FORM - Earnings call transcript Q2 2019

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Operator

Thanks you and welcome everyone to FormFactor’s Second Quarter 2019 Earnings Conference Call. On today’s call are Chief Executive Officer, Mike Slessor; and Chief Financial Officer, Shai Shahar. Please note that today's call is being recorded.

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

Jason Cohen

Thank you. be intended P&L of to financials. will important and the company results non-GAAP supplement the discussing results GAAP some company’s Today, your understanding of website. the company financial on the and the Reconciliations section release and non-GAAP of Relations available our press by are in other today issued Investor to GAAP information measures

to future respect laws. such forward-looking performance; statements, Today’s business discussion technologies; the conditions; for momentum; development business products; upon customer within seasonality; and and of and statements the statements macroeconomic the projections and anticipated requirements; meaning of demand our financial sell such future those rates; produce products based. Examples with which to exchange the and products assumptions contains of forward-looking future the are the ability of federal securities foreign include business

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

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

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

Mike Slessor

you, for Thank us everyone Jason, and thanks today. joining

of the outlook growth profitability year-over-year during and resulting robust at sequential delivered FormFactor range. and our quarter, cash top-end in revenue second strong the generation

validate our capital in less leadership this positive markets, volatile momentum. than Our results attractive which third outlook R&D-driven positions These continues diversified quarter further are and broadly equipment. consumables and outlook

customer & test-intensive means, transitions to and releases, by FormFactor's continued that factors strong probe and DRAM design advanced demand card Foundry and recent empowered Two driven packaging. adoption be Logic of node continue prominent performance namely,

new combination growth production of second the a LTE handset RF from cards and quarter customer XG XG During in wins refresh probe pilot we for cycles. also delivered

enabling on In and generation addition, capitalized we like applications also silicon in nanometer VCSEL steady for X photonics. Engineering exciting next Systems demand CMOS,

& in to perform and detail areas. cards Our well three largest some I'd probe on fronts specific to like provide business, Foundry multiple continues Logic

are card mentioned as electrical we increased we in probe SAW test our testing grew RF second RF as admission of of customer with for parallelism launches. best-in-class and half card First, these seeing to their initial and probe serving of cards midyear I customers make typical technology, strength XG earlier, to business their maximize the test front-ends probe demand filter delivered new from performance, of in adoption BAW are we base our to round efficient handset installed enabling providing XG Filter where use more equipment. support handset use

we Second, business X business experiencing build smaller, but are to wins quarter. the and the important a business. are design of breadth of continued design that softness on multiple major nonetheless scope we on customers. mobile project fourth expected long-term our present, is typical that wins executing foundry executing in variety XX of at out program ramping and multiple as nanometer -- is our prepare X the processor for we this applications nanometer At begin building midyear That

cards that designs Third, which both ramp design. on nanometer plan of the demand largest node, for let reputation, still chip everyone products. that is At consumable of mature publicized on a while new our remind probe is XX nanometer specific customer risk well me its generate XX with to are progressing our his new each releasing

new transition and node. XX designs from release existing the the both the And XX so we on node of benefit nanometer nanometer

of some some quarter provide background. and are strong like weak especially for to memory. growth. in for With second understood backdrop plus may be demand and XX% outlook robust the surprising capital our probe DRAM decelerating I'd two our third Turning of quarter, to revenue spending contributors a customers cards The DRAM bit well to given the

the it and drivers in to existing Founder comes down mainly no releases card probe demand, design fundamental the new & As nodes. Logic, transitions, on of

double Notably XY starts by mix nanometer XX% you've class they major underway revealed of simultaneously of the the nodes. customer from nanometer end and nodes, DRAM their our starts XZ transitions wafer As to capacity, nearly a plan a accelerating the to heard one scaling manufacturers of each over shift new back and while directly, recently its are wafer to they're to XX with XXXX.

