FORM - Earnings call transcript Q2 2018

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Operator

Thank you and welcome everyone to the FormFactor, Second Quarter 2018 Earnings Conference Call. On today’s call are Chief Executive Officer, Mike Slessor and Chief Financial Officer, Shai Shahar.

Before we begin, Jason Cohen, the company’s General Counsel will remind you of some important information.

Jason Cohen

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

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

Mike Slessor

Thanks everyone joining Jason for and us thank today. you

position again the XXXX of tested quarter second The diversified resilience as of leader demonstrated FormFactor’s a measurement. electrical in

high by our produced expect earnings of favorable share growth good the differentiated quarter with target solid factors As revenue profitability to range. of FormFactor our many our to above in Coupled of We quarter, expense businesses. major teams, of performance and the levels product our control model financial the we comparable end third near in and the the increased quarter. of lows biased advanced operations margins continue this be Because grew second from third these towards outlook revenues high expected, with benefited driven per produced off applications. we across products, the first each executions primarily mix packaging mix delivering a end quarter, by gross

X in many recently node to As The now major of have announced one delay the our customers’ aware, customers more major our its term delays customer think card the it node that probe news profile the are events DRAM you our transitions. of and nanometer and XX-nanometer of these we DRAM now there unlikely cause a largest delay, our delaying largest been two the short node. will volatility is customers Obviously XXXX growth here. demand Y delay be compounding our in XX-nanometer is with

the term of longer short technologies. our utility this and Beyond volatility term we to demonstrate value continue products and however,

customer example, test their of require new cards as releases fleets to mature they these XX-nanometer For largest our probe on new designs. new designs node,

a these in cards. drive As as the we probe contributors through of year. probe steadily with designs to expect to the our IC a demand reinvigorated This design, specific customer new cards consumable each the new quarter we to each increase we past, strengthen and since this of sequential activity move revenue for demand XX-nanometer described are one second was

those impact as the by to In designs XY a to way similar transition ready the in demand probe that will This were originally XX nanometer a while node we're to have in planned card to migrated Foundry event shifts with and node. on also similar in for the further Logic driven ramp, business, but probe occur, demand the are is XX-nanometer delayed expected XXXX. customers term being expected XY now a are card We one capitalize DRAM see an case. back incremental the which short effect our very

XX node. new for on We nanometer one designs expect probe card demand to materialize the

capacity constrain scaling likely current to DRAM is help maintain pricing in this will and addition, continue robust supply the which difficulty bit to In growth, balance.

the industry for unpredictable, and As to high challenging performance these probe be these FormFactor’s more key and options relying in to Advance card is node on requirements. of handful viable of electrical our and continues a meet advanced density innovate to applications driver stringent packaging packaging increasingly technology one and is the business progress. transitions becoming MEMS-probe

have leadership That the As VLSI again of than we shared and devote customers value expand we performance Research’s revenue technologies, further twice in is applications competitive of direct Two FormFactor second advance multi-decade result to with this supplier suppliers our our of the capability. the you last share survey differentiated great reported in position with card leadership We advancing manufacturing card more are MEMS top our advantage. leader to a key of technology. investments enabling than provide continually which increasing in next in market plan the we largest examples refining as as inventing, significant investments and a significant similar fraction continue on enabling overall MEMS packaging evidenced the technology, R&D This reflected quarter in results. with unique probe call, made annual will developing to MEMS is as R&D using advanced our cards market supplier. probe probe our a

business fan-out and First, a applications at mobile processor will that shipped largest this products we the to levels world's comparable packaging. or shipments. customer first XXXX to integrated supports majority on of record foundry the project Logic in In with quarter X-nanometer rely our our Foundry

we We also for we broaden and important are that qualification this customers opportunity. as have designs this grow fabless now additional shipped units to work to report to and foundry pleased

growing say these dye the excited business digit we I'd levels. quarter already growth to flash stacked application structures packaging electrical the and customer card the memory of strong in largest technologies in unique or are bandwidth first Second, wafer HBM revenues high FormFactor’s to growth advanced of like mechanical requirements this match thermal revenue requires double continued HBM contributed gains and This increase. about a as about to DRAM starts volumes our words levels. DRAM from test of few probe our of to

