Formfactor ((FORM)) has held its Q4 earnings call. Read on for the main highlights of the call.
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FormFactor’s latest earnings call painted a mixed picture of the company’s financial health and strategic direction. On one hand, the company reported strong growth in its DRAM probe-card revenue and made significant strategic advancements through partnerships and acquisitions. On the other hand, challenges such as a sequential decline in revenue and margins, export control impacts in China, and weakness in Foundry and Logic demand balanced these positive trends. This dual sentiment reflects the complex business environment FormFactor navigates.
Record DRAM Probe-Card Revenue
FormFactor achieved record DRAM probe-card revenue for the third consecutive quarter, primarily driven by robust demand for DDR5 and sequential growth in High Bandwidth Memory (HBM). Notably, HBM accounted for nearly half of the record quarterly DRAM revenue, underscoring the segment’s significance to FormFactor’s overall financial performance.
Significant Strategic Developments
The company announced pivotal strategic developments, including acquiring a 20% stake in FICT Limited and forming a technology partnership with Advantest Corporation. These moves aim to bolster FormFactor’s capabilities in advanced packaging and wafer-level testing, positioning it at the forefront of technological advancements in the semiconductor industry.
Fiscal Year 2024 Revenue Growth
FormFactor reported a 15.2% increase in revenues for fiscal year 2024, reaching $764 million. This growth was predominantly driven by a $100 million surge in HBM revenues, highlighting the company’s successful penetration into this high-demand market.
Systems Segment Growth
The systems segment experienced a sequential increase in fourth-quarter revenue, fueled by customer innovation in emerging fields such as quantum computing and high-performance computing. This growth indicates FormFactor’s adaptability and ability to capitalize on cutting-edge technological developments.
Sequential Revenue and Margin Decline
Despite several positive trends, FormFactor reported a sequential decrease in fourth-quarter revenue, gross margin, and non-GAAP earnings per share. This decline was attributed to reduced Foundry and Logic probe-card revenue, showcasing the challenges in these segments.
Challenges in China Due to Export Controls
Export controls significantly impacted FormFactor’s ability to ship probe cards for advanced node DRAM designs to China, resulting in a notable reduction in non-HBM DRAM revenue. These geopolitical challenges present ongoing risks to the company’s revenue streams.
Foundry and Logic Revenue Weakness
The Foundry and Logic probe-card market faced a downturn, with no manufacturers representing 10% or more of the customer base for the first time in many years. This weakness highlights the shifting dynamics and competitive pressures in these markets.
Gross Margin Pressure
The product mix, which featured lower Foundry and Logic probe card demand alongside strong DRAM probe-card levels, exerted pressure on gross margins, which fell below the target of 47%. This underscores the challenges in maintaining profitability amidst fluctuating demand.
Forward-Looking Guidance
Looking ahead, FormFactor provided guidance for Q1 2025, anticipating revenues of $170 million and a non-GAAP gross margin of 38%. The company expressed optimism about growth in 2025, driven by the transition to HBM4 and new customer qualifications. However, they acknowledged ongoing challenges due to market conditions in client PCs and mobile handsets.
In summary, FormFactor’s earnings call highlighted a dual narrative of growth and challenge. The company made considerable strides in DRAM probe-card revenue and strategic initiatives but faced headwinds from export controls and demand weaknesses. As FormFactor navigates these complexities, its strategic decisions and market adaptability will be crucial in maintaining its growth trajectory.