memory architectures strong individual there's packaging stack buy differentiated HBM nodes activity existing or for this yield. architecture. Memory Bandwidth on better addition, like new FormFactor's of new three HBM and technologies In at and are now performance processes involved higher major all production to innovative ramp design High advanced to industry-wide enable DRAM in support the is manufacturers, using helping

like in year's that these business. packaging drive general the providing session, details Vision and cards, keynote are scheme in Test the and competitive SEMICON As during FormFactor's We cards. West aspects at advanced test probe both intensity test benefiting HBM past, detailed for we address of the integration probe our accelerating amplify on advantages discussed complexity specific both increased growth advanced this

slowly and to packaging for fan-out, law. chiplets continue favorable architectures alike We compensate front-end classical industry as advanced trends the like HBM, driven adopt the and to integrated Moore's expect these

applications, our customers’ and results a quarterly Engineering robust strong are millimeter experienced cycles. delivered solid product innovation of systems business. We applications across This posting for growth and our our development wide again that to in segment demand off XXX a Moving sequential quarter. semiconductor first optical early Systems variety

and financial multiple applications strategy. lab-to-fab base provides characterization for build in to with as continue novel VCSEL engage installations optoelectronic in strategic our this early improvement wins systems and of and We photonics silicon significant Paired devices of contribution, with business the systems during quarter. installed the we yield value our new solid

significant and of few discussing interest topic I'd like a it. a spend be to continues to China moments

been in under a and presence experienced revenue. at operate direct large business shipments our relatively stable multi-national have domestic of XXX customers. As well as This the overall the plus region to XX% long-tenured a of and in an that with employees local region composed both just reminder, has as FormFactor talented is of nearly team China we decade

we quarter, shipment experienced to and us strong second to our presence outlook need backlog to a not the delays differentiated the expect have local FormFactor's material to as and so In technology do our for enable the region. compete some additions, short-term we erosion entity in impact continue to due this restricted

semiconductor business is be impact it’s specific it chain what term, trade have or policies general but to supply in longer the the current will similar. unlikely unclear on Over FormFactor's

encouraged Concluding the than consumables average we broad-based diversified our visibility R&D-driven in our a our profile. remains strength returns with with outlook, but to demand of be limited continue and less by quarter,

make our We target broad-based the us model, XG. of non-GAAP that while continue growing the achieve $XXX roadmap, advantage, competitive capabilities enable to once packaging our of long-term returns to These semiconductor million, $XXX growth cash to the delivering to flow, enable areas EPS solidify drivers take stream industry. and especially growth, to of million revenue investments our and free top-line market will financial stable to and advantage a $X.XX in advanced like

you. to over Shai,

Shai Shahar

good you, Mike, and Thank afternoon.

mature Mike press came ranges and of and our ahead the high-end These quarter in EPS gross our margin saw in on second which benefits our outlook as cards diversified again results of nodes. both industry our Systems, at we release and of and our our outlook. probe of results leadership in you cyclicality, revenue new and show As spending as the in Engineering from slightly noted ramps benefit were XXXX

for million sequential quarter of revenues X.X% $X.X in QX FormFactor's the second over the increase increased QX a million XXXX were revenues $XXX.X or second XXXX. $XXX million, X.X% a quarter and from XXXX. of increase Card segment Probe X.X%

X.X% segment of first increased Systems $X.X the or million in million QX revenues from quarter. $XX.X

& quarter. Foundry million segment, to first revenue revenues the Logic of in were to Card closer Probe QX and XX% the $XX.X from in company increased X% total XX% QX, Within

quarter to $XX the revenue revenue In XX% the increase were during in our generally an to second was quarters. the quarter. XX% in this revenues million last for of highest DRAM first of QX, industry million from $X.X quarterly results, DRAM compared as weak four were total first contrast and quarterly

in $X.X quarter, were QX with in of the million opportunistic approach our in of these revenue QX down $X.X QX of revenue total $X.X million applications. million first from to lower to QX, NAND Approximately were Flash consistent than in markets. X% revenues Flash in flash from the X%

Going to lumpy. expect Flash be continue forward, we to revenues

the on the release for press revenues which $X.X XX.X% Cost quarter Investor outlined and our of was margin million, of revenues, in of margin the to reconciling section our million second table $XX.X included GAAP items, GAAP reconciliation than the basis available points we GAAP or issued of in QX. today Relations website. higher non-GAAP gross XXXX XX of of in gross XX.X%

for or utilization of mostly and product was result lower QX the quarter On gross $XX.X a better was than revenues, slightly a margin non-GAAP mix. second basis, gross and our improvement million QX a over XX.X% favorable above bit range. offset XX.X% little our higher The outlook of of factory margin by spend less

of in XX XX.X% to an XX.X% the is quarter, segments earlier. compared increase in Our increase QX. factors The margin Probe gross basis second I the points described Cards was due to

product of points first quarter. segment was by in margin basis Systems gross less the favorable XX% driven compared mix. was QX as a Our to decrease XX% The XXX

prior range. gross to As XX mentioned our segment in we low earnings releases, the margin to in high Systems expect XXs be

