FORMFACTOR INC Q3 FY2025 earnings call

• Focused on improving gross margins to reach the target model of 47% non-GAAP gross margins. Short-term actions include headcount reduction and manufacturing spending cuts. Long-term initiatives include developing new products, qualifying and ramping the Farmers Branch, Texas facility. - Innovations in advanced packaging and high-performance compute are driving increased test intensity and complexity, creating demand in served markets. - In DRAM probe cards, HBM3 to HBM4 crossover is seen, and non-HBM applications are growing. In Systems, progress in co-packaged optics and quantum computing is noted.

In DRAM probe cards, the third quarter delivered double-digit sequential growth to a new record, primarily from HBM. Fourth quarter expected another record from non-HBM applications like DDR5 and LPDDR4. The Systems segment had sequential revenue increase in the third quarter, with growth forecasted for the fourth quarter, driven by systems business seasonal cadence, co-packaged optics progression, and quantum computing advancements.

• Fourth quarter revenues expected at $210M ±$5M, non-GAAP gross margin 42% ±150bps, non-GAAP EPS $0.35 ±$0.04. - Plan to continue gross margin improvement through short-term actions and long-term initiatives like the Farmers Branch facility, which is expected to cost $140M-$170M in 2026 and drive further gross margin improvement.

• Known and unknown risks including macroeconomic and geopolitical conditions, supply chain disruptions, potential impacts of tariffs, and shifts in product mix.

Q: Could you go back to DRAM commentary around HBM4 and growth gives and takes?

A: We're in HBM4 ramp, test intensity and complexity increasing with HBM4, and custom HBM base die is a future opportunity.

Q: How do tactical and structural things contribute to closing the 500 basis point gap to target GM?

A: Restructuring actions provide near-term benefit, and manufacturing expense reduction through cycle time and yield improvements contribute structurally.

Q: Quantify positive impact on 2026 foundry logic from CPU and GPU customers?

A: Addressable markets are significant, but hard to quantify as selections and negotiations are ongoing.

Q: How is Q4 revenue growth driven and how is gross margin improved?

A: Revenue growth includes legacy DRAM, and gross margin improved by cost reductions independent of mix.

Q: Updates on ASIC projects and HBM revenue?

A: ASIC has some contribution, HBM Q3 was ~$40M, and Q4 sees non-HBM DRAM growth.

Q: Milestones in silicon photonics?

A: Pilot production in co-packaged optics, Triton system installed, with early 2026 announcements as catalysts.

Q: Breakdown of Farmers Branch CapEx?

A: Most is capital expenditures for physical build-out and manufacturing equipment.