FORM - Earnings call 3 2023 | FormFactor, Inc.

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Operator

Thank you, and welcome, everyone, to FormFactor's Third 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's a 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

benefits discussion in performance, laws. of respect future geopolitical securities to macroeconomic assumptions the forward-looking the those most of and capacity projections risk the upon subject those could statements materially and products expressed which statements statements Examples cause differ today. within our uncertainties in meaning the website and and this such ended the Today's of of contains financial based. investments and press federal the include and sell forward-looking and acquisitions and on and with known is XXXX, actual the call. contained statements and in reduce available which and to factors December uncertainties are conditions, regional disruptions global, are health XX, of chain, impacts restrictions, on issued the technologies, demand products fiscal anticipated in including potential new the the recent filing from during including for trends, are unknown These the and changes, for www.sec.gov pandemic, trade are the in SEC national release COVID-XX SEC's risks Form and to recent such results regulatory SEC year filings, in develop, crisis, Information with other supply U.S.-China built the at XX-K anticipated on our impact to industry of our business our

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

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

Mike Slessor

outlook foundry quarter Stronger-than-anticipated probe FormFactor's earnings near call. and coupled on third range. top and earnings high This, our record produced our of systems with end above us per third joining share the end with revenue for expenses leverage demand higher-than-expected for gross in outlook everyone, revenue non-GAAP logic our Thanks, business, operating cards, quarter of our together the for margin range. produced

revenue that the throughout overall our an sequential due We continue outlook at decrease environment operate in we've in experienced demand reduction revenue quarter the completed the we systems of today. Camtek segment to relatively weaker is remains stable range fourth customer to to probe offset due to and XXXX. by FRT short-term The logic stronger card demand in sale moderate probe from reduction levels card which DRAM spending, foundry and a partially demand. in

bottoming We're for high-bandwidth and encouraged downturn in in strong continue to broader short-term road signs our sustains sheet. like continue applications mobile. R&D long-term investments product like environment, cyclical tiles, advanced of most disciplined PC control and memory balance results we and packaging volume profitability our high that carefully innovation in to -- important end optics. product our near-term map competitive and chiplets and new investment quarterly with prioritizes and cost co-packaged maintaining most differentiation, by especially for operate see in While client demand, markets we In no this of and unit our we're a balance acceleration high

between facilities As our slowed completed and capacity to you'll lead long we've required a hear CapEx increases demand. majority from ensure reach model have target time anticipated and Shai, better the financial of capacity our the to balance and long-term equipment our

corresponding design demand cards profile. starts demand FormFactor's probe are for business, can more largest incremental a intra-quarter a for as designs cards. major Foundry individual customers ramp device-specific third in level provides acceleration Because consumable, details. to each key now and the than probe insight originally the delivered customized growth higher-than-expected segment for quarter sequential wafer Logic forecast. chip chip design, probe into Turning cards, increased specific our drive aggressively This several

these quarter mix compute cards specific FormFactor's production quarter, we did a applications, than vertical to significant as major volume. high-performance experienced third products quarter. requirements delivering cards intra-quarter their the demand less quarter wafer demand for plans space, demanding card utilized new in value our are our chip strong ramp the we in testing start probe times lead current contribution third meet and X productivity, are experience HPC we the quarter, smaller from designs. [indiscernible] shipments dynamic expect our strong do We to probe changes designs, foundry demand foundry third quarter customers. correlated can wafer In of the Since differentiated customers' to power as fourth and speed MEMS for probe In is a Foundry in

In delivered Microprocessor Like quarter tile-based probe space, example cards client probe accelerated the die a high-performance major is This as using processes. within this shared, their demand. driving packaging third into a just leading-edge customer advanced tiles advanced foundry wafer expanded testing cards assembled to we start compute multiple This plans for PC design. business. of for the great on how the I increased packaging demand customer demand design higher our client is or chiplets end meet FormFactor's microprocessor single from PC a example is

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

performance cards, memory, a FormFactor's technology weak. at DRAM like times probe while these meeting are remained we of demand short for cost expected, to overall as stable challenging compelling on experienced lead ownership. Probe card Flash requirements MEMS essential architectures In

intelligence similar current the was the rapid generative in as designs, DRAM by expect HBM-rich fourth in memory as quarter, artificial enabling As in a the second revenue driven third-generation are we high-bandwidth quarter. profile DDRX DRAM and well growth which

one cards is comprised of bandwidth revenue in the memory our The DRAM where profit, HBM our half of customer positive mix product evident the than more impact to third testing high in probe that largest customers quarter. for

packaging illustrates driving results. the example need for discussed is advanced microprocessor test FormFactor's cards sophisticated how tile-based in to As I the earlier, probe HBM

XX chip is each a of XX, processes, As advanced DRAM assembled die, such with even and hybrid packaging vias through X, silicon reminder, HBM as stack individual a [indiscernible].

