FormFactor, Inc. (FORM) Earnings Call Transcript & Summary

All right, everybody. Why don't we get seated and get ready. We're at the top of the hour. We're going to kick it off with a short video. Enjoy the show. [Presentation]

Thank you, everyone, and welcome to FormFactor's Investor Day here at the NASDAQ Market at Times Square. My name is Stan Finkelstein, and we have a great agenda for you today. We have a great lineup of speakers. We're going to kick it off with our President and Chief Executive Officer, Mike Slessor. Mike will outline his vision for the business for the next 3 to 4 years. After Mike, we're going to have Sudhakar and Jens cover their respective businesses. Sudhakar runs our probes BU, probes business, and Jens runs our systems business. Both of them will cover strategic priorities. They will focus on long-term growth opportunities for their businesses as well as some of the operational initiatives, more near-term focused operational initiatives. Then we'll take about 5 minutes break. After the break, we will have our Chief Commercial Officer, Aasutosh, kick it off with customer perspective. It's all about the customer. Aasutosh will hand it off to Missy, the Head of our Global Operations, and Missy will cover both some of the important operational initiatives that were implemented over the last year or so that resulted in very significant improvement in our financial performance as well as she will provide an update to Farmers Branch expansion, our capacity additions and some of the very innovative ways that her team is approaching this capacity expansion. And after Missy, we will hand it off to our Chief Financial Officer, Aric McKinnis. He will provide a view of our financials, talk about capital allocation and close us off with our target model. Before I hand it off to Mike, I want to bring your attention to forward-looking statements and GAAP to non-GAAP financial measures. And as I have this slide on the background, I want to run through a couple of housekeeping items. So first, the presentation itself will probably take about hour 45 to hour 50 minutes. We will take a break in between, and then we will have an hour for Questions and Answers. Unfortunately, we will only be able to take Q&A or take questions from people in this room. So for those of you online, I apologize, but obviously, you're welcome to stick around and listen to Q&A part of the presentation. We will have Crystal and Kelly, who will join us later, handle all of the mics. So if you guys have a question, raise your hand, you'll get a mic. Please keep your questions to 2 to 3, so we can have broader participation. And the last point, this presentation will be available on the Investor Relations section of our website. It will be posted right after we are done here today. And again, welcome, and thank you for joining us. I'll hand it off to Mike now.

Thanks, Stan, and thanks to all of you for joining us for a few hours today to learn some more about FormFactor and the bright future we have ahead. I'm Mike Slessor, FormFactor's CEO. I've held that role since 2014 after joining FormFactor as part of FormFactor's acquisition of MicroProbe back in 2012. I'm going to start with the punchline today. By 2030, we plan to double FormFactor's revenue and through operating leverage, more than double our non-GAAP earnings per share. We're going to do this by executing at a unique position that we've created, the intersection of high-performance compute and advanced packaging, 2 of the most powerful trends ever in the semiconductor industry. From that position, that unique position at the center of high-performance compute and advanced packaging, we're redefining what's possible, redefining what's possible in terms of technology, in terms of products, in terms of scale, in terms of operational execution and of course, financial performance. Our plan is built on 3 foundational themes. First, starts with customers, focusing on building sustainable long-term relationships as a leading supplier to the top customers in the industry. And I'll get back to that in a minute and explain why it's so important in our business. Second, continuing to build and grow our diversified position as a leader in wafer test, creating scale and a diversified set of revenue streams, both organically and through M&A. And then finally, realizing the benefit of that position of scale at the center of these 2 trends with a really renewed capability and focus on the ability to operate and execute at a world-class way. Today, our team is going to share how we get there and why forms a compelling investment opportunity. I want to start -- we've already motivated the idea that we're a key player in enabling high-performance compute. Let me do that by mapping our major products onto a high-performance compute module or chip. So you see this thing at the center. I think everybody is familiar with the architectures by now. High-end compute logic devices like GPUs and custom ASICs at the center, surrounded by high-bandwidth memory, a variety of networking and interface chips, some bridges and interconnect that tie all this together. And in the very near future, nearly the present, co-packaged optics, which fuses photons together with electrons and allows the industry to take the next step forward. So let's take our products. Starting on the left here, probe cards. Now we're the world #1 leader in probe cards and have been the #1 leader for well over a decade. We operate in both DRAM and foundry and logic probe cards. Up at the top, our DRAM architecture, which has been the real growth driver for our leadership in high-bandwidth memory. Down the bottom are Apollo foundry and logic probe cards. These got their start in applications like PC and mobile. You've now seen recently us extend that application space to networking and moving on to GPUs and custom ASICs. We're the only supplier of scale in both foundry and logic and DRAM probe cards. And that gives us the ability to create synergies, technology synergies in the basic R&D we use for things like the advanced MEMS probes that Sudhakar is going to share with you. It gives us operational synergies and giving us more scale and more leverage operationally. And as you'll see in the future, as certain applications like custom HBM start to dominate the landscape, this fusion of DRAM and Foundry and Logic or Logic IP on a chip, we're uniquely positioned to capture that opportunity. Probe cards are an interesting device, an interesting product in that they're a device-specific consumable. Probe cards are specific to each customer chip design. And so when a customer changes a mask set, no matter how subtle changes the die size, changes the specs, that means new probe cards. And it drives a fundamentally different demand characteristic in our business than capital equipment, even capital equipment that operates very close to us like ATE. This is why we call it a design-specific consumable. And it's one of the very unique flavors of the probe card business and as I'll get to, some of our competitive advantage. Shifting over to our Systems segment. Jens is going to share with you how we're advancing the Systems segment with respect to serving co-packaged optics. This is an area that's a perfect example of our Lab-to-Fab strategy and the benefits of that strategy. We've been working with leading customers for almost a decade on silicon photonics, co-packaged optics and various photonic-based applications. We've taken that learning, that co-development, that refinement of the technology, again, working with key customers and now driven it into a production-worthy platform, collaborating with Advantest and Tokyo Electron. And as I noted on the last earnings call a couple of weeks ago, we're now beginning to see the acceleration of production adoption here. The point is, you can't get on this train right now. We had to be on this train a decade ago, working with leading customers on some real fundamental challenges associated with integrating optics into the overall production testing scenario. So you can see across all of the major applications driving high-performance compute, each of these pieces of silicon that are essentially the engine room of generative AI, FormFactor has a strong and relevant position. Backing up for a minute and talking about how we got here and where we're headed, I talked about customers. And you see some names across the top. These are customers that have recently been in our SEC reports as at least 10% of revenue. There's a set of names that we're proud are leaders in the industry. And we work with these customers every day, not just in serving their production requirements, but in serving their next-generation R&D requirements, this Lab-to-Fab strategy. It's critically important. We have essentially -- not essentially, the largest R&D budget in our served markets. And these customers every day help us prioritize what we're working on, how we're developing it because the industry is moving so fast, they don't want to leave anything to chance, right? They're dependent on our technology road map, execution and then operational execution to get to their next challenge. And that's why these durable long-term customer partnerships are so important for our success. I talked about expanding, growing and diversifying the business. We've done that both organically. You'll see some examples in a minute, but also through M&A. And here's a list of some of the major M&A events in company history. These have both been strategic acquisitions, but we also hold ourselves to the bar of them being financially accretive transactions. The most recent one we did at the end of 2025 was the acquisition of a small company called Keystone Photonics, who has an innovative optical probing technology that we think is a key enabler for driving the CPO road map forward. A couple of milestones or a few