FORM - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen. And welcome to the FormFactor, Inc. Fourth Quarter Financial Results Conference Call. At this time, all participants are in a listen-mode. Later we will conduct a question-and-answer session and instructions will be given at that time [Operator instructions].

call recorded. this reminder, a is being As I to Jason like to conference over turn the Cohen, would now General Counsel. Sir, you may begin.

Jason Cohen

and ability are year www.sec.gov during XXXX issued today. in factors on fiscal SEC this SEC press expressed cause for and statements the release Relations important press and the call. filing the and with Information today forward-looking products, merger demand to produce securities could and and to other financial are our Today, seasonality, results business contains technologies, releases on in of GAAP the contained which on macroeconomic the most issued ended the and which you. company our future discussion are Web section assumptions to meaning risks such anticipated measures projections the based. discussing federal Today's materially Reconciliations site. the filings, the between the Web effects the within our be on upon Thank and laws. differ Microtech, the are future and unknown risk Cascade available non-GAAP SEC's GAAP for Company's uncertainties conditions, such and customer and future development financials. known some Company forward-looking of of statements results your recent available uncertainties our those subject products non-GAAP business completed by anticipated site statements is and our supplement of intended benefits statements Form with that of information of to the respect financial momentum, other to of sell FormFactor performance, results the actual XX-K Investor These Examples understanding and of from include requirements, will those P&L in and the products, at to business

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

Mike Slessor

you start by spending joining And made today. XXXX. progress Jason. reviewing for FormFactor I'd thank in us Thanks everyone a moments significant the few like to

revenue mobile of Our throughout performance, achievement served towards have to integrating successfully per further integrated we than differentiated growing leverage major worldwide probe earnings more operating earnings record, $X.XX our model a XX% performance scale customer statement, more the nanometer our all-time an and businesses financial inherent From of growing of team perspective, this great than Microtech. the base, by over technology we steps doubling the demonstrated we attained demonstrating standard GAAP in the MEMS the result generating by first And business a increased XX outstanding income share, testing FormFactor results with our produced target is diversification for our by of our adoption and per share. by and packaged diversified processer. the of Cascade highlighted and and This model. non-GAAP

our guidance quarter approximately gross were fourth exceeded but of expectations. the XXXX, midpoint of For million of margins $XXX revenue below the

systems silicon QX placing we photonics segment and determined industry points nearly manufacturers. penetration factors in per area leading the the the subsidized our pleased gain the gross disappointed that meet systems most at contributed miss, we business, points, recent see percentage at enabled lower us margin continuing percentage gross earnings operating fourth with quarter discipline guidance to the guidance to significant midpoint below advantage over share of research margins future by missed growth levels. in gained could we in In range. X margin to the we end are While and gross have to two are consortia competitive non-GAAP our system of expense XX by our emerging the Several

an development in enables strategy beyond that with some photonics Imec, the one into pure opportunities. footprint as diversification described phase next micro part silicon placements have semiconductor before These initial new growth advancing As important of of photonics represents test of to online. such we silicon areas test joining diversify tool the recently new photonics measurement, and in of in LEDs, our Imec applications published are these is and work and and example, placements that electrical play long-term was

first quarter unchanged investor the revenues we an remains from to commentary commented fourth present, half from that where decrease significantly quarter of the first XXXX. will January at of the our the Turning view provided of in conference, XXXX we

in described are At at XX situation one we demand quarter I’d customer. further nanometer As production card ramp to same with insight a largest to the our the second probe data the to customer, of year. card we very support revenue present, that that probe in like reduction due time, the times to continue nanometer into that will that XX from given the our quarter is with approximately largest now quarter. a managing monitoring indicating node half provide a this to record and begin shipments in situation our shipments delay actively that available customer indicate second were their lead data to in half this

minimize installations. impact customer well this, and equipment assets. the as for taken forecast working importance the short-term indications, to visibility we underutilized have on into clear process independents are ensure of we customer scale such closely plans recent details as them and demand to sources, as this step and of multiple to this our customer dynamic discussions, as cost using FormFactor capacity capacity and such reduce demand Based with to the changes, Given the manufacturing of

learnings the those short-term into incorporated situation. ramp were first half ramp this from and customer match our demand our capacities the last multiple from retaining customer, There the learned our balancing this reduced to major this while need XXXX, lessons back are with in We quickly. with to to approach up of flexibility we've the

largest deliveries a serving performing With intersection variety the end is of logic push-out to probe from our foundry begin packaging. with applications. strong and new our business year, the of card and solid levels the a device FormFactor exception activity advanced of design demand integrated on the key at ramp X customer, execute fan-out to be driver packaging with of continues of for nanometer The processors initial a as market we mobile in major