automotive. do an same and data growth a the We for in advance as it and this not in continue as to sight of line view as opportunistic our rank packaging, we class factor FormFactor business mobile opportunities

business expansion requirements, flash multiyear of NAND is of associated probe towards count card gradual move our the demanding high devices. a complexities mostly and of layer However, densities with XD test the more indicative

the trend flash limited Given to continue market, the exposure broadband to so we gradual in delivered are our by NAND but growth encouraged relatively expect business, far. long volatility term this we’ve

the quarter systems again Engineering improving second strong Turning results the metrics. to in segment our Systems all gradually on financial Business, produced

accurate won next a system complete these that quarter of to benefits the LED that micro of but application. the challenging provides also the applications selection and of millimeter pilot and Tesla-XXX unique of addition In productivity released and important in and leading and to future will our results our it carefully stations, meet engineering in time which optical support significant probe end, complete RF the we together a customers. To of with application. install combination automated also example one which XXX businesses automation to for bring flexible this In this a are quarter XXX production engagement test of from and capabilities automotive contribution, the technologies, With and Blu-ray base probe second providing supporting a we line tester mechanical, the matched generation specially to is receiving devices. both Semi-XXX of electrical capability, power this we're financial visibility temperature growth interface, high in an developers and high applications. In our the combination the investments in our our high opportunity positive its card worldwide and initial our probing display exciting case prober, developed Tesla in and turnkey handling system advanced of unique that feedback sight we platform add power to requirements material includes

let the late achieving financial our this a rate expect remain over Shai, the next year. on target we state will me that we committed run call basis performance Before model achieve and turning to

served will node results As excited earnings With to customers. third require financial delivering I’ll insight benefit share. per from $X.XX occur, revenue Shai in hand that, issues the million our that time quarter outlook. at transition the about into current for details these FormFactor's of markets over call the quarter second continued we and growth $XXX over non-GAAP we also to we're our frame, further on provide and industry Provided resolution of our but major some leader

Shai Shahar

Thank and afternoon. good you, Mike

line cost our saw from outlook you As gross for QX margin outlook our high QX from deliver top range. level. above end Mike's high results continued coupled above press were outlook allowed the These our operating control good our to us midpoint non-GAAP of results, our And comments, the release above and of heard the our the significantly end exceeded EPS with range. of and

to segment card by revenues million $XXX.X the $XX.X second increased XX.X% increased XXXX. million of And $X.X from million the to Probe or million revenues $XX.X of quarter were for compared first system revenues QX. of segment FormFactor‘s or compared QX. million up by quarter X.X% XX.X% $XXX.X XXXX of

Within to customer attributable additional revenue expected X.X% the to of the card designs. our higher segment, first was mainly increased to and as relates probe by revenues compared $XX.X million The Logic quarter. Foundry XX increase from largest our and nanometer

XX% our the quarter revenues first which revenues the world’s second were and shipments nodes. leading-edge from company significant advanced utilizes packaging the we XX% to down foundry in second technology During Foundry for of see largest applications the quarter. total to continued Logic in quarter, in

of increased revenue total in million million strong the was QX, dollars, revenue Logic and $X.X up QX. percentage revenue XX% Foundry in mainly due revenues absolute sequentially. in the the decrease DRAM of were $XX.X to While or

were DRAM XX% the of designs increase a DRAM first million We first for XX% continue quarter. the as sustained new Flash customers slight experience to than million higher and of from revenues were in applications. our revenues total revenues in $XX.X quarter. the release center second data quarter, company mobile the demand $X.X in

of outlook quarter basis, of was on was the primarily better during second in and I issued the and product our press website the from revenue, favorable stronger in today. excellent second $X margin Investor for NAND reconciliation of technology for XD in We for demand revenues revenue account for we QX from NAND. or QX in to layer were compared outlined non-GAAP to XXXX of million applications. requirement GAAP GAAP X.X% Similar the mentioned, increase of available quarter was XX.X% first factory or in section increase first in included our Relations non-GAAP significant million Approximately the of margin Flash revenues, continue $X our quarter. second $XX.X QX, gross The execution of table a and XX.X% On mix, our X.X% the high million up the Flash items, to XXXX. the above to to test as up due see revenues, a of quarter quarter XX.X% XX.X% the million which operational reconciling our to due $XX.X cost gross range. release utilization,

card segment probe in X.X% was Our XX.X% a due to second significant the factors quarter, of mentioned to increase compared the gross margin QX before.