milestones here. I won't talk you through all of them. But again, this notion that engaging early with these key customers in long-term partnerships is central to success. We shipped our first HBM probe card to our -- who's now our #1 customer in 2012, the year I joined FormFactor. We've worked with them and other DRAM customers to optimize this technology where it's now capable of astounding things in serving HBM4 and 4E and in the future on to HBM5. Sudhakar will touch on how this architectural development has occurred and why FormFactor has a competitive advantage that will continue to persist in this important market. Same story from Silicon Photonics. And Jens will walk through the time frame associated with that and some of the key milestones as we're poised on the brink here of scale -- production at scale for CPO. The point again here is this is a multiyear, almost a decade engagement in refining the technology together with some of the customers you see on the top line. The other major milestone that I want to draw your attention to is a few years ago, we decided we had to change the organizational structure and some of the leadership of the company. You see -- you're going to hear from some of these leaders that we've added as part of FormFactor's executive team today. But this was a really fundamental shift from the organizational structure and people that have led FormFactor to that point. And it's basically responsible for the dramatic improvement in financial results we've had. The underlying financial results or the underlying operational results have improved similarly. As we look ahead, we're making some very large investments this year in Farmers Branch. Missy is going to walk us through how we're doing that, right, why it's going to drive some of the attributes of the financial model, doubling revenue and more than doubling profitability. But this is a big organic initiative for us. Poised at this intersection of high-performance compute and advanced packaging, we've got the company in a very strong competitive position. We also need the capacity and capability to build all of these products. And that's why Farmers Branch and the global operations team is so central to FormFactor's future. I want to come back and motivate the other side of this equation, advanced packaging and why it's important for a semiconductor test company. It's not obvious at first. But again, if we take one of these example, high-performance compute modules, a variety of GPUs, ASICs, HBM, networking, co-package optics, each of these subcomponents and the total collection is built using these techniques of advanced packaging, things like TSMC CoWoS, Intel EMIB, right? These are the techniques the industry is using, right, as you saw in that video, to kind of make up for what undeniably is a slowing Moore's Law. It turns out that if you -- and this is true, not just in semiconductors, but in almost anything, there's some pretty universal math associated with breaking something apart into its subcomponents. A little bit of math on the chart, but I want to use one of the subcomponents of this high-performance compute module, HBM, to motivate why test and probe are so important in enabling advanced packaging and therefore, high-performance compute. I'm going to contrast something we did years ago, right, an HBM2 probe card for -- to test a high stack, right? This was in the early days with our #1 customer. HBM was just developing and hadn't really required -- garnered the momentum associated with AI. So you take 4 chips, if you have an incoming defect rate of 1%, so of those 4 DRAM die that are coming into the stacking process, let's assume that 1% of them are not going to work, don't work. That results, as you can see on the chart, in a 3% to 4% yield loss in the stacking process, not a disaster, right, not great either. As we move to today and 16 high HBM4, that math compounds the 1% incoming defect rate into a composite defect rate for the stack of something like 15%, an additional 10% yield loss just by stacking higher. And again, this is simple universal math. In addition, you can imagine that the HBM4 16 high stack is a lot more valuable than the 4 high HBM2 stack. A bunch of advanced node silicon, a lot of process technology has gone into building this stack. This is an expensive thing to scrap. So we've got a situation where not only is the probability of scrap going up, but the cost of scrap is going up. So something needs to be done. That's something is reducing the 1% incoming defect rate. And the way to do that is through wafer probe and wafer test, screening for something close to what's been called known good die in the industry. And if you do that, you can move left on this curve and work your way back up, right, to higher yields after the stacking process. That's why wafer probe and wafer test are so important in enabling advanced packaging. And of course, the road map has only more of this happening, right? HBM is going to continue to increase enabled by copper hybrid bonding. Future GPU products go from 1 GPU to 2 GPU to 4 GPU, right? This math is a fairly profound effect on the economics of the industry. And it's why 2 things are happening to our business in our business. One, what we call test intensity is going up. Test times are longer, more probe cards are required. Basically, the chips are being tested across more conditions and with more test vectors going through the part. It also means higher test complexity because each of these chiplets needs to be exercised across a broader process parameter range. If you think about things like speed, things like thermal conditions at different temperatures to make sure each of these chiplets is good before it goes into the stack, driving down that 1% defect rate so that the composite yield goes up and our customers have an economically viable advanced packaging process. All right. Before I hand it over to the team, I want to kind of map out for you how we're now organized. I said this was a major change for us and give you some background on what these people own in our organization. You can see clearly from the last 3-plus quarters of financials that something has changed at FormFactor. And it really starts with these people and the teams they've recruited in and the way they're coming together to drive FormFactor towards 2030 and the doubling of revenue. The most recent change is promoting Aric to CFO, right? That happened a little less than a year ago. And what he's done in partnering with me and the rest of the team is make sure there's absolute consistency between our strategic priorities, where we're spending money and how we're executing to make sure we're delivering a financial return on every dollar spent and invested. You can imagine that's critical with us spending the amount we are on Farmers Branch. If we move to the center, this describes at a high level how we engage with the customers you've seen before. Aasutosh our Chief Commercial Officer, will walk you through some of the details of that engagement. And the details, we use the word customer intimacy because the idea that we're building customized design-specific products is really, really important for how we interact with these customers. Jens and Sudhakar, one of the things we did as part of this reorganization was get our business units and our business unit leaders really focused on developing and defining world-class leading products. And so they're going to walk you through some of the technical advantages that we have and where their focus is on engineering, product development and driving these new products that we codevelop with customers into strong market share positions. Missy, who joined us about 1.5 years ago, has completely revamped our operations. We decided we were going to create a global operations team, getting leverage and benefits from the scale we have across all these different revenue streams. And you can see in recent results, how that's benefited us, especially on the gross margin line. And then finally, Aric will bring us home with the details of our new target model. Before I hand it over to Sudhakar, I want to frame what we view as FormFactor's durable competitive advantages. I talked about probe cards being customized to each customer chip design. And you can see some examples of how complex these things are over at the table there. To be able to do that on lead times well within a quarter and do it first time right, do it perfectly, so that the probe card and probe cards because we're now doing this in parallel, get there on time but work out of the box. This is absolutely critical for success in the industry because our customers are depending on us to be able to ramp on their schedules. And as you've heard from companies like NVIDIA, TSMC, things are only getting faster, right? This idea of speed of light in a 1-year high-performance compute cadence has fundamental implications for a company that has to design and ramp things quickly and scale. Another piece that's critical to our competitive advantage in probe cards is the MEMS technology, and Sudhakar will walk through that, but it's a foundational proprietary technology that we keep in-house. We've added to that, if I walk you back to our M&A strategy, Keystone Photonics offers an optical probe, which is the analog of these MEMS electrical probes as we move into the era of co-packaged optics and photonics taking a much more prominent role in compute. And then finally, as we're positioned, right, at this intersection of high-performance compute and advanced packaging and really redefining what's possible for form factor, we need to be able to build all these compelling products at scale and drive very fast ramps in the overall industry. Those are what I think we think FormFactor's key competitive advantages are, again, as we redefine what's possible for FormFactor. Sudhakar?