excitement engineering addition, an the out This industry. required density and In theme customer fables a and XG of for a node probe FormFactor’s nanometer our foundry In we for expected card ecosystem. demand growth China with robust, that card we way initial MEMS the prototype slower a is RF probe RF the and applications semiconductor for in processor probe for in paving indicators Even successfully packaging to alert activity across remain our transitioned penetrated inventory. the to important play any application opportunity, recent our handset customer changes, technology, than continues chain long-term business. future strong mobile news especially increasing that short-term and XX space, the and for these supply with logic

nodes. major is probe and DRAM slightly part node Our year, cadence the a card perform the of what to strings each continues with of well different of introductions existing manufacturers the on DRAM typically demand new design on weak seasonally business during

they new mobile supply other the players moderate server additions, for from facilities, enough As to that not capacity DRAM. you strong planned will be DRAM in shrinks heard appear either demand the recently offset various or and chain, through

market We to space probe in expect the end-market this to share continue our to leadership from allow DRAM health card benefit us condition.

to confident we the we of While revenues remain in continue XXXX, to advanced mobile year quarterly opportunities another growth data as start and about automotive we applications. line decrease that for our are realize sequential will sight be in disappointed this packaging, FormFactor

deliver financial million of our of make non-GAAP revenue In and per progress to addition, continue we $XXX model to expect earnings to share. toward target $X.XX

of best On Mike March press turn in of you our Xnd, to this orderly as be wish earlier I’ll from to announced new over for a saw that, CFO, details March the to in opportunity him FormFactor’s has during I his years his as Finally, outlook. over evolution that Mike to am all employees further Ludwig will and want in to financial effective after and underway, also provide and on to CFO. and for years. help Xnd. further shareholders, and us our last five-plus partnership I’d I like call FormFactor future. today, his Mike pleased our replacement take into the note, results seven a guidance my for release behalf search With and us in to transition a contribution FormFactor’s to CFO fourth quarter assisting thank Mike the A Mike thank for insight growth retirement leadership personal the and On I execute our

Mike Ludwig

afternoon. good and Mike you, Thank

percentage in point past with to XX%, to as points have company of eco-system. to increased part a St. the We retiring non-GAAP be diversification XX.X% privileged executing will I I Tom to transform and shaping this years. with $X.XX dedicated several and work of years to capacity and Slessor, and advantage diluted serve seven growth on by Xnd. as would you and increased results strategy. outstanding so X benefits serve worked many mentioned, FormFactor were those operating inorganic profit into Mike entity, EPS for the the elements in to XXX% profitable the also allowing of to thanks team measurement the been say March of revenue by proof demand share. As employees I Directors, taking and from test per the of community the have me CFO XXXX to the financial non-GAAP to Dennis over successfully margin our thank drivers Board the like Mike of grew of

diluted over EPS we generated flow. of of addition, per fully In cash GAAP and free $X.XX achieved $XX million share

and margin above quarter midpoint end the guidance, mix our from at fourth you guidance range. deliver the our our Mike’s control Good heard to with us guidance. cost of comments, saw release revenues below non-GAAP low of results but gross we our As operating allowed EPS press in from generated the

were million, segment revenues to the $XX.X QX. revenues XX% of Probe for of decrease compared increased fourth slightly $XXX.X the revenues quarter quarter. system FormFactor’s third X% segment from $XXX.X quarter, the down card million compared while third to million

probe from attributable our design segment, reduction of quarter XX% during positive they third decreased $XX.X to million foundry quarter. their of an the and ramp the new anticipated began of card prior as $XX.X revenues and logic and Within On Foundry applications revenues RF a foundry who and logic a was delayed our advanced a compared we record largest utilizes at leading probe quarter, total shipments XX% technology at company node, fourth quarter, while fourth increased The shipments. comprised million customer next revenue probe for card probe decline from packaging XX% edge the of more to to our the note, quarter. down digesting the decrease quarter, the were fourth the applications for third in $X.X quarter. card cards sequentially. revenues nodes, million in revenues in DRAM of a

platforms. While flash third point third system million guidance driven decrease fourth due the section demand of and can the revenues a $XX.X slight Relations segment half non-GAAP quarter strong decrease revenues quarter, of from total decline. the company principle in revenues of a to There million in and the the XX.X% XX.X% X%. as $X.X revenues positively see a increase by slightly, to available percentage for non-GAAP $X.X in from to site. a segment in sequential gross was basis, probe of of comprise was to were were was quarter. Web the results millimeter in down NAND we down causes which overall slight on for margin compared quarter table million continue our XXX The the continue of included The the by higher find quarter demand. from the million technology the revenues DRAM or XX.X% robust the quarter quarter, missing of revenues outlined fourth fourth our card XXX XX% increased quarter in or third midpoint card margins demand probe over third flash transitions increase Flash primarily items, the with for the reconciliation environment than node from GAAP of XX.X% in system influence were the GAAP datacenter environment was a fourth margin to our for revenues On the couple of million quarter. you quarter. over $X.X in the revenues, XX.X% gross gross quarter $XX.X X.X The short reconciling fourth to Investor applications.

