FormFactor, Inc.

Thank you and welcome everyone to FormFactor's first quarter 2022 earnings conference call. On today's call are Chief Executive Officer Mike Schleser and Chief Financial Officer Shai Shahar. Before we begin, Stan Fickelstein, the company's Vice President of Investor Relations, will remind you of some important information.

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 and geopolitical conditions, the benefits of acquisitions and investments in capacity and in new technologies, the impacts of the COVID-19 pandemic, anticipated industry trends, the disruptions in our supply chain, the impacts of regulatory changes, 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 its physical 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, April 27, 2022, and we assume no obligation to update them. With that, we will now turn the call over to FormFactors CEO, Mike Thresser.

Mike, thanks, Dan, and thanks, everyone, for joining us today. FormFactor again posted strong results in the first quarter, delivering the second highest quarterly revenue in company history, exceeding the non-GAAP gross and operating margin levels of our Tiger financial model, and producing the highest quarterly free cash flow in company history. This momentum continues in the second quarter as we manage through a variety of challenges to utilize our added capacity in meeting growing customer demand for our products. Like many manufacturing companies, we continue to face supply chain and labor headwinds, both in terms of availability and cost. We expect these issues to continue at least through the middle part of 2022, and our team remains focused on tactically resolving component and labor constraints as they emerge. while taking steps to moderate the impact of inflation in both manufacturing and operating expenses. Our long-term investments in automation and vertical integration have helped us partially mitigate the effect of these headwinds and have contributed to our strong results for the past several quarters. Before we move to market-level details, I'd like to share some exciting news on the customer front. FormFactor was recently recognized by Intel as a 2022 Distinguished Supplier in their Epic Award program for our dedication to excellence, partnership, inclusion, and continuous quality improvement. Only 26 of Intel's thousands of suppliers worldwide earned this award this year, and we're extremely proud that Intel recognized FormFactor's recent performance and commitment to supplier excellence with its second highest honors. Turning now to segment and market level details, in Foundry and Logic probe cards, our largest business, demand sustained at an overall level comparable to the strong fourth quarter, with the expected decline in RF offset by stronger Foundry demand. Both the top Foundry and the largest Logic IBM were 10% customers in the quarter. Key drivers for the Foundry business were 7 and 5 nanometer designs in high-performance compute, along with mobile and RF, and we expect a similar demand profile in the second quarter. IDM microprocessor demand continues to be a diverse mix of client PC and server designs, primarily on the 10 nanometer node. Foundry and Logic customers are investing in both leading edge capacity, as evident from record levels of wafer fab equipment spending, and early stage innovative advanced packaging architectures, like EMIB, phogoros, and 3D fabric. These chiplet or tile-based integration schemes drive both higher test intensity, which expands the number of probe cards required per wafer route, and test complexity, which raises the performance requirements for the probe card. Advanced probe card architectures like FormFactor's MEMS technology are essential to meet these challenging technical requirements at compelling cost of ownership. with the short delivery lead times needed to support our customers' rapid and dynamic production ramps. To maintain our competitive advantage, we are investing heavily in R&D while collaborating with our key Foundry and Logic and Memory customers to meet these challenging technical and commercial requirements with our proprietary 2D and 3D MEMS technologies. At the same time, we're investing to ensure we have sufficiently vertically integrated MEMS production capacity to meet the growing demand for our innovative and differentiated MEMS probe card technologies. Turning now to DRAM, as expected, first quarter demand for DRAM probe cards reduced from the near record levels we delivered throughout much of 2021, and we expect second quarter DRAM probe card demand to be comparable to the first quarter. New design activity from each of the major DRAM manufacturers remains healthy, with a mix of new DDR4 and DDR5 designs in both mobile and PC server applications. As we often note, probe cards are consumable specific to each new chip design, and so we benefit both from node transitions and from the release of new designs on existing nodes. The current DRAM activity is a diverse mix of designs across multiple technology nodes and memory architectures from each of the leading DRAM manufacturers. Our systems business also delivered strong results in the first quarter, with revenue near $40 million, a level that we expect to achieve again in the second quarter. Paired with its solid financial contribution and revenue diversification, the systems business provides significant strategic value, enabling us to engage with key customers in early characterization and yield improvement of novel new devices as part of our Lab2Fab strategy. These engagements range from 300 millimeter wafer probers for mainstream two nanometer CMOS development to optical metrology and inspection tools for yield improvement in advanced packaging and chiplet applications to wafer and chip scale cryogenic probers for development of tomorrow's quantum processors. We continue to expand the served markets for our systems products as evidenced by our first quarter introduction of the Tesla 300 high power wafer probing system for automotive, renewable energy, and industrial applications. Let me close by noting that our first quarter results and second quarter outlook demonstrate another step towards our target financial model that delivers $2 of non-GAAP earnings per share on $850 million of revenue. There continue to be challenges to overcome for both form factor and the industry as a whole, including supply chain constraints and inflationary cost pressures. Our recent results and outlook have demonstrated the resilience and agility of our team and operational model. And together with our leadership positions and our attractive served markets, this resilience and agility will drive continued growth and share gains as FormFactor progresses towards our target model and beyond. Shai, over to you.