FORMFACTOR INC Q3 FY2024 earnings call

Mike Slessor highlighted that third quarter revenue exceeded the outlook range, driven by growth in both segments. DRAM probe-card revenue set a third consecutive quarterly record, but the DRAM-rich product mix led to gross margins below the target model. The third quarter saw strength in DDR5 DRAM probe-cards, while HBM revenue declined due to customer digestion. The company's diversification strategy across Foundry, Logic, DRAM, Flash probe-cards, and system segment products was emphasized. Shai Shahar discussed Q3 financials, including non-GAAP gross margin of 42.2%, operating expenses, and cash flow, and provided details on the Q4 outlook.

In the third quarter, FormFactor achieved an all-time revenue record of $207.9 million. The probe-card segment contributed $172.2 million, with Foundry and Logic revenues at $107 million, a 3.7% increase from the second quarter. DRAM revenues reached a record $60.2 million in Q3, a 3.7% increase from the previous quarter, though HBM revenue declined from $43 million in Q2 to $29 million in Q3. The system segment generated $35.7 million in Q3, comprising 17.2% of total company revenues, up from 15.5% in Q2.

FormFactor expects Q4 revenues to be $190 million, plus or minus $5 million. Non-GAAP gross margin is anticipated to be around 41%, plus or minus 150 basis points. Operating expenses are projected to decrease to $56 million, plus or minus $2 million. Non-GAAP earnings per fully diluted share for Q4 are expected to be $0.29, plus or minus $0.04.

Risks include geopolitical and regulatory changes, supply chain disruptions, customer demand fluctuations, and the impact of product mix on gross margins.

Q: Krish Sankar inquired about weakness in the U.S. customer and visibility into 2025.

A: Mike Slessor stated there's limited visibility into 2025, but the Foundry and Logic market shows softness in Q4 with sequential reduction in mobile and PC end-markets.

Q: Charles Shi asked about HBM and probe-card growth dynamics.

A: Mike Slessor explained that probe-cards are device-specific consumables, differing from testers, and HBM transitions drive demand for new probe-cards.

Q: Craig Ellis questioned GPU opportunities.

A: Mike Slessor mentioned progress in qualifying with large Fabless CPU/GPU manufacturers and working on advanced packaging for GPUs.

Q: David Dooley asked about HBM revenue growth.

A: Mike Slessor said HBM revenue is expected to grow due to customer capacity additions and transitions between HBM generations.

Q: Unidentified Analyst asked about Q4 GM guide.

A: Shai Shahar noted it's mainly due to volume decline from the Q3 revenue record.

Q: Christian Schwab asked about HBM3e and HBM4.

A: Mike Slessor said HBM3e will dominate bits shipped in 2025, and HBM4 activity is starting with several initial designs.

Q: Tom Diffely asked about HBM share.

A: Mike Slessor said share is strong with the leading customer but may vary with other customers.

Q: Gus Richard asked about co-packaged optics timeline.

A: Mike Slessor stated co-packaged optics is expected to hit volume production late 2025/early 2026.