FormFactor, Inc.

Thank you and welcome everyone to Form Factor's fourth quarter 2025 earnings conference call. On today's call are Chief Executive Officer Mike Schlesser and Chief Financial Officer Eric McInnis. Before we begin, Stan Finkelstein, 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, anticipated industry trends, potential disruptions in our supply chain, the impacts of regulatory changes, including tariffs and changes in export controls, the anticipated volatility demand of our 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 risk 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 28, 2024, and in our other SEC filings, which are available on the SEC's website at www.sec.gov. Forward-looking statements are made as of today, February 4, 2026, and we assume no obligation to update them. With that, we will now turn the call over to FormFactor CEO, Mike Schleser.

Thanks, everyone, for joining us today. FormFactor's fourth quarter revenue, gross margin, and earnings per share all exceeded both third quarter results and the high end of our outlook range. and we posted record revenue on both a quarterly and annual basis. Building on that momentum, we expect to again deliver sequentially higher revenue and non-gap gross margin in the current first quarter. As you've consistently heard from us, we're focused on and committed to improving our gross margins on a path to achieving our target model. We're making progress faster than expected by executing a program of rapid and immediate gross margin improvement actions that produced a 290 basis point sequential increase in the fourth quarter, better forecasted to add another 100 plus basis point improvement in the first quarter. Within our existing footprint, we expect to deliver both output increases and gross margin expansion throughout 2026, albeit at a more moderate pace than in the past few quarters. Later this year, we expect our farmers branch site to come online, providing increased capacity with structurally lower costs. creating the foundation for further revenue growth and gross margin expansion. Eric will discuss details of both our current operational performance and our future plans later in the call. Moving back up the income statement, rapid innovation and accelerating investment by our customers, principally at the intersection of advanced packaging and high-performance compute, is driving increased test intensity and test complexity, creating strong demand in our served markets. In some of these areas, like HBM and DRAM, and network switches in Foundry and Logic, we today have leading market positions. In others, like GPUs and custom ASICs, we're making steady progress on qualifications to produce market share gains and revenue growth. Driven by this revenue growth in our existing and building market positions, with gross margin expansion from operational improvements and earnings leverage from disciplined operating expense control, we're closing in on our target financial model. We expect these trends to continue and we'll host an analyst day on May 11th, where our executive team will share form factor's next target financial model and discuss the market opportunities, strategic priorities, and operational focus areas underlying that new target model. Turning now to segment and market level details, In DRAM probe cards, we delivered the expected sequential growth in the fourth quarter to a new record, with the increase coming from non-HBM DRAM applications like DDR4 and DDR5. When we provided our outlook a quarter ago, we accurately forecasted DRAM growth would be driven by non-HBM strength, which is now understandable given the widely publicized in-market demand and pricing for non-HBM DRAM. In the first quarter, we again expect to post an all-time DRAM record, this time on HBM strength, with contributions from both sustained demand in HBM3E and the early stages of the HBM4 ramp. As I've discussed previously, the ramp-up of HBM4 offers some exciting opportunities for form factor in 2026, and the first quarter offers an early glimpse into these opportunities. First, The test intensity for each HBM stack further increases with the transition to HBM4's 16 high stacks of Cordyce chiplets, up from the 8 and 12 high stacks of HBM3 and 3E. This layer count increases a powerful driver of increased test intensity, resulting in higher probe card spending by our customers for HBM applications. As we've also seen in Foundry and Logic in recent years, this dynamic is not unique to HBM. All advanced packaging architectures require increased test intensity, as each of the component die chiplets must be comprehensively tested to ensure that a single defective chiplet does not cause a failure of the entire stack. In addition, both the P&IO speeds and overall stack bandwidth for HBM continue to increase at a relentless pace as the industry moves from HBM3 to HBM4 and then on to HBM5. The overall stack bandwidth of HBM4 more than doubles over HBM3 to an astounding 2 plus terabits per second. And HBM5 bandwidth is projected to double again over HBM4. These speed increases drive greater test complexity, which produces competitive advantage for form factor, as our smart matrix architecture