XX.X% segment to QX, system higher than improve quarter, Our continued margin higher was in X.X% second revenue. the and on gross slightly

As low-XXs, excluding to high-XXs, discussed the business calls, systems gross previous the potential FX. we expect the improve target margin towards to of of continue level in impact

expenses t Our quarter. $X.X were higher GAAP first for $XX.X the the quarter, second million than operating million

items. quarter XX% to reconciling employee operating performance up non-GAAP million including $XX.X expenses mainly $X.X costs, related is The increase ERP QX. or to were of compensation due the second million based and operating for included expenses compared million benefits. GAAP to higher quarter, implementation including The costs, of revenues, second $X Non-GAAP

our second the depreciated made also in We investments quarter competitive expand advantage. to R&D future some

million quarter. As of million million non-GAAP and second the expenses integration tax respectively are in beginning we U.S. with remaining and $X.X similar accordingly expenses compared the view and second XXXX. of remainder expenses Company for We quarter similar was expense quarterly QX implementation effective and non-cash and were these first QX based $X.X excluded routine, stock-based the a amortization X.X% million, the level assets, intangible for expenses. not implementation and as reminder, XXXX costs our rate X.X% integration of to levels of for operating depreciation XXXX all during $X.X $X for ERP from we million first quarter. expect $X.X approximately ERP entered of The compensation included non-GAAP the to $XXX first quarter t over for million with quarter NOLs. and the the

compared in fully to higher X%, $X.XX previously diluted share $X.XX X% we increase $X.X X% and share the utilize versus profit while percentage $X.X to per the in foreign in non-GAAP net such, from effective income jurisdictions quarter of or to rate X% communicated increase fully GAAP due QX. the tax the the second a we rate for of in in second NOL. tax net income tax are million share, U.S. U.S. effective million per to or per expect As The range quarter the diluted of our have to was

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

increase $X in million quarter, million in compared is QX Moving the our of on interest of second higher the at our $XX.X end million of in sheet $XX.X $X.X We million generated payments mainly flow QX $XX.X taking including The cash results QX, total revenue. during million and the of to QX the principal flows: to term the free the cash than on on in flow balance and free as cash prepayment. generated $XXX quarter. the quarter, to cash loan We higher significantly million spent

our end. to spending of million debt line $XX invested we $XX million, our $XX with Our capital of total by expenditures during on In annual the balance capital balance quarter $X.X million million cash QX. at exceeded plan

quarter $XXX with to favorable million. to the to by Consistent QX, QX tempered million the quarter of being volumes be and revenue factory outlook, Turning we in to QX expected the to quarter, in $XXX similar utilization range similar third revenues slightly less and third be to we comparable second to to be QX mix. expect are non-GAAP therefore product expect QX

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

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

Operator

Instructions] Ho question Patrick [Operator Our first from Stifel. Thank with comes you.

line Your open. is now

Brian Edward Chin

is end Patrick; market us Maybe Hi good QX? This questions. there, for mix though, confident ask tell letting a is us Mike; to expected calling you for in guidance to Q-on-Q. few QX relative QX question afternoon. the Can pretty is thanks Brian first vary for revenue how

Mike Slessor

Yeah, I’ll take it.

be not the So be being There customer some are even emerging not leading to interesting things the puts we and world it just our QX. engagement the different in would as as overall highest revenue characterized we businesses. we Brian just volatile was but with different do is takes different our like way overall things pretty go similar some from view way at it’s are we foundry, QX the to pretty and but mix, the market Obviously these as to customer for just line, the our we similar QX. comparable, I through product said of mix work going we and to and but company say things are the comparable level top QX move mix

