FORM - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Thank you, and welcome, everyone to FormFactor’s Fourth Quarter 2019 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 release on Investor to available information company GAAP the the website. in issued Relations of measures financial and are and Reconciliations our of today by

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

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

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

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

Mike Slessor

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

digits. XX. semiconductor end double shrunk record we growth against performance and strong which high range market top financial capital the line of profitability XXXX on The equipment that the revenue exceptional delivered surpassing outlook December FormFactor revised in XX% with the quarter the closed by performance fourth posted in we in upwards

broadly measurement. and attractive in driven results semiconductor test again R&D FormFactor’s diversified positions leadership in illustrate consumables Our robustness the markets and of

contributing the we a of of to XXXX early strong are results the same As many quarter first drivers of our outlook. through XXXX move part

our as other a fourth in leading-edge from an ramping for breadth of products. accelerating XX As December, and logic and foundry both on designs X cards layered foundries. top in well demand as we coming two foundry nanometer logic microprocessor of designs notable steady was probe strength assortment the rapidly nanometer for its from it each benefited noted and quarter demand XX X our and The

shipments launches cards the to test year. to anticipated We be this volume which RF key frontends in also are of later devices began of wave probe a handset XG millimeter component RF planned

building On the we memory XXXX third on decade DRAM with front, revenues in quarter. high growth revenues probe sequential ended in the posted card the

an example At releases. both demand from the transitions not risk offer excellent of capacity additions, FormFactor’s equipment. card new and of node customer Probe drivers from results differ how from generated repetition instead DRAM capital but is our XXXX primarily baseline design demand

instead benefits DDRX major each XZ as nanometer from manufacturers product such and node both the from as releases. both transitions migrations as in architectural new mobile but execute customer of and transitions nodes Consequently, well as advances Consequently FormFactor and server the know design such to implementations. DRAM XY and as

board Sheri We Turning directors briefly Rhodes the to quarter. fourth to team. during our welcome our of

adds retired to Sheri and insight for cybersecurity with over Mike experience. board appointment, Sheri's Workday, years from guidance significant of Officer IT eight Mike his Zellner like Information I'd Chief As of thank publicly and service and to our Concurrent FormFactor.

key model. demonstrating one to target of operate also profit strong I've discussed of capitalize our I'd capacity and done market They've class to and enabled extremely to operating like and a labor short our only not strong outstanding times. efficient This tool scale demand operational ramp relatively world an attributes also recognize team. in add to solid us our of financial on to performance gross the cycle on leading leveraging way the deliver but the job margins leverage

Turning now to the current quarter.

logic and we probe albeit continue that demand We foundry in to only added to the the DRAM the not continue quarter. the cards demand same in reduction the a quarter. utilization the we use card basic in drove probe lower capacity first Accordingly, themes extending We expect robust do sequential quarter fourth experience for levels.

manufacturers general new DRAM cards large major are The wafers delivered producing of probe half that them second designs and of said With digesting the we their of with volumes on the utilizing to robust during architectures XXXX. the advantage environment to like of DRAM remain from and the design to manufacturers new we take XY long card nanometer demand term expect solid. new DRAM like pipelines pricing nodes DRAM DDRX strengthening new probe and

continues simultaneously nanometer in levels at probe nanometer space volume. significant as designs microprocessor card for the high XX demand even sustain In to ramps XX designs

slows, As diversity example of extended FormFactor’s breadth of node Moore's and is drivers. another the Law demand this overlap

cards As both we XX probe the the new reminder, design consumable to so specific a designs chip and from each nanometer node. are transition new XX of on node release nanometer benefit existing and

significant multiple the and X major and nanometer packaging interconnect be In where ownership processor performance to differentiated mobile with is the designs. we're continues both experiencing design advantages. and challenging requirements. densities for high especially electrical applications applications nanometer This MEMS probe strong and technology foundry This high pronounced X a performance of space compute mobile space, demand cost FormFactor’s test provides performance in advanced

get further their packaging our us opportunity expected that enabling dye exciting like With technology top level and innovation us with are provide leadership paired leading more their This strategies integration, triplets in our requirements new customers FormFactor’s test adoption to edge to complexity even are and give market value challenging. an of customers’ telling heterogeneous advanced roadmaps.

