FORM - Earnings call transcript Q1 2021

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Operator

Thank you and welcome, everyone, to FormFactor's First Quarter 2021 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 laws. securities forward-looking the within meaning the Today's of contains federal statements and forward-looking of changes, financial future acquisitions the are ability new in assumptions regulatory demand and technologies, performance, COVID-XX for sell of and future pandemic, projections such respect technologies, of the such conditions, in of based. the include investments statements Examples future the the with the macroeconomic our those to anticipated to products, products impacts statements and of which upon business benefits the products and impacts the produce capacity development of and and are this risks cause from subject that could differ known results during those expressed statements uncertainties to actual and to materially unknown call. These Information for at XXXX today. on filing which uncertainties in XX-K recent and SEC website other on Form with are press release contained our fiscal and most our filings, available the the is in risk in our factors SEC's the www.sec.gov year SEC on issued and ended

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

Mike Slessor

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

the we technology, long-term our people the closed non-GAAP control, call good with outlook quarterly revenue investments in first industry. fourth throughout highest earnings range recovery. paired serve We and earnings as impacted gross performance, results, expense in continued margin second our addressed gross our and discrete the per two to growth semiconductor at share producing FormFactor of revenue the produced midpoint quarter broad-based posting started issues and strong capacity, This a operating it year the history. successfully described quarter that with margins, February company in

Foundry to demand logic world's as was and XX% first in world's first applications. and FormFactor's the robust the XXXX, expect was compute for again the our and design do in underlying The demand and X mobile strong reduction the ramping PC Logic Foundry of and foundry. XXXX's leading evident center, Logic in client quarter XG, timing Foundry IDM sequential similar with Probe customer the multiple were continued. We quarter individual data chip customers in Logic quarter, to and due demand leading of quarter new second releases. components specific Card business designs the strength in

specific design said past, we volume are and As customer each Probe in are those releases design consumable the create the chip in timing ramps demand. a to of Card their Probe Cards fluctuations can and

capacity equipment investments, new technology technology aggressively their future foundry new new advanced designs, this top growth probe of strong market and well-publicized cards. to these and logic capacity, as capacity in are be and each we with we making they begin continued opportunities. our nodes customers planned chip tested on executing which Accordingly, capitalize investments must online and the producing the wafer in are With and secular fab expect comes

fourth to nodes. existing quarter releases customers first to DRAM, comparable levels to continued Probe at for node design on and the quarter Turning demand new transitions sustained Cards execute as

in in DDRX mobile the expect volume. and server high DDRX Probe by off DRAM already driven ramping We shipments increased these primarily XX-gigabit Card levels quarter, new and second designs

intelligence. of current less as in XXXX. as as remains for advanced or quarter, second in we new has the always, bandwidth DRAM. high encouraged the With lead-times enhanced fourth In comparable the market of quarter gain to limited HBM, are high but demand to our decade this by delivered revenues such to application one packaging DRAM incremental artificial memory, than quarter supporting levels momentum addition, visibility the applications in design activity we're This potential substantial adoption performance continues drive in

will manufacturing Shai expected foundry dynamic leading in serve probe probe revenue. card all to flexibly is probe cards quarter as gross demand to favorable can the cards. deployed pressure customers product underlying shift because first resilience generally and swing model. to is resources either second DRAM at shift or in our FormFactor's produce logic and than this quarter mix second This we DRAM. range demand, highlights revenue be industry. margins, detail, logic more the product applications anticipated quarter and occurs to semiconductor in reported major from As similar logic outlook operating mix DRAM this Even foundry With in with foundry serve of that This discuss a less the

characterized capacity extremely Consequently, Although demand taught by variability experience been to top for strategy. a to central foundry like our basis. several has is also the the which set our the operating and VLSI quarters position effectively broad of that installed survey exposed card demand, that research's logic market highlight is ensuring and eighth us cyclicality customer strong on our quarter-by-quarter consecutive that FormFactor have year. probe in there a to we're and I'd of at again opportunities annual the market, utilizes showed past