Good morning, everyone. First of all, thank you for taking the time to spend with us this morning and early part of the afternoon. My name is Sudhakar Raman. I've been with FormFactor for about 5 years, and I've been in the industry for about 25 years working at various companies like Onto Innovation, Veeco and MKS, which is used to be ESI in the laser world. As Mike mentioned, FormFactor is strategically positioned at the intersection of high-performance compute and advanced packaging. So what this means is with the demand for higher and higher computational power, we're seeing increasing demands on power and thermal density increasing, while advancements essentially in the networking space is driving the demand for higher speed performance. So by addressing the thermal and the high-speed challenges that we have in front of us, we plan to double the probes business revenue by 2030 by innovating our differentiated advanced MEMS probe technology solutions and delivering differentiated products at scale to our customers. I want to take a minute here to kind of point out how -- what's the major inflections happening in the marketplace. To the right of the slide that you see here, essentially, we see a pretty -- because of the high-performance compute and the advanced packaging trends that's happening, we see a pretty strong robust growth in the advanced probe cards market. We're seeing a growth of about $2.8 billion to $4 billion by 2030 and primarily driven by all the major inflections that's happening across compute. When I say compute, it's GPU and custom ASICs, as well as inflections happening in networking and HBM and DRAM. So if I take a moment and focus your attention to the bars, the kind of the size of the bars that you see, the width of the bars reflects the size of the market that we see today and continuing to grow in the very high single digits or double digits into the future. So our plan is to gain market share in all these major growth segments that we are highlighting here. So as you know, we have a pretty good position in CPU, and we'll continue to see the growth that we are going to expect in the GPU and the networking sector. The other interesting trend is, as you see at the top of these bar graphs, what you see is all the different technology trends that's happening, right, whether thermal challenges or speed or whether it's higher parallelism or reduced pitches. But what's unique is you can see there is multiple trends that are common across multiple segments. Being the leading provider of the probe card solutions, FormFactor has a very unique competitive advantage having participating in all these major growth vectors. What do I mean by that? So we're able to see the trends across different market vectors and able to apply our innovative solutions strategically across all these areas with speed and efficiency. Now as an example, as you can see on RF, all the way to the right, we have decades-long market leadership in RF. And RF, as we all know, kind of really lends itself in terms of developing high-speed probing technologies, which we are leveraging and migrating onto the high-speed networking space. And that's where we are starting to continue to see growth and continuing to see our growing market share using differentiated solutions here. Now I want to take a moment and just kind of walk the audience through what the probe card is. It's very hard to see what exactly does a probe card do because it's kind of the design-specific interface that kind of integrates into an Automated Test Equipment, ATE and on to the -- and that efficiently flows electrons and photons to the wafer. So think of it as essentially as a massive parallel high parallelism of lanes on a highway, right, that allows electrons and photons to travel efficiently from the test equipment onto the wafer. So because each probe card is, as Mike said, it's highly engineered consumable, it's really designed, custom designed and manufactured to the specific needs of the customer device. So what does this mean and mates to a standard automated test equipment. So what this really means is as FormFactor as a company, we're highly motivated and we encourage and maintain an open ecosystem. That's very, very important for us because we are able to serve the needs of the industry and the customers' road map very, very efficiently. Now if you see here on the top, it shows -- it's also on the table on the right side is a foundry and logic probe card. And in the middle is a DRAM or HBM probe card with very, very high parallelism. Essentially, this kind of demonstrates the ability that we have to have extremely high parallelism, which is about 2,000 or even 3,000 devices under test and with extreme high density of pinconns. When I say extreme high density of pinconns, we're talking about tens of thousands to even 150,000 to 200,000 pinconns that we can develop in a single probe card. That is, again, design specific to the customer's device. On top of it, we manufacture these things at tight pitches. So just to illustrate as an example, just to give you some compare and contrast, a probe card, you can think of it as a single basketball sometimes or even the size of 2 basketballs. But if you really get it down, what is the actual probing area, where all the needles of some people call it or we call it probes, it's kind of the tip of a pencil. And that's where you are seeing sometimes tens of thousands of probe being manufactured, assembled with very high accuracy and repeatability. Now the probe itself is actually the size of a human hair. Majority of the hair in this room probably is somewhere between 50 to 75 microns in diameter, right? So imagine the level of complexity that is -- we are manufacturing here. As these power requirements and thermal requirements are continuing to increase, we have to design these probes using advanced MEMS probe technologies. Mike talked about the proprietary mechanism. Essentially, these are manufactured using standard semiconductor production-proven semiconductor techniques like lithography, CMP, Chemical Mechanical Polishing and advanced plating technologies. Essentially, what this allows us to do is design it in such a way it has the ability to carry multiple amps of current. A good corollary I can give you is think of your iPhone, iPhone take a few amps to charge, an entire iPhone. We send that amount of current with a single probe across tens of thousands of probes. And it sees somewhere between 100 to 200 degrees C of temperature at the same time. So the ability to withstand these kind of things is where the innovation comes in. So the point being the technical barrier to entry is very, very high. So in the subsequent section, I'll talk more about these technology innovations as well as architecture improvements that we're making to address the demanding needs of our HPC ecosystem here. So this slide, we'll now dive into the Foundry and Logic space. We'll have 2 sections, one on foundry and logic, another one we'll get into the DRAM and the memory space. Essentially, you can see here when Mike presented the entire HPC ecosystem, we talked about all the different devices. What we'll focus in this section is going to be all around the GPU, custom ASICs, the networking and the co-packaged optics. And as you can see, there are 4 major trends that are driving essentially the technology inflection in this area. Number one is essentially increasing power density. What does that mean? So the devices are starting to see, particularly the GPUs, somewhere between 2,000 watts all the way in the future up to 10,000 watts in the device. So what this means is the thermal density is continuing to increase. At the per centimeter square, you're going to see 200 watts, which means you have to dissipate the heat as the customers are evolving the needs of the HPC compute. So that's where it puts the onus on suppliers and companies like us to continue to innovate. Number two, several of the high-speed test content from final test and system-level testing is kind of shifting left. They want to test every single die as a known good die to mitigate yield loss, which Mike talked about through the HBM example, it applies the same exact logic and composite yield math applies here as well as in foundry and logic. Number three, you see those