FORM - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the FormFactor Inc.

First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow given at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. introduce for to conference like would your today’s host Mr. I Company’s General Cohen, Counsel. Jason ahead. Sir, please go

Jason Cohen

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

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

Mike Slessor

us joining everyone, you, thank and today. for Jason, Thanks,

The set measurement. the leader benefits of demonstrated opportunity test first and quarter FormFactor’s diversified a electrical as of XXXX in

Momentum our XXXX, Foundry revenue but we were probe As and deliver advanced what their seasonally end markets, growth DRAM Logic driven advanced by of solid also These mobile in us weakest robust enabling the largest share opportunities at to quarter, packaging non-GAAP both revenues on by per engineering business, forecasted customer a continuing and in multiple our from is of applications, in lowest earnings from packaging, and at outlook. automotive anticipated, and environment. typically largest data continued capitalize in our memory quarter line-of-sight Highlights and the sequential card by are the in our to augmented top customer. applications demand demand regions levels since were in in the a driven year. systems increase our investment continued applications second in drivers

For XXXX we growth as progress for through overall, we continue to year. revenue expect and the plan

DRAM. team, further in them is focus and our environment revenue three like probe for Each depend technologies applications Our area and investment largest a the at strong continued demand production worldwide of here. and namely: recovery of of more a provide and foundry each from factors, will our packaging key customer, our largest advanced trajectory world’s on adoption card on to these details I’d major

in announced, at to has the and XX-nanometer largest recently node customer. a XXXX ramp be the caused As challenges significant this yield to continue our of node at manufacturing delay further

will However, released that they XX-nanometer continue the products new on also to be node. announced

customer to expect to initial FormFactor devices these increase products. are cards We’ve transition And provide demand Accordingly, device-specific of a the this of probe designs consumable a incremental as shipment generate to new first probe we some grow quarter designs cards and we XX-nanometer units high-volume these probe cards, for manufacturing. reminder, the require shipped expect these new from a to quarter continue lows. As new which revenues for XX-nanometer volumes second

further little a than ramp, of down increasing albeit our that sustained a activity. driven full-fledged by from XX-nanometer maintain XXXX, we and road, a lower Looking XX-nanometer will view gradually at the levels build this throughout combination business activity XX-nanometer

shipped high-density we packaging We delivered and world’s continue the through meet and situation, continues of options key packaging. shipments Advanced and very Logic projects to monitor few and record to for from in these stringent And the learnings with processor card manage leveraging applications, and driver significant fan-out dynamic in technology the be shipments requirements. our business. supplier viable this probe integrated as sustained FormFactor’s a one the major largest performance a to supporting X-nanometer customer quarterly customer. foundry, is DRAM. of electrical quarter, to a have second In FormFactor’s this four Foundry application quarter. generations advanced MEMS-probe space, And first Logic start the for Foundry actively both packaging the key we volumes to In

our generate as our and performance packaging sustainable example enables manufacturers XXXX. new these DRAM products. to balance of be contained and probe and business this beginning also in and single testing designs, second step advanced nodes HBM. customer, and migration of for concentrated expand known is multiple effectively FormFactor’s customers business Staying still footprint as and new in our investment densities test In heard significant with significant as are devices, new higher stack is to investments this we there also at a and technology advanced DRAM the supporting present, we broadly, from the for customer. designs chip important this an fabless high-bandwidth packaging of of a Although to opportunity, other important first X-nanometer die XX allows but through you’ve them This continue design revenues expect we both our release to preparations products DRAM adoption the continues shipments half strategically from on in quarter cards with to suppliers, with and of memory innovative number these This to supply.