XX% in advanced card probe and foundry category, our non-memory fueled classification. which logic overall XX% an revenue Our VLSI's growth probe mirrors by was card eye-popping

high-power customers provides of requirements meeting millimeter compute next-generation we test we've by position. above-market outpaced ends, and one significantly And number XX%, our of products, logic previously. in growth packaging in that market trends growth validation differentiated advanced the wave in processors. processors as RF front growth This FormFactor's for share XG our was foundry highly growth complex highlighted gained application and XX% market FormFactor's driven

R&D global to meet share needed high required that two second, rapid resources are around probe product continue develop ramps support gain a to multiple cards expect preferential regions volume to reasons: test to this world. and infrastructure first, for is complexity, scale We increasing at significant customer in simultaneous the coordinated

temperatures. drive of capabilities the Combining optical we how, from R&D applications of infrared added target helped emerging product often first legacy in at favorable improvement detectors. growth model was in A are Test technologically which and this to for long-term a executed cryogenic shipments of enable levels. zero, the know us with labs on at research in and computing we to applications. more engineering significant the area these the key the factor of quarter to enabling our field ultra-low critical Systems measurement of measurement mature to mix approaching temperatures, quantum these quarter, to multiple our testing as absolute offers systems, systems in Turning return margins demanding segment. potential variety We more electrical devices gross a HPD, test further and fourth acquisition

the ourselves. As that and the test volume our the and early the applications mature our like benefits computing well we production quantum engagement FormFactor in cryogenic as industry, over continue of to fab customers years, execute both serve reach next positions strategy the to to needs production lab lab several

advanced Finally, by and with growth. year path important more tailwind powerful packaging revenue. XG, semiconductor of the delivers million non-GAAP demand financial earnings per outlook, the $X Test the memory content and a $XXX place continued we on strong from trends, unveiled share we're is a driven last measurement on strategic target that including industry, in becoming towards model the and of

over as our paired share target strategy these we in month. and towards Shai, you. will attractive continued to the growth execution disciplined differentiated progress drive with markets, position leadership gains Our and

Shai Shahar

good Thank you, Mike, and afternoon.

non-GAAP press end quarter and the release, second our range, history. were range in of margin of outlook gross saw at midpoint outlook the As you highest below recovered first company our at to the our midpoint EPS of the revenues range. the in high Non-GAAP slightly was

decrease Flash offset million, were and a a decrease from foundry driven $XXX quarter. million an fourth lower of segment quarter, record The million $XXX from sequential partially or quarter $X.X in of revenues. revenues QX or FormFactor's XX% QX, segment revenues, increase X.X% from in DRAM were and by $XX the XX% million lower our Probe card was Systems million were a first in increase decrease $X.X revenue the of revenue an and first X.X% by slightly QX. logic decrease year-over-year. revenues

revenues, of fourth in in three demand quarter revenues last QX, as quarter. the than for the and quarters, in to million up decreased revenues foundry higher were QX segment, in the million were trends X% of revenues, continue decrease The fourth quarter in QX DRAM this X% the $X.X $XX.X QX. during XX% a same million Within by from quarterly in million comprising million total from $X.X revenues to the company revenues $XXX.X $XX quarter. in seen slight current total compared in fourth of continues logic from million were Flash total the and and of strong QX, a fourth card we QX, quarter. XX% expect the in DRAM the $X.X of and probe XX% to decrease were we have

did in to logic first to to non-GAAP our section revenues as the the Also revenue press than product our quarter new in non-GAAP mainly foundry first reconciliation which released past, Investor As MEMS gross QX, the table be in we for of was quarter-to-quarter. margin outlined XXX QX costs. gross the issued to the lumpy warranty to for QX that XX.X% impact million flash in and systems non-GAAP began higher said from like we we've the XX.X% of for to anticipated available reconciling an for a not manufacturing recur of raw a rising XX% items, margin in and mix. $X.X today key improvement to in due revenues, materials XX.X% On GAAP the recovered, revenues as segment expected more GAAP quarter to basis Cost points which compared expected, release in and rhodium, QX, our Relations in in basis, QX. gross margin in included favorable is of costs website. product related gross expect we see of margin costs