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

non-GAAP XX.X% of quarter quarter investments. revenues benefits, for million of operating million second or or $X.X relates to as $XX.X The compared mainly QX. of employee $XX.X to revenues, to reconciling the in R&D as as expenses of higher same operating Non-GAAP XX.X% million the GAAP well million were in items $X.X included QX. increase second The expenses

million. second $X.X million stock-based of for Company depreciation and Amortization intangible assets, stock-based compensation amortization non-cash the as the expenses and for $X.X million intangible in $X.X quarter was QX. compensation of assets for same of included

the per rate in communicated net to income quarter million non-GAAP diluted in in approximately fully estimate second of previously $X.XX was QX The line our effective net above XX.X%, for the with of for the XX% or and share, GAAP was year. tax second of XXXX for diluted $X.X XX.X% the quarter X% fully QX. or share $X.XX income million compared $X.X per GAAP

cash X% the fully As tax based remaining our of at income until a NOLs. million to U.S. is expected $XXX to pre-tax rate X% of reminder, we utilize remain

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

free flow in QX, in million the cash payroll investments free taking Moving the at and our was payments We of sheet cash the on significant cash of in the million to $XXX generated to to second end cash in and [tying flows. $XX.X quarter. $XX.X of and result collection. both] total a compared second The balance and AP quarter the flow million increase mainly quarter improved

in DSO decreased to from days days Our QX in XX XX QX.

paid at quarter quarter, million principal loan our We on term in $XX.X interest and payments balance bringing loan our during $XX.X the to million end.

exceeded balance $XX cash million, total an of increase balance Our by the million. debt $XXX

the cash. down for M&A paying of we served be continues our to deploy loan, to our using priority term While our we to positions part that intend made acquire first leadership extend strategy, important capital and markets. an

annual second expenditures as million. million of quarter our spending We $X.X invested plan in $XX million of $XX of to part the during capital XXXX capital

to the non-GAAP range we revenues the in million. be to $XXX outlook, third Turning million expect quarter of $XXX QX to

us total expected a partially mix good be QX expense non-GAAP at the margin be is control Our outlook of to for XX% of and expected in operational than favorable. gross higher product our by less revenue to range, mid-point factors to QX XX%. offset continuous lead the These in range estimate execution is to

A Non-GAAP of expected $X.XX QX non-GAAP the to share GAAP is to fully in on of earnings $X.XX. diluted our reconciliation of range for our the QX Relations outlook Investor per be is to section available

website today. and in our press issued release

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

Operator

Instructions]. [Operator you. Thank

of Craig Ellis B. first line FBR. question from comes Riley the with Our

is now line Your open.

Craig Ellis

the on a my near-term the Okay. first more and congratulations of for question. quarter. taking you in question is Mike, strong performance Thank very question Shai My

gives So, and the clear. year? aware very within as that nice is guidance of of be in in half that, we kick the the we third off quarter. any any notable of the growth back are product is should There takes sequentially But there segments

Mike Slessor

Yes, you. Craig, Thank it’s Mike.

quite look schematically product you third if think look similar to to and theme the the at the quarter. quarter, I second perspective expected mix a from we and

base, ramping, and But a customer the talked transitions we creating We prepared reasons pockets DRAM both we are in & strength, through again the incremental positive second Systems expect do in and about growth. Foundry customer new a steady Engineering remarks, in the of the to the cards lot overall, Logic different continued third undergoing Foundry DRAM growth node releasing & quarter different the expect in the some in with all and probe continue for incremental pretty quarter and they business space. partners showed applications trend Logic slightly the being designs

top noted, growth. little difference but a level So, themes of over as the for QX, sequential you not much bit QX

Craig Ellis

for you is Thank The that. more follow-up question longer-term.

you run three-part businesses through the and drill As to Logic. helpful the Foundry was different & it get

we has some on two were in the and Logic as made about Foundry year, & SAM The is relative has, RF time? of company opportunities this areas. then do to SAM how you and to opportunities talking think, expansion touched you fast couple is looking progress that that If forward areas, a at automotive be where the both the strong company packaging of of very You next would we memory. advanced those the and in at time question expansion those company positioned

