FormFactor(FORM) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q4 revenues were $168.2 million, a 2% sequential decrease from Q3 and a year-over-year increase of 1.3% from Q4 2022 [89] - Non-GAAP gross margin for Q4 was 42.1%, slightly higher than 41.8% in Q3 [64] - GAAP operating income for Q4 was$ 81.3 million, significantly higher than $2.7 million in Q3 due to a$ 73 million gain from the sale of FRT [67] - Non-GAAP net income for Q4 was $15.7 million or$ 0.20 per fully diluted share, compared to $17.3 million or$ 0.22 per fully diluted share in Q3 [96] Business Line Data and Key Metrics Changes - Probe card segment revenues were $126.8 million in Q4, a decrease of 1.3% from Q3 but a year-over-year increase of 1.9% [62] - DRAM revenues in Q4 were$ 35.9 million, up 31% from Q3, representing 21.4% of total quarterly revenues [63] - Systems segment revenues were $41.2 million in Q4, a decrease from Q3, primarily due to the sale of FRT [90] - Flash revenues in Q4 were$ 7.3 million, an increase of $2.8 million from Q3 [91] Market Data and Key Metrics Changes - The company expects HBM revenues to grow nearly 50% sequentially in Q1 [55] - Foundry and logic revenues decreased to 49.8% of total company revenues in Q4, down from 56.2% in Q3 [46] - The company anticipates that the overall demand environment will remain stable, with expectations for first quarter results similar to recent quarters [51] Company Strategy and Development Direction - The company is focusing on reinvesting in R&D and capacity, with a share repurchase program of$ 75 million to offset dilution [15] - The strategy includes capitalizing on HBM growth across major DRAM manufacturers and maintaining a strong balance sheet during industry softness [44][60] - The company is well-positioned to benefit from trends in advanced packaging and generative AI, which are expected to drive future growth [52][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the industry's recovery, noting that the current environment is better than a year ago in terms of inventory and production capacity [9] - The company expects to outgrow the unit growth of the market, particularly in advanced nodes and high-volume markets like PCs and mobile [18] - Management highlighted that the transition to advanced packaging technologies is a key driver for future growth [22][85] Other Important Information - The company announced the divestiture of its Chinese subsidiaries, expected to close in the first half of 2024, which is not anticipated to have a significant impact on financial results [72][87] - The company plans to maintain a strong focus on advanced packaging and high-bandwidth memory as key growth areas [84][145] Q&A Session Summary Question: What is the expected impact of the China divestiture? - Management does not expect a significant impact on financial results from the divestiture, as it is structured to maintain relationships with multinational customers [104][105] Question: What is the contribution of HBM to DRAM revenue in Q4? - HBM contributed approximately $10 million to the$ 36 million of DRAM revenue in Q4, with expectations for significant growth in Q1 [78][106] Question: How does the company view the future of test intensity in relation to advanced packaging? - The company anticipates increased test intensity due to advanced packaging processes, which will drive demand for their products [114][123] Question: What is the outlook for HBM revenue growth? - The company expects HBM revenue to potentially double on a quarterly basis from 2023 levels, driven by strong demand from major customers [146][145] Question: How will the company manage the mix between DRAM and HBM? - The mix between regular DRAM and HBM is expected to remain stable, which is a factor in the gross margin outlook [134][135]