low sorry, of segment lower range revenue. favorable card to to probe charge just Systems lower returned first XX.X% XX compared Systems XX.X% a in by XX.X% an in The XXs the segment is of and margin mainly even QX basis XXs. Our gross quarter, to anticipated from absorption XX.X in the quarter, on partially in margin increase offset the on I'm significant points X high to resulted I recovery in QX. In revenue. increase segment the mentioned, points gross higher lower warranty due mix was -- in of The to spending gross XX.X% percentage QX, in QX product manufacturing margin

model progress expect to financial As we gross fluctuate will our towards XX%, we quarter-to-quarter. continue margin of from target margins achieving make that

$X.X of $XX mainly million of revenues partially amounts XX.X% compensation, quarter-over-quarter for for compensation, expenses compared first Non-GAAP to The revenues quarter. expenses of than quarter, the Our impact and payroll quarter or first fourth for million expenses annual of amortization million $XX.X included million acquisition-related the quarter first to operating of operating in million $X.X or due and lower XX.X% Company by is for QX. benefits the performance the taxes. the decrease GAAP lower of $X.X the million. in $XX.X were $X.X were depreciation $X.X non-cash offset stock-based for million million

or as GILTI, of million, result fully expense was for also of acquisition. global fourth diluted X.X% were Stock-based of rate compensation good tax income revenue. QX first in lower to previous $X.XX non-GAAP $XX.X as First XXXX. call. of income, the compared we amortization we than first the The export quarter to tax quarter Due quarter margin lower despite the gross for of mentioned effectively or finalization a quarter, non-GAAP an to $X.XX the quarter million in QX. of per diluted intangible quarter purchase regarding in benefit revenues, amount of a $XX.X in in and operating of million $X.X QX as share as increase depreciation QX. net share in a low to control, the million million XXXX flat per to generated XX.X% allocation cumulative in earnings the compared and result application $XX.X was regulations similar GAAP was effective income in related taxes to lower compared XXXX The onetime the recovery acquisition-related known and rate was our fourth $XX.X fully first

annual anticipated of The rate first our fiscal for to effective XX%. XXXX quarter effective tax tax communicated rate is within XX% non-GAAP

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

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

changes total to Moving the $XX in the flows. $XXX cash the to sheet at the in end quarter cash first taking and increase million reflects The compared cash in accrued We and in inventories cash $XX million balance of QX, and investments mainly decrease liabilities. flow decrease million an generated our quarter in working flow quarter. first a capital, free in the of in sequential free to

quarter, As QX. capacity capital on the expenditures of end We This building million. $XX loans to compared the $XX campus. first remaining $XX.X we of the Livermore had term new investment totaling invested first our million our in the sheet, in expansion during two relates million quarter in in the chiefly balance to

continue for to million our as be to the XXXX, expect $XXX previous a between in earnings significant We to call. in CapEx capacity $XX year expected investment communicated is million, and in

At the revenues total in quarter exceeded financial return we our reminder, after target debt $XXX balance conclude expansions. expect our balance end, these we a As CapEx to capacity X.X% model, X% $XX by is capital cash to flow to for from the cash quarter. strong of QX during stock less from an increase repurchases The used attributable and $X.X quarter cash used for million, increase end. the to operations, million of million mostly expenditures,

Turning to outlook. non-GAAP second quarter

quarter As and revenue system. to generally of foundry in demand and demand XX%. less non-GAAP the for is revenues, higher for million logic factors resulting increases million. the result an QX expect with foundry to expected range DRAM costs expect we second in to outlook Mike favorable offset the be continue range flash, These we materials advanced by decrease in and also lower of in increase in on QX, between expected the section issued and non-GAAP and with earnings $XXX release performance-based to mix strong $XXX non-GAAP raw partially pop higher QX for the and lower share is margin outlook $X.XX and ranges, a outlook by diluted Product of to questions. press and in midpoint to Relations the mentioned, in per logic QX costs, available we gross to Accordingly, Operator? in in DRAM operating spend, GAAP open than by be $X that, $X.XX. let's to headcount At website A R&D With million, increasing XX% reconciliation our these is for of expect million our and QX due QX be $X expenses of compensation. our Investor the today. offset in fully to call

