FormFactor(FORM) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - FormFactor reported second quarter revenues of $204 million, a 3.4% sequential increase and an 8.4% year-over-year increase [21] - GAAP gross margin for Q2 was 46.3%, down from 47.8% in Q1, while non-GAAP gross margin was 47.4%, a decrease of 160 basis points from 49% in Q1 [23] - Non-GAAP net income for Q2 was $36.8 million or $0.46 per fully diluted share, compared to $38.7 million or $0.49 per fully diluted share in Q1 [26] Business Line Data and Key Metrics Changes - Probe card segment revenues reached a record $167.7 million in Q2, up 4.8% from Q1, primarily driven by higher Foundry & Logic revenues [21] - Foundry & Logic revenues were a record $122 million in Q2, a 7.3% increase from Q1, comprising 60% of total company revenues [22] - Systems segment revenues were $36 million in Q2, a decrease of 2.7% from Q1 [21] Market Data and Key Metrics Changes - The anticipated reduction in Foundry & Logic demand is attributed to global macroeconomic uncertainty and inflation, leading to changes in customers' wafer start and design release roadmaps [10] - Despite the expected decline in Foundry & Logic revenues, steady demand for DRAM and flash probe cards is anticipated to partially offset this decline [17] Company Strategy and Development Direction - The company aims to maintain its position as a diversified supplier in the semiconductor and electronics industry, focusing on multiple market segments to better amortize fixed costs [15][16] - Continued capital investments are planned to support long-term growth, with a target of achieving $2 of non-GAAP earnings per share on $850 million of revenue [18] Management's Comments on Operating Environment and Future Outlook - Management views the reduction in Foundry & Logic demand as a short-term response to changing market conditions rather than a structural change [12] - The company remains confident in the long-term growth prospects driven by semiconductor content growth and advanced packaging trends [18] Other Important Information - The company executed a stock buyback program, purchasing 1.2 million shares for a total of $45 million during the second quarter [29] - Capital expenditures for the year are expected to be between $60 million and $80 million, focusing on capacity expansion [28] Q&A Session All Questions and Answers Question: Can you provide insight into the weakness in Foundry & Logic demand? - Management noted that the weakness is due to multiple sources of reduced demand from customers in both mobile and compute segments, with changes in wafer start plans impacting probe card demand [34] Question: What is the outlook for gross margins given the current environment? - Management indicated that the expected decrease in gross margins is due to a less favorable product mix and higher manufacturing costs, but they remain committed to achieving their long-term gross margin target of 47% [31][46] Question: How does the company view the current demand environment for DRAM? - Management expressed confidence that DRAM probe card demand remains stable, with ongoing design activity and new releases contributing to demand [57] Question: What is the company's strategy regarding capital expenditures amidst current market conditions? - Management confirmed that they believe the current headwinds are temporary and are continuing with planned capital investments to maintain industry leadership [43] Question: How does the company assess the long-term growth prospects in the semiconductor industry? - Management remains optimistic about the long-term growth driven by advanced packaging and semiconductor content growth, despite short-term volatility [67]