the you've Logic that within share the that expect I typically, to Is you business had have historically and hold do there? second APU And Foundry a the

application Those areas high-performance we foundry drivers to be I focus customers just for space the are middle generally in be It's very interesting application business, in so. to than the revenue. move think as the the processor of XXXX. processor going important more an with of and continue I foundry lot us key big projects compute year Yes, year -- a think through although

of we but stable a R&D things top in continue a we've running element X HBM, right about, diversification invest a now; line businesses put capacity. hot DRAM sub this the and like are exactly and DRAMs in cyclicality surprising the I There why together competitive relatively strategy cycle. to surprisingly; study these and in overall we produce differentiation for can are that try to case it's remarks, weather given where But talked demand said of we the as not pretty DDRX right? being, prepared bit so different profile so

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

ask question like capital I'd deployment regarding in maybe to this a at strategic point time.

metrology the invest with had to business, that -- to now. Livermore decision to you sale of the business. I of extra you Mike, a So some I don't capacity strategic at And believe capability mean the grow Livermore kind make have not

you some use that, your thoughts certainly of at incremental discuss look best it's maybe Could about would call mean, you just I for when So liquid. your of or sheet, maybe highest portion what highly the your I excess balance cash? and

that competitive some terms a least kind of retain sitting balance. at or portion through or goes with maintain global use step your what something that optimizing words, be kind maybe countermove of of the highly In integration to balance recently forward or could a your But of equity parts a some sheet, mind liquid would your of the from of sense? in that or -- there you received investment requires competitor either vertical large does that makes expand other footprint there Are back your here profitably

environment especially returns strategic decent where to a space, M&A. the Yes. I'll some dry talk think in is we let don't to holding But we for on move. the need powder I details. still bad cash, with Shai expect think through consolidation going an We're in

in expand to be our necessarily segments, and useful And to consolidation, served have. our M&A cash a continue asset believers available market. not but very is to We inside served

it to little Shai turn So talk allocation with over a capital I'll to about priorities. that, bit

Right. Yes.

compared didn't really Mike what mentioned, our priorities as change to before. So we communicated

We focusing integration mentioned are down and about. offset and share And been -- we $XX automation. in talked still program I in although repurchase. investing quarter you we on it's million recently, X capacity, to This dilution. since We We're invest that have plan, the things repurchase share we have vertical to still that announced a started and it's like is reinvesting X-year R&D. in it.

with accumulating current So aligned that. M&A strategy. interest and cash of we do And rates to And still have X X year quarters and capital, the . right? with M&A, our is cost

through have pretty If a and steward of in been been M&A XXXX, capital. acquisition you activity in look at in we've creating Microtech XXXX, our the MicroProbe our good acquisitions, Cascade value back good acquisition historical the

And our from the question is follow-up from of David Duley a line Steelhead. next

in the you do Yes. the growth? if or I that growth for X% as market than volume Logic far range would think you case, -- for the of Foundry are XXXX and comfortable volume -- just segments. than was kind faster slower guys to that's can you unit unit curious, the with X% And IC grow as that

Yes.

for growth. specifically the as think in variance there's lot half look, we assumptions drive of to year second different I of the a

enough see activities you more we're could half think first where you because different you is I planning our more, less. think there's growth, variables could on and X% sure, and I could resourcing to forecasting where, in X% the focused see see

doesn't know, of visibility second the into extend half. most really you our And as I think

you scenario, it how second without get of is see market, there the to PCs the I that of unit high with of If especially markets year. advanced likelihood growth of the associated don't do unit bulk honestly, handset like can that some and and good double-digit the nodes half very were growth to high-volume if the and PC think the is you And a mobile. outgrow in growth Logic, have and I Foundry we

given baseline of advanced So our think that given the in I'm yet packaging, that we work outgrow I'd scenario reasonable first adoption of increase test through but scenario, half. as sure yes, we a the the as it's market, not I intensity that can adopt way the

your question all Fair And advanced Intel been on out curious wondering intensity whatnot. that point from and a and talked TSMC, their was calls. seeing with to generally sorts about packaging, final frankly. I'm just if OSATs chatter where spread is, from to that's I conference there's of more increased kind lot a One enough. -- I'm on of you're wondering you start the because certainly you've of view lot form sit, factors and

ASE's more year-over-year up CapEx focused think packaging. year, And advanced than I on is XX% this

wondering, kind see ramp just of advanced are up part to are to business? well capture starting OSAT in you packaging? market of the I'm a middle And you for so And positioned

Yes.

the probe but way probe of OSATs cards. the manufacturers card works the typically, large the So or the at OSATs, are not base have installed very often is It's the the semiconductor we themselves. foundries a market the fabless purchasers

the a there's to us. OSATs, with of not lot interaction they're so often but And purchase orders issuing

it's they're drive the and foundry if of it a at OSAT if either trend the do happens it business at that's going at us, good at just a a for those up slightly what. different to IDMs, for foundries, it -- because the going the advanced or at It's in matter model intensity us. test to no adopted higher it has customer packaging, places happens test think to I if So going advanced drive packaging the all happens intensity. if fabless And OSATs,

our next line of follow-up Krish And TD question Sankar from from Cowen. the is a

and be that category? think one. think cards, TechnoPro finally when to [ that revenues you quick market high-density customers you a ] evaluating be Mike, to expect can how the in like And looks GPU EBA will you done? share probe When if what them? MEMS-based specific the do between from post about just are It prognosticate would

Yes.

where manufacturer as But really absolute interesting sizes, as the leading MEMS adopt needed And probes. I their adopts really because MEMS die advanced the they the to packaging discontinuity move an haven't advanced it's probes think case MEMS they they technology, that's GPU to [indiscernible] an packaging, must. probes. adopt of large are

right are so primary you and our an happening Those now. us Foundry know, Logic. and opportunity, competitor And that's as for in qualifications

production XX-XX, degree supplier think -- a balance time where where be talk and in I there's customers about our it that X of typically I'd kind X/X, us now. some this either to window, -- shares customer differentiation. often Most application places of in or we right the over like an but have of expect X/X competitors as the pilot

out it XX-XX. so works quite to And never be

majority think here on from advanced start That's GPUs you're I continue to in card monolithic significant small going to But XXXX. overall part for lucrative product to a at that to I packaging. probe least their the see XXXX the a of still to on way portfolio. expect very of of not So but in legacy technologies. that silicon still course, be going is customer stay

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

at spring, at the Thanks, to call. earnings us not, everybody, if our talk some care. for next point again joining today, you Take we'll and in

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

You day. may Good now disconnect.