Operator

Davidson. question comes Instructions] Tom from with [Operator you. first Diffely D.A. Thank Our

open. line Your is now

Tom Diffely

maybe versus gross high and nice the Yes. of Good particular function with Obviously, guide the you quarter But back up. for below during the revenue starting margins at step the afternoon, by to thanks any the end Shai, question. you when margins. the midpoint, range the items? on EPS were see impacted look the at the

Shai Shahar

with things X Even are high that's as we margin time, revenues end exchanging we we a of within the changes, these up ended we slightly range, provide but the that's, gross know, Well, in backlog, weeks we within just lead to is entered when And the turns Tom, the closer business, but below quarter, because And that right? the quarter. of quarter, range. X midpoint. to changes you even in mix, change with particular, the the the even are where

Tom Diffely

sure Okay. was I just the if the surprise material a high wasn't during quarter? cost

Shai Shahar

gross in start margin gross No, good impact is are going question. quarter, we noticing impact forward. a margin will or that something QX, things impacting in that's in for It's but but inventory mostly we're our QX. will started This the

Tom Diffely

million both the then, dollar how picture about Thanks. over the the When probe that of translate one look helpful. and next a card timing talk customers, And your three That's of a market? Okay. years, customer, a of amount does from to kind or spending at Mike, here. you question big you $XXX

Mike Slessor

Yes.

are & need about there's by are and several result, pretty next And well-publicized been design advanced designs tested Those those starts, customers, largest our couple Foundry wafers the be wafer particularly from and cards. over announcements probe think, some I Logic, investments in going of market, capacity in starts. to more obviously, technology to more all years. to going of

between look three spend, and how So by card WFE typically two somewhere translate quarters. capacity increases at lags probe if and you into

if Logic comes as would during cards additions. increased are they're significant either customers into just this XXXX, demand expect a Some faster Foundry capacity for result to advanced in build existing and online incremental we & an late that in But or facilities it's especially going year probe XXXX. the capacity into

Tom Diffely

And do period quarter step function well? kind you see over a up of a increase? do ramp several you Or see it as

Mike Slessor

-- starting There's ramp WFE that takes to qualified in, logistically accelerate think that while it running. But to it get will been get we're it here over and it magnitude, Obviously, No, those I see a years. for announced in investments several to all to up. of XXXX. equipment have get

it and gradual. going don't So I a few the to to to expect be qualification expect rather quarters. function. a would it But I again, trail be we're step installs equipment by

Tom Diffely

Great.

Okay. Well, thank you.

Mike Slessor

Thanks, Tom.

Operator

Thank you.

Brian with question next Chin Our Stifel. comes from

Your now line open. is

Brian Chin

there. afternoon gross a few bit. revisit the a margin first me questions. to for ask Hi, discussion and Maybe Good thanks letting little

in I I to revenue of the highs. commentary think run back XXXX you rate referenced heard sort the DRAM

suggests so a today, quarter QX, they're rate And sustaining of wafer in test DRAM seeing companies part the sort that in of high sort a maybe the somewhere of earlier growth that of business lot business. run given XXX of

about kind frame, in And back at guiding that QX, more kind the I time points XX so percent. was closer plus the gross at why go the down the sustained you're end margins XXX I hoping of gross the range higher noticed Because of talk to you of midpoint? maybe in could by basis margins the XXXX

question. And the so I that's guess first

second trajectory. guiding on know sales. of sort for you're question Second just I would half be not

getting provide level, you a some kind back difficult. you get drivers that a in But to back would XX%, maybe of in can sort bit little range? maybe of the terms of that So it's of XX%

Shai Shahar

Yes. Sure.