each ensure stacking various intensity DRAM leading the process, card the assembly during DRAM To and die prior a overall of and points the at probe component test die test substantial probe customers out. stack multi-die to good per and the increase probe yields to higher stacked in chip,

In addition, standard scaling the technical speeds requires for than DRAM thermal higher involving for tests unstacked test challenging these HBM significantly specifications. advanced more products and more are

grow, significant probe based and market of our value profitability adoption meets MEMS by accelerating the requirements, superior share SmartMatrix differentiation our performance drive FormFactor's to these generative as HBM FormFactor. to We both card for advanced gains and customers AI. capabilities will providing architecture believe driven continues

Systems. to now Shifting

This optics foundry photonics, fourth enabled to by driver photonics continues customers our delivered show the and important As demand engaged with system a in shipped to in We're silicon to development leading of strong silicon to production. exciting were the in early co-packaged for we driven silicon our from FormFactor's by we metrology. the anticipated, the test record Co-packaged be business business. photonic photonics systems early an Systems major R&D and CMXXX for And like future quarter, transition that a of plan low-volume low-volume business production. and remains market-leading and products to support applications current of packaging revenue advanced as third quantum out for second quarter. measurement computing pushed quarter silicon

map both test over increase and cards probe our electrooptical next the several these delivers years, customers photonics product improve silicon our production systems As from devices yields, consumable to seamlessly lab-to-the-fab. volumes and transition road enabling to the

metrology all from We this for the business. segment FRT worldwide FormFactor revenues do and want thank in substantially team term I reduction medium acquisition and we the third the sale expect work levels Systems record in forward, following value contributions Moving our to creation. the XXXX due of their FRT our to of growth to of quarter's business, grew

are allowing inspection continue to transaction Operationally, the FRT growth. FormFactor's next scale we unchanged. and but with growth capacity packaging, and [ of later, the microprocessor strategic we a established with expand priorities businesses M&A evaluate repurchases and our will in Camtek's and to ] a metrology together robust the enabling tile-based deliver to like co-packaged you reinvestment stage while realizing earlier. on allocation initiatives R&D remains leverage FormFactor's also optics of scale one market Financially, of offset resources targets details in update share advanced maximizes team funnel and the focused our the our pillars shareholder to return and focus value in and that Shai examples to served markets. us the primary I enables significant M&A by transaction of technologies leadership broad shared and capital on our where dilution of and addressable have complementary more expertise add investment

revenue. near-term FormFactor stable the In as innovations and efficiently co-packaged excited in in term, growth closing, our and portfolio. technology bandwidth we demand product across fundamental exciting like remain semiconductor chiplets, see in overall, relatively operate and diversified the what Longer growth the a environment memory cyclical FormFactor are we by our and trends prospects of content for driven the we we're $XXX stronger in confident to industry continue leaner per that to on model an is technology as enabling of earnings target a of share positioned our and well current competitor, delivers [indiscernible] confident to photonics. and from These FormFactor downturn, capacity and emerge and R&D that achieve silicon non-GAAP industry $X investments leader, million position us

you. to over Shai,

Shai Shahar

Thank Mike, good you, afternoon. and

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

decrease a Systems strong QX our Probe increase revenues and $XXX.X $XXX.X the million, decrease in benefited comprised and million the increase million DRAM [indiscernible] year-over-year million driven down The range higher million from Third in segment partially segment third Systems QX. were XX.X% by second segment by probe an revenues and both revenues, quarter, in revenues revenues. value were XX% million and of QX. quarter quarter X.X%. the Foundry QX. sequential in revenues, of XX.X% and from offset A was were a revenue. and increase $XX of XX% record cards outlook or cards increase a $X.X $XX.X from a total $X.X were of slightly revenues below revenues in from Logic company

revenues $X.X were XX% QX quarter X.X% as to quarter in in of of compared second to the of the million revenues in revenues segment, second compared as decreased or the revenues million, decrease second from than XX.X% to $XX.X QX, of the total card lower XX.X% Logic QX. a second and Within in company revenues Foundry were than $XX.X were the million QX compared quarter. in Logic million XX.X% $X.X to QX total in QX. to a and X.X% higher probe revenues in Foundry and revenues Flash quarter. quarterly $X.X DRAM XX.X% total and increased million were increase XX.X% in

margin third GAAP X.X On increase and the gross we high quarter the our end compared range upside margin the probe basis, our Investor was higher of press of gross result X.X the as for segment items, in above release XX.X% issued QX versus in were our XX.X% today for million on included range. XX.X%, The of card QX website. to points a third margin higher in of gross in outlook was margin. of GAAP to gross non-GAAP to Cost non-GAAP points of a QX. as percentage revenues the Relations section compared XX.X% percentage and than which and outlook our the quarter available non-GAAP table $X.X reconciliation the reconciling outlined

third margin quarter X the decrease. higher increase gross points XX.X% segment is increase percentage QX. to The main contributed of XX.X% in X.X was the cards revenues net X from points the to percentage due in factors: probe an First, to compared QX Our of effect

higher mix. levels a factors to these Partially favorable utilization Second, product point positive less was production at X.X points factory percentage slightly related X.X improved X percentage increase. a contributed offsetting to