is the industry's only production-proven probe card architecture that combines high parallelism productivity with high-speed test capabilities. This enables our customers to test hundreds of dyes simultaneously at the 10 gigabit plus IO data rate of HBM4. And to ensure we're ready for the future, our global R&D and engineering teams are partnering closely with customers to advance the smart matrix architecture to meet the challenging specifications for HBM5 and beyond, further extending our differentiation in HBM applications. This combination of high parallelism productivity and high speed performance, which is critical for several important test insertions in our customers' HBM process flow, is producing market share gains at all three major HBM manufacturers. We expect this trend to continue as we execute our long-term strategy to be a key supplier to all the leading customers in the industry, thereby growing and diversifying our HBM demand profile. That said, our first quarter HBM revenue continues to be skewed towards our largest customer, consistent with the current market share split between our customers. Shifting to the founder and logic probe card market, it's expected fourth quarter demand in this market was comparable to the third quarter. In the current first quarter, we expect increased founder and logic demand levels. Notably, this growth is not anticipated to come from our historical drivers of client PC and mobile, but instead from a significant shift towards rapidly growing data center applications like network switches. Our evolving customer makeup offers important evidence of this diversification. As our top customer historically, a large microprocessor IDM, was not a 10% customer in either the fourth quarter or for 2025 overall, even as we posted all-time record revenues in both of those periods. We continue to partner closely with these customers, supporting turnaround initiatives in their core business, as well as their effort to become a leading foundry. Given our longstanding partnership and corresponding market share, FormFactor is well positioned to grow with this customer as they make progress in these areas. At the same time, like in HBM, we're successfully executing our strategy to be a top supplier to all the leading customers in the industry. and continue to build the foundation for market share gains at a large fabless CPU manufacturer. We're also accelerating the pivot to fast growing high performance compute applications with our ongoing production qualification in leading edge GPU applications. We continue to expect to be in a position to compete for volume orders for GPU probe cards later this year. Finally, as an additional longer term component of high performance compute exposure, We're also growing our custom ASIC XPU business on the back of a multimillion-dollar mid-2025 design win, and are expanding the future opportunity set in this space by deepening our engagements with the hyperscalers and their ASIC design partners. Turning to our system segment, we delivered the expected sequential revenue increase in the fourth quarter, driven by customer investment in co-package optics in quantum computing. In the first quarter, we're expecting the typical seasonal reduction in demand for systems. Co-patch optics, where CPO continues to be a primary area of focus for us, as it represents an exciting growth opportunity where we have a strong leadership position. To strengthen form factors leadership in CPO tests, we recently made an important strategic addition to our optical test capabilities with the December acquisition of Keystone Photonics. Keystone's innovative and differentiated optical probe technology enables high-efficiency optical coupling to our customers' photonic devices. In much the same way, our advanced MEMS probes provide best-in-class electrical connectivity to our customers' chips. These optical and electrical probe technologies enable the highest fidelity test, and therefore yield, whether the device runs on photons, electrons, or in some cases, like CPO, both photons and electrons. Together with our market-leading CM300XI and Triton test platforms, Keystone's optical probe technology expands FormFactor's leadership position as we help enable the adoption of energy-efficient optical beta transmission in tomorrow's data centers. Before I turn the call over to Eric, I want to reiterate our continued commitment to achieving our target model. As expected, we reached run rate target model revenue levels before reaching target model gross margin levels, but have made excellent progress in closing the gross margin gap. We plan to continue that progress with output increases and gross margin expansion across our existing manufacturing footprint, followed by further improvement as we bring our farmers branch expansion online at a structurally lower cost. We look forward to demonstrating continued progress in the first quarter of 2026 and are excited to share FormFactor's next target financial model in May at our analyst day as we meet the challenges and opportunities of increased test intensity and higher test complexity at the intersection of advanced packaging and high performance compute. Eric, you're up.