for during optical and leadership sensors. position in including silicon carbide and up million FinFET MEMS in The CMOS opens applications. optoelectronic primarily fourth structures, steady produce in electrical advanced next-generation systems devices VCSEL power of FRT’s incremental results market, devices the the multi-sensor and a engineering R&D Our metrology business applications addressable serving of development quarter surface of optical variety addition $XXX an packaging again

products fabulous Logic the memory and the the ahead. and leading early inject These encouraging year expect to We customers. worldwide we FRT’s growth and technologies in and FormFactor efforts accelerate longstanding with our contribution FRT’s leveraging into have Foundry, begun top are further footprint to partnerships selectively

the We our and of our significant Corona of have virus employees, with preventative concern and restrictions customers are monitoring And measures FormFactor like taken being situation. well-being many peers primary the including who travel partners. closely health

China reflect recently outlook. contributing and approximately first revenue, With substantial quarter could XX% total in potential demand of impact to FormFactor’s our have be attempted the we this

accurately evolving the quantify nature makes impossible However, of this the at this rapidly impact time. to situation

lead Finally less our than visibility quarter, always. limited as a with remains average times

XXXX the fourth where clearly and our lukewarm So, capital multiple semiconductor we we are records quarter and of strength are in driven This spending demonstrated demand overall continued posted in specifically in by consumables encouraged profile. diversified R&D strength the a environment. was

our of results flow quarter the an Although a single annualized it $XXX free FormFactor $XXX ability is on over top a to $X.XX deliver and million. has target our showing model quarter, line Shai, cash EPS financial of only million of to fourth validate non-GAAP you.

Shai Shahar

you, and Mike, Thank afternoon. good

of our that factors range. press outlook noted of in revenue and saw updated quarter The outlook as in QX range. low and EPS fourth was exceeded of range high was rate updated you these in our combination Mike end effective coupled our tax our end with outlook our release above at margin the As significantly resulted the gross

record to an quarter $XXX of fiscal quarterly were compared record $XXX.X quarterly XXXX revenues million about card increase. of of million came million $X.X of revenues a to higher QX, $X were $XXX.X XX% Probe in revenue than from revenue or of XX.X% X.X% FormFactor's revenue high QX million FRT million contributed QX XXXX. segment $X million. $XX.X fourth XXXX. or million sequential an as our in million, included were $XX.X XXXX. increase total million an estimate XX.X% and $X increase Systems These preliminary from revenues year-over-year QX segment to in increase

Foundry our third Within incremental we press with in QX card in & from increased probe XX segment of QX, was the from company XX.X% the quarter. a line to XX% in $XXX.X Logic and XX% revenue in demand up revenue December discussed million total release, robust

$XX.X the demonstrated our quarterly highest XX% revenue the increase total in $X.X in DRAM in two were from $X.X than lower DRAM third million increase quarter strength the $X.X past QX revenues QX million and were of X.X% revenue was Building over since million QX. compared quarter. to an revenues from Flash QX years, revenue $X.X DRAM in the $XX.X QX the million of X% quarter of of XX% were an revenue as down quarter QX, third in were and XXXX. in were quarterly third this from of the third million in total from of million

to The in and GAAP of $X.X for revenues the outlined a reconciliation reconciling fourth of QX QX. margin $XX.X basis the the of quarter. gross Investor of in XX.X% included or GAAP as available our Relations release points million is in acquisition higher in table the during section press in than was of XXX result website. QX of on increase XXXX which today items the reconciling items Cost XX.X% million to our gross $X.X quarter of margin GAAP the revenues, issued FRT we the non-GAAP compared fourth million of non-GAAP

of quarter On the million end in gross or our QX gross XX.X% range. the at for basis was points the a and $XX.X revenues, high fourth non-GAAP margin than came XX.X% higher of in non-GAAP outlook basis margin XXX

to and offset and of variances was segment QX. QX by in volume higher the XXX partially manufacturing gross based performance lower The from of a compensation. an XX.X% quarter points card Our probe in margin basis compared XX.X% was higher fourth increase increase result

compared was to QX segment third Our in as system margin the XX% quarter. gross XX.X%

mainly basis driven XXX of by decrease mix. points The less product was favorable

high low As our segment we’ve between to XXs. system said range margins the previously to we gross expect XXs

