Earnings call transcript Q1 2023

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Operator

Thank you and welcome everyone to FormFactor's First Quarter 2023 Earnings Conference Call. On today's call are Chief Executive Officer, Mike Slessor; and Chief Financial Officer, Shai Shahar.

Before we begin Stan Finkelstein, the company's VP of Investor Relations will remind you of some important information.

Stan Finkelstein

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

and new of discussion capacity future laws. of the respect and anticipated US-China macroeconomic national upon assumptions of to chain; conditions; Securities technologies; COVID-XX to and to anticipated forward-looking health statements sell the regulatory those financial and of such benefits crisis including statements Examples within meaning which produce, geopolitical products; such the restrictions; Today's global, impact trade of industry acquisitions our based. contains products the pandemic; of for and the recent and in Federal disruptions trends; ability regional, demand projections include in potential forward-looking and investments with the the are statements impact the business changes including the our supply performance, develop,

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

May made Xrd, update assume today and as obligations are them. of Forward-looking statements to XXXX no we

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

Mike Slessor

joining for Thanks us today. everyone

due to quarter's, fourth to the range revenue shipments second outlook quarter from first FormFactor's comparable our the was pulled in quarter. exceeding

end gross improvement sequential margin the results profitability, significant ranges. at their and generated also of achieving in We top

remains anticipate the similar we that against quarter, diminished second we the stable at levels. demand environment results relatively executed In as

investments protect and cost While strong balance carefully preserve short-term with and profitability downturn sheet. our long-term this continues, we're quarterly results balancing to disciplined cyclical control

components capacity R&D as in competitive plans. lead-time our of and differentiation for new product equipment invest as continue well long increase the and in We to innovation facilities

to above-industry surpass These trough, current from and gains levels designed to and model. target then the of and investments growth are we financial produce our profit share emerge current achieve cyclical the positioning when market FormFactor revenue

Turning In now to segment revenue largest foundry level as cards, benefited the Foundry from Logic significantly customers. probe at and multiple first wins our business, in technology-driven details. we and increased IDM quarter major

expect mobile of demand and in these We customers moderation application second X-nanometer digest chips. in shipments some quarter tile-based X-nanometer Logic recent and client processors, ramps and production initial in as compute microprocessors, Foundry the their high-performance

leading-edge XD providing packaging FormFactor. Advanced increasingly and adopted an processes Foveros chips like on being exciting the opportunity Foundry are and for Fabric Logic

noted which probe the the for performance in required out good the of card. higher higher die and drive we've per past, number integration requirements As each expands test intensity, schemes complexity these both test cards which raises probe

dynamic ownership, short card technology performance production FormFactor's the that Probe ramps and customers' our at challenging these to meeting also a essential like fulfilling lead-times are of compelling cost delivery architectures rapid require. MEMS while requirements

In experienced to starts probe reduced DRAM elevated demand first as as levels. Memory, cards consume both quarter inventory of manufacturers wafer major expected, weak for we memory the and each Flash

like each which driving levels new with these to modest However, memory, activity high-bandwidth are and maps of memory design even in at quarter increase lower DRAM advance DDRX continues revenue. road expected production a sequential innovations the major customers third-generation second our and

demand new probe a levels lower probe card designs typically probe early the generating demand. a we DDRX volume at production This specific low-volume each for provides in of unique HBM insight is Since characteristics to consumable see designs are for customer's cards individual than cards into new chip cyclical and albeit upturn. activity

and DRAM broad-based beyond design base is our new serve activity customer across extends markets. and This

result, teams utilization full chip MEMS test adapt as a work we probe engineering our teams with engineering FormFactor's customers' new at their As to designs. upcoming operating currently card are design architectures to

HBM processors And when span the filters foreshadow designs projects and and bond design for RF and these to both and FormFactor DRAM. ramp volume. in acceleration HBM die to Similar single-die process X-nanometer standard is demand products SAW market HBM DRAM architectures. test Logic, complexity industry as and Foundry opportunity intensity packaging Fabric growth in DRAM XD well to diverse the Foveros These the and new returns exciting increases advanced growth an of stacking the test as of compared

they complexity key enabler number of increases good intelligence is in XX% their for with this artificial generative with stating die of more sales This customers year AI and the growth expectations for our out. expect to than further turn for DRAM increase year need this memory. higher HBM HBM major next for of because recently required cards probe a speed both also one application's

typically of strong design we our quarter, visibility by but the for than remains to new encouraged less limited, very With overall be relatively the we're the supporting stable across products continue probe lead with along a times activity demand card our industry.

across product from As Logic, Flash quarter-to-quarter and probe customers these with of experiencing across our details we Segment major products several outlook, shifts quarters are all business past for relatively pools the in cards diverse but top-line Foundry the compete and again producing at broadly and demand spending expect and in System demonstrated lab to us customers underlying we've results diversified our together the quarter. the is our portfolio second for stable markets, enables to overall DRAM, fab between evident