were decrease technology our As quarter earlier, cause of emerging Mike silicon the applications. establish significant strategic photonics the one to investments mentioned in the for

were stronger thermal experience impacted sub-systems In favorable less continuing our margins of mix by negatively sold and addition, a we euro.

we these the quarter, the strategic uncertain. recognition the of revenue in the several opportunities and being was with discussed as While institutions and entered customers subsequent were placements timing

During decision to the to revenues ensure the transition revenue and to fourth quarter, not did the we lose we new recognize related accounting and take us the made revenue actions cost the allow to standard. to the

investments we the XXXX. Given our the photonics XXs the to applications, non-GAAP return of of XXs half first gross silicon in to low high the nature one-time systems to margin expect in percentage

volume the segment due revenues to probe a margin gross in lower compared to cost percentage XX.X% foundry quarter. lower points decline logic and of fourth in resulting and QX, was the Our fourth quarter, fixed X.X from non-GAAP absorption primarily less

million the to quarter, million for fourth million includes of a million Non-GAAP items. The of third reconciling quarter. or non-GAAP decline fourth were quarter. XX.X% the quarter $XX Our fourth for quarter the less GAAP $XX.X compared the third million expenses revenues, operating expenses to GAAP than were $X.X $X.X operating $X.X

the third quarter. quarter was reporting due tax credits compensation. Our in the tax expense was quarter non-GAAP compared lower operating to The fourth performance of rate lower the the XXXX effective effective X.X% non-GAAP for X% A&T based fourth due rate refundable the to fourth to in the declined quarter. The in

U.S. rate operating non-GAAP ended for approximately net was Our of million $XXX XXXX XXXX effective with tax We X.X%. fiscal losses. remaining based

per impact million for included the net on of X% while material X% the $X.XX utilize expect profitable fully based diluted $X.XX net amortization depreciation million. fully fiscal per to share for share a a of expenses income non-cash of compared per XXXX. to we a non-GAAP to $X.X non-GAAP for third million the tax tax losses. We diluted or share quarter diluted operating income not non-GAAP As all was were per fourth or effective assets, tax fully rate have fourth rate for such, effective Currently have net we net million intangible quarter. share compared our fully diluted and $X.X quarters of Company GAAP of $XX stock do the to for quarter Fourth GAAP or the in $X.XX compensation expect $X.X XXXX. million was we $XX for QX. legislation million and $X.X for income quarter $X.XX

million quarter, to our XXXX balance of and million expected within of cash The fiscal sheet. cash short million. fourth term investments quarter plans, we for bought of restricted In by at million, authorization stock In to expenditures. million in million. $XX.X on With XXXX capital from the on cash company interest $XX at quarter, the generated cash of free balance in for spending an total, $XX.X of stock principle Moving fourth higher company flow back capital exceeded cash our the The cash spent than the and $X.X free bringing the against Capital and fiscal expenditures $X.X million the for of $XX $XX.X our quarter flow comprised for fourth XXXX fiscal and proceeds $X the were payments million $XX employee annual million $XX to and million $X.X balance investments QX. short million $XX million. term restricted our million quarter end. our of ended debt $XXX.X cash

first the quarter guidance. non-GAAP to Turning

product and card continue segments. We experience broad across both based our lines to demand system and probe in markets

quarter however, on a Therefore, that revenues. demand experiencing delay XX we first from our expect currently revenues the the production largest range to customer with in Consistent As we of in expected the will the Mike discussed, a are weigh nanometer utilization in million. revenues, $XXX lower and are card factory quarter. first $XXX be reduced quarter to fourth be to than volumes million QX

customer from our fixed balance our with half lower volumes While need we in increased second to largest XXXX. the in volume manufacturing will continue cost environment, to manage the actively of we a expectation of our cost management

first range of in and currently margins gross As XX%. expect to such, be quarter the we XX%

per We $X.XX earnings diluted the expect in $X.XX to realize to share. of range fully

rates. guidance non-GAAP assumes Operator? consistent foreign the questions. QX that, let's call to open Our currency With

Operator

Thank Instructions]. [Operator you

of question Davidson. comes from Tom Our first Diffely D.A.

open. is line Your

Tom Diffely

it's First and farewell for pleasure seven Ludwig, to of Mike will all, working I'd say you been you be missed. to years, like with a