XX.X%, Our XX% basically flat in was a QX systems gross margin quarter. segment the with gross second margin

a to of $X.X for GAAP higher million to operating fair expenses to FRT were as million and timing the Our grant third $XX.X quarter. reasons the business. were sale grants related The $X.X in the main and transaction for compensation of stock-based expenses value million second higher million quarter $XX.X the date increase X compared of the related

month quarter transaction adjustments. purchase As and operations today previously to into the the for disclosed, we agreement to The results include outlook cash of to subject FRT sell million Camtek for customary entered QX the $XXX a FRT and closed will price October. during the of in for definitive

of million revenues from and after The relates in proceeds expenses declining Non-GAAP XX.X% QX, higher are the taxes, prior million mainly $XX.X Net compensation. for third quarter. performance-based $XX.X million as from to to be expected quarter to transaction $XX adjustments, operating with the the approximately were expenses XX.X% compared million. in increase $X.X

noncash million assets quarter reaching earlier, higher was $XX.X for QX second compensation, $X.X second depreciation million million of in for to the than million included stock-based of quarter. expenses million for intangibles, said in which as third lower intangible amortization full Company than acquisition-related the certain and due amortization similar I $X.X $X.X the quarter, $X.X to the

previous or with million for million for GAAP for $X.X QX. the was second third the loss quarter. in in $X.XX diluted share fully QX per income income the fully million $X.X was or of GAAP or million with XX%. share of compared million compared compared operating GAAP GAAP of million was $X.X net million $X.X per $X.XX in quarter diluted operating income a $X.X net operating third income increase the Non-GAAP quarter $XX.X $XX.X quarter, an with

tax lower than normal discrete basis items actual XX.X%, XX.X% the estimated differences for due non-GAAP between quarter, effective quarter third points in taxes. mainly The XXX arising the and the second rate was to from U.S.

We continue our expect XX% annual non-GAAP to be tax and between rate effective XX%. to

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

in is free $XX.X of We to CapEx expenditures million QX. There to and decrease cash in significantly main facilities compared for model. capacity compared capital for cash balance The $XX and investments Moving [indiscernible] XXXX flow reach to [indiscernible] our ensure million is completed of generated range $X.X was quarter cash equipment our target invested to $X.X million sheet $XX.X capital increase no the the in is the down in with but we of of in payments, million slow The previously million CapEx the We in decrease in required QX expansion to third change financial has a quarter partially long as QX. $XX.X expected flows. million this of the third due to free million. timing during the flow in to of our also expenditures. majority communicated $XX aligned to have intent not capacity reason

Overall, end, increase total cash QX. $XXX.X of million and an million, were quarter investments $X at from

of end outstanding quarter, $XX the third we loan of X As the million. of a had with balance term

buyback the $XX of under October XX, million Regarding program stock million buyback, during million that in $XX the program X-year XXXX. not new approved authorization. remains shares third our quarter, share a QX we did approved On in which X-year repurchase Board available addition Directors purchase existing $XX.X under our is to the

reminder, purpose As from dilution stock-based the share repurchase offset a main compensation. to the of program is

the to quarter non-GAAP fourth outlook. Turning

the lower to We revenue business $XXX of QX is approximately end expect metrology $X October. FRT to QX midpoint or expected with of of QX, plus of in million. million at sale At range, $X of outlook minus million, than revenues related decrease the be this the half the

partially Relations $XX offset million, section minus be the our operating non-GAAP issued minus and Fourth gross diluted release non-GAAP plus lower QX and on plus quarter points. outlook to A is earnings to XXX midpoint Non-GAAP minus margin our available fourth quarter these for QX plus the of also reconciliation is million. by the per At of Investor XX%, $X.XX. in is in DRAM revenues. we QX to share to website We of be press $X or outlook expenses $X.XX an or ranges, expect our fully GAAP in or today. expected be expected Foundry revenues expect basis Logic increase

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

Operator

first line TD [Operator Krish from Instructions] Our the from of question Cowen. comes Sankar

Sreekrishnan Sankarnarayanan

mix that gross question more DRAM that but are has I is HBM. also more strong. first December you cards the quarter it's probe the you Shai, under was the HBM said impression said in Michael, pretty margins

it I'm just still help that gross [indiscernible]? wondering, wouldn't overall is So Or below margin?