Our tool photonics silicon engineering increasing in business investments applications. strong financial produced our results quarter, for following in quarter with placements the fourth gross first systems margins strategic

growth increasing test with we addition can with and example will the development this and technology I along probe also In X/X when website. share want upcoming in power week, capture our card photonics benefits annual these fab the from a step on devices our from well increased right ready probe part back business leading broader technologies a in cards, are provides and share scale about to along to the number this, volume ago. next-generation spent position, technologies. in the part MicroLED engagement, survey as applications, XX% components good the we billion deliver, suppliers, with business. it strategic a continues is In to growing advanced less we semiconductor value to of nearly XX% combined the display Silicon these revenue VLSI, together from electrical strategy, processes. fastest the to using market the our contribution will number our a space, have applications According is past. measurement technologies. market, years in on the of than over be of that It two and our largest the $X and three early production, to to up probe five customer FormFactor, billion our MEMS of is with published customers the the of emerging read of working financial the Earlier FormFactor, now related fabricating And with you VLSI market. required RF products. reach XG funnel, discussed development over and market take eventually the of the its this develop and of $X.X our take of key Research world’s others card Demonstrating lab to as grew again, leadership showing largest view market,

is scalability As FormFactor’s performance packaging. enable adoption I and advanced of technology earlier, mentioned industry helping of the MEMS

FormFactor years always barriers Although advantage, the there volatility in MEMS, competitive for growth and in technologies, be such our innovate secular to entry will as investment individual significant generate the with share businesses, ahead. large drive advanced will probe and required develop short-term

I’ll building our first FormFactor’s deliver to to partnership, working together over turn to of I’d quarter extensive insight million in details has $XXX $X.XX process begun and that, to semiconductor like I’m financial and help his enjoying in the improve new that Shai and introduce I’m further to provide of has to months, looking our Shai and the and financial Finally, target Financial per team forward of experience two been on industry call our to financial for leverage further the performance operational FormFactor’s to time, further our Chief outlook. With Officer, realize share. model into efficiency. operating revenue part non-GAAP welcome Shahar. for and and results earnings of Shai our

Shai Shahar

Thank you, Mike, afternoon. and good

I’m in business execute and that in a in a key in Having role for and has continue of to revenue very position confident early Mike company. our to great can excited I’ve company creation, joined test expansion. measurement met I we drive The situations industries, mentioned, and value semi strategy electrical already smart As and the and played FormFactor in growth and that FormFactor be passionate space to semi people similar leadership leadership given the and equipment our growth part the the margin family. March, potential the I’m

in with Mike’s press QX. with allowed continued margin EPS our deliver largest and midpoint our comments, you from results results high above These expectations, quarter we volume QX customer’s an to release revenue resulted first delay from range. Despite decline, our non-GAAP above – XX-nanometer its our anticipated process saw gross at the cost and decline revenues As ranges. from group outlook end compared outlook of as and the in coupled achieved us slightly in to production our operating above the slightly control, heard

the card $XX.X QX, revenues first of decrease revenue were million from XXXX million quarter is quarter decrease XX.X% to XXXX. X.X% fourth compared million, segment’s system compared QX. seasonal XX.X% segment System million Probe of $XX.X revenues decreased revenues The FormFactor’s or usual the lower of the and for down $XXX.X $X.X of to by than segment decline.

advanced Logic segment, and million The compared a Foundry customer. largest saw in anticipated of the attributable new utilizes applications increase from our revenues nodes. quarter. technology largest our the On of sequential XX% design significant card to during in more $XX.X was quarter, first probe lower to note, the we fourth a packaging leading-edge world’s decline which shipments decreased positive to Within for revenue the foundry, a

end announcements indicated soft market demand handsets. high-end Some for recent

volumes However, sequentially. X% our in of innovation first filters see DRAM in we the in Logic revenue essentially the for in $XX.X this RF seasonality XX% in quarter, quarter, from were revenues continue flat down and customers components, Foundry the and $X.X million quarter. as company consistent revenues other or with RF to total of card million XX% applications fourth down were market. were first the in revenues probe QX,