Mike Ludwig

Tom Thanks

Tom Diffely

how Now some the once at questions. NOLs, of were used in hard be? look would financial the up used then rate where and your much When tax you NOLs they are XXXX up,

Mike Ludwig

think at million $XXX so million. we We we probably expect the effective XXs the XXXX, at we’re time, million NOLs million NOLs. $XX we And in somewhere Obviously, say, XXXX. approximately expect to -- And in XXXXs, of the we we and but early will answer. year enter is tax forecast in utilize the when sense to but right think, mid studying we about have be the probably but, used I now, the $XXX Tom. we and remaining that obviously still said utilize $XX point into as started probably think, would that in So the of I in about we about we about right once it’s that non-GAAP midXXs our NOLs rate make hard

Tom Diffely

quarter? margin or you systems in quarter when Was those then the little how business in I change it the quarter? wasn’t that guidance And did the into captured business, itself, churns I pricing was the unclear. officially am so in at the run curious look low

Mike Slessor

turned quarter. were that there Tom, the were in a few opportunities

one one remarks, Mike the return like change us and of significant the system then opportunities where the recognition, get there these revenue we the But want the I the where As view was because LED Imec to for business. represents significant of in work place consortia standard. to are fundamental our micro to in these for prepared applications. with that systems in the one with, also to test development of leading Lugwid growth accelerated described in areas application penetration really emerging along we And

So emerge, but a the we we in as revenue any didn’t have Lugwid year issues view recognition, with had crossing them we as that the opportunities we revenue boundary already recognition said, shipped again Mike standards. There when accelerated were couple, jump on things them. the the that so change

Tom Diffely

VCSELs high this is like expect something markets, technology? end for you pretty that utilize where So volumes to or your

Mike Slessor

different in other like of data ones some generations end VCSEL think a pretty applications. the switches higher and going to drive datacenters modulators on of probably up rates, of I so next Yeah, to things the are that a and ones are switches These electro-optical sub-example, variety modulators. focused

Tom Diffely

And then you do finally production, give at some opportunity you to nanometer goes about talked more think X When the scale? that new node. would what actually a you

Mike Slessor

that were ramp mobile with X of we nanometer we processor advanced applications packaged integrated So highlighted fan-out major beginning a packaging. that’s the

the to If you year big ago, a not that our year a recall that little over uplift of of we as middle the major last to. been a penetrated represented one had foundries a supplier FormFactor

see XXXX. happening here the theme same in So we

Obviously, shipping we good engagement this those the timing quarter, last we perspective, From that little the will think news good ramp speak of at the in than is preparations half chain first year. bit tail a quarter units is that were last is going or overall of capacity we grow year, earlier initial some going the which earlier ramp the But this a some forecast. a has point. in year. noise track pretty in going second driven we’re speed in around to expect third front full And that bit as of recently. business are record we’re initial having reasonably ahead were the end by are there in drive a been be volume the volume the significantly that able for I and to through established the quarter. supply confident all handset to FormFactor the And of we’re have obviously even the

Operator

Duley from comes Stealhead. question next Our David of

open. now is line Your

David Duley

how increase as customers, I ramp, half? then second first remain bigger talked about nanometer you half, you've or a guess spike second in think second should much that we in the And the the wondering pushed strong again second flat quarter. indicated. QX and in your on in see about business Will is an the but XX will it largest it and out we increase guess I a I'm half, they just

Mike Slessor

the that's I customers’ is I a to first half we guess want their are One talking and those Clearly, the we nanometer two quarter, I about about for making But approximately linked. be point very upside production to demand it not get both ramp, a that given any responsive am obviously for times probe on have this, but lead downside. so across. of couple points. that comments to XX need of things cards you the make the instead clear us,

as second it means this of a said our evidenced indicate recent currently sum There the trajectory. the timing that in Now, that quarter. have in given had in around as forecast first we been we closely what triangulating we customer as in changes especially like narratives direct forecast remarks, managing total things no will in this, the light you January both started information monitoring available situation and ramp are that very from process all QX The information, move start to is that I the very early we update changes installations, the to that prepared from about. equipment we've the to But guidance. expect

standpoint, efficiency step is quarter. So those and getting cost. And quarter to reduce a consistent down us and information be our new want everyone. building be we've, half situation it's But then it from to second a is in see This with obviously, significant the approximately of given so we reiterate for that up the second levels times in second we there to the record function pieces in not lead half. can going a driven monitoring that but quarter, our again, managements a I responsive to are

a mentioned we're as the forecast business on part visibility. of here. you a of of side that fundamentally direct lot terms Tom the running is call, flip And the have So first don't