Mike Slessor

Yes.

reiterating mobile model target and or advanced being our automotive. really drivers, by those data, packaging, the three RF, just we So bridge to highlighted growth driven

that target I And we up we’re there. hold packaging steady they those. short-term of and to continue think, I are I for although to well that highlights. to meet the progress But tailwind that ways are go opinion though, as in are, a our to Automotive data a making their mobile to The the term, think and favorable automotive progress, can as show continue a the our each and of markets customers have on supply served get contraction long our to at as advanced be do of bit undergoing we surprise don't really anyone business. present. to think FormFactor content continue customers automotive model increase the Longer doesn't automotive chain as complexity it's in little demand opportunity. a the

see So from advanced we I progress growth on we need short-term the on that both a think, XXXX. of bit driver. continuing RF, little the help through as the automotive good and markets We packaging go

Operator

Thank you.

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

is line open. Your now

Tom Diffely

Following last the up the the on on RF see you question, side. strength

the another the the renewal kind handsets XG, most of of designs this new by is components? mentioned XG You or of is XG driven driven of by just for of round strength cycle

Mike Slessor

we back bigger the XG out of although of refresh to continued remarks, handset prepared shifts both, So going markets, point. the would the we've of RF this I have probably are we’re been share the at that Yes, Tom, components better RF suppliers, filter -- some it's base. component characterize And inside aware supply handset the customer as Part doing build historically. there the is than have we a strength being to the among

FormFactor efficiency test of the high Some still parallelism able reuse overall technology. really their test people of solution. equipment, to by the of electrical to adopting allow our are high great and but the term the had providing on really test wins people We're improve performance these who've give structure short yields, effectiveness costs RF

little So XG, refresh some of associated we're real material But XG indicators now. a right the there. through business with exciting going the growth cycle bit that was

Tom Diffely

couple next a of years, XG that cost enter increase Okay. card to complexity to probe meaningful or in the earnest new is from in And the market? move when to XG we there a

Mike Slessor

us think that about I to pieces two the transition excited there's have XG.

steady cusp for content she driven. explosion. The that content. while going and to going this know, of no to increasing expectation and This is the both on means is as I is some that XG to goes want exciting take the us by complexity set part you be As driven we're a and

need unit. XG at look infrastructure there's XG of in on is with content that, If handset, you you the input But millimeter top handset, the content ability driven higher a got what customers drive reminder, our look those so MIMO complexity our the frequencies and because tremendous the front-end a our and about a requirements of business sort the much multiple these play XG, multiple deal all if both different over to well frequencies, beamsteering, as you've are got saying to a and deal like new of a of RF you've by and with new all increase output, big wave these really increases, in at And not -- to beamsteering increase. relatively strengths.

would increase XG we a move so And expect or we increase from XG. opportunity SAM an into more as

Tom Diffely

the chips more probe cards individual is cards of complexity the Are probe complicated? underlying more of just Or because it the themselves? Okay.

Mike Slessor

I’d going for or driven be results. to once, that more some same, testing parallelism, maybe kind are more that little the more complex these where filter next But steps, same it’ll cards of with components. the probe a the other of increase that’s short-term say are at they complex more get we much thing our

chips are cards Some complex expect be we raise has but and to of do, probe the will to we elements cadence system different the RF the beamsteering for would compensated very the test that. and

I expect So ASP it’s reasonable think increase. an to

Tom Diffely

great. Okay,

customers, multiple early working talked that customers on? is multiple clarification, foundry you're working or multiple you and market, multiple with foundry foundry I that the the mean Just fabless about designs

Mike Slessor

of It's both. elements

as of these a fabless continue the across regardless adding foundry at the foundry and So share probe with produce fabless as cards out decide customers card each to the customer. of new the presence and designers, ecosystem themselves. also foundries we share you multiple increasing they fabless our probably build our foundries, chip space at probe but the to our customer, the know, well of both and involves a fabless And of sale delivery into as

Tom Diffely

market like sounds the take It part as opportunistic marketplace? guys itself, a versus did of down weakness year-over-year. you Okay, in you great. the that's what being finally, follow-up on obviously And more of Flash products to this the just

Mike Slessor

relatively market to got share compared we've in again, small DRAM, Yes, Flash.

spending We there after in opportunistic, are continue technology, the volatility designs. a Flash associated year-over-year subsegment of compensate the In overall high opportunities concentrated and that's current on share environment obviously value, Flash our to I’d small of customers characterize But a view pretty where Flash at reduction more our revenue that But is the with we’re small us position relatively end going and lumpiness will find the where those value with our number as this Flash in few customers market. opportunities. associated being for a small weaker.