from our segment Approximately fourth half While robust into moment. down applications. in of the our revenues increase the DRAM today. the revenues now spending. results were were Systems quarter, substantially available a XXX decrease discuss mix revenues experience strong XXXX in XX.X% points slightly, increase GAAP million in segment by first compared in driven thermal probe million sequential total increased reconciling Flash the euro. center NAND DRAM gross items, XX.X% $XX.X fourth non-GAAP from was Flash slight quarter. record release outlook the a This by lower can demand Flash low, quarter Relations a for XX% a above $XX.X range. on sales Investor slight subsystems. or basis of the to positively warranty of we $X.X mostly sales, the in in was QX data included and a basis as in fourth of revenues, transitions for table due million in which up to or stronger card XXX outlined the XXXX. continued improved company of million XX.X% the station than find product our issued in and in GAAP On non-GAAP lower of I’ll offset offset a favorable million margin QX points XX.X%of the our was The revenues, margin you up of revenue first were demand, quarter. were from of XX% the basis, Systems costs, from fourth first to negative website the by QX impact was press partially $X.X the in quarter revenues and section technology quarter gross decrease to quarter a overall, primarily as slightly margins of reconciliation QX $X.X of

mentioned Our and compared QX. redeployment revenue, XX an QX quarter, on XX.X% to primarily product mix probe of in card segment the costs gross to margin warranty points favorable the labor lower due to of lower was high-demand manufacturing first basis direct increase product in above,

Our X.X% Systems segment revenue. first the compared quarter, a on QX was significant to margin improvement in gross XX.X% lower slightly of

our our quarter recall, gross resulted did was normal euro, level, stronger other approximately Systems impacted X% by you’ll fourth a returned to is QX margins We decrease hedging strategic tool FX foreign include partially P&L. the in which currency line and not reflected in in margins. exposures, our income QX placements. As negatively margin gross benefit the this our in hedged however, Systems our our activities despite from

FX potential to target We improve towards of to XXs, the including low high expect the margin XXs, impact. Systems level business continue gross

quarter, $X.X lower than quarter. were operating first fourth GAAP million Our $XX.X the the for million expenses

excluded expenses included effective level from costs, amortization by intangible ERP integration of of from the expense for for $X for implementation Company $X.X non-GAAP in and quarter, partially as including X.X% and were compared ERP expenses initial $X.X expenses two foreign million XXXX. the higher was expenses. $X.X and performance-based we quarter $X.X revenues, for first non-GAAP view NOLs. based higher items. Starting nearly rate and mainly operating And due assets, to increase the The up million Cascade of tax Microtech, of expenses a included Non-GAAP XX% quarter non-cash $XX.X tax years the the compared million the offset fourth our and as we integration QX. to expenses GAAP acquisition expect ERP remainder jurisdictions due R&D compensation. ERP implementation million similar during effective we QX, the completion approximately lower versus profit The $XXX our percentage first depreciation commitment, these routine. excluded to quarterly of for of The of the and integration is with We quarter – $X.X costs, stock-based first achieved investments implementation tax in of million operating synergies million accordingly, are not to higher U.S. operating million implementation first was for ended cost XXXX, reconciling the The or non-GAAP were XXXX compensation expenses QX million. rate U.S. quarter. X.X% of approximately remaining to

continue X% net to the we for a in $X.XX fully non-GAAP of share of to utilize we NOLs. per was while As income rate to such, compared effective per QX. have X%, share first fully our or to expect income tax diluted net GAAP diluted quarter $X.X $X.XX million

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

of $XXX.X first We and prepayment. on principles our million and loan $X.X sheet cash including Moving generated cash on term million total flows. the balance We our free quarter, the to payments $X.X the the $X to in million flow the cash of of quarter. of during spent million taking quarter, end at interest

Our cash of spending investment QX. in balance generated In increase compared of our the of $XX.X exceeded million inventory capital spent low QX and $XX to The million, we during revenue million QX million in to annual line mainly anticipation quarter-end. decrease $XX total in is with at by balance as QX QX. cash $X.X capital million revenue in our the flow on plan expenditures free the of results in $XX.X debt

the to non-GAAP outlook. quarter second turning Now

of with Foundry and our in stronger revenues from we customer. including in in Consistent quarter $XXX be continue the million. quarter second outlook, volumes mix. $XXX product experience range factory card are higher first to QX expect to than demand higher probe a utilization Therefore, Logic the to offset in largest the DRAM revenue by partially to be be second in We quarter, strong and expected markets, will memory-rich million revenue that

the margin be XX%. range As to non-GAAP such, gross quarter second currently in XX% to of we expect

the We GAAP outlook open section Operator? of Relations range issued website earning we Investor A to to available QX in call in With fully our reconciliation the today. that, share to our expect and of press to release $X.XX. $X.XX diluted questions. let’s non-GAAP realize is on our non-GAAP of per the

Operator

[Operator Needham Company. question Our line from you. of Mok Thank Instructions] first Edwin the of comes &

is go open. Your line Please ahead.