Shai Shahar

the lower designs that take or I'll expect lower be we is and of but It's and DRAM it's do general, be other HBM margin revenue Foundry than that. gross Logic gross could end general, or margin to Logic true than DRAM in QX, systems expect Well, on that Foundry or HBA in margin. the And gross flat. higher the lower in range higher still, we and

why margin all we that's this that's QX XX%, So and together, accomplished slightly below of some the for if revenue why -- -- is you outlook we XX.X% range lower level -- take QX. overall gross the in

Sreekrishnan Sankarnarayanan

is assume ] a Got we of Shai. And market was the today? more bias? Logic as And question increase Is the it, it. applications? get said to to Foundry largest share kind you I'm it there September market a logical Got fair for quarter, NPU with the AI share and of then is what quick Mike. [ foundry, potential curious In there's some your strong.

Mike Slessor

Yes.

the was we in September think ramping business. tile-based drove adding Logic we in I of the a on a designs some the commented the But to Certainly, highlight X also foundry that chiplet-based strong pieces some Foundry and in or quarter, high-performance strength. the highlighted compute space microprocessor results. client key

to share As memory, our and relationships I it market Logic, the market, one in the some of strong on we gain leadership. the look at be very And Foundry the is making share and think some there of company we and investments market customer with foundry, Foundry the key in have customers. is we're industry, key Logic based the RF, opportunity strategic those across whether pillars

Sreekrishnan Sankarnarayanan

Got a market to Is you, way there that quantify number or? mike. share

Mike Slessor

Yes.

consumables. chain to through need the our beyond. was have Foundry a competitor for move in because in they I customers key about around quarter-to-quarter. have are and XX-XX say moves around. can suppliers primary win They any Again, pandemic us would it probe X major a A in that think design-specific most it design I cards learned supply quarter for lesson window. and continuity, Logic hard and

And so we're most And are of window. in think the of most there these window. that major upside offer for opportunity a of think in this And competing I us. customers, couple that were I in exceptions customers

think on currently was I based QX the we designs the X because data pretty strong performance these have. of

Operator

the Brian And line Chin of our next comes question from Stifel. from

Brian Chin

against a about in normally that of fourth what's of And foundry the activity maybe you side the maybe is business, stage, volume the Is normal logic guidance. characterize? something the in to might terms Ask design Mike, the to of at desired, on quarter implied leaving breadth the thinking order be few pretty questions. of way of designs that kind the first, a fair activity but release still see versus the just this guidance. these

Mike Slessor

hit on the this head, you've Yes, XXXX. throughout And has Brian. it a been theme

peak a each a for Our of of of designs design be throughout reorder because Those customers, revenues these individual as the very we card that are is a and microprocessor still inventories Design microprocessor, the parts after. probe couple first into client-based client it customizing that tile-based easy and of volumes the less new of continue examples the than to kind design. pretty is not except we're behavior chip [indiscernible] industry. a think And we cyclical unique somewhat understand to various the our the I utilized. XXXX teams like design and counter elevated be that are pretty HBM is teams in large, say, back in important half fully to architectures of part the customer did, business seeing are is translate Where would

inventory new to channel so still to the designs out, pretty of they also costs levels. that them their but driving to drive innovate. has minimize customers, a they want want And into high Yes, obsolescence they want

Brian Chin

sort kind you of but probably That's kind about revenue certainly you you AI-related couple things long years of and than I related, thought get however million And HBM when guess Great. environment think better? for that persists opportunities $XXX of until that of when target. augmenting are helpful. revenue it a larger set then ago

look test sort market addressable it of a do like the probe what components at or look cards X sense could of in package X years? you have now there, and HBM and GPU you served and the advanced when so that And what is individual size under [indiscernible] for of

Mike Slessor

Yes.

other a committed you the in target second, and that target there to and think center can million imagine put suppliers. it's an important takes, have that We're of still high-bandwidth for pretty and target model with element the now. I GPUs model. as model. U.S. and front didn't different memory get to $XXX But puts I'll but on when think place, we hand, open AI in that as our China or I reference, was we we the But anybody's do the trade

So going to to and puts way have model. the we're financial target on a takes always

a for and of all die, comes equipment wafer associated DRAM GPUs kind and Again, and us, industry, much from think silicon drives supplier the it's HBM than But you're with at volume. larger because I with most the get wafer. the consumable of each its the just HBM Specifically in you increase AI, glory, in the also the the other although tremendous stacking individual those area look memory, own overall memory, GPUs.

can just looks AI well. DRAM HBM a at current GPU the we -- hard third if card And get largest was you That's quite of customers. than of follow-up, on forecasts, revenue general, in penetrating that more bit this but completed I we as our we're quarter, half contribution our contemplated. a said, to as HBM like, hadn't probe bullishness for and at with look DRAM quarter then it X there's market a in working associated pretty still the industry So

Operator

the from Charles from Dr. Company. Instructions] of line comes Our next & [Operator question Needham Shi

Yu Shi

seems QX. for Just terms the the have add revenue be of QX or lower or the be lower upon I I little Is a your PC revenue because think FRT the still back the to just It FRT to on mean, really smartphone maybe answers get bit in Any [indiscernible] and are I this below side just or I a spending why seasonality seasonality might into from back great. -- want you QX would want if QX side? color QX. questions, on previous looks QX a to things of ask really about to than to Mike, in like additional it your but touched a more little that -- seasonality. thoughts below bit

Mike Slessor

Yes.