Brian Edward Chin

Thank you. helpful. that's Okay,

volume watermark here to next prior production logic So moving curious, advanced water customer, into major prior point high up color you on expect prior of I'm XXXX any out be your would in or sort it you contribution XX-nanometer mark in to be of to in to the would at the relative to you XXXX? the kind here How to in can begin this you expect tape helpful? should time year, watermark high know Would relative trend provide XXXX, revenue year? other

Mike Slessor

to I activity, customers our the our Yeah, transitions to comparisons well want no some things as through you interesting way too then we the I largest know think XX-nanometer in highlight activity innovate of one future work before supporting node. incremental the I think that with, we the we far business are associated talk probe in card at about is in nice design experiencing continuing

logic customer, back we to a very growth If did I that I going combination certainly we need conditions getting repeat over those QX to there's in sustaining different few as that look XX-nanometer have or XXXX, if those from we to the believe node $XXX that QX, in can concentrated The for moving year. of again pretty moving two bit exceed which confident QX. support forecast XX-nanoeter largely little both those the issues resolved strong was customer foundry we're we one XXXX. RAM, watermarks a think if customers we’re activity, million moved with XX-nanometer to exist; larger and again. and all transition to touch continues together a with parts of But any largest DRAM with things through these again that quite increase see our we the on So and in get of our high customers, on we

Brian Edward Chin

would that; kind ramp Got up? be that’s color. you know a would maybe that in to sharp, sort experiences a you of will even it, you it be on apps sharp or kind more of onto on helpful prior curious just can’t the a but XXXX, of gradual be just gradual for And or and precise timing pick though add say based

Mike Slessor

example timeframe going tap to XX-nanometer ramps. Well, these historical I XX-nanometer in our sharp back with our that been over if up customer before trajectory, a route It follow to go patterns, some think back something pretty go reasonable typically be largest historical quickly and If historical I you XXXX. challenging they pretty from do really probably think the know the node imagine and actually as that brakes customers are don't a revenue getting revenue it’s the that's challenging so transitions look patterns. experience, our they you for intensified the when two on quarter to because trajectory at ramped to like with they’ve is we of

Brian Edward Chin

business pretty a know material you flash is? about know normalized flush drove could Kind Maybe kind and I that you level what curious, on the that of are to can it of know maybe that quarter. corner. should things there question the out if this number more you what profile incremental Okay, opportunistic one understand become marching How very we the you and characterize you do in helpful. the capitalize in business. think think you in

Mike Slessor

$XX No, end we the to be in the high opportunities really where technology really business chips, us MEMS quarter it's question, least and million, the second very great to high will it odd is at I that had. second reiterate volatile quarter it that layer thing NAND, insignificant there high serving this because is and where at do customers of accounts densities, a of do more a as fundamental driving piece because test material becoming business. was to FormFactor’s need able of there's the be these probe XD view

I XD standpoint, think flash treating profitability but opportunistic you overall know goes look were concentrations FormFactor’s think gross pretty you result if you do from high into our even as technology this things to end a applications. at we're requirements for technology, can with that of a we're I see demand these healthy and margins, heavy yes, an and compensated that as NAND being business, kind delivering MEMS the it

Brian Edward Chin

is Okay, really Thanks Mike great, helpful. so that much.

Mike Slessor

Thank Brian.

