FormFactor(FORM)2024-10-31 02:57Financial Data and Key Metrics - Q3 revenue reached 20 million in Q3 from 172.2 million in Q3, up 3.2% sequentially, driven by higher Foundry & Logic and DRAM revenues [33] - Foundry & Logic revenue was 60.2 million in Q3, up 3.7% sequentially, but decreased to 28.9% of total revenue [34] - HBM revenue declined to 43 million in Q2 [35] - System segment revenue was 5.1 million sequentially, comprising 17.2% of total revenue [33] Market Data and Key Metrics - DRAM probe-card revenue set a third consecutive quarterly record, driven by DDR5 and HBM [7][13] - HBM revenue declined in Q3 due to customer digestion after record shipments in previous quarters [13] - Foundry & Logic demand is expected to decline in Q4 due to weakness in mobile handsets and client PCs [21] - HBM4 activity is beginning, positioning the company well for future growth in high-performance memory [14] Company Strategy and Industry Competition - The company’s diversification strategy across Foundry & Logic, DRAM, and Flash probe-cards differentiates it from competitors [10] - The company aims to expand its market position in Foundry & Logic through new customer qualifications and products [22] - The system segment is focused on solving complex electro-optical test challenges in areas like quantum computing and silicon photonics [24] - Co-packaged optics using silicon photonics is a key growth opportunity for the company [25][26] Management Commentary on Operating Environment and Future Outlook - The company expects Q4 revenue of 190 million, with a slight increase in DRAM and system segment revenues offset by a decrease in Foundry & Logic [50] - Non-GAAP gross margin for Q4 is expected to be 41%, plus or minus 150 basis points [50] - The company remains committed to achieving its target model of 2 non-GAAP EPS on 16.9 million of shares in Q3 under its 8.9 million, with full-year 2024 CapEx expected to be near the midpoint of the 45 million range [48] - The company had $360 million in cash and investments at the end of Q3 [45] Q&A Session Summary Question: Weakness in Foundry & Logic demand - The company is seeing softness in client PC and mobile handset markets, which is impacting Foundry & Logic demand [54] - The company is working to diversify its Foundry & Logic business by qualifying for AI-driven applications like GPUs [55] Question: HBM revenue growth and digestion - HBM revenue declined in Q3 due to expected customer digestion after record shipments in Q2 [57] - HBM revenue is expected to grow sequentially in Q4, driven by resumption of spending by the leading HBM provider and activity from another DRAM customer [58] Question: HBM transition and probe-card growth - The transition from HBM3 to HBM4 will drive demand for new probe-cards due to increased test intensity and complexity [62][65] - Probe-card growth is decoupled from tester growth, as probe-cards are specific to each customer chip design [63] Question: Revenue from China - Domestic China revenue increased in Q3, but this is not expected to be sustainable due to geopolitical issues [69][70] - The company divested its China operations earlier this year and now operates through a distributor [71] Question: HBM yield dynamics and revenue growth - Low yields in HBM are driving high test intensity, and yields are not expected to improve significantly due to the rapid pace of industry transitions [74][75] - The company expects HBM revenue to grow in 2025, driven by hyperscaler AI spending and transitions to HBM3e and HBM4 [91][93] Question: Gross margin guidance for Q4 - The decrease in Q4 gross margin guidance is primarily due to lower revenue volume, with no major impact from product mix [99][100] Question: Co-packaged optics timeline - Co-packaged optics is expected to reach volume production in late 2025 or early 2026 [120][121] Question: Traditional DRAM market - The company is surprised by the strength in DDR5, which contributed to record DRAM revenue in Q3 [113] Question: System segment cost issues - Unexpected quality-related costs in the system segment impacted Q3 gross margin, but these issues are limited to that quarter [115][116] Question: HBM probe-card premium - HBM probe-cards are differentiated products with higher gross margins within the DRAM segment [119]