Shifting now Systems. to

our our revenue strong outlook levels the assumes in The record metrology. deliver computing advanced to and by again continues packaging and gross test revenue. second for development silicon near and strength photonics, and is market-leading record quarter products like driven first business of quarter results at margin quantum applications with measurement Systems Our early

exciting is photonics and segment. driver in Silicon important an this

with subsystems Our from leading integrated on tightly systems SummitXXX built turnkey and electro Technologies optical Keysight are CMXXX engineering partners and measurement like PI. our probers

next systems XX-plus percent probe new growth are Together debug rapidly market characterize, development with silicon FormFactor's customers a over driven speed And forecasts and to fab. silicon Independent on and optics. efficiency analyze production. years is photonics as undergoes co-packaged and our transition that from to power rate these enabling for this pilot center research FormFactor from photonics opportunity the derived silicon devices several lab the photonics capitalize by early data in devices well-situated electrical cards the the to the improvements

export in manage domestic to continue restrictions we China customers. semiconductor Finally, serving

with significant in to a US-China all As affected leading-edge foundry headwind technologies and regulations and a businesses. our recent the supplier are US-based controls of these by customers memory exposure export

deemphasize over anticipate of not to semiconductor strong advanced We export relaxation domestic suppliers their FormFactor any supply believe customers base do continuity. ensure China this This time US-China controls. trade headwind of their to business provides like persist a course and for foreign and onshore will incentive

and the I'd encouraged across XXXX. product like to close of our short-term, the reiterating diversified by stabilization portfolio the by demand of first we're that half in technology in

prospects model current per technology in is driven and and share revenue. like Over capacity from the the industry FormFactor where longer we're non-GAAP of term, and of by competitor, fundamental our an stronger confident we photonics. content delivers us overall the semiconductor growth the $X trends $XXX earnings remain cyclical for are leaner to trends excited industry packaging in well-positioned will and position downturn, that of advanced as in These FormFactor innovations invest and that silicon the and growth to confident on enabling FormFactor our a to leader R&D million commitment target emerge achieve and

Shai you. over to

Shai Shahar

you, Mike, Thank and good afternoon.

EPS the slightly saw and non-GAAP Mike range. exceeded our high end at revenues were end mentioned, QX as press and high As outlook non-GAAP range of and margin the release in of our you the gross

quarter our a QX decrease $XXX.X our fourth XXXX from XX.X% from million, First increase revenues sequential revenue. a were revenues of quarter and year-over-year X.X%

the revenues by DRAM by end quarter, Flash quarter. QX pulled The driven were revenues. from outlook was high slightly range, in higher to in Logic mainly revenues and or of card offset due an of were Foundry X.X% above and $XXX.X revenues Probe from million million second the in decreases the mostly increase QX. increase our first $X shipments segment

down in a record million QX, million from of and the $XX.X slightly $X.X quarter XX% QX. comprise were revenues revenues increase from segment XX% total company Systems fourth in

$XXX.X card increased revenues from compared to QX. and to revenues and were company total fourth segment, in XX% significant of the Logic a XX% XX% QX Foundry Foundry increase Within Logic quarter. revenues probe million, the

million as $X.X revenues in were in or and in compared of Flash lower $X.X quarter. in fourth the in fourth in QX, the $XX.X revenues quarter quarter compared QX as and million were $X.X quarterly million total fourth were QX. revenues than revenues million of X% in QX XX% X.X% XX% total DRAM than XX% of the to to lower were

revenues of website. XX.X%, basis margin the gross non-GAAP a table in which as a quarter margin release the Relations in of was first in the GAAP GAAP QX. our to XX.X% gross in card improvements higher QX. the gross margin of percentage margin for today higher in XX.X% outlined reconciliation $X.X for in XX.X% segment gross reconciling Systems segment. first achieved Investor compared in Cost On margin in was revenues section non-GAAP delivered We the and quarter of issued X.X to our million gross non-GAAP than probe items, the we and points press available significant also the included

increase points of processing of quarter, Our lower production to due is. is points wafer in relates margin percentage the factors; effect the the card manufacturing such improved segment better The first gross increase compared expenses XX.X% of probe increase was following the and percentage QX. to four XX.X% first, a four cost to in as significant net X.X

obsolete lower utilization. due revenue Partially to memory points third, factors lower Logic Foundry favorable three and is a Second, a and percentage a with percentage two point percentage positive and these reserve. relates is And excess three points decrease three to factory revenues lower higher to related offsetting more revenues. inventory mix

in we full year PTL first the versus annual plan the In terms of one-third QX. savings in taken QX, the reset. these restructuring in achieved impact savings lower beginning mostly of first cost, labor to benefits quarter of savings quarter comparing the offset the of typical additional by about the QX of and were In quarter a

Our was more slightly basis higher quarter, favorable XX.X%, than mix. a higher points and systems gross the QX fourth gross revenue reflecting segment XXX margin XX.X% margin in the

expenses primarily million for revenues quarter. similar were million annual PTO QX. higher operating first increase were GAAP is Our first or XX.X% less $X.X the $XX.X reset quarter the operating compared in performance-based taken. as $XX.X million with $XX million benefits fourth of to XX.X% or and for expenses The due revenues quarter, Non-GAAP the of to compensation

acquisition-related Company similar at all for levels non-cash million amortization stock-based $X.X million $X.X of for the intangibles $X.X and to the for expenses quarter. million of included first compensation, the quarter depreciation fourth