Charles, think So this has elusive here that's well. in bit And talked in true as a past, think become in business. as about the I we've seasonality little I XXXX

Shai is the what look is that to the QX million be in which and although Foundry bridge of Offsetting are I short said, superimposed believe calendar a DDRX. Foundry we quarter results QX of HBM weaker you major term, designs it. the for parsed the think as customers FRT $X and might the we there's products. are our seasonality, use absence highlighted, calendar of and Again, in the something which, to the HBM of seasonality some of logic we're for as seeing some pieces what to designs DRAM incremental from And might way and DRAM. is major on and of QX driven really, strength strong the seeing half going probe I is different cyclicality third you, about superimposing digestion given Logic. be in regular midpoint as degree there by We're some top at really demand, of the components But of Logic in it, is strength the and some like of delta. from major bit then outsized cards contribution foundry FRT digestion set these our at a If in from on guide, those they that those

Yu Shi

largest expecting of million much actually more provide X-ish and you right, hoping in we your is QX in $XX little more like on can QX. revenue there, half you DRAM in -- largest mean QX? how got is think was stuff, always DRAM know, of were customer, QX revenue a X, you QX, bit much million, we you said the your in HBM DRAM revenue how but than for how much customer clarity I I it don't revenue that $XX Because

HBM million-ish, the kind us it's any X quarters June quarter [ did the the it last next last understand what going say of June, to progression lumpy So to Is just help we because has quarters? over can it? in you showing X, and understand how X in over the is ], want been revenue growth sequential $XX you of

Mike Slessor

with you numbers, that to Yes, same the $XX I be in probe at this basis, chip volatility fourth in things being share. look made quarter. also absolute comments We DDRX million. again, cards significant different to of We contribution there strengthen to round want HBM about specific design the a customers individual is the some DRAM to that to expect third quarter at showing different each around ballpark quarter-to-quarter. was it designs and the market like different activity ramping times. and do multi-quarter going inside similar in But on the of magnitude I

So stable. on an customer. absolute X level, about It in was concentrated heavily

who's associated a we're longer-term was X customers, that this also and But DRAM at customer leading major just of -- -- right all got not looking customer with with HBM build as each the this tailwind, DRAM HBM. where continue we DRAM revenue to our perhaps activity them. of trend, ride now, but on this our surprising share at and differentiation the X to half said, X we've I but of in of As want at

Operator

And our Shrotre the next of from question comes from line Jefferies. Vedvati

Vedvati Shrotre

versus HBM This devices Can you me MPU? please a Jefferies. from you have your have in help understand there's chiplet -- and now test I chiplet intensity guess [indiscernible] for difference microprocessors if die-based HBM is that you Vedvati can ramping.

Mike Slessor

of think matter. foundry increases see and HBM the we good And the across think that board, some in for in XX%. that you to for both a quantified rule that's we've designs And the of past I intensity. test thumb No, XX% similar I somewhere logic for and between

them that. of bit quite are higher Some a than

because chiplets of a individual of them of complexity are to chiplet. it's what customer need as they less degree the than that yields Some well each test are function the for as that individual the

in HBM HBM interesting of there's to and kind is is insertions case the test test But chiplets at is is well MPU them a get high very as is Each that interesting intermediate good some make die being variance the That speeds as multiple because pretty there's you get stack to to the of another around some assembled, test as the too. a seeing of rolls things tested. XX% increase. work. in up -- of X insertions. XX% we're all the number, sure to going But you

Vedvati Shrotre

my for Okay. so earlier answers Got it. And provided. then to on question, it goes the you second

-- share logic So every for starts the kind you understand you're were you and the that Or this ramp? to just you another each before leader with do market that Is it Do on when design? an competing design a particular of foundry design. do aftermath? is like competitor know if -- you

Mike Slessor

starts really want understand us. it you Because design to customers our to No, surprise before the ramp. don't

Our lead relatively short. are times

So customer in in visibility your design predictive start entirely is won particular that have can you of designs third demand. what on revenue and plans real we to wafer or on But that not the gone time essentially what designs the you have you into do customers based their decelerate saw competitor. because as their that accelerate quarter,

that in ramping, get put can but designs, that market so it you have both And revenue-based majority don't might of ones result you a But to won of with ways. the simply, not the that share. lucky are a if majority swings

that's with we've is probably got winners Our wins. as working said, difficult be But to in and teams the I our sure given extremely dynamics picking honest, impossible do, of design make to maximum are something industry. to the to number very on do the the focused customers