David Duley

Is I change as do events customers, take to you when there this smooth topic. is guess, on circumstances help more. these you can Can that out? far other particular else you on you're forecast the positives to question things mitigate anything or any demand a the one there you you as their operationally more contemplating that can that large bit customers

Mike Slessor

I mean, first continue Cascade action XXXX our Microtech. and obviously is to think I We and element and the made world's acquisition of that progress market continue the we another largest of take base good qualified customer of diversification as growing in the and business, in driving with drivers. towards to drive With getting that that's ourselves foundry it.

through I want short them associated with the each don't of I we and And term to organically required to and that of grow their some obviously a XX% commitments so think think to these that us with significant any demand such and of careful M&A, we businesses, is represents industry an that be our work for both customer it. But different customers that diversify impact to flexibility single a have revenues understand in ramps. the quarter. has continue the support material we're to on on very that cause profiles solution really one can

David Duley

of guys is obviously position I you DRAM us on topic. you be you but are or the just talked how different calls, just be And a tracking on how the for outside for put fabs the DRAM shelves you built a that DRAM upcoming share China up I in later was at more important then on your feel or previous And ramp. wondering, might that about side. then many for but China in memory us overall facilities facilitized you've as And maybe this in date guess highlight with China. could not --could are being place being in you

Mike Slessor

the in So major to get the here later tracking I mixed you one back on lives, all facilities. that I'll will to got up is so that The back one to get fabs, giving is and enumerator XXXX on. that I Korean of me probably impact if try we're the But one. one question our get China let a capacity you

in position China. Our

footprint It and we more supplier over So the offer to there. now. to started we off local people for a with some support supplier and have were a probe for with U.S. the operations manufacturers significant little those been of design domestic decade And repair the cards. China and moving had in

Worldwide on those but especially built And see FormFactor initial a job And in in working do the the flash DRAM has that of in so some footprint. as our China of capturing in brand, lot team taken very done advantage And we we with opportunities well. nice a team U.S. designs.

ramp it very if see it's for they down memory probe to to the still in consumable big signal to while of get the solid is, its as design initial volume. card and probe this bit the is close of a work innings each is starts. told this a inside, a and of a like but them design tie view situation ramps. position the before significant like we probably work yield is about the all But Our two that end take All that, I'd And you one, because China. fixed. early their we of into those finding year China product so initial some path going what the a volumes expect specific those shift equipment probe card from volume to new it's manufacturers; follow in as to to see a Obviously, three and yields first the puts you'll later; we're assets at card quarters think development significant companies start feel in a

Operator

at B. Ellis Craig from Riley. comes question next Our

open. is line Your

Craig Ellis

pleasure things. the Thanks appreciate on question. to Mike move Ludwig, other as help. you taking And your for and luck with been working you good It's a

Mike Ludwig

Craig, it. appreciate Thanks

Craig Ellis

fourth Just dynamics I first are in with and gross and the margin quarter want understand different make to the sure that start play quarter.

was issues for that; then correctly think are There got one, a in quarter. two, I if we margin XX% about quarter guidance that was variance, they in And I I that that, the basis and two-thirds was issues we're of your that gross that on those the systems correct; little the degree late or see relative the a that heard customer? do XXX is if was the was impacting what and which call So first issue to there about points to so, is resolve card total. seeing of issue with probe largest the

Mike Ludwig

couple I address we say business, First, of institutions with probably from majority things by let we as silicon margin made really the would the that the QX call, the photonics and talked business. cards customers of was the and some gross driven miss. both some side; that And system about not the with placements probe a on -- regarding investments And of again, me investments. that some the was really systems on it strategic actually one

probably major part systems a some driver driver that That perspective. Mike and So was the was from spent time I talking think about good that. the of major

The strengthening business would would to other still of from degree, subsystem and euro. the be impacting impact a then the things continuing some systems thermal mix product but with our be again, lesser

to first get XXXX. margin the I is forward, would what business and going about low-XXs that say systems we expect to do in a the that back half gross high-XXs of talked issues Now non-GAAP will we the

photonics point time. with applications. don't tell you mean investments at impacting us silicon time, will in we I that down see other similar any more Doesn't opportunities onetime in really we this strategic that in this somewhere what at we those or the But investments made make the were is point of So wouldn't road investments.

the at throughout look on So getting back even systems could from the depending high-XXs. back euro a when second be into we the we And move standpoint, as into see low-XXs. quarter strengthening QX we that

really interrupts think it relates our business. model as we to financial the that systems nothing So target

the a side, On foundry what things; probe logic I say card lesser the it was business. two less quarter, really business probe would and and the little degree in impacted fourth was a cards

foundry of one volume two logic. therefore always could probes; QX, -- QX, is I Therefore, are mixed, impact three in we related items were transactions largest impacts So is continue those customer. the And In volume -- items primary we've had one primarily and think items low as two that was three there the manufacturing volume those our it to impact through talked or is or and And to execution. the going mix areas respect to that will impacting. was lower the really with the factory. the about us one on other