Edwin Mok

great a Hey quarter guys, congrats and on guidance. great

I And question your was how you many first if in have, second the the know First let and quarter? the customer you how largest in had can first you us in quarter XX% many customers quarter? big expect how

Mike Slessor

Yes. Thanks, Slessor. Edwin. it’s Mike

details come our the obviously, XX% we XX% customer So because in The customer, activity customers in significantly first But customers stepped in largest quarter. our DRAM, that. down heavy as of next added see the the the we was you’ll out had demand and DRAM first our will of one And of two and week, a Q perennial XX% quarter. customer.

the As through wait disclosable that line. out will how our to up customer plays of finish there’s quarter, But other as the here customers and we some up chance we’ll XX% end of second reasonable in I we quarter. move memory the sort think a that see have

Edwin Mok

I demand second about card kind quarter. happening. thesecond the still Okay, our or for the you growing half? that a couple think, not great. it like on a you you guess as supporting XX-nanometer’s pushed talked why historically, half, into sounds large for new do mentioned, probe And that’s demand they you’ve is XX-nanometer and cover How then records XX-nanometer then customer see I ramp. push progressing that a all of out guys as during predicated out But guided obviously, highest they focus products there is second

think in first demand half, the quarter? then some second give second and to kind on what the you’ve color about dynamics of the can into quarter done relative you maybe So you how

Mike Slessor

Yes.

largest the to our directionally, we I see demand building continue customers year. think throughout

As record And new a you have allow few way. a as given and addition revenue will see one have cards demand that. the and of card the demand helpful the I But drive still you people data we’ll existence designs do noted, trend that in us realistic expectation growth levels of the XX-nanometer XX-nanometer would XX-nanometer directionally push is levels from to that this node. appearance probably to and customer in is move a the QX the helpful obviously, that year activity record weeks over last design trend customer. that We the some that probe confirmed to not this not is out various points think the that seen But continue going certainly us that’s noted, probe with to at execute would on take QX. throughout and in XX-nanometer also of activity record

Edwin Mok

that Okay, great. on One expect the guys to see have is it consumer very in the like first questions. sounds the Two quarter level largest foundry, more lease well and done you in second quarter. in level

one has how year how kind that know, half, and of of [indiscernible] in you you and changed with in we as think think As look I this that year customer that of you progress go about kind that design second very have think this customer. historically, guys optioning think lead I particular How terms XX. concentrated that on beyond about do

Mike Slessor

opportunity a very Well, point I in it’s set. think, important our

driving focused both year advanced part node the that’s last on design Our single really year packaging. the the largest and integrated the has most fan-out been of foundry, and this for opportunity, first a at

MEMS wafer we’re with where this to beyond of enables half effective back the opportunities the customers node associated seeing packaging, through fan-out very do integrated of that these test. much move advanced and FormFactor’s job still really some technology design. an we They’re the single year, As

this revenues We advanced into forward some seeing integrated business significantly. of more importantly, as beyond, activity that’ll more advanced the that more nodes for in we year. initial the foundries as opportunity beyond result we’re our shifts the the like of So real design. FormFactor think think card in packaging, employs and much that a wafer fan-out, But single business things to half probe grow broadening to second mix as the we on and XXXX move

their as a MEMS the opportunity packaging, So really more the towards where key nodes advanced integrated and shift mix will shift towards us is enabler. fan-out technology FormFactor’s