Operator

you. Thank

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

line now open. is Your

Christian Schwab

for we Thanks DRAM as Most The in trends taking would type I be to my a question them for question. continue have what year? growth only need of answered. into to XXXX, that is, have see been of you

Mike Slessor

a cards XXXX probe be growth DRAM For XXXX. over to that? year Is

Christian Schwab

Yes.

Mike Slessor

surprisingly perhaps Yes, okay. said DRAM in the this point, remarks, Well, think as is at the given strong I overall prepared backdrop. I

and diversity, limited. a our DRAM. customers, to visibility nodes, growth could drive we that is I year see we a think if pretty But and to continue packaging advanced increase transition adopt in reminder see continue design like HBM

lead average is times quarter. Our much less a than

to DRAM those a position, the robust And We've releases, so continue, customer results going innovation ourselves got ball a good have think as good is XXXX I node forward. as given market continue and And this current results. our a in foggy at in crystal to shape we're point. transitions, packaging design long little obviously

Christian Schwab

obviously believe wear I new business quickly. Can in that don't think tell what estimate more know you probe out us portion one is nature? have designs rough of we But more consumable that rapidly. cards happen your you of I a question.

Mike Slessor

actually requires mean -- wears replacement. consumable you out By it direct

real It the and relatively does small continue card. business of that's design at The which our a on to customers probe is driver that fraction our think of consumable point. changes, application. business obsoletes fact depend the segments accelerate I this essentially

we essentially one very something design being That’s bought reorder wear they're mobile out. something cards those case cases the multiple by robust, individual where cycles very life. long and are in exception wear refresh So -- to or over And to The product not do like like steeple most business the no is a are compared probe continued consumed in longer cards work. center. able to see automotive the times mobile where never hand. life data where probe In a really probably service

Operator

Thank you.

Quinn question next Our with line Bolton Needham. from comes the

Your line is now open.

Quinn Bolton

sort term or long-term I that application, forecast think to When you look of you your don't largest look at wanted DRAM model. much have longer I growth customer your term. start the with model, guys from at the yet near we from

I high largest its end customer the range. near of near back of was again, end think DRAM range, higher historical the historical the your

bigger And got long-term thought ago? be so whether a that the might have plan parts business And follow to to ups? actually then I'm wondering XX you contributors of those of two and I've couple could six months

Mike Slessor

underlying Okay. our strength think drivers. in nanometer And short-term some do to be from something XX the we I want some there's XX think model depend on customer expectation transitory. I a that growth in XX correctly. We're characterized that Yes, Certainly the components, on there. there. secular releases and to design XX, goes to from be the and historical of rate if want the not there's I long-term there that's roadmap expecting our those you we although transitions may as nanometer overlap know I'd some largest annual assumptions I may to don't persistent but both stabilizes set the probably on as think ramp most theme nanometer run upside million to see But in that $XXX XX of remaining

sensitive. content we with for test cost think DRAM DRAM very obviously associated Customers I are applications us, in HBM. like increasing historically do see

data to that be could reasons longer really at long a mobile back there packaging, term. look said And term to so that right, driver. continue of there growth test believe it drivers get always If a we bit Having are be model hard working to the that that, automotive advanced intensity down. the and are over

think places. I from or average annual expect But sort DRAM run from of too may acceleration given the any period, coming XXX towards we different fundamental in don't our growth we customer. sense, in rate so largest some much And some see

Quinn Bolton

you business. And then about foundry the talked

that there. mentioned then demand the Sort stated their here for of and One, I seeing they're [KSMC] also, some design additional And recently nanometer two good you're if X nodes year better X support flow building of for sort on like application? you you X out that Wondering question. end. that incremental near the And term share pretty questions expected Do X the the capacity from has than seeing any demand. in to that of you've back to nanometre? think nanometer sort got market through near nanometer demand feel initial X nanometer

Mike Slessor

Yes, X maybe question the nanometer with dealing first.