Craig Ellis

is fair look that think it to have there I total five we items we say -- significant. as those in So at are that the its

in XQ. that model. Your predomination ramp you customer the of where there degree really then is and be in walk mentioned target target -- intercept that how some you going with the the the And think XX% will add XX just through can level? we major largest determine in us And it's that quarter which to XQ. issue XX% first Can about the be to we milestones between nanometer

Mike Ludwig

I think it really one again pieces, probably gets back to to two the is mixed.

the as increased So customer, there. I our largest think volumes

And are and secondly a logic biggest impact And up it’s how one. we volumes, favorable probably again within our the then gain more the quarter, about will that a on to that. that the forward, Michael execute help about impact think two foundry of have we course continue As business those play factory. big mix on And going we in coming every particularly that volumes margin. talked business, areas

So our very to to areas getting to we model go as those QX I model. are XX% we about to XXXX still good in think in want our financial again the And revenue the period. financial into $XXX million reiterate said, I where model, target three XXXX from Mike that, feel where very, our and in are

Craig Ellis

could very the that full great guys. are at solid and be enabled in be if Can quarter. a we then now within at DRAM steady important the more more just and logic business thoughts reports foundry in XG card looking and that of the RF an flip there probe be half XG we right very going it would for over performance topical to that then Slessor. the couple is XXXX? are the And is are and Any to be milestones company. you look about year given DRAM as business Michael seemed a handsets should talk on And first coming helpful. I just some to of Thanks

Mike Slessor

with started RF. we Let

XG activity a for themselves a the chips, speed RF protocol and really initial in stations, is the some big end I have we base as of Obviously, front we like in the as is are about the it’s investments activity it we’re the infrastructure set and test essentially think work the this set whether right material in that. they going to I the enabling not prepared high that the or excited infrastructure. really now, things of handsets mentioned R&D of in the remarks, business with handsets but XG big customers to and standards digital use, define us

a now key us of activity, enabling to both the really some customers the are handset driver be but the So working side. side of XG and going development for that lot with right infrastructure

agree it’s hit. again, XG XXXX the timing make with or we’re a to a for with that your But think us today laying really whenever work in I it’s adoption event those sure ground XXXX I us. for customers business

On think a the DRAM remains business customers. overall simplest I us healthy for for our side, is it and the characterization

like shrinks you participate to in demand in to for the difficulty obviously everyone doesn’t less the short the and of ways the that happen That too with other some As it that node chain, going you it’s virtually of really heard capacity check. who balance many side significantly appears term. in reduces demand for check doesn’t reason. And look our the roughly throw equation from DRAM in customers leave are supply

design major is other thing, slightly business, no shrink different benefiting The specific is FormFactor each DRAM be seem to now customers from, on more of release the our cycles. to getting and

emphasis to continues initial one move a for and talked of DRAM fourth releasing new major we’re the next pretty so a each be the And I smoothing XX% on more But can DRAM in with is three they bit projects the quarter revenue. there’s a shrinking business of node of see activity. all And in manufacturers at to results, XX%, even design, from where about, different little or the you the and as to that. a used of China card us timing supporting strong probe

Operator

Our from Company. Roesch question and Edgar of comes next Sidoti

open. is line Your

Edgar Roesch

my I’ll it's and add pleasure. congratulations It's Ludwig. to Mike been but And been hello. Thanks short

Mike Ludwig

Ed. Thanks

Edgar Roesch

revenues So I the correctly? for Mike first that year, I understood you believe. mentioned to full still grow trying

Mike Ludwig

Yes.

Edgar Roesch

some so is going trying And half. originally to and revenue run-rates in at revenue big QX it. the I some plug midpoint strongly to QX I'm if back be just modeled going looking understand growth than I quarterly more bounce to for Or in second year, the you're guess pretty at full if the

in You so tapped past to year out million million quarter? ship $XXX XXXX. you around or million $XXX left Could a this $XXX

Mike Ludwig

we're the overall with of math of that guidance implication for QX simple half the we’ve the then and year year. as significant through to quarters growing pretty some have the given midpoint means the back the Obviously, we going move

predicated couple I think things, a quite that's obviously. on of

automotive have The then we that of I we other essentially first data is beyond. light things unchanged those secular just pieces the are growth in guidance. talked DRAM really some about some opportunity data. And in of customer packaging other and driving the the are or applications and There reflected growth talked a forecast pretty things good time QX that is despite the in that its executing in largest about of spent also opportunities like business. like talking And data the advanced our haven't looks XXXX about demand currently us. we some are front whether

throughout biggest So the demand customer. XX our we the ramp from nanometer But variable growing year. businesses those far is the largest and view by

in to the could today. past to the math, place through in we've bring related, labor as different and do the it. out the growing gone don't labor in those We elements levels significantly direct direct that implied mostly the that on in On ability the of done how we've can to produce a It's response process we figure believe we planning volume are we by capacity have business.