Edwin Mok

through Okay, think on the expect kind business, the great. the last systems question growth year trends think you came you to in side, I right? business used that than mentioned think of call similar this think and I year? strong year? Thank about I XX% you you. we don’t the much out seasonal, how this very XQ last fourth Historically, seasonably, better And systems grew year. that grow And on expect was is quarter year, do Last typically,

Mike Slessor

growth to on little. planning year. systems again delivered us the a be are we growth We for XXXX, surprised in this business double-digit honest, The

vast I worldwide but the a customer things, in like in things broader for set its think it’s plethora with the the of serving of part MicroLED, have of whole world of we that systems continue a is leading applications, engagement of characterization. couple niche the of team CMOS a result as things opportunity customers FormFactor the photonics, the of classical broaden sort different to silicon one business like beyond them

are diversify match I planning emerging we’re closely result present that’s get double-digits business themselves development. on these And put growth continue think production. applications up opportunities opportunities some when able customers to going year. work we our these in don’t and the applications interesting pretty to a we last But for be the with So we’ll year. confident to to in to

Edwin Mok

all have. Thank That’s great. Okay, you. I

Mike Slessor

Appreciate Edwin. it. Thanks,

Operator

from Ellis of line Riley comes the question next our And you. FBR. B. Thank with Craig

Your line go ahead. Please is open

Craig Ellis

year, going volume a different? cards standpoint? new talk or a from questions in Or bit probe more they’re taking environment, there you more Mike, executing growth, with you’re Thanks I demand to start the to little that Intel, of just my aboard. the something point wanted through ramping understand need volume and making question. Mike, When welcome the is with there with volume some for that about Shai, product on better. dynamic there points deal is to XX-nanometer good job that happening

Mike Slessor

fill the XX-nanometer this the the think – sorry, to customer’s then and architectural hole side. to latter. I’m continuing roadmap, that, product node chosen more that of XX with increased of delays I Craig, in the performance, former, associated them rather there from to on transition it’s XX to In release innovate the rely the to on some get on continued new designs they’re the No,

new While and products cards. means new everyone of new new probe doing require to remind designs, that a again, designs set

And this so innovation XX-nanometer provide going some if on of case that’s pushing a for increased really us base to of design just to compared demand level XX-nanometer out.

Now But I will than because is isn’t and temper But relatively would high so are times business bit, relatively XX-nanometer XX-nanometer. be of straight enthusiasm a consumables a volume flavor yields say, it. volume this that XX-nanometer as test and is little are and one trend it the to is of trade lends they aspects XX-nanometer this concerned. node FormFactor’s it a mature as shorter far of for, helpful a a for like

Craig Ellis

or card probe the my That’s of up gets Or XX-nanometer higher similar completely understanding sometimes volume the is is would would question, XX-nanometer be and just forXX-nanometer for reason, with it card two XX-nanometer their different a versus those that which to does, leads immature technologies as XX-nanometer XX-nanometer plus-plus, of next to helpful. be, But intensity probe in point It Intel ramp it to than XX-nanometer? for XX-nanometer? intensity coming next whatever curve. whenever year

Mike Slessor

yield well. yields higher historical a intensity start, and test right? times test When are node. first Over all then kind as in dial at we’ve of true are out, probe intensity Foundry pretty it the there’s you think customers probably solve pretty that activities part tend normalize if DRAM times working to drives the to and intensity. the of as first they about and I true, and in we’ve aggressively Nodes and the to lower moderate get seen is levels, or will. probe and wafer node yield typically seen associated improvements see enhancements of of a therefore, per tend think customers on yield node we is and much our card entitlement I And card with test up that to as every Logics, normalized certainly their levels, comes transition this customers obviously And problems. back view time, a and

I and across that’s the true maybe across industry. the this, is thing different DRAM this and again, time Foundry Logic think and

so normalization think I are Law that Moore’s difficult out process so that and so getting and node drawn shrinks take longer seeing the contemplate we’re and longer. shrinks, the

example, the with how With to capacity something XX%. customers through, is hard rates each as think the to for as only the add for even it of additions DRAM, indicative like and the That’s capacity. are that growth of view still I year the going DRAM is shrink hard how it

true, industry. business, in it’s our the just not I So it’s across think and Logic’s true Foundry but