in Our million expenses the for than million QX. the reconciling were items, fourth in to $X.X quarter operating GAAP million included slightly quarter. of $X.X million In lower the $X quarter. expenses GAAP higher $XX.X operating third non-GAAP the fourth items reconciling or than

of $XX fourth operating XX.X% $XX.X of inclusion were in FRT compared based or due is mainly million for to to quarter million higher Non-GAAP expenses. performance million increase QX. the expenses compensation XX.X% operating or The of revenues of the $X.X and revenues

expenses of the for $X.X assets. intangible the Company $X.X FRT. amortization million. the was for compensation, $X.X step quarter up of intangible QX for and of of a stock-based included million million result of million million as Amortization of amortization in acquisition non-cash depreciation $X.X than $X.X of assets higher fourth inventory

diluted $X.X per QX. the fourth for GAAP million was $X.XX $X.XX per quarter fully fully compensation million $X.X to net or GAAP share in million net lower $XX.X timing diluted or in to was QX of grants. than of Stock-based annual compared income income share the due

foreign for versus was the to is significant in Due income. The points share or annual was increase for year XX%. than per was lower $X.XX slightly at quarter QX. previously a XXXX net QX. estimated US our lower taxed XX% diluted for $XX range communicated non-GAAP fourth rate XX.X% Fourth $X.XX compared to income fully XXX XX.X%. basis fully XXXX in rate based quarter which the effective million of tax diluted below based XX%, rate in Non-GAAP XX% tax income effective the a $XX.X per share to million or of non-GAAP

quarter. quarter third $XXX higher profitability. to of the $XX.X free as on compared of to in was quarter cash in the the cash the flows. flow our sheet taking to million generated result balance Moving and of cash the and flow The to quarter million at a QX, fourth free increase cash and in mainly We investments $XX.X fourth revenue end total in million the compared

spent FRT We a fully reduced to interest during beginning loan utilizing new to XXXX. million of acquisition on balance on million loan €XX million. the $XX the years’ euro-based interest low our denominated was by This cost rates optimize loan the our of principal and QX be $XX.X quarter repaid the with the We funded and payments capital. will three term loan

slightly our debt our we for that capital during in important and million, continue end, strategy total intend by estimated million M&A to of We positions year. above $XX the part deploy XXXX, paying FRT. did spending $XXX to our remained our $X.X At $XX markets capital the investments exceeded to to is with our for invested priority our served first our annual bringing increase capital expand fourth while an quarter $XX.X balance quarter of an term acquisition cash to leadership acquire the million million as loans of plan million down $XX.X these of million the we of cash. balance using expenditures

income of Before the would turning deduction for mix our our biggest first to XXXX foreign quarter like intangible rewards US tax rate. our the income are rates non-GAAP elaborate XXXX corporations. on and to outlook, effective tax taxable the and US The effective drivers I derived two impacting foreign exports which

Accordingly, US tax of based in our the to rate XXXX higher the effective effective overall the for lower tax the be estimate to general, is. non-GAAP fiscal taxable income rate our In range XX%. XX% we

rate reminder, we until at pre-tax a US cash a is fully R&D X% our to our X% As remaining income based NOLs expected tax and remain non-GAAP of credits. to utilize

to non-GAAP first XXXX the Turning quarter outlook. of

non-GAAP As demand solid on continue demand margins to probe to our layered for in the $X.XX. strong to to outlook other website on be for outlook issued year-end Mike reconciliation range today. is XX%, and $XXX the release of mentioned, Relations million QX the range of $XXX cards of non-GAAP the press QX to range and diluted to is of expected our and continued we share in XX% of revenue expect for section QX be result Investor products. These earnings the gross factors million GAAP in $X.XX per to in available logic top in of the A our fully Non-GAAP foundry our

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

Operator

Thank you, Company. Please & comes first Bolton Our go from Needham [Operator Instructions] ahead. from sir. Quinn question

Quinn Bolton

expansion Hey. Charles Bolton. Quinn This capacity Thanks of Shi behalf part. question. I have on question taking on my a is for the

little you million plan. So last the probe And very are $X.X than – is about higher already million per $XXX million a card and at CapEx a million if model. $XXX the QX close million think $XX you in we the look $XX bit original to your are target the I to running at you – quarter year spent your

and my is what CapEx? think should with of – year, right, next question what I capacity associated we expect about So when and up how your about about demand think the context you coming a expansion

Shai Shahar

for thanks question, the Charles. And Sure.