Operator

you. Thank

Craig Our with FBR. B. next comes from Riley Ellis question

is now line open. Your

Craig Ellis

question Mike, the Yeah, as you look color thank thanks the you taking all ahead. for for and

said be wanted just sales back with I flat you I to you XXX utilization, was about talking go guidance. gross but So by then issue. down about and gross basis to margins margin flat quarter-on-quarter. points would your essentially the commentary We're on

quarter suggest that’s execution be operational So the in or What margins there in similar? so prior but we the to gross intra think segment when customer material fairly about would gross and factors moving their or other interest it look of that flat it margin level, was a as quarter the variation off prior causing is dynamics. revenues utilization, stellar

Shai Shahar

mix higher we activity quarter. main DRAM strength the of and It's HBM second board quarter, Thank the which margin question saw our Logics, driver packaging, Foundry in you. segment saw both memory product across the it second the but advanced in We gross market. the the for a with in in was and under great also

biggest contributed gross piece margin. to that So higher that the the was

and we higher it Going revenue dollar be, total forecast the forward and contributed. course of to also the

of which QX, Going XX product update expect we we contribute mix XX. in less that different to favorable will mentioned the forward to QX a range

glad our QX. moving is to in be So the execution we XX a with Many were way should good things are in describe we very it. for QX. favor. XX QX as similar, in comparable

Craig Ellis

other? and Would you in more both, is credit margins it versus a systems card the expect or the decrease one the gross

Shai Shahar

at I stay to as we’re the improve levels. system expecting to continue think similar

We’re at XX.X. now

is goal high you low to know see we be – Our XX’s and at XX’s, to continue the low improvement.

at mostly be the change in a change So card’s come the and I expect weakness the it the mix. level because will from to of probe similar

Craig Ellis

and question has towards but you're form the opportunities? seeing helpful. had, in Is at still be I helpful. there go on business a market has appreciating and at per that’s XX next bit that. then more try seeing that or can looked view, at below even manufactures the where you or coming Mike as Any that Okay, volume you're year success different And color it at XX specific with would the and opportunistic the historically be XX really little form, levels

Mike Slessor

probe to test where the and effective going of get need in No densities same and electrically to cases end with way. layer really probe more and away. it’s a thing a the the to know last the it Semantically of up simple requirements smaller down dye range up. dye cost really year caused it and you of and challenging. Form smaller associated people the foundry that and cost In integrated to accurate sort and need be out the gets customers some count on applications these are really go a of MEMS in themselves pretty largest our the story fan scalability adopted some where get the Factors the densities it's as world's similar high technology cases in Craig, advancement goes probing really do at technology be HBM, for to effective that's Pads smaller; able pads us MEMS that

Craig Ellis

longer term to rate able color I year. run half and the in of to the next appreciate target helpful, get regarding last then That’s levels second the model being question,

ahead, look Form you that you you As confidence things within for that Thanks Mike. give list is so really that or just the can Factor? reach three four much path

Mike Slessor

thanks Sure, Greg.

So it that maybe little market share, I certainly to customers is associated continue look we non first get grow a but to to a $X.XX of consumables no a confident and semiconductor and opportunity described, and things packaging card really opportunities, more of need served as line-of-sight grow, three pretty uncertain opportunities and and of remarks. earnings execute we but data bridging target $XXX bit one I that particular and highlight our as our capturing there. revenue market. confidence timing significant in I good we’re few mobile and think largest you share carrying markets the in but billion I in markets, at think think of $X.X the model the Advanced that's in growth there, shown momentum prepared was as we of all all progress or think produces each without million that Brian's where demonstrated pretty ahead the can GAAP described puts that the the pretty packaging, we rely lot of need in that XX-nanometer signals one on drive last things in transitions us Advanced that on I to with pretty mean know as details where where continuing Analyst them. thought of probe that takes some we we we'd that can be and systems I through automotive packaging there. we revenue that articulated well per Day these gives The question, are clearly and that line-of-sight inside a there of that we our the them, are about In growth we see uncertainties we're the the going the are trajectory, healthy some market each leader transition on advanced we've year so momentum. market

begin know revenue move to with that confident to things to here to that going as You run DRAM the resolve those that target we're happen know exit transitions people, but XXXX themselves support those to that's financial consistent are on that need confidence a and why base, trying design need XXXX you different node and and we that changes well, to our rate things convey are we’ll indications model. that's we as to we all

Operator

you. Thank

comes Our Mok & next question with from Edwin Needham Company.

Your line is now open.