red bars that's connecting different chips. We call it D2D here, die-to-die. Essentially, they are basically silicon bridge, some people call it. Intel calls it EMIB. That's basically what that is. And it's really starting to have significant adoption in both in the CoWoS as well as non-CoWoS architectures, right? And four is co-packaged optics with higher networking speed going from 112, 224 to 448, it's not only driving the demand for electrical probing, but it's also driving the demand for optical probing. Jens will talk more detailed about the CPO and the advances we're making there. At the end of the day, what does this mean to Form? For the past several years, we've been stating that there are 2 major vectors that is starting to drive and is starting to play out, which is test intensity and test complexity. And it's really starting to play out with the HPC and advanced packaging intersection. As you can see here, with the number of devices that needs to get tested that needs to be known good dies, it's increasing the test intensity, which means more number of electrical probe cards and more number of electrical and optical combined probe cards, electro-optical probe cards as we call it. And second, with the test complexity increasing, it really plays well into our advanced proprietary MEMS manufacturing and technology development where you need to manage the thermal envelopes as well as the high speed with high pin count and high parallelism. So all of them are converging together, which is driving the advancements of these innovations even further. I'm going to take a moment here and kind of dive a little bit deeper into kind of what are we doing as FormFactor to really future-proof the foundry and logic requirements and the technology inflections that's coming along as part of this whole high-performance compute. So on your bottom left graph that you're seeing here, we picked the 2 major vectors that is driving the technology and the technical requirements forward, which is power, which translates to thermal and speed. As you can see, the GPU, the HPC compute ecosystem is continuing to drive the advanced MEMS technology development. But I want to kind of take a step back and address the custom ASICs piece of it. Historically, in the past, custom ASIC has been about 2 to 3 nodes, technology nodes behind. What does that mean? So it really means that the demand for power and speed hasn't been there, which means you can actually cater to those needs of those custom ASICs with essentially what I would call as a medium, mid-end, mid-tier type of MEMS probes. But what we're seeing is the custom ASIC is now starting to be adopted with more of advanced technology nodes like 3-nanometer type nodes, increasing number of transistor cores and density increasing. So the power density is increasing. Thermal requirements are increasing, pushing the custom ASIC as well into the advanced MEMS category. If I shift to the right side of the slide here, essentially, what you're seeing on the top right of the slide is what we call the Apollo probe card. On the table, it's that big rectangular one that you see. So that's our foundry and logic probe card. You see there's vertical lines that are the advanced MEMS probes that gets integrated into the ceramic plates, which all those are highly engineered with special proprietary coatings that we develop. That gets integrated onto a metal multilayer organic is essentially an interposer, which can spread the electrical signals onto a PCB, which gets integrated onto the automated test equipment platform. On your right, you're seeing is the advanced MEMS probes, examples of a Scanning Electron Microscope, SEM pictures of actual how the probe tip looks. That's the size of the human hair I'm talking about. It's actually the tip that actually probes at the wafer pad or the wafer bump onto the customer device, right? And again, these are manufactured using advanced semiconductor techniques like lithography plating techniques that I talked about. But I want to kind of drag the attention to the 2 areas of innovation. One is in the power and thermal requirements. So why advanced MEMS is important? Because it gives us the ability by using these advanced semiconductor techniques, it gives us the ability to kind of marry or mingle different metals and alloys and come up with composite metals and composite materials, essentially doing metallurgy engineering that is specifically designed to the customers' device needs. So this is very unique because -- and only through semiconductor manufacturing techniques, you can achieve this. This is -- and you can see there on the middle portion on the MEMS probes, there are multilayers that are being developed. So that helps your ability to carry much higher currents and at much higher speeds at the same time. So you're designing in multiple requirements with a single probe or multiple types of probes that are very, very application-specific needs. The second one is, I want to highlight the attention to the bottom right is on the probe part itself, as we go beyond the probe tips into the ceramic plates, where we are actually engineering new thermal dissipation materials that gets manufactured and coated onto these ceramic plates and that has the ability to dissipate the heat that's coming through the probes so that you increase the uptime and predictability of the yield binning and the performance for the customer. And the other axis that you see here is the speed. And again, with speed, what you need is extremely high signal integrity, meaning very, very good, clean signal to -- very low signal-to-noise ratio with very high signal degree needs to happen. So when we do these composite metals and metallurgy engineering, we ensure that the way we design these probes, develop and manufacture it, it has very low impedance, very low resistance path to go through. So -- and again, it's at the tight pitches that the customer needs, whether it's EMIB type pitches or IOs that are much, much tighter pitches. So those are the 2 major differentiating factors that we continue to evolve as we go from our advanced MEMS to even future advanced MEMS. And we're pretty confident as we look at the requirements, our MEMs can confidently approach the requirements and even beyond. That's what we mean by future-proof. Now switching gears on to HBM. As Mike talked about the multiple different stacks from 2 to 4E, what I want to really highlight here is there are 2 things, again, test intensity and test complexity playing out as we've been talking about. So when you look at HBM3 to HBM3 to HBM4 or HBM4E, so we're seeing the number of stack going up, which increases the number of probe card needs to really test these stacks. So as an example, if I give you, you can think of test times increasing and the test insertions increasing. So what does it mean to the overall -- the growth of the market. It increases the test intensity by about 25% to 30% when you go from 3.3 to 4 4E. And we're expecting to continue to see the same as it migrates forward. The other interesting piece is test complexity, right? There are 2 areas within the test complexity that's critical to pay attention to. One is our differentiated smart matrix architecture provides the need to test at very high speed at very high parallelism. So this is the industry's only production-proven platform that is able to test and give the customer the ability to do high parallelism productivity at speed and enables the customer to test hundreds of HBM stacks simultaneously. So that's number one from a complexity standpoint. Number two, as you can see, the base die migration from 3E to 4 to 4E to 5, we expect to see there is -- we're starting to see A lot of the hyperscalers and the end customers working with DRAM and HBM makers to integrate more of the logic functionality into the base die. So that's what they're calling it as custom HBM. And the reason this is happening is really to optimize the AI performance, the power consumption and having the ability to have more space on either a GPU or XPU to have more compute power there. So they're shifting more into the base die of the HBM. What does that do to us? It means we need to start testing logic IP on a memory-based die along with the memory IP. So this provides a very unique opportunity