We about really sort processor, their the mobile winning X wafer and have leading of beyond major designs talked additional application X edge this starts. customer nanometer at dominates just

leading of flow So that some seeing we -- of flow through indicators have some that of through.

to that think the project. major business be driven continues seasonal around mobile pretty and I processor application

with capped in But supporting expect part We're obviously point. like preparations X a XX% we results of increase. position again, another show I processor We in share on have reasonable those have think that of in as customer customer. quarter. in associated share fourth the to to it, XXXX somewhere and at we X we the feel to aggressively, continued XX X to view compete strong nanometer continue the our market As our sometime to like addressable share execute look that this that around the ... we nanometer and opportunities position going served has to begin probably ramp forward and nanometer we've for the that got Certainly to of

Operator

[Operator you. Thank instructions].

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

Your line is open. now

Brian Chin

DRAM, down probe cards driving seeing resilience by a pleasantly relative DRAM? outlining do put your this. more DRAM really share are behavioural down I finger out, even of market in surprised had gaining this midst nice cycle you to guess standpoint, sales, are your more I job why even and guess point if to also guess at aggressive active historical the strength first just think guess, do the concur there a pricing you the behavior? are margin, and from you a and in on to any what's you tag the staying I customers you're think along you to the little did in in on you cycle here I

Mike Slessor

imagine, internal might one of discussion internal you topic a and as And that's debate.

think although gone significantly, prices and the key is from profitable. market, behaviour there's their a differences our customers point prices I in DRAM down the one historical to stock or their historical the of piece customers’ this prices market still conditions reasonably have at

than the state so new was designs like still to worse they're in cut maybe and tried so kinds of invest are continuing in And where new and cut on really funding, previous back HBM, differentiation everything, architectures in the things the competitive to downturns much is entire was it off, because today. they profitability

they including of DRAM, end lot been not But customers. winter be still the that spring. things profitable, to in we continue It's that believe invest hopeful bottom-in from last so set we earnings certainly think more turning We might has like Obviously, look a the autumn the I fundamental that's for markets. at do really they're the of reason it's trajectory that with a will like corner. of interest and is past. in our the late We're calls it the

Brian Chin

a to also I and the then various of diversity fulfil not was thinking trying end and kind robust just about will, well. as offering on a you seasonality of standpoint, from market will if and of they’re optimize. expenses, are but even how pretty markets kind Wondering just markets. the one Also two, levels the thinking then help you X -- of It’s talk slackened key three, curious beyond sort another Do did going of little DRAM, process bit, do one seeing offsetting a XQ, two you the a up one to in to think was ramp. probe you little removal factors, maybe think bit, kind you and If QX? to that XQ they're of say sort card we're nanometer stay business. about visibility, those one it the

Mike Slessor

we've done, in it you consumables different our what you've the to the R&D-driven not releasing stable can stream period, and time or these achieve. growth addressing magnitudes of that driven whether would opportunities roadmap acquisitions the one and strategy, fundamental of all products, exactly so cornerstones address we're and that go given is touched spend of innovation on new revenue customers got we've organic it new you exactly. having and a in trying your fund acquiring the Maybe of But go relatively any be to

example you our the bit associated is slack at to up one into this a taking with where step example us businesses, allowing and of a another the -- good could perhaps your visibility taking one continue major have of fourth But lot we the one So invest. offsets don't point. to a have of quarter back, your these

I think direction will strategy our magic the FormFactor. of continue that's and drive to the to-date,

Brian Chin

just to longer this span question, bit a term. out, last One little

to alluded think sales incremental $XX for $XXX again from several to packaging. you I embedded years million Yes, million revenue advanced from now. target You your it around

but am over You what of contemplated horizon? TAM because packaging guys that pretty curious two year say extent seem to that activity how I and a augments that. against to chiplet this or be tracking well much TAM three

Mike Slessor

the see third one two model applications advanced I was DRAM there first and about our really quarter and certainly our when packaging, HBM line talked you that in that put were manifests we had outlook. we and in of results think sighting, Yes, together in the quarter second

at our piece share fan-out is integrated was other partially foundry. gains leading responsible which world The for

opportunity. we come have notably from the some to and to those consider things them chiplets the that think $XX probably now to think I customer, talked the largest our the of term longer over floor, be of about additive I million other some

same Now timeframe. that’s the over probably not additive

I when packaging take has long-term the maybe of but into think advance longer legs thought the model So, much $XXX turn you can we and $XXX million together. million put than we the originally got it

Operator

Thank you.

