FormFactor Inc. (NASDAQ:FORM) Q4 2018 Earnings Conference Call Transcript

Feb 06, 2019 • 04:30 pm ET


FormFactor Inc. (NASDAQ:FORM) Q4 2018 Earnings Conference Call Transcript


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Thank you, and welcome, everyone, to FormFactor's Fourth Quarter 2018 Earnings Conference Call. On today's call are Chief Executive Officer, Mike Slessor, and Chief Financial Officer, Shai Shahar. Before we begin, Jason Cohen, the company's General Counsel, will remind you of some important information.

Jason Cohen

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 include those with respect to the projections of financial and business performance, future macroeconomic conditions, foreign exchange rates, business momentum, business seasonality, the anticipated demand for products, customer requirements, our future ability to produce and sell products, the development of future products and technologies, 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 the fiscal year ended 2017 and our other SEC filings, which are available on the SEC's website at and in our press release issued today. Forward-looking statements are made as of today, February 6, 2019, and we assume no obligation to update them.

With that, we will now turn the call over to FormFactor's CEO, Mike Slessor.

Michael Slessor

Thank you, Jason, and thanks, everyone, for joining us today. In the fourth quarter of 2018, FormFactor delivered its strongest financial performance of the year, exceeding the high end of our revenue and non-GAAP earnings per share outlook. The primary driver of this performance was robust demand in both foundry and logic probe cards and engineering systems, along with some customer pull-ins from 2019. As is evident from our first quarter outlook, we continue to experience relatively stable demand given the general industry backdrop.

Before we get into current details, I'd like to share two takeaways from FormFactor's 2018 performance. First, we offset more than half the $40 million revenue reduction from our largest customer's node transition delay by capitalizing on our broad and diverse opportunity set, especially in advanced packaging. Second, when we compare the back half of 2018 to the front half, we grew revenue by nearly double digits, even while broader semiconductor capital equipment demand shrank.

As we described in the past, probe cards are consumable that is specific to each new IC design. As a result, our underlying demand drivers are less cyclical than capital equipment because we benefit both from node transitions and the release of new designs on existing mature nodes. An especially clear example of the demand generated by new designs on existing nodes comes from the trajectory of our largest