QX for flexible addition. in $X.X noted our and a slightly function as both in higher capacity added million and labor of in and brought QX. mostly heard prepared million the total our expect a capacity the in the QX and CapEx previous the and CapEx We capacity line and quarter in investment higher our as So to year. $XX the with of you during you some similar revenue a level And the invest and flexible we that to added is remarks is than was CapEx higher level

Quinn Bolton

Okay.

Growth going efficient a at Mike, the think search like ago mean I labor. And – Thanks. the whether I handle efficient higher do should regarding saw XXXX? what differently? you've little expect the Conference I of I to that – think deal mean similar should utilization the think about less mean to that – Okay. demand like like the mentioned we month last had you I or we to with using higher mean one situation we a way How into repeat – the Needham less in about quarter Do that, that you paying leveraging and

Mike Slessor

associated obviously the conference on going made the I retaining comments the run. bringing be to ramp not you flexibility we're over you're earlier It's think the needs long trained. with labor And down. that at up back this Anytime to that at efficiency. capacity I capacity peak quickly, It's Well, that. this be bring Yeah. to also the new year, we’re

the event paying bit. in we're of our wages to that bit overtime So so demand not the adding substantially fixed little a temp costs a quite moderates

in of relatively levels, first outlook peak with even when range is And our So look the gross at noted you still not range consistent this, operating top the I high that XX%. we're levels. that's efficiency revenue at if at end probably quarter margin

the through trade efficiencies But to those – us be some give to with believe reasonable we move that's going for inefficiencies we a as XXXX. operating still forward flexibility sorry. So

Quinn Bolton

my Okay. you questions. guys Thank for answering

Operator

Thank you.

Our Riley next Please from question ahead. FBR. B comes go Craig from Ellis

Craig Ellis

was in on the for company quarter Thanks and go wanted Yeah. I with outlook. the fourth and Mike, in what just congratulations the a taking quarter when the guidance and thought I raised outlook. the point reconcile strength our announcement question to back the the in

and company's of think view there good it time, being I execution at there. around was number opportunities the opportunistic the was certainly a that was very

the guidance there might of talk can with that just X% at what calendar the quarter, at we're you opportunistic, the to seems decent speak first more what's gives and point first to takes about might it sustainability midpoint, But more quarter's down some seeing so like sustainable? be maybe some as look you perhaps the be what

Mike Slessor

Yeah.

the and times well quarter it of turn to quarter. bit business Craig, I'll retaining observation, very and little in where a flexibility. has business the to in our lead short maybe about a remind operate a this limited So that good back everyone inside we visibility point most with goes

and important So agility downside the both in to and flexibility our operating the upside are model.

node fourth of part and by the the the view prepared to as results that had part the node be the I around said the business and how the as logic in foundry in When very we we well to microprocessor we the first large overlapping quarter compare currently business foundry work both strong quarter. advanced quarter remarks same the advanced as fourth of themes in at continues

a quarter. note compared of We the due to first positive So we probably decrease card sequential the to expect digestion. that's mostly are ledger. But DRAM those fourth in really did we quarter side also probe demand the that think

record half for you this levels put into in DRAM shipment operated we of probe If at XXXX context the high last cards.

refresh middle more part normalized the and as as of new advanced of to due packaging we've move probe the to like need the use it's customers does there digestion test But to Certainly levels. reasonable those expect our and and intensity. be that talked little trends to roadmaps that a increased some probably year design through is their they about bit think of I return cards

puts as and I strong. be else of for through to how that the of first see in that a kind last bit But digestion steady and bit us phase, how a of view of issue quarter phase. last digestion XXXX strong a of We'll terms in gives through think XXXX. takes else everything DRAM logic Everything study of So in goes. kind DRAM a that XXXX. foundry continues relatively a

Craig Ellis

arc the And very that. just Can clearly expense appreciate give a despite just I initiatives to Thank How in quarter? to the revenue follow programs aware helpful. big there you that we That's XXXX? fourth or in look Shai. be of line particular about think I'll talk operating Are increase about should the through we controlled up operating of you. expenses well then item?