share in million for $XX million operating $X.XX income income net the in $X.X $X.X in with fully diluted GAAP million of quarter was compared quarter $X.X for loss first per million or GAAP for first compared operating of Non-GAAP $XX.X share was operating with $XX.X quarter. compared million net QX. quarter. a or income with GAAP $X.XX fourth GAAP QX loss million the diluted previous was the the per fully

tax benefits we our discussed that first XX.X%, in of percentage effective lower to X% was due new rate decrease to XX.X% non-GAAP quarter tax previous X% manufacturing QX. advanced the the In we the credits to AMIC. expected expected X.X effective rate call The than non-GAAP or our in for the XXXX to points investment earnings

expense a plan assets reduction accordance as in AMIC than regulations, expenses. our the proposed to issued life over we the of recently with the lowering rather IRSs' tax to However, benefit depreciation the our record

expenses outlook thus XX% above the recognized rate The the in tax expected line updated service have and since XX%. not margins depreciation for to be to will the We operating over be qualifying the of assets. the are effective benefit and gross material non-GAAP XXXX, in between lives annual our mid-teens to reduction

compared to reduced a or income goal or in continues net share current to $XX.X an QX, and be first per diluted took important diluted our the fully million at million contributing non-GAAP full QX. the costs at us fully we for profitability $X.X the Maintaining quarter to to demand $X.XX per share actions $X.XX reduce during QX of in levels impact

free to Moving We repeat and to flow compared flows. a of sorry the $X.X quarter We quarter compared let sheet of free free negative that. million cash flow negative of the million the cash flow in cash of $X.X had balance QX first flow QX. cash $X.X in had negative million -- negative in me million free $X.X in to first cash

of provided compared than QX. in both Cash million tax is provided cash activities customers. expenditures main QX was operating by in in the million the decrease during by million QX. to payments million $XX.X capital in reason $XX.X first from for the quarter activities lower invested payments operating timing our The $XX.X $XX.X We and in

on With the rate -- long demand. lead our in plan, capacity our core our equipment lower to and significantly place, continue still in increase rate placing drivers execute capacity portion does we strategy not facilities increasing to ensure underpinning service a at equipment of time a outpace slower at albeit

range We and million between expect XXXX $XX CapEx million. for to $XX

$XX State in years During P&L benefit California the from make in an as planned is headcount capital the increases we a five received P&L, the achieving plan grant of million expected benefit goals we the investment. of XXXX. we quarter, and which as to No of progress record

$XXX million Overall, million, down year-end. investments $X at quarter and end, from total were cash

million. one remaining $XX.X term of the a As totaling end the had quarter, we balance loan with of first

quarter, purchase end, QX remained buyback, $XX.X shares repurchases. under during $XX million first future buyback not additional did quarter available our million stock program. two-year the At Regarding for we

minus non-GAAP as revenue by outlook from in be our to Turning to plus revenues Mike DRAM QX of record segment. revenues partially $XXX mentioned, similar QX million. results expected higher expect revenues, the million demand and Systems second and quarter outlook, Logic offset or a QX This lower we revenues Foundry to with $X

reserve. non-GAAP lower mix card is gross to XX%, points. revenues to within favorable and of E&O The quarter lower basis projected be the product increased segment systems impact or is and plus expected minus Second be XXX by slightly segment offset a revenue margin forecasted less higher-margin probe

to outlook $X additional R&D. At these minus earnings to expect or section fully increase Non-GAAP the website to our ranges, million per today. as available to Relations reconciliation for of issued GAAP $X.XX, outlook is million QX $X.XX. QX $X on non-GAAP investments to our Investor $XX A plus QX of million, diluted be expected share with we operating QX is the or $X be minus release and to in the mainly in expenses compared due midpoint plus million press our of

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

Operator

you of first [Operator Chin question Thank Our from Instructions] line of the Stifel. Brian comes

Brian. please, question, Your

Brian Chin

level? revenue on do mix you. XX% ask of with in that, the how XX% of even there. Maybe know that's from levels pickup needed maybe margins role all the a say appreciate to trend up here. Good that or kind few start I the Hi, And gross the and to of gross questions. below drive to of half sequential of margins certainly that what a would in drivers those what second need more visibility, a second or part I I gross to afternoon to terms that year? although is everyone. caveats get apply will plays in margins, the in level revenue you let's likely be your Thank beyond typically would sort know quarterly But bring to limitations

Shai Shahar

take Brian. I'll that. Sure,

say revenue XXs. be level at XXX-something, a maybe line, the try XX.X%, XX% to We about quarter, that, XXX of talking I we a we're midpoint at the to I is QX. would I high in expect trend think if saw draw current

as gross once to to last XXX on margins If of you to around margin basis, get expect the back And target we go a of expect to levels XX% get we our be see we QX we these first level of the in around we to revenue of once quarterly XX%. model back million XXXX. half gross XXX, year, around saw

noted. this from this market going our mix represents continue probe higher need come increases to margin But line. support as I these line to and We you trend within this is the subject. to increase think cards Logic, trend based which thinking fluctuate to Foundry on on that It's mainly over business our