Craig Ellis

at That’s quarter. per business the And picking up very $XX helpful. just on DRAM very well right point. The has been million tracking

nanometer talked about volume as couple XXXX. manufacturers moving a more think go Xx recently output towards through they of I DRAM

the year, consistent of So you and nicely been a five as the has over the DRAM puts from to takes for quarters? just you what four last at can some frame look us performance

Mike Slessor

Yes.

exciting here continue opportunities for grow to to the said the of remains business. we the in us XXXX in DRAM As one remarks, prepared

larger still into believe we of DRAM it that Now But fits cyclical a the period. businesses, profile and FormFactor right is diversified investment in now, cyclical. we’re

as through XXXX, transitions for and we’re well for over releases. node on depend balance As for those the different are customers you design releases continue move shrinks year. we be node pretty card on, not the and a customers at in lot these about demand spend through as to talking healthy on described It our and different before, know, adding They year. see DRAM different helping we’ve planning sum But it discipline design continued of balance trying business we activities, be on DRAM and slightly on the that continuing the scenarios customers capacity. levels, different different now is to executing is these DRAM we throughout right the of view will us nice balance for capacity. which our migrate of a our continuing total pretty to cadences the and probe and But

Craig Ellis

been been view Last appreciate a the question our just the Cascade you. think for of the deal, and potentially business years for since and I Cascade strategically the how growth color. shows moving very has time thinking can Mike, deal me, was on you’re just It post-integration performance and about the all it’s a long company of onto has I and robust two in update that process other Thank that. opportunities. from integration you But with where that, inorganic is us

Mike Slessor

Sure, sure.

overall other the But in business teams and And the go addressable about we Engineering I’m allow identifying continue on talked our that in remarks serve. our shows market in we’ve VLSI probably made measurement us packaging business grow well execute inside to fairly like our I said continue continue the And reiterate, very in to we increase like like the buyer We’ve addressable us of RF taking ourselves has highlighted team to components: are And markets I two want to that But for is We broad front. will with other to through that strategy opportunities continue first, a gains leaders these that and having FormFactor the acquisition to along to prepared we the were Cascade resonant share my that some we think and we acquisition. our of process. that in markets were report the components. our is the advanced leaders that with electrical space. efficiency will increase on XXXX Systems with Cascade we the a progress business. view through the and with refocused pleased test – two markets, M&A. important So the piece be continued in to in attractive

part is M&A of future. So our

We’re as come to all while we’ve made continuing to forward. on we analysis move direction deals with you But the know, to execute and pleased and as a where take that. want we funnel focus And the together. our I’m on defining progress

Craig Ellis

Thanks, Mike.

Operator

next the [Operator Edgar & Instructions] comes Thank from Company. Roesch line Sidoti of with you. Our question

open. ahead. is Your Please line go

Edgar Roesch

your largest Just wanted to ask another question customer. about

And would Or there than off early spread QX their so been of kind in those out cards much some Would have to their architectural migration more orders of to probe if have fallen they expect of fallen gates, for right changes? hadn’t So QX? occurred? node as XX-nanometer January. what planned have this of the out business you the more

Mike Slessor

really takes continued one some can understanding and XX-nanometer innovation there. bigger a the of this but question, dynamic very fundamental the here is is that hopefully obviously Obviously, about of not me Ed, I the provide pieces. ramping XX-nanometer sure let the I’m puts principle the that between some mix insight talk situation. and And dynamic is

node in XX-nanometer at world’s largest making our with it’s packages customers think foundry moving way. a our of are the pretty a to continuing whether active choices Those to they’re I release using continue innovate, are time node X-nanometer mature the to all or and advance new on that like what’s real customers, to designs.

pretty to to honest, baselines, tough so are be establish And here.