to differentiate for us because FormFactor is the only company that has production proven platforms on both foundry and logic using our Apollo architecture as well as in the DRAM HBM space using SmartMatrix architecture. So with that, as we migrate into the, hey, what does advanced MEMS do for this industry from an HBM, DRAM perspective, Again, here, we picked about parallelism and speed as 2 major areas. So the same set of advantages plays right here into the advanced MEMS techniques that we talked about. But more importantly, we can tailor the need and to customize the metallurgy and the different metals that we use to address the needs of memory probing. It's memory as in DRAM and HBM probing because for logic, they test a different type of functionality test versus in memory, in DRAM and HBM, it's very high parallelism, but speed requirements has to be tested at the same time. So when you see the smart matrix architecture on the right side, we have integrated some unique thermal management mechanisms to take care of the needs of the customers' different temperature that they want to test at in a single -- sometimes in a single test insertion. So essentially, on top of the advanced MEMS, we have also designed in some new thermal dissipation and thermal management into the architecture that gives us a very unique ability to say customers can test it from either from room temperature to sometimes as high as 175 degrees C without changing the probe card for that test insertion. But again, the third one is we talked about the custom HBM migration with the test complexity increasing. What you're seeing on the right side of the 3D MEMS HBM probes is the 2D vertical MEMS probes. It's pretty similar to what I showed you a couple of slides ago. And this is where we are starting to see the fusion of 2D MEMS, advanced MEMS technology being integrated into a very high parallelism, high-speed testing into the DRAM HBM-based die architecture. So this gives us a very unique opportunity, again, to differentiate and continue to grow our market share and grow our revenue. So kind of in summary, we talked about the test intensity increasing, driven essentially by the HPC and advanced packaging intersection, expanding this addressable market, SAM, as we call it, with the test complexity, both in foundry and logic, where the thermal and power are driving the needs for differentiated solutions and in HBM, where there's a fusion of both with the custom HBM logic and memory IP are being fused together to test, which gives us a unique opportunity for Farm. And lastly, we also are seeing a new vector of growth, which is the convergence of electrons and photons and co-packaged optics. So this is going to be driving the need, which Jens will be talking about of how we're going to continue to evolve that market across multiple test insertions. Kind of in closing, increasing test intensity and complexity in the HPC architecture, we believe our continued focus on developing and manufacturing differentiated innovative solutions at scale will lay down the foundation to double our probes revenue by 2030. And now we will be in a position to kind of continue to further along on the technology evolution. With that, I would like to thank you. I would like to introduce Jens Klattenhoff, who is our General Manager for System Business Unit, who will talk about the CPO.

Good morning. Thanks for joining us today. As Sudhakar already said, my name is Jens Klattenhoff. I'm with FormFactor since 2016. And since 2021, I'm running the Systems BU as the Senior VP and General Manager. My background is in laser technology, which is a pretty good fit for co-packaged optics and silicon photonics. In my career, I worked for several optical measurement companies like Polytec and Baumer before. So we are redefining what's possible. FormFactor is the global leader for wafer-level test systems, and we are extending this leadership to a new era of computing. Over 3 decades, the systems business, formerly known as Cascade Microtech, which was acquired by FormFactor in 2016 builds its position in foundational markets like RF testing for mobile and connectivity devices, DC testing for logical and mixed signal devices and high-power testing for automotive semiconductors. Today, this industry is shifting. Advanced networking and high-performance computing are driving new demand for higher bandwidth and lower power consumption as well as rapid scaling for artificial intelligence and next-generation data centers. This shift is a structural growth opportunity for FormFactor when Silicon Photonic is moving into the high-volume manufacturing for the first time. Our technology leadership, the global scale and the customer relationship we have with all leading co-package optic customers positions us to set the standards for optical testing in this area. In the next couple of slides, I would like to show you how co-packaged optic will change our systems business, how FormFactor is well positioned in this market and how our strategic partnerships will help us to make this shift happen. By 2030, we are actually planning to double our revenue within the Systems segment, and I'd like to show you how. Co-packaged optics will be the engine of our growth. Traditional interconnect, electrical interconnects have fundamental limits. As data rates scale, couplings can't provide the required bandwidth and the power efficiency, which is required for hyperscaling computing and AI. Co-packaged optic will solve this. New architectures like TSMC's COF technology are actually integrating optical IOs into the package close to the compute die. Leading platforms like NVIDIA's Quantum-X switches are already using this technology and switching to co-packaged optic designs. This creates a complete new opportunity for FormFactor, as I said, when co-packaged optic is moving from design to high-volume manufacturing. As Mike and Sudhakar already talked about advanced packaging, advanced packaging is critical in advanced packaging that we are testing early because we are combining very expensive silicon, substrates and optical components in one device. So early wafer level test is essential, and that's exactly where form factor leads. We see silicon photonics and co-packaged optics to be a multi-hundred million dollar opportunity by 2030 for us, which is a significant faster growth than our traditional markets. We are not just entering the silicon photonic testing market. We created it from Lab-to-Fab. In 2017, we deployed our first 300-millimeter semi-automatic probe station to an institute in Germany. Since then, we have installed over 160 systems globally at start-ups, universities, leading co-packaged optic customers, foundries and other companies. The silicon photonic test system is known as the industry standard for optical testing, which is the foundation of co-packaged optics. In 2025, we acquired Keystone Photonics, the leading company for advanced probing technology. Keystone Photonics brings 2 assets to the company. First, their scalable optical probing technology; and second, their deep developed partnership with leading co-packaged optic customers. So this strengthens both our technology leadership as well as our market position at the right time because 2026 is an inflection year when co-packaged optic is moving from design and niche production into high-volume manufacturing. With our Triton system, we are providing a fully qualified production-ready test cell for co-packaged optic testing in high-volume manufacturing. We already deployed several systems, as you heard from Mike, and we saw first revenue impact with qualification and niche production in '25 and expect strong growth in 2026 and beyond when high-volume manufacturing starts to increase for co-packaged optics. Like any other advanced optic -- advanced packaging technology, the economics of co-packaged optics favors early wafer level measurements. So let me talk a little bit about this test strategy. In semiconductor manufacturing, we are testing in different production points or insertions, as you heard from Sudhakar for HBM, for example. The known good die strategy, testing very early in the process is very critical for advanced packaging. As I said, you're packaging expensive silicon, substrates, optical components. So at insertion 