Operator

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

Thomas Diffely

another question on business. the Mike, just Photonics

years couple that last your for does look is goes in of for to when quarters. obviously, the what like of it the what fab, So a kind good from systems opportunity the it's over But lab been several that you? business

Mike Slessor

Yes.

in mentioned the XX% past highlighted somewhere today we've driver revenues, think system co-packaged XX% I strong silicon calls around several on customers revenues photonics the a to System and our again of as those segment in R&D. and of It invest has early been segment optics. progress

take we you that because so several in the foundries years sort forecast serve really One If depends is the first could shipping chip-to-chip application it system transition, production these made the at power we reduction can optics to the applications. prepared power there. it [indiscernible] on world of is increase of it silicon whose the major photonics as they of customers in a we really efficiency co-packaged the and When data we're in sizable into one a market of the for going offers, some communication in. see off key next points look believe of that offers with their center low-volume remarks the

the on scale significant consumable Our substantially, one perform But got Now the as see Photonics a could cards work there's think forward this. we lab. we engagement fab, some we if And of we primarily chunk this from focused test, our of enable where with bring the revenues, it's of do, R&D technology the as right. you I we've key the R&D, low-volume XX% the the to together XX% going that multiples get together go production. areas in business And in early the transition to R&D see this probe test that right? with to Systems electrical great spend to that to

Thomas Diffely

similar at And fourth revenue a the look if somewhat quarter, we year had Mike, what Great. it's then, the for ago. you -- the guidance to just

picture the wondering versus to a if of industry talk health ago step you were could revenues the same. just a today the of back Just when be about projected year view from big point and

Mike Slessor

Yes.

change state a Tom, first not was noted, the I strong those industry similar came then we're quarter we and you in year. gave, puts revenue -- different is of overall I what was strengthening, this atypical downs that's that the designs of seeing Although second down and pretty much and half foundry through the if We go guidance, quarter fourth to as although -- ups recall, are quarter operating are at condition. third very the ramping XXXX. industry stable very, the And the different XXXX. really the there's off first takes, see and and We've revenue different. some logic been HBM levels at and more But think the times. in business of we of levels quarter as very That that -- same, rate our a

a we're like in feel phase. We bottoming

foundry in If you in space. our to listen space, the the key customers, some of PC

does things couple some I and think seem the of bottoming It even there's over mobile bit. little like are days. earnings here maybe strengthening out next a

variety made the next a investments Obviously, think given think capitalize the upturn better wide I shape. I that. But we've shape much pretty So there's good on the capacity and industry things are is. to is going in on we're when of views to in when inflect

Operator

Northland. Our Richard next Auguste from the question line from comes of

Auguste Richard

starting that about Yes. to ask system been and Are -- want a to A lot put mobile package test [indiscernible] you had expansion did customers? answered tiles of and to they is I the and in there? package but to increased look multiple them of the to starting reach

Mike Slessor

Yes.

-- the a really One, think a other a chiplets you been client driving which gave while. has examples our where of business. tiles HBM, so theme we are of for I the microprocessor, couple or

probably going those. we're are going it's roadmaps. the tiles better really mainstream some quarters, on, the before of the into few I to part year infused to not a very R&D mobile be we with projects and chiplets in but think There if see early at innings start associated least

and package. a we are And uptick at multiple those where an the was that, XG variety XG see antenna of there was have Having least in characteristics. where places with when now packaging high-end adoption saw RF handset in business. mobile said a filters where mobile system that, kind do front strong, packaged end, package RF ramping advanced are the we you is and of a together One areas great in a

packaging. as all advanced from M&A place but it view bets, we the to values R&D We to we're continue shift think also exposure this to spending, I both then broaden funnel. wanting and thematically, look the created industry as goes our secular in us a to chain, somewhere to continuing an to in where it's our and supply

Auguste Richard

photonics. touching That's just again then on helpful. it. silicon Got And

talked automated forward both Is going you little fully about system. that You're between shipping a consumables the at this systems in bit as you ramp volume? point? and mix And can

Mike Slessor

Yes. into still early volume the in pretty production. implementation We're

the in into the optical And only chip. shipping still system really part quarter It's testing optical low-volume so test. goes an that of production we're the the

co-package the engagements photonic Now test at key with to chip need separate chip we it's functional fairly combined electrical least do some in of have do electrical our the customers. and this to be together on optical with ensure that's when early going But combined to test. you co-development that works, a die

the XXXX, to systems-based. to pretty continue expect be let's through I'd So say, mix heavily

Operator

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

Christian Schwab

share? just any large I on of a opportunity update that you quick couple could have the there questions. Is new customer