Our next Northland. Richard the question of comes line from Gus with

is Your line now open.

Gus Richard

Thanks for question. taking the

Just a and which about follow-on or integrated drove those the the relative advanced the quarter, could in the you HBM on packaging current chiplets, in of strength was strength which quarter between fan-out talk strongest?

Mike Slessor

Yes.

and been a above have two HBM other it So, would of couple for reasons. shoulder head the

about talked their manufacturers all each part the major we've all, said First innovation significant prepared them of we’ve now production -- as -- at HBM in of really roadmap. significant about in volume talked three of remarks, and

is tons not to is but our and material away significant there obviously results. is volume and it for So, it material

think least perspective. a at but Integrated secular is mostly wafer fan-out, still continue growth pretty lumpy because start I have is adoption to from noble the

And probe so with sort they’re with application mobile the associated mid-year through of delivering mobile softness usual growing for cards processors.

a So, just that of based around easily the and now on individual time. quarter granularity half from flip could

legs very the key innings I with advanced is our question HBM engagements think Again fan-out. now, early and in give an chiplets more driven least back packaging But opportunity our volume right exciting integrated story. being the going at customers. to really to to Brian's the were by with

Gus Richard

customer some And that or primarily about on fan-out, that I'm has just device guys. is talking customers? out one broadened the integrated multiple And

Mike Slessor

Yes.

volume designs are from one multiple So being but there again really customers the is by driven customer. really,

Gus Richard

probe the would how Got you you're big card it. think color And target you then can XX% gaining? the answer how share, of and question of of this A, market just that be that year you much just bit on: think share will a sort your in market give little market of terms

Mike Slessor

you of a I and reduction half guidance, that results last share. that gaining if that X% not imply a market first of it we midpoint a it. so more share quarter this much will third Obviously to and our are do say given broadly take of enhanced on more this much bit of probe XX% to progress the with contract equipment -- the to would take X% reduction about of card but billion making capital volatile less than But a going our think some covered was it on believe I -- we’re nonetheless. it’s sort was year market, year, triangulation $X.X a little expectations have

Gus Richard

in The was is what engineering Okay. fundamental of systems? assuming rest your presentation says the X.X. market I'm

Mike Slessor

That's right.

asked about you me card, probe clarification. with So

of engineering part cards, served that's of two to XXX distinct million gets that served but our separate is together other The nicely you about is which X.X. and market systems, from obviously another probe market work

Gus Richard

I'm decreasing? market or that assuming, engineering And flat, Right. or increasing is steady,

Mike Slessor

contract, probably I a strong, We've driven years. this primarily to seen a market be over R&D of the probably doesn't business customer assumption probably something fair budgets, to that reasonable in close And past year-on-year. it's but I growth flat and given continue in flat which couple by it think it's think some it's that that our the year. assumption it's nice

Gus Richard

for systems think engineering Are technology? the shipped some from market? you And the last there see I quarter to then I engineering on an you pickup guess any in beginning MicroLED. Is one in commercialization me is, in last system for that interest incremental activity

Mike Slessor

it and MicroLED, on development we've it's early reminder, pretty the And exposure, done do early. system is very customer engineering work a in to continue product still our cycles. as MicroLED, So on

in. this, We indications from cost somewhere. production But it's our to going positioned And of in issues there's think that highlight certainly I activity the part need VCSELs standpoint, and the optoelectronic ramp bigger commercialization. technology. big it's this like continues. the adopted that because performance we're MicroLED imminent any and work quarter it well I people photonics It clear activity that have The has A it reach compelling we're when some of were of think a to silicon through. continues, is position we quarter finally not The be got does a mix. a

Operator

Mike This call today's like back now Slessor would you. I concludes the turn to for Thank remarks. session. to closing question-and-answer

Mike Slessor

Alright. Thank we'll joining in a much you quarter. you and very today to talk for again us

Operator

and today's participating conclude thank program. for Ladies today's gentlemen, in you This conference. does

a You may have Everyone, disconnect. day. all great

FormFactor (FORM) 31 Jul 192019 Q2 Earnings call transcript