Mike Slessor

salary think two all have XXXX FRT, changes QX. to main for is And company first look OpEx the them I right. year. raises, if benefit of increases think if the related OpEx the about XXXX, are million about of at we quarter. which we're acquired We year-over-year. it addition going XXXX you $X.X versus in increase in They the And structural costs OpEx to per call annual adding full let's in

I’m XXXX, being quarter $XX are quarter So, the you we with we benefits per for if million the first about talking ranges to end probably annual at look the of OpEx of million range set. of that the $XX – because at high

Operator

Thank you.

comes question Stifel. Brian Please Chin go from from ahead. next Our

Brian Chin

year the quarter largest sort a us QX. back and end. that execution of Hi, QX your of few epicenter they're is this in of of here. you've some Congratulations of high customer, kind to driving good level QX strength honing first, going in for Maybe a very spend in the But the this hone into on afternoon. again Thanks in letting ask and to questions. on past seen

of that the supply that's this they’re Can and across made public rate what they do in comments terms have that about you of trying recent consideration again visibility maybe getting on talk taking to moving comments into some and been in maybe in made year sustainability run front the recent your in maybe degree? to forums out about of that

Mike Slessor

Yeah.

part great retain to we of the I again reason think agility. why want and it's Brian it's some a and flexibility observation,

the operates are in things as semiconductor today, chain very I anybody supply who knows think dynamic.

consensus the spending We the Logic & and upside see seem like to showed ability customers Foundry well capturing Foundry respond some strength & first our XXXX. an first-half of quarter and that there's fourth customer in really Our into a other largest to the execute the continuing but quarter, weighted it in with probably investment the in Logic is that general does demand.

plays nanometer customer the largest the that and Moore's constituents being that's the with usual I our think at the to relatively node, driving ramping demand the nanometer of nanometer a apply this of new activity result said be of it's products of situations with the of also FormFactor’s those high present Law overlapping both associated on with strength definitely here. intensity node strength into for sort Having XX slowing XX time, caveats visibility where test but one XX continue the

maybe moderate that consensus the will the into first-half overall resulting move general second-half in spending we the weighted as A these.

& are this Foundery and can opportunities strong take at So pretty I execute, advantage capture think themselves. they Logic point. we as to present demand as the continue of We'll the

Brian Chin

That's Got Great. helpful. it.

correctly maybe I'm to the correctly? And heard – more revenue relative in – I'm you if concentration the guys moderation for the some second not then… if if second-half in first-half you hearing I So some

Mike Slessor

big that I bars fair assumption right. I that’s around error think that it, yeah, a think has – working pretty

awfully is visibility just point at this us. not everybody's think I limited

Brian Chin

can you more coronavirus of Yeah. you're of difficult be you just chain quantify sort what would range but to to mention even your did of be out in disruption a midpoint from sort seeing But in that and or there where albeit how is be of around go into kind March for to get Okay. quarter is revenue that. the relative Maybe the guide a some something that read revenue would kind more anything is standpoint or sort of to on on, the clear, helpful? you difficult there guidance ranges put of provide width reflected the supply your again else contemplation the Mike that just

Mike Slessor

say, the parts, will operational I will about I the I'll impact that. Right. and would demand impact. chain I about And supply answer to and take also talk two

the because quantify additional difficulty coronavirus would It's to the So million. comes we’re you as lowered now more $XX than time, the the when heard our otherwise of outlook and been, have the in widening we it but prepared our have impact also this of uncertainty the demand range. remarks at revenue to range accurately

previous you $X was at it look million. quarter, If

And a to situation. we shipped as our adequately took taking assigned higher We your risk And specific closely to the we transaction, we we range. to already we've what continue and to question to been backlog certain monitor consideration is reflected China others. the the situation into believe our outlook current

comes side. operations and manufacturing. operational our minor That's impact, but the and over our comes for there be decade demand in footprint we the on have virus. When on the chain it it believe very Corona the there significant And now, a to not to supply supply will chain when impact we China significant

Brian Chin

the any deal? remarks. terms towards of Okay. And free one of of you and are the as That’s company clear characteristics capital talk there extent in a the alluded an helpful. in for to can in it’s terms Thanks, a terms last standpoint, Jay. bias any timing lot you cash. you is update the putting is in of eye clearly or Maybe looking allocation Is the – M&A potential From question. prepared with to

