• Q4 Revenue: $189.5 million, a 9% decrease from Q3 and a 12.7% increase year-over-year.
• Fiscal 2024 Revenue: $764 million, up 15.2% from fiscal 2023.
• Non-GAAP Gross Margin Q4: 40.2%, down from 42.2% in Q3.
• Non-GAAP EPS Q4: $0.27, $0.02 below the midpoint of the outlook range.
• Probe Card Segment Revenue Q4: $150.3 million, a 12.7% decrease from Q3.
• Systems Segment Revenue Q4: $39.2 million, an increase from Q3.
• DRAM Revenue Q4: $63.3 million, a record high, with HBM contributing $32 million.
• GAAP Net Income Q4: $9.7 million or $0.12 per share.
• Non-GAAP Net Income Fiscal 2024: $90.2 million or $1.15 per share, a 58% increase year-over-year.
• Free Cash Flow Q4: $28.8 million, up from $20 million in Q3.
• Capital Expenditures Q4: $7.7 million.
• Cash and Investments at Quarter End: $367 million.
• Q1 2025 Revenue Outlook: $170 million, plus or minus $5 million.
• Q1 2025 Non-GAAP EPS Outlook: $0.19, plus or minus $0.04.

• Warning! GuruFocus has detected 5 Warning Signs with FORM.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• FormFactor Inc (NASDAQ:FORM) reported record DRAM probe card revenue for the third consecutive quarter, driven by strong DDR5 and HBM demand.
• The company experienced significant growth in generative AI and high bandwidth memory, adding $100 million in revenue over 2023.
• FormFactor Inc (NASDAQ:FORM) announced strategic acquisitions and partnerships, including acquiring a stake in FICT Limited and agreements with Advantest Corporation, to strengthen its position in advanced packaging.
• The Systems segment showed sequential revenue growth, driven by innovation in quantum computing and high-performance compute.
• FormFactor Inc (NASDAQ:FORM) expects growth in demand for its products in 2025, particularly with the transition to HBM4 designs and new customer qualifications in the foundry and logic market.

Negative Points

• Sequentially lower fourth-quarter revenue, gross margin, and non-GAAP earnings per share were reported due to reduced foundry and logic probe card revenue.
• The company faces challenges from export controls limiting shipments of advanced node DRAM designs to China, impacting non-HBM DRAM probe card demand.
• Weak demand persists in high unit volume markets like client PCs and mobile handsets, affecting foundry and logic probe card sales.
• Gross margins are below the target due to a challenging product mix, with a DRAM-rich mix impacting profitability.
• Visibility into the timing of recovery in client PCs and mobile handsets is limited, affecting the company's ability to forecast demand accurately.

Q & A Highlights

Q: Can you provide more details on the sequential reduction in demand for non-HBM DRAM probe cards? A: Michael Slessor, CEO: The largest factor in the sequential decline from Q4 to Q1 is the reduction in non-HBM DRAM probe cards, primarily due to the recent U.S. export controls affecting shipments to China. We have adjusted our outlook for DRAM probe card revenue into China to zero for Q1 and expect this to persist unless there are significant changes. Non-HBM DRAM outside China continues to operate at cyclical lows, around $20 million per quarter, with limited recovery expected in the near term.

Q: How does volume impact the business, especially as we transition from 2024 to 2025? A: Michael Slessor, CEO: While new design releases drive probe card demand, the volume of these designs is crucial. The number of probe cards sold depends on the ramp volume, which is currently low due to weak markets like PC and mobile. However, we are optimistic about 2025 due to transitions like HBM4, which are expected to drive growth.

Q: What is the outlook for the foundry and logic business in 2025? A: Michael Slessor, CEO: We expect a return to approximately $100 million per quarter in foundry and logic, driven by a potential PC refresh cycle and higher unit volumes of new designs. Additionally, new customer qualifications should contribute to revenue growth and diversify our customer base.

Q: Can you elaborate on the strategic rationale behind the FICT acquisition? A: Michael Slessor, CEO: The acquisition aims to enhance our influence over FICT's product roadmap, aligning it with our needs for high-performance compute. This partnership allows us to accelerate innovation without the financial and execution risks of a full acquisition, ensuring we meet the demands of advanced packaging.

Q: What are the growth prospects for the Systems segment, particularly in silicon photonics and quantum computing? A: Michael Slessor, CEO: We are excited about the transition of silicon photonics and co-packaged optics to pilot production, expected to ramp in the second half of 2025. Quantum computing is also a focus, with investments aimed at building a leadership position in test and measurement for this emerging industry.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.