Brian Chin

potential expand Mike way Foundry that of ramps commentary that catalyst that these some think then be Is cetera? and start of maybe And of the pull year. higher on think the to to revenue in higher of the maybe et then the drove those follow-on kind as in or how to if way happen maybe Okay. PCs, are here bit smartphones, If XQ second well. and even to Logic. in little sort in ramps a pull-ins, revenues initial the of right sequential about in for terms to flagship against drive of activities from progress saw probe those of additional cards that maybe some pull-forward and could guess orders What's the that sort there's also QX, for half revenue, move here? you would right can about I

Mike Slessor

perishable to QX we really some I'll thought the the is wafer this One, that. a above if a very came it going range, the be to don't. top what is places. we The RF ship meet currently good If pull-ins three time, into revenue short led it out example, Brian, time demand of And we get on where we QX Mike. we Yes, products. from we're take lead there's on have net customer to can't specific business. end that we from time, it can ship schedule.

so are we'd little than where we thought those QX had might. we more ones And a in bit

client associated customer We the had specific to industry, that right pretty There's microprocessors in designs, smartphone, some on ramps delivery flagship a specific you prominent few with going ramps on mostly about. talked the accelerate that now. Aps, requests are tile-based

we'd in of we little until we those think revenue get of QX, out that recognition wafer And had some QX. a schedules some accelerated, bit. And didn't deferred

up of some given demand have forward limited have. think look in As these areas, I particular and half, if our I think, But customers visibility start be some see start we lead whether handsets, we whether upside. they now aggressively to you we we ramp noted very to they times as a be devices we see, bit could more in to the those pick PCs, little the client mobile second

the the we go as you which and levels, could part But lead the a year, we're as reasonably through we point, level don't upside. we're that demand stable term we're to the continuing now, talked said, the for in Right about, that factors upside but to. appear invest we've why sized this that to of capacity some of visibility operating be current part longer kind it's baseline of at to R&D. pleased business middle We any to have reason

Brian Chin

helpful. right. Thank Okay. That’s All you.

Mike Slessor

Thanks.

Operator

Thank you.

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

is open, line Tom. Your

Tom Diffely

afternoon. appreciate at really design-intensive chance first the ask the on constrained guess questions. you all, had forward? quarter. Good to I new on are going more this part your curious some designs like sound design, the during design I'm I Yes. the these point? of And are -- are you it capacity activity And strong

Mike Slessor

Yes, like feeding busy, are parts. foundry X-nanometer working so our memory, did teams that test teams with the make things next high customer the we on is the design This the us. very of and for some DDRX future of engineering devices bandwidth generation essentially, point essentially

probe design. design this now, past more cards volume years. couple ramping it chip to all customer although, had specific that's of are are right As work we've And complex each wouldn't much as cast things the for you being not significant in of on, than know, I going

to when high-quality can them so across and the get of designs a shifting we upturn growth them then articles future produce designs in do produce getting markets But very once able in ready, our design teams, in technology an busy to probe sure a in way. will we're cards, -- these and volume, that customers predictable handful customer for that ramp our essentially these work first we're making the industry, are validate, new end

Tom Diffely

itself? node of based activity very a a design specific much So on chip design how to versus is your to

Mike Slessor

different design, characteristics of team But to produced latter, X-nanometer node that basically envelope set good so individual when for go foundry then you the It's node. mechanical on that are designs those processor ramping customize cards that to design for right? and to year, to we're work MEMS able requirements, X-nanometer to with example, to all each going that's specific in the said, that probe electrical is that architecture have qualified it. high-quality get the or with that goes I the a a probe architecture, middle as is part to application ready essentially the the customer, produce of foundry, individual a our to fabless a in validated designs, right accommodate and chip example, on the chip architecture be and chip predictable You were way of a need the

Tom Diffely

Great. that is you moving a for you of And China, for you like it in And business was there? think to kind to over then, sounds kind China the time. how decline quarter? big do expect there of Very helpful. follow-up tail, What

Mike Slessor

Yes. It's interesting question. an

at revenues the you So, post go our regional our we down. broke do so Relations how in Investor on world website, look can

were China I something in XX quarter. think, million the like in we

it that's in that of quite we the to in haven't two is, components. always -- been that the while. region. That's a Now multinationals low shipments as is, composed, operate One

the large and to We factories both who operations customers, shift Logic they'll activity and region, and global have Memory is. their on depending where in those a some production large have customers operate so Foundry

And export ability part, as form leverage really over us to projects. referring out. semiconductor our figure advanced is, the still declining time with we're edge. supporting in Clearly, The the we're customers. factors provide and with controls, export supplier, limited time advanced the nodes domestic for a I'm line restrictions support that, to to And the US leading leading-edge China really and to trying

think our card intensity on there. complex yields high improve If where don't we're leading-edge about The need business, customers really those enabling nodes, have new has business capabilities to and great you designs yields. new designs, systems probe test

about trailing lot opportunity to China, talking not some that. WFE have where edge of the a so, we're manufacturers And exposed of in been

we're let's going pretty next de levels. years, I think do over to business call so, the drop that see And minimis couple to of it,

Tom Diffely

Mike. appreciate I your time, Okay.