Mike Slessor

has M&A said, and as part our Sure. I to mean we’ve will of strategy. be key continue a been

you fourth see quarter serve in first positions the the executing We important now also of a quarter and as in in we strategy markets outlook. leadership have our can have as equally part

compelling to On M&A support relationships to funnel is executing lacking infrastructure of study to customer an the this. we’re drive fourth of customer risk inside smaller pretty example pieces be a and positions the channel, there the it. take front, case verge share One, quarter in may their two companies tuck-in excellent FRT a Smaller them the and deals, really a of with base. technologies

we’re companies. think value we example make FRT we of being are to lot kind progress on. some to again bringing So, that of a a beginning nice those

did deals the and XXXX and of cost possible scale. changing revenue, company example value where deal would fundamental investigation really character strategic the the good adds and of that also execute to that A in Cascade pursue synergy significant we have We’re Microtech of been EPS. our to trying back

As might of we’re market little to being scale able serve more we’re executing those on generating we're that work reason up expand put imagine, deals tuck-in get to the not and challenging hope part done, our to given continue the you of a funnel. for why cash do are But to on shareholder.

Brian Chin

Okay. Thank you.

Operator

you. Thank

comes next Diffely ahead. D. Davidson. from Our question A. go Please from Tom

Tom Diffely

Yes. Good afternoon.

little mature node point So to obviously still that Mike seeing, bit that fairly at the a I ask about business XX the nanometer and you're it's this want fact a it's bigger a robust previously how intensity change longer be nodes driver capital of these that and tested testing for your for last long-term could you. intensity view Does and/or and than thought?

Mike Slessor

Yeah.

we nanometer off, that around three ago. expect now And especially seven from for made nanometer XX years maturity node, years our we'd I at nanometer yields been push shipped. XX said in tail that, I or obviously probably I by largest point and think first comment really as some reaches cards probe at to a the entitlement activity having the think excuse good observation mean, customers XX me, Tom, I eight

So its pleasant longevity time release their us. very a and new to yields efficient these because But any of our the work test works demand test and surprise time for mature obviously The node with design work over Customers that has they wafer they're a make of spend nodes any does cards being really on robustness for probe and way on time. there's it most even capital. intensity creates incremental down over been test less go go demand sure hard time mature intensity a up. drivers. The for

in back and but like And when cases, that's us. new we in XX part automotive of need some new as XX designs XX nanometer customers are release nanometer what you're driving at seeing up about those probe space for just the microprocessor talk they not opportunities even cards but nanometer demand

Tom Diffely

it And sounds next your at big what as seeing years you're base quickly to touch leading in foundry as was the over be customer the broadening like I going the Thanks. far opportunity a Okay. maybe the edge mean, nodes? just few then, of on side. that

Mike Slessor

compute a this think in to front pleased primarily report then applications of the really out today I nanometer. largest interesting And X and is diversify, at processor on nanometer big other still at just at processor Apple concentrated projects in and of high to was projects diversify mobile to broaden both the Yeah. application be part us, a performance foundry But able project every our and lot that the of one still remarks us and X of and are advanced beginning begin it's that having nanometer that nodes we're X the project our business year. is prepared couple to

advantage, Obviously take can us, think customer to supplier starts more into do for this nodes customer a grow a effort the still have it's wafer as scale that we're big where years and our currently contribution advanced these grow makes to largest of as us to the stature going competitive this to scope we several we as and customer. relevant a to move and continue our

Tom Diffely

all DRAM, sector and Shai, Okay. it or a range. guess widening was at taken a Chinese of I that general logic, Chinese specific coronavirus or the Great. the looking you’re customers? across or serving haircut then, was that a it And just the Was foundry related lowering

Mike Slessor

specific it's say markets general serve. we but it’s over the would I to China,

Tom Diffely

in you OpEx as the two just driver the not look at about items you increased quarter, when that Is a surprised increase Okay. headcount that. of did meaningful you talked And the the then mentioned? you as was I mention as when finally

Mike Slessor

that’s went but So was even and the R&D, of flexible for I structural of inclusion direct more some some headcount talked us the most or or increase question XXXX And we talked Craig’s increases. to FRT answering right the annual increase labor, about. some about investments capacity of some the in the COGs, mostly in headcount the

Tom Diffely

Okay. Thanks for your time.

