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FormFactor (FORM) Q3 Earnings call transcript Oct 30, 2024

Daily EarningsThursday, Oct 31, 2024 3:58 pm ET

2min read

FORM -- HBM -- MRAM --

FormFactor, a leading semiconductor test and measurement solutions provider, held its third quarter 2024 earnings call, revealing a quarter of record-breaking revenue and a positive outlook for the future. With a focus on diversification and growth, FormFactor is positioning itself to capitalize on the trends and challenges of the semiconductor industry.

High-Bandwidth Memory (HBM) and DRAM: A Growth Driver

The third quarter of 2024 saw FormFactor's revenue surpass expectations, with high-bandwidth memory (HBM) and DRAM revenue setting new records. This growth is a testament to the company's leadership position in HBM, which is a core component of generative AI systems. FormFactor's ability to meet the challenging performance requirements of HBM has not only driven market share but also profitability gains.

Diversification Strategy: A Strategic Priority

FormFactor's diversification strategy has proven to be a strategic priority, as the company's revenue is no longer reliant on a single customer or market segment. This diversification strategy has allowed FormFactor to compete across diverse demand pools, resulting in relatively stable results during the industry downturn and overall top-line growth.

Foundry and Logic Probe Cards: Navigating Challenges

The foundry and logic probe card market has faced challenges, with the third quarter seeing a reduction in demand from high-volume end markets. However, FormFactor is proactively addressing this by expanding and diversifying its market position in foundry and logic. The company's strategic priority is to qualify new customers in client PC and server applications and develop new products to improve its competitive position in high-performance compute GPU applications.

Systems Segment: Exploring New Opportunities

FormFactor's systems segment delivered the expected sequential increase in third quarter revenue, driven by customer engagement in solving complex electrooptical test and measurement challenges in areas like quantum computing and silicon photonics. The company's co-packaged optics using silicon photonics is an exciting opportunity for FormFactor, as it collaborates with leading customers in data center applications.

Future Outlook: Balancing Product Mix and Market Dynamics

Looking ahead, FormFactor expects a slight decrease in fourth quarter revenues due to a reduction in foundry and logic demand. However, the company remains optimistic about the growth potential in high-bandwidth memory and the diversification of its market position. FormFactor's focus on investing in differentiated products and capabilities is expected to drive market share and profitability gains, aligning with its target model of delivering $2 of non-GAAP earnings per share at $850 million of revenue with a 47% gross margin and 22% operating margin.

Conclusion: A Strategic Path Forward

FormFactor's third quarter earnings call highlighted the company's strategic position in the semiconductor industry, with a focus on diversification, innovation, and growth. The company's leadership in high-bandwidth memory, strategic investments in emerging technologies, and proactive approach to market dynamics position FormFactor well for the future. As the semiconductor industry continues to evolve, FormFactor is poised to capitalize on the opportunities and challenges that lie ahead.

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