Mike Slessor

Tom. Thanks,

Operator

you. Thank

ahead, go Our next Steelhead. question Duley comes from line David. the Please of of David

David Duley

taking have couple Yes. I a questions. Thanks for technology my question.

business, I big now with your know increases to. probe of wondering production product. your module chiplet I that now in module strategy card was as is that are far sort customers one that from Foundry card intensity you seen or and seeing production, a probe type chiplet refer in that you've might Logic whatever in what of As in

Mike Slessor

one in as in have talked probe speaking about Typically, cards manufacturers and past loosely a die Yes. about XX% of basis, intensity. a that's talked past what out. the we're This call is and seeing we've between well. we think number APE of I the on increase the some like-for-like XX% in test And the somewhere required per good

that One, into a you're And from to comes used couple chip different one chiplets. what fundamentally breaking of reasons. be multiple up

there, that do an you that so there done for requires cause an And buffer card elements that of was perfectly, be uplift If that, individual different probe and chiplet. cards need efficiently like increase. probe wouldn't an each the but

significant is associated something call close more really the The die. known the move part to with of towards increase people good what

commit have chiplet of very imagine redundancy the in each is to chiplets or want stack, to going not it rework these out you chiplets before that stack can turns you confidence there's a lot of you're high eight if together, those to it architectures. good You because

these die we're So what's package. they in increase And like responsible the test seeing. more XX% a for customers comprehensively are testing might that that's XX% something to intensity, really single than much chiplets

David Duley

Okay.

intensity the in for think, your applications. I memory, you're you kind specifically the high-bandwidth along in follow-up lines, probe of same prepared where seeing to it remarks in large a my referred AI-type increase As

servers number increase memory you the or X devices application. of might one X little just that? times I bit a of an have AI or about for said in elaborate more think, talk in server or you the Could Mike,

Mike Slessor

new a years. Sure. opportunity been you generation in know, for the pretty as over talk And the now high-bandwidth our customers HBM. -- couple for for the demand of modules. working of We're on AI a us has third had about interesting we Well, memory HBM designs we've

as a this we move through going AI. it's So adoption to be of cycle driver

is for on cards of architecture. chiplet HBM a consumables interesting The us probe is as that, a test essentially and part built provider

up You product. that have DRAM this DRAM to multiple die up die, are to XX HBM stacked end build

to XX And each with -- gets to stack Again, die. them. as die of be to want just needs for it because check those close to die goes tested. you each good same known associated four insertions And of the to required something extra die theme it built customers as have eight the being up individually over from die

in And DRAM previous so, quarters seen years. you've past in our

DRAM million. revenues A get with high-bandwidth exceed by to with close been Our HBM, of adoption ramps $XX that associated and has up lot in driven memory.

driving opportunity another advanced probe So interesting card up. intensity where packaging

David Duley

And as business your server? memory high-bandwidth much uptick that. a your from think follow-up you just that Do going since to there's of I'm sorry per memory portion so see is AI to a big more

Mike Slessor

going still us. is overall in a an their adoption about It's But, at for to think customers curve. questions probe point, in our right? is there's to I no that talked this in like card rate XX% that much HBM memory. We about hard the curve one how business open DRAM question of positive looks our early relation There's We're to and are talking say over AI growth question adoption we're no what directionally direction that But see. time, business. requires that more high-bandwidth

David Duley

you. Thank

Mike Slessor

Thanks, Dave.

Operator

you. Thank

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

Your question please, Christian.

Christian Schwab

great. Hey, Hey, thanks guys.

a on quick on high-bandwidth memory. Just the follow-up that Mike

and of the largest rates supply continues imbalance going market market that to customer off tweak and and XX% they're demand in memory they're obviously production buy before we're they going to then ton to So, capacity. your increase then equipment they the more after utilization a if taking and dominate memory get

drive AI million back wafers? longer as category, people still leading even that your accelerate I if a a assume probably in new cycle, commentary, XX low So, the CapEx memory does. right? and adding some customer But into your on for memory high-bandwidth side, it mean could spending DRAM the business we're should

Mike Slessor

sequential Again, in that second pretty there's uptick DRAM in the our think possibility. a and we're I forecasting here off revenue levels. seeing quarter low

coming I But of were in decoupled And up piece to cards, can is expecting A up probe first million example where round revenue of QX. quarter, in WFE. we a not the numbers for from think that. obviously come $XX another DRAM is to design-specific it's off about consumable QX tooling. be interesting in WFE design-specific

But quarter. right and do in wafer a up cyclical a ramp see of could enough Even the XXs second HBM have we strong again, uplift really in get helping to we with goes probe into starts, of of we're that the that memory associated We're a everything here. it's card downturn major is provide our DRAM us here quarter If per front not it us part highlighting term one interesting sure. and something becomes revenue. not that calling in the DRAM the and just -- opportunities overall in

Christian Schwab

And kind correct the the me out thing of in there silicon DDRX, working helping if is we wrong have for from fact right? I'm everybody Right. other finally that DRAM that's you

Mike Slessor

Yes.