So had you last the expect we rightly year. to DRAM level a grow to in pointed out to we that record similar

it, that call $XX there's wide low even different million. range products. a let's So different customers margins with to of you remember And within the need but DRAM, and

DRAM. is in margins not QX Logic also see higher going we only what up, And historically So & down. going DRAM than Logic has gross Foundry but & Foundry

So replaced can a we high were being if margin, there are level. to revenues. even of DRAM this gross QX specific fluctuate mix in see a is similar is is the quarter-to-quarter a mix that phenomenon gross at customer And specific it revenues from margin low the and shift specific by because revenue margin in

the you if range, look I so decrease X% this and from less little foundry there’s than QX And would say of to of midpoint midpoint that remaining mentioned that a mix materials DRAM. at a in specifically yes, about little to X%, of our outlook about the that the it be And the may of than I shift relates QX, from less relates higher to in call, the bit X.X% cost rhodium. the to the logic

higher terms of levels. XX% ability we these In model a in We put had of our get level, to to year, model. evidence back place reaching about target We of last financial right? so talked to the going good some

at margin to If you of go that at model quarters back QX was XX.X%. a almost few XXXX,

we are in can that way fluctuate model, we get quarter, confident margin And So good saw that there. to achieve that was but this the our to evidence ability level. on we of achieving that our as the quarters last upcoming in couple and we in a can are

Brian Chin

costs basis I foundry down, expect of pick DRAM to second could the I higher probably maybe part input the hit you'd those from can the half. about up those for the logic, turn revenue Okay. thinking guess, carry in XXX bit in of going the business XX basis not guess -- and perhaps perhaps points, mix that year. how but the streams little a towards points necessarily trends latter

gross And on so that the will help you margin?

Mike Slessor

Yes, Brian, I think…

Shai Shahar

ahead. Go

Mike Slessor

challenging into the foundry of foundry With here high with activity do pretends question, to seeing in DRAM But capacity right? certainly, at times that's all card half reasonable of year additions some beyond it's and go think the probably of strength demand and much we're to a second that. the advanced through middle in almost lead back to DRAM I probe and the a turn that quarter. part scenario, Tom's the the We design logic less increased strength logic, quarter, than end of space. forecast the those see

scenario to mix your reasonable the think about one XXXX. I a think shift go through So in as is we

Brian Chin

and little bit longer Okay. to Thinking XD six-plus developments of over positive the And or last past horizon three-year your bigger fab that growth around in think you be adoption, probe the back targets cards up was But as build-out And conservative, well. for what just frankly, here. a months maybe gave around now kind again, that about seemed growth you one last question, general. picture little the X% are packaging again, to I going again, that. too next-generation again, Do new market? bit would growth summer, I X% potential those your bump think above sounding your it the a for market for growth guess,

Shai Shahar

contemplated. and It's question we ourselves been we've increase fair hadn't a WFE summer, model a a to rapid as year the capacity the that When been industry than together, in ago. last less really little put Yes. This in well. posing one

in advanced happen, agree with said it's we that digits digits, if reasonable we may of nice couple go the revenue talked going be that, before -- not target timeframe to increased we XXXX's with We're think grow provide that a look bit achieve more associated capacity, about. the model, mid-single to card had so and wafer that uplift that in reset that assumptions earnings market next target than able allow little the but at to where leading-edge results, we but this to And we I obviously, us achieve $X be over five, share nodes, probe more results you and I higher will non-GAAP $XXX should a Having need WFE should years, a assume model increased where and market allow on hopefully, little the faster. the XXXX bit outpace starts that million the maybe see per us in growth do faster, you, conservative. mid-single to

Brian Chin

Great. you. Thank Okay.

Shai Shahar

Thanks.

Operator

you. Thank

Our Charles with Shi next question comes Needham. from

Your line is now open.