intensity, good will earlier. a the – it to a what and be business for think a in is probe good be cards if continuing that the to drivers lower demand as pure Law very releases by with a FormFactor’s mature to off it us Moore’s helpful QX I that’s bit more customer think XX-nanometer little node, if shrink, going But us innovation device-specific innovate this the the XX-nanometer, than lower There we’ve in new of that’s consumables were innovate where if we they but to learned of discussed decide lows. grow on a well. of as to recently points design arena, are design for a the us, I releasing decides

Edgar Roesch

on be the been show have I in DRAM about still up XX-month million. XX% surprised pace. it customer like was a to appears side, to – at a which trailing seems little million, settled and that very healthy segment that tend you then $XXX at And is revenues $XXX Okay. it in that

So for do you this that maybe pace? of is build cycle or for expect think revenue a would level you this to peak on XX-month trailing that DRAM sort

Mike Slessor

kind of Well, comments. of indicated DRAM strength our we level. I as at There that rate it do think guidance relative in now couple see on right is overall. some a We comments run card probably continuing probe spending

I probe have some We’ll revenues up to a I and of spending card maybe sure, little a too going above probe are DRAM anything quarters are see card talked see that that’s that an much of demand. the be customer to overall little of, But run probe was probably and But standpoint, think, than DRAM go I a comment continue a rate request bit part from QX around from quarters level. to we’ve would product That of pretty by stronger not a We the fluctuation memory-rich at We’re not strong mix right about. the and weaker. delivery indicative card intensity bit other think DRAM that’s investments expect went spending DRAM and revenues, to timing. that and short-term to component QX little from indicative down bit. a for

Edgar Roesch

it. Got

thank you in on a clarity the situation. there for and very managing Okay, dynamic congrats

Mike Slessor

Ed. Thanks,

Operator

our And Diffely the question Tom you. next Davidson. D.A. of Thank line comes from with

Your line is go please open, ahead.

Tom Diffely

Yes, good afternoon.

Foundry had them. were business. the nice just margins high-end a on products to business in – by overshadowed really question it’s know more getting a another some profile maybe the getting the you that for year ago type producing the as you memory high-margin Is a I second concentration? of on case is and still So margin quarter, the of based

Mike Slessor

Mike again. Slessor Tom, So

on up back to QX XXXX, of full was budget product So that usually fronts. mix if an unfavorable our I

normal closer were we gross time. to very there think QX standpoint. more a So mix product I cards DRAM And some in there probably margins as high-end at about the talked the from

the remarks, our margins the the said continues X-nanometer we in pretty This some executed QX as levers were revenue this as expected. but prepared key than was as little we think we I it otherwise timing I Shai the more business, bit for Although, with well might the lumpy so fan-out XX-nanometer you package part, early where in but kind XXXX, And in contributor and expect was noted, with supplier, last higher late, in With gross have much to it in not was into obviously, pretty call, a were QX. in were a our in bit cycle under it involved on of the a there our were the revenues, year, process. a year, XXXX. to I Obviously, if earlier we’re be and probation was of this would earlier last shift the experience little than time. you we we will. commented still

Tom Diffely

Okay. a But or you from second get was business kind first a the nanometer kick from margin more didn’t of point of year, that surprised view, added margins a latter. it business, that was I this X- last of XX in nice seems pretty margin and the like of the business? quarter and And to Foundry the then year

Mike Slessor

heavy QX mix lot again, the So that One favorable was QX DRAM out. of was Logic whole factors. of the that mix, us Foundry a but helped really there XXXX in a and had bunch XXXX other

I QX. it is simplistic So business it’s is more of little isolation a there a But out view. still Logic, QX which although this our viewing maybe and and highest Foundry – bit highest a little our think too at the in probably year, spread margins, is between

Tom Diffely

Flash when you was I noticed XX% talked you or so about NAND. the that business, Okay. then And said

like are is looks card more more And kind curious So or the it NOR probe Flash a with of of from more a I is that like, or or or like XX% guess view. DRAM, that means it other point Flash.