1, testing the photonic IC on a 300-millimeter wafer is where FormFactor operates and leads. We are catching defects very early in the process before high-value components are getting added to the package. Testing here at this point reduces cost of good die by up to 5x compared to other insertions. We also accelerate the yield learnings and can isolate photonic issues from assembly and production effects. Later insertion exists, but they do not scale at least currently. High complex test systems, long cycle times, low throughput are not ergonomically yet. So FormFactor focus on insertion One today. Insertion One actually represents the foundational optical technology, which is required for all other insertions as well. So during the evaluation and doing -- when the high-volume manufacturing for co-packaged optics gets more mature, we are able to deploy the technology, which we have developed for insertion One into other insertions later on. Our co-packaged optic leadership with Triton is built on deep partnerships from R&D to high-volume manufacturing or lab to fab. We engaged early with a leading high-performance computing company directly at the development stage. Engaging that early helps us and the customer to shape testability into their devices and to design scalable co-package optic architectures for the future. As a result, FormFactor is providing the whole life cycle and supporting the whole life cycle from lab to fab. I showed you how co-packaged optic will change our market, how we are ideally positioned in this market and how our strategic partnerships will help us to make this shift. Along with Quantum, this positions the Systems segment for durable and high-value growth. And now I'm excited to show you a video of our production-ready test cell for co-packaged optics in high-volume manufacturing called Triton. [Presentation]

Well, thank you, Jens, for your presentation. And I think we're at the point where we're ready to take about 5 minutes break, help yourself with coffee, pastries, et cetera. And we will kick it off with Aasutosh in the commercial part of our business, and I will see you at 11:05. [Break]

Good morning, and welcome back. So my name is Aasutosh Dave, and I'm Chief Commercial Officer at FormFactor, been with FormFactor 2 years now. Prior to that, I used to work at ASML, AMD, Mentor Graphics Siemens. And I've covered the entire semiconductor design to silicon life cycle, and I'm super excited to be part of the FormFactor team. And the question always comes up to say, what's exciting about FormFactor? It's all the advanced technology that's happening with advanced packaging, hyperscalers. And this is where test complexity that Sudhakar was mentioning, co-packaged optics, the industry is headed in a completely different era now. So today, it's about one core idea. And Mike mentioned about this. Our strategy starts with the customer. And it's built to win in places where semiconductor industry is accelerating the fastest. When we talk about form factor strategy, it's a simple strategy, right? We are talking not just about redefining what's possible into the product areas. So Sudhakar and Jens talked about products that we have into probes business unit, into test systems, co-packaged optics. So our strategy is taking that beyond what we have from the product point of view, but extending that to customer value. And how do we gain that, right? So it's just extending not just market leadership, but how do we grow our market share, too. So looking at this, we focus on global support, talking about customer intimacy plan and market leadership. At the end of the day, we want to make sure that we are driving all this value to the customer, and then that helps us continue the leadership position that we have. So what differentiates us and what keeps us ahead than competition is our support. And when you look at this global scale, it's not just the scale for the sake of it that we are spread across the region. I think it is more about we are at locations where it matters the most for the customers. This is a place where customers are ramping fast. This is a place where customers are ramping production cycles, and we are at the forefront of it. Any execution misses are super costly for the customer. So it makes extremely important for us to be there with the customers where customers are ramping fast and simultaneously at multiple locations, and it becomes important for us to be there. So if you look at what's important from the customer point of view, all the geological locations that we have, customers want to ramp faster. We are talking about how these customers are advancing into the next technology nodes, making sure that we have our design team, we have our applications team, we have our service and support organization into all these different regions helps enable these ramps along with the customer. So we have boots on the ground to work closely with the customer. It helps with the faster response time. This is also what is mandated by the customer, but we are at the forefront of it. So global scale and support infrastructure is important. It helps us basically ramp faster. It helps us penetrate with the customers where they really need the support, and it also helps lock in with these customers where it becomes more -- it brings stickiness onto the solution that we are providing along with the customers. Switching gears a little bit. So we talk about global support. Now this question always comes up to say, what does the customer intimacy map look like? What is changing, right? So breadth is important, but what really differentiates us and how we engage -- how FormFactor engages with the customer is we are not engaging with the customer at one single point in time. We are engaging with the customer for the entire semiconductor life cycle. And using this example, if you look on the left side, we are engaging from early R&D to high volume. Early R&D engagement helps us work closely with the customer to define the test architectures, which are changing significantly at a faster pace that we are talking about that Sudhakar was talking about earlier. And then staying involved with the qualification and driving all the way to the high-volume manufacturing, that continuity is super important and super critical. The early engagement, if you look on the right side, we engage with the customers on the R&D side, but we stay engaged with the customer all throughout the ecosystem and all throughout the life cycle of the product. You'll see that we are deeply engaged with multiple teams at a customer, whether it's R&D, yield management, quality, supply chain and high-volume manufacturing. So we work with all of these customers together very closely, and we are embedded with all these customers. So if you look at this multi-threaded engagement, it's strategic. And it becomes super important for us to make sure that we are co-developing not just one thing at a time, but we are codeveloping as a solution and the value that we provide to the customers. And this co-development drives a pull-through. It increases lifetime value and materially strengthens us for any competitive barrier. This is also where the dynamics are changing that we were talking about previously is to say this entire life cycle by which whether you're taking high-bandwidth memory application, whether you're taking HPC, high compute application and advanced packaging applications, having this life cycle and ecosystem is critical. So what customers talk to us is that we are no longer just a supplier. We are a co-development partner for all these customers. I'm going to change gears. So we talked about global support. We talked about the customer intimacy map and how we are embedded with the customer. This slide illustrates something more important. We are present not just through the semiconductor value chain, but we are trusted partners with these customers, and we are recognized by these customers. From early-stage R&D to high-volume manufacturing, we are there. These customers are the one where any execution misses are not allowed. So this is -- the recognition is not just from the Trophy's point of view, but it's the value that we are providing to the customer. It's a testament from this customer that our operating model works, that our