Charles Shi

want quarter few somewhere expecting million, down sort question. or quarter a fourth taking quarter fourth at I even a Are getting similar understand, running be on may QX million for and with supposedly, can quarter the a can QX. and at you, after the here. get $XX of, you're sequential probe rating than and card of third my Thanks given Well, come bit level question about have foundry that, Hi. quarters to it's momentum slack a hard longer probe lead run the up and and as $XX kind pick and DRAM foundry bit to a situation card card, a I the a into probably in maybe the DRAM of probe probe time end? And and follow-up towards growth little you little have better visibility bit for little probably logic logic you card, the you third strength. year

Mike Slessor

shifts Yes. scenarios. are of articulated one the certainly that just you I mix the possible mean,

go this We the we're But fourth our to customer the anywhere have their share fourth visibility quarter with now. direct times cadences. close understand capacity don't quarter. the No PO part why in point. us, reason right the visibility design PO of visibility into at place. no forecast in quarter putting It's significant we release Obviously, and lead fourth

little we've and lead bit at a look logic of visibility going history XXXX, strong about some into quarter. would lead you years, to activity quarter, look if there both believe past currently foundry times sure be third statement and fourth the mobile the in at XXXX to there's we're that you you got running. And when the Your

affirmative make pattern I are you just to, the really in scenario want is to aggressively don't to reason of of, painted able be create one. of the the that that have profile the unreasonable It's visibility So that, we continuing don't that, way. years. couple the It direct is to confirm been Having last in also the in but sort expectation we why part has an bag. investments, the not said any

Charles Shi

because down, gross And gross Mike. of into probe of margin some shift offset higher mix Thanks, on foundry and the -- Okay. Flash that but are the will come quarter, and unfavorable the also Maybe kind second mix. you've should System Systems you and margin business product logic up. follow-up the expect talked DRAM cards a is about

Shai the However, relative to a is that gross margins wonder for what's on your for or next like DRAM of gross going a quarter. I probe par? but relatively historical card a I think, level going slightly few did mention Or feel here low factors, at the -- running year-end? I into still kind average, QX your margin lower is on

Mike Slessor

gross course, has even a can to So foundry design is, DRAM what DRAM design. similar design low-end to DRAM high-end margin of and the lower DRAM have logic DRAM, margin. the gross a But Flash DRAM. has within can and the logic And I than that margin high-end Flash with than answered than have overlap higher Tom, a and than lower it's there higher true gross historic -- historically, the foundry

foundry addition in a range, to way QX are in within QX logic the we So the that we gross high-volume -- lower the -- is the lower that what and expect see mix seeing that and gross shift in we designs design is material have the in we're quarter, margin margin second combination DRAM impact the get of And gross what margin. the costs. off with that of higher in that creates these is two over to the in some we high low a

Charles Shi

to up bit switching customer, you I a Mike, that strength this carry that Maybe want if to could we business bit competition some your out may. market at X.X -- it, business. into Thanks. any foundry question, the just side open share thoughts want last enter particular of little longer could call the some customer my they on a largest to -- ask, strength of term, foundry just or -- if existing Zooming whether I of potentially your And your little have competitors. this to the mean, IDM to let's I

Of strong. whether a for But you risk course, always or the any at the competition for when is lower for risk market just thought a high you is risk Or increasing I know negative guys? you? this expect is growing a -- positive level,

Mike Slessor

Yes.

between aspirations an a the over view we the enter individuals well -- for relationship involved. the think is both there I opportunity Obviously, goes the that to business their us. with partnership customer decade and foundry companies exciting back and

close can foundry as very this exciting going opportunity. to test they foundry business, us. and a the at we've the best major plan technologies partnership. some of how foundry pretty support we as a it's offer They've got not I But that business. And there's a that clear their be enter least assembly for begun that about compelling So to can business initially. part really a net-net, part think of positive It's they're represents discussions

to a We and can I hopefully right value into businesses. help mutually obviously, have, initiatives it, our we Their market add the strong their entry position now. in think grow foundry

Charles Shi

Thank That’s Thank all. you. you, Mike.

Mike Slessor

Thanks Charles.