Christian Schwab

So, movement DDRX working the be I long DDRX. should than memory a have there. there, how time. know, materially for for will higher silicon we to don’t have out We certainly the -- now will the manufacturers finally the -- But accelerate we prices because

Is than wind important? the at more back. that HBM more or more important that's HBM So, is

Mike Slessor

that HBM that a of part test is there's the wafer I become important good. packaging DDRX intensity driven with uplift HBM that I advanced because we built significant by associated more structure think more If AI, is on. is can starts feel see like of the there. lot transition a

slowest We're DDRX. still of been server the mobile probably my note, DRAM both and transition, higher, data in architecture career. in transition server the DDRX a are doing you amount in -- reasonable mobile but it As on rate ASPs PC has

Christian Schwab

my Okay. And question about then last slow migrations. talking

have trying market rolling of versus in in lose with to fixed Your it's of compete and out possibly X-nanometer have largest their five a a ALs four the share generations years customer appears to everywhere. new XX-nanometer and chip chip chips process

guys that suggested growth they're you you saw successful math. I just sequential It's And previous your industry could good of surpass So you in news your that's materially model saw the correct? prepared some for expectations. kind you in certain there. If comments trends that

Mike Slessor

Sure of course.

I'd success. a quarter. customer But is a neighborhood and is industry our We a to technology key have will $XX benefit our pioneer The And important execute above for things on and in worked segments. whole up technology think business they're as right platform goes work really in the also Foundry the business systems accelerate pretty hard they and a the growing argue to driver like FormFactor's elsewhere pushing how customer and million growing largest obviously leader. and example if on good architectures diversify the it's right? different always base technology tile-based now There's able by been industry a for I Logic forward.

Christian Schwab

Thanks. Thanks. Perfect. question. Great. No

Mike Slessor

Christian. Thanks,

Operator

you. Thank

of Ellis Our next of question B. from Riley. comes the line Craig

Your question, please, Craig.

Craig Ellis

the how more not points color their prior XXX maps The on I question guys. basis XXX of mix that the for have so trying increased Mike mix much this programs much may the customer question, that consistently Thanks that executing how of up about picking would year have you quarter-on-quarter. to start or had or share to nodes? more see you maybe great in programs that point basis the far thanks in year? gain customer. better to off is win road Yeah. last with on of this wanted year points their the the own form increase knowing for that been And all It and with just customer to at is back the taking and consistent share new that largest last was are question just

Mike Slessor

Yeah.

recommitted on board share in to you share. Logic our some really share lost gains compensation on we've people share we've market for it's important team and changes a think right? become the changes, has our made focus across the we certainly But to Foundry biggest changes and and I that, business to initiative organizational call very market secret with been XXXX pretty primary this also no to the ourselves It's that competitor. us, transparent in people

As won our you can note and the QX, shift the a You that designs your share a did different one-quarter years won depending that over is in have competitor who's it's good in market been spending who's given share we not improvement event, on there, but can designs right? any different you quarter that that incumbent. experience see

in customer be then with customers major both to to our we largest across continue for in is the and compete Foundry but Logic competitors at this our area So in of going major customer continue to Systems. base Memory an and our as focus FormFactor

Craig Ellis

there's that recapture considerable gain So you you is it with say think that in was there to the that customer? fair XQ happy you're to to Mike a to short still extent share go ways the until

Mike Slessor

Absolutely.

we've would I think progress. some the call there very accomplished. way in we QX, small make I what steps to think about forward in much with was but it is you is need us This satisfied work in a It no like forward. progress way seems

Craig Ellis

different question And see I message. DRAM. might a a on and second how of it there's you frame been inquiry and reply. Clear try Okay. then up I to lot got the know way just

and model were could the be the fundamentals DRAM industry quarter in seven-year XX-year and are at in off first my DRAM probably in the at frankly least at lows So revenues model low.

build normalized but to The you getting the about levels. look talk memory So just is of memory, cake? bit were are at part obviously to As part outperforming historically DRAM at mid-XXs a of XXs small revenues server I can a high layer industry, very question think total High-bandwidth potential little but more you low pretty intensive. the more this: back level, you is how

normalized getting more on time, level, do DDRX that is stack is getting other particular a how to shipment pieces a And volume smartphones? and but just and looking things? you up? much as not the going much How into is a much PCs -- to back how Just how be see, lot for

Mike Slessor

Yeah.

some think persistently weak. consume are still it's demand build it's our going customers said, you cake if Obviously, think of of end-markets require the to And a to layer I are under couple I out clear all the that that's inventory of high you there. try as shifting DRAM in and very things.

DRAM that to but layer So supply a the to that's to all customers much when back piece demand of first is ship actual slightly probably different view essentially mid-XXs. the first and there. the is happen to of the start that, They very to that seem that's the out happen thing has have going and demand to into cake balance get and back getting our

will that DDRX drive designs. The of new some about the question talked memory second piece his stuff in Christian

in think see require there's a fleets piece to of more certainly mix probably significant of DDRX a the bit. designs adoption now. the mix in memory new of amount DDRX If And I a cards. New But DDRX we little probe is that. right off that take

for cake I'm And example industry piece and innovation third the excited advanced forward. stack back-end about packaging it's the its comments, map technology underpinning AI are up another is layer that helping enable it yet integration my is semiconductors to be then, exciting you HBM. because moving is and And fundamentally which It's drive it. from game-changing and to part the of most road probably world inferred the a the we to cool is

when finally, then think advanced per probe noted advanced and our you basis. it's card star opportunity a wafer on the high you outsized us for And about an intensity packaging, associated packaging as with

things up icing So now us. these the for the think bigger of a becomes on but I it's probably the right all part line probably if cake cake

