FormFactor, Inc.

to form Factor's second quarter 2023 earnings conference call. On today's call are Chief Executive Officer Mike Slesser and Chief Financial Officer Shai Shahar. Before we begin, Stan Ficklestein, the company's VP of Investor Relations, will remind you of some important information.

Thank you. Today the company will be discussing gap P&L results and some important non-gap 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 global, regional, and national health crisis, including the COVID-19 pandemic, anticipated industry trends, potential disruptions in our supply chain, the impacts of regulatory changes, including the recent US-China trade restrictions, 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 the fiscal year ended December 31, 2022, 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 us of today, August 2, 2023, and we assume no obligation to update them. With that, we will now turn the call over to FormFactor's CEO, Mike Thresser.

Thanks, everyone, for joining us today. FormFactor's second quarter revenue was below our outlook range due to shipment pushouts. However, higher than expected gross margin and good operating expense control produced non-gap earnings per share at the top end of our outlook range. We continue to operate in an overall demand environment that remains relatively stable. This is evident from our third quarter outlook. As we navigate the current cyclical downturn, we continue to benefit from FormFactor's diversification strategy, which differentiates us from our direct competitors with a broad lab-to-fab product portfolio across Foundry and Logic, DRAM, and Flash Probe cards, together with our system segment products. This unique portfolio enables us to compete for business across diverse demand pools at all major customers, producing the relatively stable top line results we've demonstrated for the past several quarters and that we expect again in the third quarter as we exploit growing areas like high bandwidth memory and DRAM probe cards and co-packaged silicon photonics and systems, helping to offset the impact of areas that are presently soft like mobile handsets, and CPUs in Foundry and Logic probe cards. While the demand softness that has persisted for several quarters continues in some of our most important high unit volume end markets, like client PC and mobile, we're carefully balancing short-term results and long-term investments with disciplined cost control that maximizes quarterly profitability and protects our strong balance sheet. We continue to invest in R&D for new product innovation and competitive differentiation, as well as in the long lead time facilities and equipment components of our capacity increase plans. These investments are designed to produce market share gains and above industry revenue and profit growth when we emerge from the current cyclical trough, enabling form factor to achieve and then surpass the levels of our current target financial model. Turning now to segment level details, In Foundry and Logic Probe Cards, our largest business, we experienced the expected moderation in demand in the second quarter as customers digested first quarter shipments for initial production ramps of 5 nanometer and 3 nanometer mobile application processors, tile-based client microprocessors, and high-performance compute chips. In the third quarter, we expect to deliver sequential growth in Foundry and Logic, as we see modest strengthening in both mobile and client PC markets, primarily driven by adoption of advanced packaging processes like Foveros and 3D Fabric. Advanced packaging and chiplet innovations were prominently featured at the recent Semicon West Industry Trade Show, where a variety of major front and back end suppliers, along with leading customers, highlighted the increasing role advanced packaging and chiplets are playing in re-accelerating industry innovation in the face of the slowing of front-end-driven Moore's Law. As we've noted in the past, advanced packaging integration schemes drive both higher test intensity, which expands the number of probe cards required per good die-out, and higher test complexity, which raises the performance requirements for each probe card. Probe card architectures like FormFactor's MEMS technology are essential to meeting these challenging performance requirements on short lead times at a compelling cost of ownership. In memory, as expected, we experienced stronger second quarter demand for DRAM probe cards, while flash remained weak. The sequential increase in DRAM was driven almost entirely by DDR5 and third generation high bandwidth memory designs that are enabling the rapid growth in generative artificial intelligence. DDR5 and HBM together more than offset the softness from each of the memory manufacturer's reductions in wafer starts that are helping consume the high inventory of older memory designs like DDR4. HBM is yet another example of how advanced packaging is enabling the industry's innovation and long-term growth. since one HBM chip is a stack of 8, 12, or even 16 individual DRAM die. To ensure high yields of this stacked DRAM chip, customers probe and test each component DRAM die prior to stacking and probe and test the multi-die DRAM stack at various points during the stacking process, leading to an increase in the overall probe card intensity per good die out. In addition, the technical requirements for HBM tests are significantly more advanced than for standard unstacked DRAM products involving higher test speeds and more challenging thermal scaling specifications. As one example of increased test complexity, the 100,000 MEMS probes on a single HBM probe card must remain within a few microns of their target position across an entire 300 millimeter wafer as the wafer temperature varies by almost 100 degrees. FormFactor's MEMS-based smart matrix DRAM probe card architecture meets these advanced requirements, providing significant value to our customers and differentiation for FormFactor. We believe our superior performance capabilities will drive both market share and profitability gains as HBM grows from a current single-digit percentage of DRAM wafer starts to 20% by 2026, as projected in a recent Wall Street Journal article. Shifting now to systems, our systems business continues to deliver strong results, with revenue at near-record levels again in the second quarter. These levels were, however, less than we expected in our outlook due to some delivery push-outs caused by a combination of customer facilities readiness delays, single-point supplier issues, and internal first-pass yield shortfalls. We expect these systems to be shipped in the current third quarter, and we expect to again deliver strong system segment revenues in the quarter. The strength is driven by our market-leading test and measurement products for early development of applications like co-packaged silicon photonics, quantum computing, and advanced packaging metrology. Co-packaged optics enabled by silicon photonics continues to be an important and exciting driver for FormFactor's current and future business. This technology is poised to revolutionize chip-to-chip communication in the data center with significantly reduced power consumption at high speed, driving industry forecasts of 30-plus percent growth rates for silicon photonics devices over the next several years. In the transition from early R&D to low-volume production, customers are deploying FormFactor's turnkey electro-optical measurement systems, built on our CM300 and Summit 200 engineering probers, with subsystems from leading partners like Keysight Technologies and PI. As production volumes increase over the next several years, our product roadmap delivers both systems and consumable probe cards to test and improve yields of electro-optical silicon photonics chips, enabling our customers to seamlessly transition their co-package optics devices from the lab to the fab, ramping quickly to high volumes to meet the demand for these revolutionary and innovative devices. Finally, I want to share an important customer highlight from the second quarter. FormFactor was one of only six suppliers to receive the exclusive Intel EPYC Program Outstanding Supplier Award for 2023. This award recognizes the absolute top performers in the Intel supply chain for their dedication to continuous quality improvement, performance, collaboration, and inclusion over the past year. I'm extremely proud of the global form factor team for the dedication and performance that resulted in this top tier recognition from Intel. And I'd like to take this opportunity to thank and congratulate our world-class team. In closing, let me reiterate that in the short term, we continue to be encouraged by the stabilization of demand across our diversified product and technology portfolio as we progress through the cyclical challenges of 2023. Over the longer term, we remain excited and confident in the growth prospects for form factor in the industry overall, driven by the fundamental trends of semiconductor content growth and innovations like chiplets and co-packaged silicon photonics. These are trends where form factor is well positioned as an industry and technology leader, and we're confident that our commitment to invest in R&D and capacity will position form factor to emerge from the current cyclical downturn a stronger and leaner competitor. enabling us to achieve our target model, delivers $2 of non-GAAP earnings per share on $850 million of revenue. Shai, over to you.