Mike Slessor

Christian. I think updates, couple a of

logic just favorable to microprocessor X have we in heavily it's that -- at industry the when biased towards in the with So associated segment customer. the look especially share customer. share applications, our that everyone, orient for shifts been And not all recently pretty and

focused. supplier. in where fundamental also our every said we've technical packaging. end needs primary the the in the interfacing drive nature. technology. leading one in to high have is driven both that Foundry by a We've technical They've some of because be been here's we And an of that's adapting especially So There's gaps only qualifying past, at continue very customer the technology, with of requirements strategy Logic can been really team area us in second major customer but cards, the gaps. industry. in the and advanced to really be a our supplier the That that at with X probe customer It's our changes made

And liked. so would have we than longer

committed We and continue position we this to make continuing continue share to customer. at be building a changes, we're -- to

Christian Schwab

to capacity update. Okay. Micron bandwidth the will memory, high finally is other it act together get [indiscernible] That's shortly. quick And industry their probably high-bandwidth the the looking more fair of a question memory second then making is than Xx

So that, going quarter next some in quarter million high your industry is accurate that a point -- a go business that bandwidth to should plus million it $XX memory $XX dialogue assume safe is to at from year? easily

Mike Slessor

Yes.

intensity starts and gone over has between good card typically, I you scale card look a probe output, time. although semiconductor spending, up probe intensity with and at relationship think right? does time, pretty overall revenue over the If there's wafer

as X potential caveat TSV I [ any technology to think like HBM not pour cold the matures the in yields will mature, on here, die up. go stacking it, water ] is

enabling A $XX really quarter some like reasonable the million a able doubling to I go the all something start And it ramp. supply will a have to you for in the those come an for through depend so X point as expectation lot these when what yes, the demand to of on from we markets. business I be HBM think other that's think bit don't XXXX. as go of native DRAM [indiscernible], I us. But for believe AI. let's business think to in counterbalancing on customers manufacturers underlying unreasonable a assumptions, AI it quarter. been lot But end A to it's a will we'll it, HBM call from, of is that million our depend if pull-through and close that's $XX ramp

Operator

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

Craig Ellis

conversation the client going in more some on some side Mike, either side the related a things ] following like on lot and seemed and was about similar logic. outlook, I related strength up the in much HPC or quarter wanted to by RF around start and of of [ I things mobile the compute but the just It didn't on too to foundry foundry/logic. hear

So at that looking mobile business? we're side changes in up exit any the you think next do the And logic foundry as as notable how shapes your year? into we heading on

Mike Slessor

Yes.

mobile apps XXXX indexed the think general. did it Foundry is heavily space. and are some anybody industry the of report it, stabilize we've maybe businesses, inventories, of our as usage knows think like before pretty were that's there ecosystem be even handset that in our And in follows the overall driving I even pretty and a mobile filters, rest for better. or They really business RF I processors that I wins who volume. they that said, compute wins little which just the bottoming our feel there's ugly and RF we see the Logic, like application towards growth. business, But really been in of we inside mobile bit ramp in designs. new nice most chips RF in as handsets if digestion, across some to do I chips see contribute a And you weren't that to major We the the quarter channel, some some the mobile as third results. look get things the processor -- those whether seen still for at of

about operate one the some know RF our shortest is Now of lead things we in. of times the business to

average part lead times are quarter, are where that. a better than times actually shorter of RF lead our So

so in can change the their some see wafer And changes significant very demand plans. we customers start profile as

the So I'm not guess, a lot things trying of of one visibility, to say. is I

Craig Ellis

one what And last million should How China helpful, related in going of forward Q&A, X the That's the noted in that every versus anything of might be few China the the had that structural and ticked or released from in there restrictions, Mike. much cetera? pluses the at expect you would of things lower here, that's more question quarters. China. X in with trends just earlier to have more was geography? be that quarter a cyclical the minuses one shipment that been then the second model supplement minuses And and that noticed is And we be, et over target the looking pluses vis-a-vis country importantly, I would

Mike Slessor

Yes.

back structural. a Our at at To the early again answer 'XX down it's good business, levels And directly, entirely was in probably your point, right? or peak half 'XX. almost it's late I China So it the think, question was sequentially.

increase businesses not to business China our to in point advanced in part some China quite at probably the supplier and the based customers. here, being alternatives out based domestic restricted logic being limited U.S. aren't to of are competitor the been holding with And I as they have probably subject are. is of competitor we've that supply but still ability the the foundry those export They memory and expect continue we to And up geographic Japan, multinationals that relaxation fairly our been that as holding to the Department EU of in that we them. cultivate controls from strongly around [indiscernible] operating well. seen our business nodes expectations us, we've primary local of a X license, Commerce expert that a up The as clear As were in in think they do granted are recent controls and to go the operate we've at extensions alternatives region.