Edgar Roesch

R&D, wondering you XX% just of a at to about the or speak XXXX. of just up current getting are some model, a one rate efficiency areas you're ramping for already maybe target revenue revenue the whether XX.X%, just question then you'd it know there And could any to wondering be your R&D aggressive seems future favorable unexpected I I are higher mix ASPs or that. to the it's impacting was more term investment but about dollars, versus maybe about if around long have whether identified whether R&D in it's be

you. that, any have that'll you If color on great. be Thank

Mike Ludwig

right. You're

grew industry some about the long I from we spend term enabling high did, growing some like to we have we out places we roadmaps in you’re where you pace we’ve roadmap. a on something customer long with of we where going we did fit R&D can quarter-to-quarter. Obviously, gets with to those that called as but long like year-to-year that's in that confident of of market to those fluctuations clearly and the to term. and bandwidth think with the revenue fan-out talked XX% that a guide model, add we’re XXXX business integrated we to I memory, we’re investments to to XG balancing make and -- R&D get enabling in revenue the the guided the wanted XX% RF to earlier share that list, are XX% was budget can as cost So have, as packaging keep opportunities And position going shown felt revenues past. XX% in essentially Things ability wish R&D. And the especially operating the to as level. spend not while going going view have continue that are our R&D, cost within rapidly we leadership discipline call,

Operator

and from comes Company. Instructions] Edwin Our Needham Mok question next [Operator of

line is now Your open.

Edwin Mok

high is So Are record to first level. a on read level to just to full talking what have correct? I to on you’re pretty very your about as understand want customer. to year on am my expect clear said half I you base very, exactly be referring largest second base you just quality just that you trying or question a

Mike Ludwig

expect what be said in levels said clarify hadn’t our clearly low We to and QX. customer at So it we’ve to very largest we enough. obviously

our I in though ballparks whether reaching direct to different record largest its whether $XXX second customer million the you bit. planning if was XXXX, we have, little other receive that quarter, XX% point of you levels. information of And we All from triangulate, to so approximately we back the pieces available where our want point forecast revenue the of data I half it’s quarters of them, of QX a times lead businesses that in share sure of make one years. that and that remarks why why that prepared the is been we of operating components gained to over it’s the to flexibility, agility we that past are the in couple essentially quarter. of everyone did big half are market our done all we’ve and we’ve with improve our understands we And a included this and

respond We’re to It efficient. obviously much internal able more to demand operations makes quickly. also your

the I weeks the the do long math, and are six from from if we six weeks way from third that So simple a start quarter ramp. of

reach it’s up a we’re record why can the we the POs when time clear managing demand very specific levels and we’re those fourth placed making And make sure on yet there, customer with contact ramp quarter. in and so in the it third people, being visibility that’s not keeping actively the is in comes to whether close to and situation

Edwin Mok

a just that So almost that. a capacity correctly. like do it’s obviously with putting big you mentioned profitability switch But flip hire business, you you just rate. that your a you mentioned churns how I on like that given level, your low tight have that control not very from some that drag to rate, capacity that having mean

about So forward you help to Can can you weeks to level the saw. it you just I want that that pre- to do low understand XQ in level that how go frame how that? flip we from

Mike Slessor

and didn't to. of I say realized from you that And I revenue can different producing places the learned us in positioned zero of leave have higher as some we other labor, the is It back, remarks I have a you we then to we gain it up half we and the labor our as made confident prepared needed that comment we a from did we we businesses. transfer to maybe XXXX do overall of in sum is labor pool can in set for bring direct where to labor ramp its some the relatively where quickly direct And the as of There lessons company. half lessons driven. XXXX take learned that locally we across of in the do pretty that a first if direct first have of switch, business. quickly. primarily skilled about and required And drive the flip fast both But

one you're forecast why the we’ve talked week under on Now, double capacity we have. the the and that not going about that's timeframe to of reasons based six a the utilization the hanging in information on December

front So back us where of clearly, the and quickly in and I and see act challenge one on way flexible that responsive need decisively up. be we to

Edwin Mok

flash know again. this then strong quarter was I the pretty And

might have as that’s level I NOR/NAND you prepared sustainable now? a remarks, do strength you or from and it. think far in Where does come missed mentioned As that