execution model works. And when customers are looking at us, it's not just one particular team. They're not looking at us as a product or a technology. They're looking all throughout the ecosystem that we are talking about, the technology has to work perfect, quality, operations, service support, all has to work perfect for us to get recognition from customers like this. Another thing that you will notice is there are some repeat customers. So these repeat recognitions, it speaks more about consistency that we are delivering in the value to these customers. It's not like one-off awards that we are getting, but it is repeated recognition that kind of testifies again to say we have to keep repeating it. We have to make sure that we are providing the value not one time, but consistently. And when you look from a portfolio point of view, Mike had mentioned this in one of his slides, we are -- when you look at this perspective, right, we are in the semiconductor ecosystem, we are at all the semiconductor leaders in this industry, whether you're taking high-performance computing, AI applications, memory applications. We are working closely with these customers. But what also is critical is as these customers grow, as these customers are driving the market, we grow along with them. So I wanted to make sure that, again, these awards recognition and the customers that we are engaging in, it's not just simple awards, but it's recognition from these customers on the value that we are providing to them. So we begin talking about our strategy starts with the customer. And we are leading at the forefront of these customers. We are #1 over there. And I'll end over there. So we begin talking about leadership, I'll close there as well. So as long-standing #1 leader in this industry, we continue to grow our market share. We continue to be #1. And everything that we are talking from the product technology development point of view, from the products, making sure that we are supporting the customer, we are bringing that value to the customer. And that happens with differentiated customer value, life cycle partnership, global support. And last but not least is reliable scale. What I mean by reliable scale is we talk about capacity, we talk about operations. And with that, what I would like to do is I would like to hand it over to Missy, Global Operations leader. She will talk a little bit more about global operations.

Okay. Hello, everyone. I'm Missy Figueroa. I'm the Senior Vice President of Global Operations. And I spent the last 28 years building and scaling semiconductor manufacturing, 24 years at Texas Instruments, 3 years at Wolfspeed and the last 18 months, strengthening and unifying global operations here at FormFactor. So over the last year, we've been redefining what's possible. We fused test and measurement innovation with the rigor and strength of semiconductor manufacturing. And we've done that by building a unified global operations team that didn't exist in this form before. We started by bringing together teams that had historically been distributed and aligning them under one operating model, one set of standards and one shared vision. We strengthened that foundation by bringing in new leadership with deep semiconductor and manufacturing expertise, and we integrated them with the strong legacy talent already here. This combination of fresh perspective and institutionalized knowledge has been a powerful catalyst. Our new unified operating model is already delivering results. And everything you'll see on the next few slides, the performance gains, the operational discipline as well as the impact of our new site all stem from this transformation. So over the last 3 quarters, we delivered meaningful measurable improvements across our operations. And those gains did not happen by accident. They came from a disciplined approach to yield execution and efficiency. So first, yield. By reducing defectivity, scrap and operational friction, yields have steadily been improving. And as you can see on the graph, we'll continue to improve them through process improvements. These improvements have translated directly into better margins, more predictable output and faster start-up learning. The second is disciplined execution. By tightening cycle times and improving delivery predictability, we've not only strengthened our customer confidence, but we have also reduced our working capital needs. So what do I mean by reducing our working capital needs? Well, we've been able to get more out of our installed tool base, otherwise, boosting the asset utilization that we have today. And we've further done that by driving repeatable processes across each of our shifts, lines and sites. Our new operating momentum, our operating execution is already delivering results. And the third driver is around efficiency, both as a cost-cutting exercise and a scaling enabler. So our goal here is to grow our output without growing the complexity of our operations. And to do that, we must operate in a fundamentally smarter way. So what does that mean? That means that we focus on things like reducing non-value-add activity, simplifying work streams, harmonizing processes and also automating manual tasks. So our job here or the goal is really to make execution easier, and this allows our people to focus truly on the work that moves our business forward. Again, these are the 3 strengths that have accelerated the performance you've seen over the last 3 quarters, and they're the same durable, repeatable capabilities that we plan to scale into our new factory. Farmers Branch. Farmers Branch is built for performance and scale. It's not just a building. It's a next-generation operations hub designed to maximize flow, increase throughput and also provide sufficient growth for our future. We got a strategic head start by selecting this location. It's a brownfield. Why did we select a brownfield? Because by doing that, we were able to direct capital into capabilities rather than building infrastructure. It's positioned in a fast-growing semiconductor corridor in North Texas with deep access to talent as well as strong local and state incentives that have further strengthened our project economies. Since purchasing this site, we've really been intentionally laying the groundwork for the target model that you're going to see today. When we purchased the site, we talked about the MEMS fab expansion, right? We're going to expand our MEMS fab from Livermore into Farmers Branch. This frees up some critical capacity for us in Livermore that allows us to continue to develop our smart matrix road map that Sudhakar talked about earlier today, and it positions us for continued growth. And then earlier this year, we also announced the site closure of our Carlsbad A&T. We plan to consolidate our A&T line into Farmers Branch. This drives operational effectiveness and also better economies of scale for this site. So I'm going to spend the next few minutes talking about how we plan to ramp what approach we're going to take, and then we'll talk a little bit more about kind of the life cycle of a factory and how that lays out and what our milestones are. So first, let's talk about how we plan to ramp. We plan to ramp in a modular fashion. This keeps execution risk low as well as deploys capital only as it aligns with demand. So every phase is directly tied to revenue. There will be no speculative capacity and no excess volume. The second is around bringing in new tools and processes, right? So as you bring in new processes, we are planning to optimize those for scale. As you ramp a factory or as you transfer technology, there's really 3 approaches that you can take. The first one is -- the first one that I'd like to think about is just a whole new redesign. You typically see a new factory with a new redesign when you're transferring from diameters. So think 150 to 200. This means that they're bringing in all new tooling. They're having to reintegrate on that tooling. It's extremely high risk. And typically, the time line is much longer because it takes a while for the performance and the yield gains to get there. The second is a copy exact. This is probably what most of you are more familiar with. You hear that term a lot, right? So copy exact means you pick up the site, basically, you put