FORMFACTOR INC Q2 FY2024 earnings call

· Second-quarter revenue, non-GAAP gross margin, and non-GAAP EPS exceeded the midpoint of the outlook range provided in May. · DRAM probe-card revenue reached record levels with HBM doubling for the third consecutive quarter. · Third-quarter demand for FormFactor's products is steady, illustrating the value of the company's diversification strategy across foundry, logic, DRAM, Flash probe-cards, and Systems segment products. · Probe-cards are consumables specific to chip designs, providing stable demand from technology node transitions and new design releases. · Advanced packaging drives increased test intensity and complexity, boosting probe-card spending in HBM, DRAM, and Foundry/Logic segments. · Systems segment expects a slight sequential revenue increase in Q3 with collaborations in co-packaged silicon photonics.

In the second quarter, FormFactor's probe-card segment generated revenue of $167 million, a 22% increase from the first quarter. Foundry and Logic probe-card revenue was $104 million, a 19.5% increase from the first quarter, accounting for 52.5% of total company revenue. DRAM probe-card revenue reached a record $58 million in Q2, a 26.5% increase from Q1, making up 29.4% of total quarterly revenue. Within DRAM, high-bandwidth memory (HBM) revenue doubled from $22 million in Q1 to over $43 million in Q2, representing nearly 75% of DRAM revenue. The Systems segment had Q2 revenue of $30.7 million, a $1.3 million decrease from the first quarter, comprising 15.5% of total company revenue.

· Third-quarter revenue is expected to be $200 million plus or minus $5 million, with a slight increase from Q2. · Non-GAAP gross margin for Q3 is expected to be 43% plus or minus 150 basis points, impacted by a less favorable product mix shift from HBM to DDR5 within DRAM. · Q3 operating expenses are expected to be $61 million plus or minus $2 million, similar to Q2. · Non-GAAP earnings per fully diluted share for Q3 is expected to be $0.31 plus or minus $0.04.

· Geopolitical risks such as US-China trade restrictions. · Supply chain disruptions. · Regulatory changes impacting business operations. · Uncertainties in macroeconomic and geopolitical conditions that could affect actual results differing from forward-looking statements.

Q: Follow-up on HBM reacceleration confidence and timing A: Michael Slessor notes continued hyperscaler investment in generative-AI infrastructure driving customers to ramp HBM capacity, with confidence in reacceleration due to customer investments despite limited direct visibility past Q3 Q: Foundry logic digestion risk A: Michael Slessor states Q3 foundry and logic demand is similar to Q2, driven by advanced packaging adoption despite muted end markets like mobile handsets and PCs Q: DDR5 vs HBM mix shift sustainability A: Michael Slessor mentions DRAM market showing improvement but limited visibility to confirm if it's the start of a sustained upturn Q: HBM growth drivers and 2025 business split A: Michael Slessor explains HBM growth is driven by design-specific test insertions for multiple die sets, and FormFactor expects contributions from all three major DRAM manufacturers in 2025 Q: Margin guidance and HBM mix shift A: Shai Shahar clarifies Q3 margin decrease is due to the mix shift from HBM to DDR5 within DRAM Q: China revenue and silicon photonics A: Michael Slessor says China revenue will see a moderate increase but remains constrained by geopolitical headwinds; silicon photonics is in early adoption with pilot production in the very early stages Q: GPU probe-card qualifications A: Michael Slessor discusses qualification efforts for GPUs transitioning to advanced packaging, noting it's a strategic imperative but competitive