Edwin Mok

good Thanks for hearing guys, question. Hey job for my quarter. the

XX-nanometer First was far how question, largest your question of the on line the customer. as

they rough on the for think to they if that. experience hit clearly the XQ, it expect. is talk XXXX to a give XQ do companies expect and start idea shelf products that holiday that’s When I season of targeting about time prior demand ramp; the of the or ramp if the you XW, just you can

Mike Slessor

whether the the talked some rely data are But product ramp parts end timing I in be you historical of the feed all timing that XXXX season. market situation. cards ramp going I'd a if associated probe expect not of honest, be lot expect seeing so maybe support are in market to know products with assumption current be XXXX, sort would and the initial in they ramp before, with and in the on us what holiday XX-nanometer the again, late realize demand points end are in to hit XXXX. wafers, test about consistent somewhere the mid-XXXX there's going the ‘if’s’ ramp. in the to signals be to up in I to the But season. the end to with of and holiday lot a ‘if’s’ there channel different of I duration to Yeah, in on case, to of is to the that we'd there's beginning the going reliable mid-year

Edwin Mok

Okay, on. helpful

you the get the the into comp. are flash, revenue $XX.X thought we’ll moving same the of quarter, see On idea level I just revenue your of quarter? this million rough you a of

about expect coming normalize to volatile. Do in quarter? talk the You being more this you

Mike Slessor

to quarter, a expect see caveat to on, remainder which a And the the that running With turnables you that flash different half we We profile. similar of the our of QX We delivered today mix times quarter lead million be approximately significant of forecast. operating change. so do businesses. $XX in sort in in with you QX, across in the the that comparable see a as you third mix average of we’re know true, know we're sort element that's are

a Some highest DRAM, designs we of at levels so breakdown in of little customer to see saw favorable pretty guiding quarter. us expect Foundry gross and are down from XX% that's the perspective from that That similar for and flash, the a and we margin a we’re why revenues across specific not at the Logic cost bit I'd report second mix. the Systems, the markets

Edwin Mok

thanks of of Okay, you the At that. remarks designs, you to prepared on know design we've clarifying customer ship a largest right and new stack, the newer start a you mentioned cards sample number the for great, node. lot Foundry always had probe for around X-nanometer

maybe the beyond? you consolidating know to of you way think more I year a Just even think are a curious, in is us give helpful. us or share there? Can you where opportunity would is there like understand opportunity if color but of and a can stand not you kind you kind competitor just color of market about about You this terms share market know help ’XX there of in be Any there, way there. some

Mike Slessor

fabulous progressing those consistent there, driven one primarily where packaging, is customers, towards think it's the Foundry that FormFactor’s in target our I substantial again financial us would technology. Yes, need with MEMS by really advanced and customers a opportunity model the where

of and we a in here development over we as for achieved and that made we highlight view grown project. now what good we mobile think share large you for the provided qualification than I really ‘XX which progress. half wanted significant units in a processor to just we application first We've ‘XX have that more

bit. XXXX. say challenging timing branching turning into now, is material term opportunity now would business and right bit that but a and sizing that it's a We’re and out of diversifying even I for us longer the little probably size revenue past really The to little

Significant mix, to our size as significant market opportunity high for again and view that largest model. available we nodes test a advance – a target to intensity wafer migrates As state market, our advance grows, for the it to term wafer of we the We long that as customer. of opportunity sort us way and financial packages, steady large of to factors more when design that, post severed number our the on that the for technology probably we and view the it’s and an opportunity starts, but Foundry us customer of good comparable reach starts of XXXX grows. all

Edwin Mok

third that’s design the One last the in but DRAM second mentioned that guess margin on gross demand, have. of I volume other by some offset down, that I you question part the saw you quarter? DRAM Is HBM affect On quarter. coming mix

Mike Slessor

our are configurations in cost as FormFactor issues consumable and ASPs pretty through in details and our we're we to discussed real of a technology. Well, pretty takes associated with of there’s because third deploy for lots of part our again strong of the customers put the our here here. it's excited test ways probe that advantage is as the we’ve mix strong continued reminding and DRAM year through of that, important the component some continues continues specific pretty I would design adoption past so HBM like. the on a and relatively mix. structures about middle that draw be a a will technology, HBM different subtle and what to for overall look you towards card move the say design is more the customers be There quarter