Mike Slessor

Thanks.

Operator

you. Thank

Our from Dooley Steelhead ahead. next question Security. comes from Please David go

David Dooley

and Thanks taking congratulations results. nice on for my questions

of questions couple Just a here. macro

area at in in this virus there, in out able fabs get at of you you into of product point? two that think to are epicenter the able Wuhan right Regarding ship to least the virus. there's Are memory the or stuff and the I on

Mike Slessor

couple team country of a through China is going next now. home extended got been at the kind to work and New most still we’ve very what we Obviously things day. the least in be an all holiday Well, has lunar a of understand Monday. Year on of on right at And on,

flash With we're in as a I'll you customers the not primarily the our might flash. are Wuhan from particular, they player in results, you that remind based remember and see producers. could big And

you market. have well reasonably do imagined have revenue end we lot at particular. do, But that the as of segment with a customers flash in of those high in We concentration or might memory don't the

production. and So we Flash in had lot exercised mainstream haven’t a in backlog that of honestly, out of particular just shipment region their we have don’t because

David Dooley

Okay. that on less by of Is a that I've projections. just extending Excellent. lot have lower as production beyond what maybe current their color far of week up one kind bit quarter and see would range companies the more New again as your with talked weeks two Year of normally quarter, revenue to And they that? guidance another came little the a lower on the that's for about just they in logic or essentially the Lunar behind the week projection, revenue how or talked

Mike Slessor

we significant unknown uncertainty, this mostly because don’t business general risk. and necessarily Not than manufacturing of production specific overall China. impact It’s in have at more more point

David Dooley

into move realm? packaging you advance seeing package. percentage Are into they're package seeing advanced is the for X-nanometers, packaging move that been you're a not final industry just type has advanced about Okay. a lot higher the node wondering this nodes, point? And before TSMC of seeing include parts then, parts the at the that of X-nanometers a advance at maybe higher I'm talking at in percentage and but me or question what

Mike Slessor

Foundry competitive the simple the mostly of with we've because have our us. packages, don't at of must in & There advanced before growth I in in amount be yes. and think Logic are packaged almost an concentrated more is testing advanced into is, have business all in Logic flip answer tend we've does We it shown obviously the I but still think Foundry the the of at the that this. be side we increased to a parts & there differentiation front least and industry significant clearly packages. with around chip the parts as adoption described in visibility perfect

the are associated or remarks, between difficult I and that are very reviews of very, team team, packages to set those a talked road requirements advanced And the the map with our towards those discussions about test requirements and we More and driving our HBM whether meet. have chiplets prepared they executive be of fan-out or pointed in our more memory. customers. As R&D key are

and probably one aggressive meet with pace of FormFactor keep who them really roadmaps. of is these handful suppliers can a

longer moves using so that today. that some differentiate not And end opportunities as of this the going feel forward in big the the one contribution to are I products of just create marketplace. driven innovation industry probably advanced the for off front to but is we'll a them term secular like seeing us roadmap packaging But

David Dooley

more, slip to Final question in. to I in from me. I calendar one just grow expect had want Do XXXX? you

Mike Slessor

and debating. question good one that we're A

I in to the half comments earlier spending maybe the not the the view Well, of house that's given and of questions think made being I foundry logic industry sort is general The general first on weighted. before response view view. view. house maybe the one

we to move we half growth to some and if aggressive way to I visibility I think think see to don't growth there see its happen industry’s a it But one deliver pretty XG ROA more is good of don’t make DRAM year. accelerate. you're on I in allow us XXXX capitalize unreasonable some general, that in that continue move associated going And we're need statement, into the a and think definitive in could it's here. year. if think things we'll the in they than less be shape forward but I the recovery The caveats posture to ingredients with quarter need those usual second a of growth

David Dooley

Thank you so much.