Craig Ellis

question. last then Got it. the And

was been feeling revenue wasn't the Just that listed haven't the last that And the the why both five as the Logic of I other business? on about because can customer's Foundry simply you're dropped quarters, over they looking any and and on reason at you side noticed Is or supplemental on XX% how comment just then customers. of there materials Samsung one they off? DRAM

Mike Slessor

been QX. out had few awfully they we're the close, numbers list worked way the XX% list. And a the XX% didn't just on We make in that Yeah. then, that the customers right have

So I significant. anything wouldn't interpret it as

we're topic, drives share and across Getting back delivering apply incentives the that making the We've made Logic refocused share on technology share gains. processes our board. about refocused to Foundry comments in the I ourselves our sure that

are have so into you two R&D. the segments we're investing those really deliver are to are suppliers in that able And These only requirements. -- advanced where

So up have time. charge that value compelling and margins the gain deliver for we premium a can at products gross we to share same customers drive our

Craig Ellis

Thanks message. it. Got Clear Mike. for help, the

Mike Slessor

Craig. Thanks

Operator

Instructions] Thank Thank [Operator you. you.

the Krish Our Cowen. next of question Sankar comes of from line

line open Krish. Mr. Your is

Robert Mertens

I less the talked gross of for to margins and expecting contraction start questions through with first side looks congrats a This off, DRAM shift the my on bit industry sales is we've quarter and the a on Robert taking XX like just to Krish. but, navigating Thank about Mertens things the the difficult slightly compared more it basis quarter. in you for margin environment, and June to Foundry you're know, guess I and on mix the down point it Logic

incremental takes plan the June expected and margin reduction some of there? that cost efficiencies quarter puts are or guide? just from Are gross in any give manufacturing margin there into you drivers Could baked the the

Shai Shahar

the similar items. is reduction impact us so So, talking cost The in of into already most baked you no levels QX. listed to continue QX, so changes about production restructuring there. We're

move that overall XXX versus the The lower of the -- factors them. We're repeat a midpoint is range you talking I XXX. the can to lower about. XX in midpoint of in things slightly XX.X QX QX about revenue, talked the is

negative impact. a has that So,

a And because last The we higher lower systems margin that partially which in high of less Foundry for the normalized after means by Systems segment the we And QX expect that are E&Os and year margin Logic elevated of also but impact. these and negative QX, has higher a the highest offset record Memory fact impact in have in in us. still kind revenue also QX gross P&O expect QX. and

Robert Mertens

Great, more I And one got can. then it. just if

broad-based it performing of that obviously, technologies In of demand handful parse any lab-to-fab of it's specific terms business? from was on or sort systems different a R&D just I of capitalizing business, if of or to trying side current way a well strategy. and Thanks. there's in the the more strength the been projects components to really the lot is out see

Mike Slessor

The systems business be does to pretty tend broad-based.

talked about on photonics. silicon Last with about bit. call thematically We've we little this a silicon technologies. carbide new dealing talked I think call You're

investments Our metrology and computing bucket, are in in packaging inspection for cryogenics as that well. advanced quantum in tests there for

So, spectrum of it's pretty broad a applications.

of been the now. theme out I think some us to you're them and because to equipped us the value some image nice years business common examples which systems CMOS like into -- working come into to that products. early fab get we that from we've their for things are go But the them very customers to is these to get several production better taken of have they when development, systems engagement and going foresight that probe from strategic will get card with And applications business of turn deal gives to in systems VCSELs with production engagement where the them sensors things business production

seen is nice And The other good growth buffer margin good the noted, gross financial we've customers design it's cyclical activity downturn semiconductor in profitability pretty in contributor. a card Shai out helped on and which especially to design the which pretty the industry downturn ramping overall business, heavily with products. activity, pulled some of new piece obviously, have new the the probe but across line industry on back growth the ramping as levered it, given the that significantly nice new current

Robert Mertens

Got it. Thank helpful. That’s you. very

Mike Slessor

Thanks.

Operator

Thank you.

the from of Shi Charles line comes next Our Needham. question of

Your question please Charles.

Charles Shi

various and with of you a for taking higher-level bit through ask corners you your going question. me. asking I'm Thank very Shai, think quite questions to Mike ahead I about of Thank went Hey little few business you. analysts question. my a detailed questions several

got I the optimized existing reduced the year some on got adjusted about half downward. second last design business terms the way down surviving starts in the think actually volume design the getting of you in mentioned design and projects

volume on you starts to I So, starts? that just in Are design the back? thoughts those I you. back design but get to not to two in we the design May? want do Thank may early see early What specific stand in where yet you of as and coming volume Obviously, just some starts regard. each ask want terms come vectors

Mike Slessor

it we on Charles an Yes, touch in it to because tried interesting prepared and -- is the question remarks. we

new activity. very We strong are design seeing

make articles cards for volume. probe validated with this have new So, we is our they their do teams teams and are sure to first when test designs where design working engineering customer ramp

Now them and are well, volume. a ramping on at that lot of the there's not things volume, can not count you ramping they're in high –

the they be ramping well wanted to us point As aren't volume, to for return activity. levels return in customers' overall design revenue. Even we from and a see ramp these our this new can growth of when we designs our But have narratives out from volume. industry to you industry ready that really seen from new people to to though does these things position