Edwin Mok

great. for covering. Okay, Thanks

Operator

Thank you.

next question Tom D.A. from Diffely Davidson. comes Our with

now open. is line Your

Tom Diffely

or one [ph] non-bolter side was on category; the was Maybe question that more What balance of it the Flash the afternoon. side. good Flash? Yeah NOR

Shai Shahar

It million was $XX.XX $X NAND. out the of

Tom Diffely

It was NAND the remaining. and NOR so was

Mike Slessor

That’s correct.

Tom Diffely

because in big NOR there then, the a isn’t Was for too NOR number it? something pretty that’s

Mike Slessor

is. It

is automotive of growth NAND our end growth that goes by component both has think markets Flash business the us. well. of as obviously low little We that chunk lot that I the into but NOR We couple components part good opportunity, than part in not automotive. for a NAND, by automotive. grown sector, a grew its overall volatile probably was if significantly. of view being that up all NOR as years Flash Obviously a being driven I But of that a end very, the of back the and less automotive driven see very market

Tom Diffely

what Okay, you are trends on of seeing the curious and of the kind business the side mobile RF right now.

of point. know in you much for the are for seeing out to way additional starting players, at capacity this Are weak pretty but needs You turned obviously pick year? the years this most up

Mike Slessor

to the I'll RF RF minute state pretty characterized I probe think the you business XXXX. I card business, know business, close in about our card probe but RF as systems over a talk steady

enter we are of see lot business filter into of towards developments ’XX growth the we some of start in. dynamic some as growth deployments pretty that of some but test year-on-year among different see as a fundamental bring towards performance that unit growth and drive manufacturers, the the requirements and the We markets takes we is things essentially strong of XG, to the to share and kicks do we FormFactor interesting handset anticipating move and of pick are initial in over What as part flat, the lot we ’XX. seeing that's that being back don't year, design a some strength pretty puts up going

filter they the obviously, lot well us customers or higher develop have as the new side going the systems ends working their the of a to frequencies work forward. and and devices at On on new engineering designs and the pretty of programs, front trends test you analysis RF that's going test the XG either methodologies know exposed with those for

order the is we see year-on-year I opportunities So XG leading first the the interesting of close Tom, edge production to some think as but flat business, do probe kicks in.

Tom Diffely

single great, and the call product, you high relative is same customer volume small Okay, at end. it the for versus broadening of you about XX run is products; the What having then know large you the base the a opportunity talked the ultimately?

Mike Slessor

on So design. other things, between opportunity one wafer and wafer number of of if everything are roughly for the versus else in is starts the same, sort designs the starts all different thing right, different same, same, all that same us the the XX right, if

-- inefficiencies that bit more that thing scenario. sort more you customer specific volume know design production of in little probably are any buffers dominant. in that opportunity are But in there a in XX the Now more the there’s that will and drive other factors

Tom Diffely

Okay, expanding really ultimately? wafer was for the so just of starts opportunity base customer more that an

Mike Slessor

opportunity probe opportunity expand us inside for think X-nanometer us. can customer. of for But starts, nodes, sheer different you wafer their that More more that fundamentally driving cards to the customers, of as Yeah. edge and our more leading it XX-nanometer scale

Tom Diffely

it you next Okay. said ramp Is Great. XX-millimeter weren’t you – then finally on the until on XY side? similar node to the for view And counting year. the happen that the a DRAM

Mike Slessor

installed close the cards of a installed, that one not the quarter trail quarters. and to like weeks, equipment stay two have think to what's couple a trying sure I'm capital the equipment that been to question I data that's typically probe by disclosed I process we’re except to of significant any good obviously to very add to. last something over sort say

on manufacturer ramp to XY install quarters So see one two expect as or to starting the a up later. to us to process you see

Tom Diffely

at point it's and some are you've assume volume just, so work you this about I now? done line the Okay, talking pilot XY

Mike Slessor

the pilot for solid is large and of we're reengagement customer that pretty happened think have competitive in multiyear a the position We that’s line XY XY. one work our in more with we through this interesting things

we not aggressively, when bit it's share transitions from one because disappointed are additional to going we little some customer that XX market think XY. to So ramping be us gains for that there's a

Tom Diffely

Thanks Just time. sets up a good XXXX. your for

Mike Slessor

Thanks Tom.