Operator

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

Craig Ellis

contract mix the Shai, those spot there do company the to that's for intersegment Or to something any on are of just there? risk anything you be else volatility going question dead you the price happens taker have matter hedging? horse, of can The you on though on whatever a time. guidance, I'll being very pricing that is in I Do or really leading out? going issue. mitigate at it is with the pricing dynamics start been of Or whatever a but ability rhodium that do plays was with Guys, the to acknowledging a the beating over I'm clear has mechanics get

Shai Shahar

Yes.

we of year, We what looks XX,XXX that that forward to commodity double. up if prices in expert, into to South COVID. see when per ounce in the contracts is hedging, things because almost market. there per what look of that, the read quarter productions, So it went But look XX,XXX are it we last I'm in Africa options at the and not are that. the right? mining a you issues what rhodium and from and cost papers like were not It's And some impacted comes like ounce,

think resolved what But we'll long-term too phenomenon the over few or look dealing the such fluctuations. last options don't are or I yet know early a in the certainly should be next that we with that's into soon it's months. if --

Craig Ellis

Mike, I it to That's Okay. questions. helpful. you wanted a to turn couple for of

with it's the So we is this capacity wanted that the technology sounds to what the things we year? statement, and remarks and if just more see the like the where a to prepared your that and provide I technology follow-up capacity, to with color regarding is reiterated color was of on execution. you there's one should company about first aggressive and And think little on bit could it respect just from CapEx number exactly about focused start beyond any year if were question

Mike Slessor

Yes.

think I earning it's subsequent August start if I back analyst calls, from clear. go pretty because last I you the think with and to then capacity, I'll think our presentation

continue probe cards, we're putting in out and Our footprint online capacity advanced half place, basically limited that be here. comes second capacity. limited building with in gradually right to fab a now, until increases the new new footprint building But associated the

So real there. changes no

about plan prior we've execute talked to on continue the We calls. in

XG. On piece, packaging the and requirements, serving the associated especially foundry with logic some and of really accelerated it's in about advanced technology

If contact higher. test the cost quality. are currents like all customers' and much, or up are higher to things to scale substantially. of packaging the die, and The of with are much at maps, stacking, at closer have we probe complexity pitches card drive modular you road -- to advanced integration, a the quite much, densities really much The basics die frequencies heterogeneous our pitches continues with look this in mean do way higher that have And probes we together.

And or customer, or to a their at sure those. road another And continuing towards today going and one properly so, keep that, part to enable It's targeted pace packaging our central X-nanometer really advanced of the X-plus are making and majority that customers' pointed ahead we vast technology even key technology really as our our to have packaging foundry investments are logic road pretty of clear doing map. could their enable investments maps. advanced requirements stay of

Craig Ellis

today this year, comes on half in being XXXX, the of and that to and really something things next are that the second through be back it investments just of that an of clear seeing the there, year, And you're Mike, first in next some something the up revenues half in enabler, year, board shows of is on XXXX XXXX? half

Mike Slessor

customers' those they're XXXX, need where go look of mainstream some these to be to pilot have more. expect advanced be architectures it's our logic maps in and that be of R&D contributions can XXXX driving really key there investing at of now. especially and event. hard be a production. in year for ready will packaging to But they're foundry will ramp into discern some kind we business we to in things going later I'd from you But road product the it talking And about -- volume, that, be Yes, in, DRAM. and as this

Craig Ellis

when broaden of the Or out foundry lastly larger the customers of Makes of time-to-time, some could. customers ahead, do me, half to same and and in in it we half Logic, certainly, that of year look the But, XQ? the customers had to I breadth talked XX%-plus expect the if sense. about you Logic. we expect of some about some you the And market, the year? this you could then strong as we in you've quarter. Foundry be for as customers and next Foundry characterize think back were to breadth strengthening in And in back the From

Mike Slessor

back got that customers, of another, a we've see, you of if list. look the will often popping set historically you XX% think I sort

customers same design the sometimes the expect list. customer. business the we to XX% the itself business staples both Foundry that's continue is Foundry and is our think business because the to But interesting, customer. of though, the those house, be in in fabless it's sometimes, our Memory I The in breadth,

with Foundry, to number think form design the and of directly trying demand through so, serving, of we're set diversification breadth customers and to our and whether increase. opportunities to continues their continued factor. that a the drive And that broad I fabless continue And team of expand central that's breadths the the or fabless indirectly to customer test for and

Craig Ellis

Thanks sense. Make guys.

Mike Slessor

Thanks Craig.

