FormFactor, Inc. (NASDAQ:FORM) Q4 2022 Earnings Conference Call February 8, 2023 4:25 PM ET

Company Participants

Stan Finkelstein - Vice President, Investor Relations

Mike Slessor - President and Chief Executive Officer

Shai Shahar - Chief Financial Officer

Conference Call Participants

Brian Chin - Stifel

Christian Schwab - Craig Hallum

Charles Shi - Needham

Craig Ellis - B. Riley

Hans Chung - D.A. Davidson

Gus Richard - Northland Capital Markets

Operator

Thank you. And welcome everyone to FormFactor’s Fourth Quarter 2022 Earnings Conference Call. On today’s call are Chief Executive Officer, Mike Slessor; and Chief Financial Officer, Shai Shahar. Before we begin, Stan Finkelstein, the company’s VP of Investor Relations will remind you of some important information.

Stan Finkelstein

Thank you. Today, the company will be discussing GAAP P&L results and some important non-GAAP results intended to supplement your understanding of the company’s financials. Reconciliations of GAAP to non-GAAP measures and other financial information are available in the press release issued today by the company and on the Investor Relations section of our website.

Today’s discussion contains forward-looking statements within the meaning of the federal securities laws. Examples of such forward-looking statements includes also with respect to the projections of financial and business performance; future macroeconomic and geopolitical conditions, the benefits of acquisitions and investments in capacity and in new technologies, the impacts of global, regional and national health crisis, including the COVID-19 pandemic, anticipated industry trends, potential disruptions in our supply chain, the impacts of regulatory changes, including the recent U.S.-China trade restrictions, the anticipated demand for products, our ability to develop, produce and sell products, and the assumptions upon which such statements are based. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed during this call. Information on risk factors and uncertainties is contained in our most recent filing on Form 10-K with the SEC for fiscal year ended 2021 and in our other SEC filings, which are available on the SEC’s website at www.sec.gov and in our press release issued today. Forward-looking statements are made as of today, February 8, 2023 and we assume no obligation to update them.

With that let me now turn the call over to FormFactor’s CEO, Mike Slessor.

Mike Slessor

Thanks everyone for joining us today. As anticipated FormFactor’s fourth quarter revenue and profitability were down sequentially from the third quarter. That said revenue exceeded the outlook range and non-GAAP earnings per share were above the midpoint. Gross margin was below the midpoint due to larger than expected end of your excess and obsolete inventory charges. The revenue upside compared to our October outlook which primarily driven by our ability to ship products to certain domestic China customers in compliance with new export controls, which also drove stronger than expected DRAM probe cards and systems revenues in the quarter. As we start the first quarter of 2023, we're experiencing similar overall demand to the fourth quarter, with moderately stronger demand for Foundry and Logic probe cards offset by weaker demand for both DRAM and Flash memory probe cards. At the same time, our Systems business continues to run at record levels. We expect a significant increase in profitability in the first quarter on revenue levels similar to the fourth quarter from gross margin improvement driven by two factors.