The didn't quantitative downsize full operating which QX teams, piece of our we at all in our at capacity. really design in are it restructuring

year. drive of we're or that's going year And in forward now. ramping you model. as down. if through way part towards activity middle on are it we're to situation different to industry And the very ready late target When the a our say does as to I'm the designs this the next so designs the going optimistic some than revenue won we said, we've not growth trough that a they was in second ramp, Strong the are half we design return when be it's like but these year, help feel pretty that

Charles Shi

high-performance want mobile. ask specifically Obviously, the here and the microprocessor to Thanks discussion I around to want for Mike. to I a of revenue bit. part exclude about compute exposed the

RF you? on On going QX for SoC did or shoots, the I green any in But iOS your Thank in mobile seems the side the there or moderate exclude on seasonality in you be side business do recovery think Maybe side RF let's side are QX, of to business hear of business. side? side, into seeing some Because see mobile you. the pull-ins but the for the some the you of SoC business. other I some mobile you right the now QX

Mike Slessor

Yeah.

if for but a mobile big pretty over been have several you pretty to from end And FormFactor XG an look growth weak both also years, standpoint, driver past us. adoption mobile right and the a market is at us handset So now broad-based. that's Obviously for from standpoint. handset component

ramp the we're that is part got of technology mobile the things here the the place of One sure the industry. making aggressively pretty designs on in in to on year some in processor the application major we've of first working

there As we've new requirements are they move deliver. had to X-nanometer foundry some platforms to there that

QX. to of that a contributor was Some

given need whether we digestion application But to here broadly, We said more I see the or expected we volumes we or side. RF it's bit SoC QX processor in little of component ship. the a think

a drive Android iOS and handset broad-based I in think the really to to we ecosystems see forward. to business return need that the both growth

Charles Shi

you. lag it. just Got is numbers. of business? the I the want lag it quarter QX expecting QX think like if would the are may. low down, ask, a the looking revenue another lastly modest go is growth watermark at you here the into thought still Mike, you second already I for I looks but expecting down you when middle the the DRAM left the there Maybe the Maybe that year? down leg Thank another be were more year to DRAM of in business DRAM maybe into half or to ago,

Mike Slessor

Yeah. QX We're DDRX the turn not This QX specific associated some weak activity and to move really HBM not very about. calling with that a in a -- be clear move we're DRAM. sequential into QX is we of -- the up off talked

better going to a situation whether have ramps in to DRAM return best we The gets think feels still With releases this is of shape is growth. I that inventory new the we're customers. moving trough industry, the and out along until the of and with here product in on a like gradual more inventory bottom it's growth, lead be and me our case the times to the trajectory now the consumption jury with

Charles Shi

I owe Michael. always you. as the great Thank Thanks color. for

Mike Slessor

Thanks Charles.

Operator

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

please, question Gus. Your

Gus Richard

Yes. Thanks for taking the questions.

little bit types that ASICs talk beyond about or some of just apps and to about the of sort have X-nanometer out than the probe processors broadening of to Can You in CPUs? processors GPUs mix more just I'm the less talked those other AI is intersecting designers intensity silicon. you transition a or wondering your apps transition card

Mike Slessor

processor right Yes, now for us X-nanometer is focused. app pretty

session. to that really right? advanced If HPC towards good have set is back it's and A that mobile is. packaging, tie known is test going intensity how of question part or we it die talked depends and part on their the in a intensity whether relatively an compared X-nanometer trend to that's Q&A for the example great used earlier On test customer the of the a higher of the die it strategy details go a to about of what I'll testing chiplets overall monolithic because

So thumb a of say significant advanced of intensive I if there's apps say would for being more but in I product broad-based drive vice increase there's that processors HPC rule wouldn't testing… are than up the any then end packages seeing -- or we those a end versa, to chiplets in

Gus Richard

Any And see silicon months? your of months that in Is color your wondering unfolding is photonics how close systems vendor? customers comments. it how business commercialization? the any next light prepared I just that is to it. XX highlighted moving Got or you -- I'm handful you to think just in then over it X a around

Mike Slessor

in customers are that already of a Yes. that’s production. couple reaching Well -- a there probably are --

niche they're Now applications. pretty

exciting us this I think the part market. for and more seeing we're in customers more is potential

be P&Ls when's it want frame affect co-packaged is materially our probably six months than P&Ls value closer are in into the to it them and architectures. going customers' you As it awfully going time our optics to people benefits gave. XX look at to if you that's to The months pursue and integrating the speed center the of compelling. But benefits, data power

Gus Richard

Okay.

customers Okay. that are And this point. this it's a doing handful of at

Mike Slessor

Yes.

Gus Richard

so Thank much. good. Very you

Mike Slessor

Gus. Thanks,

Operator

to closing to now back Slessor I Thank the remarks. turn like conference would you. Mike for

Mike Slessor

Great. conferences and of questions state. to Have the industry questions view one more for answer and of to update you current this the that as Thanks signed you our those everybody downturn. for some Thanks and do cyclical up months to we describe progress take joining the care. us We're day of FormFactor's hope today. of June sell-side in allowed May several see us and to a through be great at able so on we and work its

Operator

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

You disconnect. may now

FormFactor (FORM) 3 May 232023 Q1 Earnings call transcript