Shai Shahar

Tom. Thanks

Operator

[Operator Instructions]. you. Thank

Company. from Roesch Edgar comes question next Our with Sidoti &

open. now is line Your

Edgar Roesch

up past there is timing raw The Could some there. playing quarters. that Is issues to little expensive two bit ticked Quick in in a factor a or more one that Shai. bit? inventories speak you for some the materials a

Shai Shahar

revenue of Ed. in Mostly revenue the the start and in of reason to talk quarters do we then I increase these – QX. some for go expect hi ramp quarter. We last Sure, down build And outlook need the inventory being this purchasing anticipation to about ahead couple QX, we to to things bit inventory was incomparable up. the saw third a increase levels of the in in in the little QX if

Mike Slessor

levels. Inventory

Shai Shahar

I’m in yes. Inventory the third levels Inventory, quarter. sorry down go

Edgar Roesch

stock color the really maybe and Mike stand of sort bit, we quarter. where appreciate back and seemingly a And I QX that. long sort the and and little Alright, we to that second XX-nanometer expectation had split take say that really shipping of on was fair QX the relative term what to being then last normalized just of is nice difference that. plan look If financial it reported for the you XXX could minute the that delayed a disruptor you of and your between

Mike Slessor

sure I migrating and the industry designs of XX-nanometer not I’m was certainly ramping really and as model and operating Ed, customer one the the the our node view current start question situation note. in to QX represents to but not not understand Yeah, really a entirely the what current indicative low position particular XX-nanometer we in

through the with quarter second business activity the strengthening, on we customer there's that Here XX-nanometer. pretty quarter third and in because see design robust

at we in really back the as be XX-nanometer exit as year nominally that million activity. $XX supporting quarter rate run million expect we sits just design the annual business XXX Even or a on customer, we’ll hold, with XX-nanometer that that

Edgar Roesch

of Okay, one, sort major I then lot supplier appreciate testers. been already, of questions that. – last one And asked just a of my have but

was part kind of You know in still where about mobility leveled years hoping recently few reached parallel about some and testing now some to practical I is a and out, arena. a just if speak parallelism spoke could device a for playing in RF wondering the Having limits gains you're your you for I bit where was one your business. little customers. produce

share, to would you great. any be on that that If have thoughts

Mike Slessor

any reached I high very would with the the haven't parallelism Yeah limits. parallelism reached card agree though driver natural all and applications opportunities, to continue fundamental device think value I limits are and say a flashy and there's notion that bunch exciting I very, probably end be whole know a it’s in mobile where also businesses, demand processor, specific. the more has you application those and increases probe

know them. one of RF You was

know there We this RF are working is market. filter in you the with – pause

We parallelism. try their several are to with working customers advance to

XG course with compensated pick things if cost to and we've of presumably for been improved brought level a ramp, the of higher test them So up back of that. efficiency, associated their

So one that's area.

a to in is continues other down. we're parallel so I'd is The shipping continue would more overall to cards close wafer, there's so shrinks dye to of continued as and tested expect know wafer that now smaller in like XXXX are, be and in you that to driven DRAM, dye test DRAM get testing area trend per node single highlight I to dye costs sizes that and increase so parallelism

Edgar Roesch

Thank you.

Operator

questions over Thank time. you. this Mike I'm at the back not closing showing would to now call to any further Slessor for remarks. turn I like

Mike Slessor

we'll all for or again. talk joining this throughout you our on conferences you Thanks today and summer us call. to at QX Thank earnings

Operator

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

FormFactor (FORM) 1 Aug 182018 Q2 Earnings call transcript