Mike Slessor

XX% So And was flash I to was least mentioned strong Mike from at think quarters. it relatively NAND. Ludwig recent approximately compared that

growth wide on off was encouraging very around dense density kind industry probe is not It what our that speculate some some of structures it flash admittedly in really very levels. we've a moderate But centered almost we're or to business position card. of trend this low high high talked NOR we to split even of high about XD it Whether really layer need and a strategy piece consistent the of scale in of count These these flash full that production customers where at our The with rally that before So NAND. end devices devices. technology high test becomes like at really an it that between not probably FormFactor’s DRAM where is NAND. seen NAND are point. count not, very yet MEMS layer require is

Edwin Mok

half and guys you see can throughout that through stable of or guess kind stay that then the the a going the question, for going fluctuate a quarter like to relatively this expect all around year. but with think I in year? OpEx last you you have Do do share you And this cycle you back think operating weaker the Obviously, ramp expenses my strong on of are level.

Mike Slessor

perspective, in from we that to that hard think Edwin, I place worked the at put thing have our an infrastructure is one scale.

So million, just that talked I expenses when the highly said And small is should a may one tick thing the XXXX, we've leveragable. $XX pretty million. but amount would within say entire between early tell in I we you think year. is range structure operating be similar it stayed the would $XX that I that up much we

higher fourth and the lower But for think million around million, was about think in with than maybe to as half somewhere probably that but the get 'XX $XX of than $XX be will $XX quarter I I So that. we slightly volumes much that still the and the maybe leveragable it million, in about, really talking into $XX we they'll very million higher as back XXXX, be be QX. range than slightly talked we're

Operator

Our next question comes from Patrick Ho Stifel. of

Your line is now open.

Patrick Ho

I Michael you. with best, and First Ludwig been want the of it’s wish many all, to a working years, been also it’s pleasure

Mike Ludwig

Thanks Patrick.

Patrick Ho

Slessor. Mike for First

of you terms opportunity nanometer that your XX foundry capitalized XXXX. In upon in

markets? its FormFactor as migrates translating As the much that bigger opportunities many do project more mobility a to in foundry just that opportunities lot you market. see for partner X with potentially market nanometers, be expands How partner to more that its node into a

Mike Slessor

very view be both nanometer view maybe that Because and question, nodes, or to going foundry us. far one opportunity serving application was. And that clearly mobile opportunity major it, more the as -- timing foundry packaging, about for the volumes opportunities for the more space, at what design X single and X but as starts processors in nanometer Whether integrated for the the be interesting do expanding I into clear, way nanometer. different there -- the represent the going and of that So general But us. industry in optimistic we’ll X of short-term wafer Patrick. that think entry hold packaging. broadly, node opportunity in fundamental The nanometer and our generally, we nanometer I X enabling growth then the around adopts our and think ramps the participation advanced we larger are there it’s node we’re nanometer on details big fan-out to that of become integrated processors fan-out is mobile beyond X designs the currently a are XX

Patrick Ho

the for question side DRAM going a And card follow-up my to second. probe

as lower You But to helpful node Does were next in a positively have face. any been that your to seeing seeing market that that’s there and see higher tactics? bit is healthy of given is your you generation particularly given that you margin some you the benefits, itself little speeds. also bit more increased noted that impact the pricing involved, densities, environment right industry business, challenging transition potential DRAMs complexities now? a competition by see what very do very in always we’re potentially is business. more But out that I obviously pricing the mean of there And a

Mike Slessor

couple there a is different of think to it. I pieces

our they does reasons share and and challenging, related be DRAM whether the more more to density continue speeds of strength, and you going and As move of gain technical past over up that up, related. counts business for the or years. the bit speed get noted die profitability generally, couple things requirements towards And continued one to of FormFactor’s it’s improve the we’ve why going

overall the sure, far goes, in I and they customer. you the it. more reduce to historical had speed their right test, think to as that value do is DRAM of chips we're the has pricing for higher your us at able bring FormFactor cost But I cost test benefits when theme. they think into obviously to pricing customers related to enabling that in play as for intimately strengths And wants that compensate and

Operator

remarks. turn this no Slessor now the questions to I'm would call back time. showing like I at Mike for closing further to

Mike Slessor

Thank FormFactor very for a and growth you you all joining XXXX Thanks XXXX. us to delivering all talk for dedicating today. the worldwide to much. to team continued in you especially ourselves thank for And We'll great soon.

Operator

may you participating Everyone Ladies great a does and in and thank This you day. conclude conference. program today's all have for disconnect. the gentlemen,

FormFactor (FORM) 7 Feb 182017 Q4 Earnings call transcript