Operator

question comes next Steelhead Our from line the David of Securities. Duley from

David Duley

memory test My packaging. I'm last I'm the that conference we've high-bandwidth question more curious the just has both both and that rate from few quarters, as to calls you more the do the and And whatnot. includes Intel and Clearly, bunch do tile, stuff? assembly far advanced on packaging as is? seen probe think over business chatter the percent with growth the and segment a whole [indiscernible] what card of AMD goes, what and guys assuming

Mike Slessor

and TSV that And classification is XX%, customers and to difficult that's quarter, somewhere really sometimes comes really where at people in smattering bit a business other it, the techniques designs. with the we combination packaging. a [indiscernible] bonding even assembled present advanced because the client-based some right, But guess way associated advanced the third using packaging. XX%, at in that given be architectures for that's performance, the of targeting the Yes. too, break It out. of is would hybrid various little We're XX% microprocessor, clarity, can in multi-die HBM from. The what classify highlighted decrease increase we David, call our maybe of the like acceleration my around at although innovation chiplet cost, that

associated the packaging overall of really will our of we're the advanced us. And in in So the increase in the and so for things at very with also the you still out with But with optimistic in the early drive underlying the this. if revenue why of quarter exposure was third packaging that top line. associated one results. innings we're intensity clearly look The strength It's that is fact advanced associated test that's help it. some does growth things concentration eventual

David Duley

you both that growth guess Clearly, growth I'm the Xx years, growth. the probably your what But plus X volume over this industry it you rate have it's when if might increased more kind the would be? just look intensity of business than or packaging the an is? what see And in you idea curious at packaging advanced you increased advanced -- unit the next and complexity, of

Mike Slessor

Yes.

and of planning key So through one we're strategic into. that's looking now, annual the it's right we're going things planning -- and

outgrow time significantly. X-year industry it expect frame, do a over So we the to

bit technology our customers I of on. the outsized with somewhere given applications things aggressive. value may be Xx X again, in with for think reasons we it's we're -- the packaging little our position, But create advanced a competitive given we co-packaged to that growth probe optics. is going like capitalize things got and good That's MEMS where like exposure, continue and to our prioritize

David Duley

more one just And Okay. clarification.

X-nanometer As it this business. a technology? at vast are below majority wafer percentage foundry/logic Is other those and probes far point? starts MEMS-based of as sub What versus

Mike Slessor

examples Yes, it's logic be to have for it's There cards. devices a probe, foundry interconnect a X-nanometer but probed pretty MEMS-based vast thumb of not the require with GPUs, that reasonable counter like in large a probe vast of [indiscernible] majority a density and do rule doesn't majority MEMS very single areas the sub where probes. adopted of are MEMS been footprint, example, MEMS because probes need

Operator

comes Our question from CL of next King from David the and line Silver Associates.

David Silver

maybe couple year year, budgeting for time place. and of typically takes planning the questions everything a I of next when is this about but had

[indiscernible] budget. next But -- when to going about committing maybe applications or your efforts on the where has focusing spending? resources Just is words, call CapEx the largest what could biggest to? to are expansion. be going spend, capacity In you more discretionary other CapEx discretionary amount of There you the out CapEx amount been year's be

Shai Shahar

that, take David. I'll Sure.

footprint said, California, going process. that expect to in are And in additional planning in given [indiscernible] the CapEx the through So most we as you our big happen of facility.

but target our that's decrease for where model. of we the is XXXX. about compared CapEx the certainly $XX it like be and magnitude, most in of talk of we million to probe that business somewhere million down the we to in And don't in $XX expect capacity [indiscernible]. to completing in cards I expect that achieving -- in that required range it we expect year expansions to significantly CapEx level starting go the this is what did expansion before a XXXX. most a I XXXX to expect CapEx had And In capacity terms the of majority midpoint it

David Silver

spend. Okay. kind And to then your like I'd a question ask of similar on R&D

all-time an new So spend look budget, maybe increased out out would R&D significantly or what in if the the R&D again, you high. quarter you X X, I the be or next helpful? And efforts very are think to call that could your third when year, was top

Mike Slessor

adopting are and differentiated our making spend are is in areas. focus packaging who in the we're Mike this take one. volume today. It's aligned sure map road Really packaging, about talked Yes. go advanced have we've I'll the the themes applications again. to customers products to back advanced chiplets chiplets, sure and R&D key with focusing product really our those making

are variety that foundry lead in in counts really won't So associated of HBM. speed, focus higher power, the R&D and higher planned and that our new making [indiscernible] I higher XXXX. a releasing pads of competitive new in our keeping there's requirements call spend. yet DRAM, smaller we're envisioned logic, But it sure with products in and we're

Operator

of like further session hand remarks. for question-and-answer I'd program. any back Slessor the Mike the conclude does This program to to today's

Mike Slessor

Thanks, everybody, for joining us again today.

on couple posted our they've our believe end the been website. on investor conferences We have to of docket a year. I

look wrap So and care. to to you up Take to eventful hope we'll an see XXXX. there XXXX forward

Operator

ladies program. does the conclude your participation for today's conference. you, and gentlemen, This in Thank

may You day. disconnect. Good now

FormFactor (FORM) 1 Nov 232023 Q3 Earnings call transcript