Mike Slessor

DRAM as customers we’ve Foundry really endeavor or don’t the technology. high-end be talked opportunities general, of in about, a technology some inverse I need they situation and is need talked a to Flash Flash Most Flash MEMS for It’s of a our about pretty is FormFactor’s our is effectively almost and simple strategy to in testing proposition. Logic the relatively opportunistic. HBM test. of they simpler so much of Well, wafer

we’ve density, those, for the high And support high not look to die said about nearly the need in Having whether opportunities and business requirements towards our is NAND, last commodity like there electrical years, play more our They’re flash, small really therefore, but competing the are strategy end be demanding as opportunistic DRAM. sizes, individual it with of market. we strengths. mainstream pricing that couple what probably flash lot so NOR to do at which the for be of designs, that, not overall relatively And our the commented, margins model. are or participate a

for So we similar DRAM whether for similar our it being we it to relatively configuration, or business, NAND, provide. the a that are be the and compensated looks looks technology Flash, and where pretty low-end NOR value

Tom Diffely

I’m that what And compete against that Great. you finally, curious is segment it in homegrown there? you I from? a And of the noted that had uptick Okay. comes Japan. nice kind competitor in business how

Mike Slessor

localized of can the to most all over it for in give any example, DRAM Well, of place, to our them, And pretty China. obviously with acquisitions all – but tends think U.S. a all that. not have spreads I be hard in because now. DRAM customers. are I individual well, customers Korea I mean, the there elements be pretty but whether the you them or associated as manufacturers reason, of U.S., of footprint it’s Japan with think, global still footprint And

into share in to can clearly competitors. and market a we’re for think the competitor. associated than time long opportunities that it we that we against first from so to mentioned, shows you our continue execute I we build own. standpoint we major think market the report our VLSI continue them businesses Again, our overall a execute profit to Japanese higher and dig the win the share really had try share margin time, I and And relatively doing operating and with if well gross on as pretty profitably currently characteristics position I in DRAM that,

Tom Diffely

your Thank you time. for Okay.

Mike Slessor

Tom. Thanks,

Operator

Richard line Northland. of comes Thank you. Instructions] [Operator next Gus Our with the question from

ahead. go please open, is line Your

Gus Richard

expensive? on the packaging Yes, more thanks kind intensity my sufficient is more opportunity, Mike, for for that the the fan-out itself probe of card or taking question. probe is

Mike Slessor

Gus. to two think I it, elements there’s

new to test their intensity back were higher, at being lower, around and much whole commentary because a nodes partially there’s but the failures When there the was test commented intensity. first fan-out that in take And go so higher simple provider the ATE the to of. year you care yields much XX-nanometer both. bunch a your look is question integrated ramped because answer And ago, partially of

well. complex, in higher The higher ASPs performance they other card, to is bear because this to piece density, higher are those more tend as probe

got things working we’ve us. both So for

value packages, through for As node, that customers was test test of are content, what density, And advanced It that problem tougher compensated pay technology. fan-out. primarily value. we’re raise higher willing the it to like until people things for to enable content, these doing, does higher electrical tougher get integrated a migrate we the more MEMS to

Gus Richard

probe times, similar a because higher a question the more very for then I/O longer test And ASP test, that, high-memory higher? more Is it. speeds the difficult are cards? Got bandwidth. is And again, then

Mike Slessor

the we on it is HBM and comment chose to one, in that’s remarks. prepared why an interesting

good can and And going be of imagine over is in die. those configuration of that HBN die. pretty neighbors. being it not sure their the the as turns out tested end die stack people to they’re final Several the that all have known up to each this stack this rigorously You to good referred kill need to years make

tends standard, bit sure, they’re so And be a are more the ASPs. higher. associated that with the performance complicated test but up. quite to our think customers And higher and electrical going in I come the intensity’s configurations the higher of continue those cases, to short you’re right, speeds are for certain card but

Gus Richard

Got it.

it that for Okay, me. you. Thank was

Mike Slessor

Thank you.

Operator

turn you. this Mike further Thank the time, closing I’m And remarks. would to like showing no back for Slessor questions at to I conference and

Mike Slessor

you thank in for All We’ll quarter. talk all to another you today. joining Well, right. us

Operator

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

FormFactor (FORM) 2 May 182018 Q1 Earnings call transcript