FormFactor Q2 2024 Earnings Exceed Expectations

FormFactor, Inc. (FORM) delivered impressive financial results for the second quarter of 2024, showcasing substantial year-over-year and sequential growth. The company’s revenue, non-GAAP gross margin, and non-GAAP EPS surpassed expectations. A notable driver of this success was the growth in the probe card segment, particularly within the DRAM market, which resulted in record revenue levels.

The company’s diverse product portfolio and strategic focus on advanced packaging technologies, such as high-bandwidth memory (HBM) and silicon photonics, position it well for continued success. The outlook for the third quarter remains positive, with stable demand projected at approximately $200 million in revenue.

### Key Takeaways
– FormFactor’s Q2 revenue rose by 17% sequentially and 26.7% year-over-year.
– Non-GAAP gross margin reached 45.3%, exceeding financial targets.
– The probe card segment, especially in DRAM, was a significant contributor to growth.
– Q3 revenue is anticipated to be around $200 million, with a non-GAAP gross margin of about 43%.
– The company is adeptly positioned for the growing demand for advanced packaging technologies.

### Company Outlook
– Third-quarter revenue is forecasted at about $200 million, with a non-GAAP gross margin of 43%, plus or minus 150 basis points.
– Expected non-GAAP earnings per diluted share for Q3 are $0.31, plus or minus $0.04.
– Anticipations of considerable adoption and volume production of silicon photonics by late 2025 or early 2026.

### Challenges
– Ongoing uncertainty in the transition from DRAM technologies (from HBM to DDR5) may persist, affecting visibility into Q4.
– Geopolitical factors may limit significant market contributions from China.

### Positive Developments
– Record revenues in the DRAM probe card market, with DDR4 and DDR5 segments strengthening.
– Positive customer feedback and pricing trends suggest an upturn in the non-HBM DRAM market.
– Strategic positioning in the HBM market, with opportunities for growth as new versions are introduced.

### Misses
– No significant misses were reported during the earnings call.

### Q&A Highlights
– CEO Michael Slessor discussed the growth potential in the DRAM probe card market and how the company is preparing for shifts in foundry logic probe card demands.
– The company is working on qualifying MEMS-based probe cards for GPU testing, recognizing the growing significance of HBM in AI applications.

FormFactor’s recent earnings report illustrates strong performance in Q2 2024, bolstered by its varied product offerings and focus on emerging technologies. Increased revenues, particularly in the probe card sector, and solid gross margins underscore the company’s financial health.

While future developments in the DRAM market remain uncertain, FormFactor’s management expresses optimism about the company’s positioning and growth potential in high-tech markets. Ongoing strategic initiatives, such as the qualification of MEMS-based probe cards and expected adoption of silicon photonics, reflect a proactive approach to meet the demands of the evolving compute industry. Upcoming conferences in August and September are expected to provide further insights into the company’s direction and industry trends.