Mike Slessor

Dave. Thanks,

Operator

Craig-Hallum question Group. ahead. Instructions] from go Schwab comes from Please Thank you. Capital Our [Operator next Christian

Christian Schwab

customer? quarter. a Congratulations I and the you been multi-year great opportunity grow give maybe one. quick of market logic in Yeah. DRAM if and you ended us and have share what with the on the foundry one have in can for asked. where guess just most in and On you think particular of an things Taiwanese foundry logic I market gains questions year share, share in update my is

Mike Slessor

and I'm some Yeah. because several of going on little publicly. to of key industry that really that we have next weeks to data terms out the benchmarking competitors reporting over of to bit our the need both be comes in understand some reports a lawfully

over said believe having businesses gains foundry So made logic we that, I both structural biggest in do in share in and cards the year. our probe two DRAM

and DRAM pretty at there HBM on designs like look the nice you some packaging advanced executed share think gains. that some to led in If well arena we were I

at have. and there results In assume be at rate it the foundry logic, Foundry seem of reasonable some must in they gain that does Logic I share ever space implicit entire if historical tripled the unless fourth quarter the to just look there sort spends & that

to there. XXXX about particular are it, But being the too of we second in for we the our data. do there as I and need at glib wait at half performance in some And share not that look like performance so XXXX qualitatively gains feel some

Christian Schwab

Thanks. questions. other no Great,

Mike Slessor

Thanks, Chris.

Operator

you. Tianyan from last Sidoti. Goellner from go ahead. Please And our comes the Thank question in queue

Tianyan Goellner

strong have and a first then afterwards. the maybe clarify also quarter solid on outlook. And Congratulations and a Hi. just Mike I follow-up

fourth in to the probably about DRAM decline I level. second like current because volume, growth you it be experienced that assume in will the to resume mentioned a may half phase. you quarter be either you sequential in to digestion So And probably will the resume comparable mean growth.

Mike Slessor

Yeah fair observation. so a

for XXXX broader of If were QX you our put things DRAM card and into probe QX a the revenue. levels context decade high

that's that to some here. I it's so is think go digestion on going expect And to there reasonable

Tianyan Goellner

Okay.

Mike Slessor

…structural probe fundamental term card in change DRAM long spend.

the near delivered XXXX. QX If there were the half back for a in we get levels probably reasonable a and we conditions so watermark. right QX high second are in to expectation And of term maybe

Tianyan Goellner

clear. That's Okay.

level. then do follow-up very the because So now long how you we're and think still at really on DRAM high a

over As out, you high, record decade level. pointed high

least [indiscernible] one you think do long maintain at DRAM current years or how level year. will So at the the

Mike Slessor

you Again, have customers… The a to think Well. cycle, right. at look these levels I probably through

Tianyan Goellner

Yeah.

Mike Slessor

…design releases shrinks. you note flow and and through as the Ebb go cycle.

I you was $XXX call so XXXX think $XXX revenue the DRAM XXXX if closer to in it million. at million range. look And

a up stepped little So bit.

a of advanced DRAM upside is about about adoption component in bit think probe there card spend. little think the packaging. is I a One reasonable to potential long-term of levels talked of the we Q&A

test or driving HBM intensity. explained high like memory as structures in higher the much DRAM bandwidth we've past

probe is more And card overall sort HBM probe we this so an more that wafer right something be in think an $XXX level to could $XXX the you million I if But see and annual could DRAM that million for of start, get increase DRAM contribution. card about spend.

Tianyan Goellner

question you then Okay. color the my in last give and do regarding – FRT? on fourth would what color quarter, can That's great. any And did XXXX also be any FRT in you know you

Mike Slessor

$X to about FRT, talked contribution about initially that. in million million better $X million $X we than of They to QX. came

that, for about million year in $X next million talking we're about or If we year. $XX this analyze that's So, QX. for

Tianyan Goellner

all from myself. That’s Okay.

Okay. luck. That’s good very helpful. Thank you and

Mike Slessor

Thank you.

Operator

this call Mike the the I turn show I like further you. to at remarks. for CEO time, no and Slessor, questions Thank closing to queue in would over

Mike Slessor

All progress everyone Thanks joining the our great navigate for right. today. we as We'll you Have through of us a keep part updated first on XXXX. day.

Operator

Ladies call. this gentlemen, conference you. for you and today's Thank concludes participating. Thank

You may disconnect. now

FormFactor (FORM) 5 Feb 202019 Q4 Earnings call transcript