Operator

comes you. Krish from Thank with Cowen. [Operator Our question Sankar Instructions] next

open. Your now line is

Robert Mertens

Robert behalf Mertens Thank on my Hi. of taking This question. you is for Krish.

seasonality? how know volume expect we patterns I First, of follow-up. systems then, should business? you product last have think headwinds would about mix this worked the mentioned, year quick a through, any you just late the but similar from margin been year And or profile engineering

Shai Shahar

usually the of look terms we two, closer budget than In in and customers pickup little It many that back QX, seasonality, if a And in fact the that think three you see a last universities little lower we have of QX. lower. usually relates to see years, QX I then to orders. institutions market it's consume. our year-end, a educational little are in that in to And

low when years, the we target. of the between we our least XX% where margin, will gross built for we terms XXs. saying, into XXs we at That's of overall took in what In that margin. to our Systems fluctuate business -- also the are margin model last that's long-term consideration three That's the the high

will that things On but what expect. range with within the we way there, fluctuate,

Robert Mertens

one timing Probe sort we the think And just you. and of when first business? of thinking quick the through about of NAND just around Thank products Great. of part any a business the new qualification recognition year, should then, new on and about Cards the

Mike Slessor

Yes.

this business really -- two NAND history. is the company at stage in has components Our

The the opportunistic us. business, NAND legacy continues to first which for is be FormFactor

are, of competitive. cost for NAND, We most mainstream not

Advantest seen a to We is after quarter to a so That bit cost that more probe NAND more go mainstream starting of business, assets acquisition Flash leverage products pretty about we you've the card try and little as of part the market. the competitive. lumpy. and And lot last has talked historically been technology, got of product the

beginning We're bit exercising customers' early still it trying beyond work at with in And that had time so, a business very millions on innings, extend we're the plans, revenue single-digit to of to qualification that the acquisition. option. little discussing

And several of back half line for any got 'XX. architecture and to the probably So, ramp. getting new a quarters, time the takes you into for us in win go then qualification and designs compete so industry

trying going NAND But you into that's that, So, sort progress we we we'll through updated, middle take part flash. to certainly in make of to as on go of exercise you that as 'XX. keep the option

Robert Mertens

you. Thank That’s all from me. Great.

Operator

you. Thank

Citi. Our next question Scarnati Amanda comes from with

Your line is now open.

Amanda Scarnati

Hi, good evening.

there? outsource just a about terms probe from looks to of like a in look card share the there, what percentage you bit little a both opportunity FORM achieve what opportunities can Can as like for of look total Just on to what TSMC the like total what that of And can terms of perspective talk their would business? in market TSMC.

Shai Shahar

Yes.

and I for But XX-nanometer, the think customer, X-nanometer, advanced because nodes for really goes we're on represent that really on. qualified opportunity that those complexity. focused There's entire nodes, little for -- FormFactor. very relevant so in-sourcing say, advanced of at the nodes and the and only X-nanometer those

to nodes, that the going from advanced opportunity it investments these is. continue WFE back we grow go to to so, and earlier And expect question about is in the significant CapEx where

and starting going more concentrated -- are million at in where up reasonably the fluctuations. was we rate. to customer's grow look against can But address you is annual business we to as optimistic run that the to we wafer that of advanced nudge designs to it's If on to nodes, quarter-to-quarter that more revenue long to we're $XXX those term. starts first Still move quarter, and see going nodes that advanced that continue

Amanda Scarnati

we can couple through extent if able been you're about talked capacity or capacity then, a And if ago. to you've still levels constrained the And of about capacity? quarters Great. up these that open at you talk new

Mike Slessor

are constrained. And in Amanda, it areas, on think, some we depends specific capacity I mix. product the still

at capacity large, But still these levels have and constraints. revenue, factories different in by with dynamics. are multiple We we of

Amanda Scarnati

Thank you.

Operator

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

Mike Slessor

stay of and We're us care safe. going there. and Take Thanks as at joining to we this everyone be you and again bunch spring summer through late go quarter. the hope of see to conferences early for the a part

Operator

participating. for you Thank call. conference today's concludes This

You may disconnect. now

FormFactor (FORM) 29 Apr 212021 Q1 Earnings call transcript