the same tools and the same processes in the new site. very low risk. But when you do that, you actually inherit all your legacy problems into that factory or you can take a third approach, which is the approach we're taking, and it's a really balanced approach. It's actually kind of merging of the first 2 that I talked about. And it's a copy smart approach. And we're taking a copy smart approach because we already know that we have proven technologies and capabilities. But we're going to bring those over, and we're going to think about bringing in some best industry practices. So by bringing in more advanced tool sets, our current technology, along with some industry best practices and process development and our learnings, we can optimize the site for cost, scale and long-term reliability, which really just means that we have a faster start-up, more predictable output, higher quality and better performance from day 1. So now I'll direct your attention to the bottom of the slide. If you look at the bottom of the slide, this is industry best practices for phasing of the factory life cycle. Phase 1, planning a prestart-up. Everyone goes through this, right? This is the design, the layout of the tools. Phase 2, pilot and qualification. As you bring in your first initial line, you go through a pilot and qualification of every single tool in every single process and then all combined. Phase 3 is your initial production ramp. Once you achieve that initial production ramp, now you really just move into the whole life cycle of a fab, which is ramping to target capacity and continuous improvement. And those cycles go on and on, which is why fabs can exist for 30 to 50 years. So today, in Farmers Branch, we're actually in both Phase 1 and Phase 2. We're in Phase 1 because as we announced, this site had a clean room, but we needed to further expand our clean room. So that construction is already underway. So we're in the middle of completing both the design and layout as well as having vendors come in to do the construction. The second piece is really pilot and qualification. We're also in this phase. Why? Because when we announced the site, we were very specific. We purchased the site because it already had existing clean room, over 50,000 square feet. So we've already been installing tools and as those tools are getting installed, the pilot and qualification is underway. This overlap was intentional for us. We chose this specifically because it meant a faster ramp and reduced readiness risk. So our milestones are set. You can see here below, we're set to have both our Men's fab line and our A&T site qualified by the end of this year in December, with initial production ramp starting in 2027. And then once we complete those qualifications, we'll then move into a phased ramping, which means we'll start slowly increasing our output. We'll be bringing in additional tool sets. And then from there, we'll continue with operational improvements, things like tightening process windows, bringing in new innovation, so on. Okay. So now we've talked about Farmers Branch. Let's talk about how we're going to engineer it to get us to the next level. So earlier, I said Farmers Branch was built for performance and scale. To further expand upon this, I want to spend a few minutes talking about what we're doing at the site. First, we're equipping the site with advanced tool sets. Advanced tool sets actually allow higher throughput in a smaller square footage, which means we're going to be generating more revenue per square foot in the clean room. And clean rooms are pretty expensive. So the goal here is to drive lower COGS. We also have a flexible, scalable layout. This means higher output densities, and it also reduces waste around nonmanufacturing production space. So this creates a complex high output environment that scales better than traditional setups. We have shorter travel paths and easier handoffs. The second is really around embedding digital tools and AI from day 1. We're going to have real-time data, analytics, automation and robotics, driving decisions across our floor. Our quality control is also automated. We can detect and inspect millions of screens with speed and precision. So not only is our AI detect defects, it also classifies them, meaning faster, rapid response, root cause analysis and further yield improvements. And then third, we're ramping this in a capital-efficient way. And what do I mean by that? With these advanced tool sets, the processing capabilities and the batching actually means that we can ramp in the phased way that I talked about. This means that we're able to keep our investments disciplined and the return rates high. Farmers Branch and our new operating model unlocks the next wave for FormFactor. And it unlocks what matters most. Profitable scale, high yield, automated, cost-efficient production at a global volume capability that expands our margins with harmonized processes and tooling, resilient growth, a diversified footprint with a secure supply chain. We have fungible manufacturing lines for our process improvements, and this also allows for on-time delivery in any volatile market. Trusted execution, unbeatable quality and a digital backbone that delivers identical data, metrics and outcomes, instilling our customers' confidence. And finally, looking forward, Farmers Branch, a fully fungible, digitally integrated site that comes online with the same performance DNA that you've come to expect from FormFactor. It positions us to scale the demand and allows us to deepen our customer partnerships. Profitable scale, resilient growth and trusted execution. That's what our operations makes possible. And with that, I'd like to introduce our Chief Financial Officer, Aric McKinnis, to share our new target model.

Thank you, Missy, and good morning, everyone. Thank you for joining us today again. I'm FormFactor's CFO. Been in the role for a relatively short period of time going -- getting close to a year now. But I joined FormFactor actually back in 2019. So I've been with the company for a little while. Prior to that, I was with a company called Electro Scientific Industries that was subsequently acquired by MKS Instruments. And prior to that, spent about a decade in public accounting with Deloitte & Touche. So the team did a pretty darn good job of laying out what our road map is going forward and how we're going to get there. I'm going to spend some time talking about what that looks like in terms of our financials, if you will. But before I get into that, I just want to say I'm really excited about FormFactor's position right now and our ability to execute on the plans that we're laying out here today. And the reason why I'm excited about it is because as you've heard from each of the people that presented, there's real fundamental substance here. There's a durable approach that we're taking. This is more than just a spreadsheet exercise. You've seen the renewed commitment that we've been demonstrating over the past 3 quarters or so around execution, both from an operational perspective and also from a financial perspective. You've heard from Sudhakar and Jens about our leadership position in the markets. We have an enviable position right now of being the #1 probe card supplier in the world. And we have a real ability to leverage the capability that we've developed over years, those intimate customer relationships that you heard Aasutosh talk about and leverage those into these growth opportunities that we see in the intersection of high-performance compute and advanced packaging, 2 of the most powerful trends that we're seeing in the industry today. We have the breadth and depth of knowledge. And I think you've seen today, as people have spoken with you, the leadership change that we've also generated in that. So I think we also have the leadership that's required to drive our plan forward. We've got a bold goal in front of us. We're going to double our revenues by 2030. We're going to drive more than double EPS in that same time frame. So let's dive into some of the details here. And let's start first by talking about where we've been. So our last target model was really established in 2020. And in that target model, we were targeting around $850 million in revenue, 47% gross margins with operating expense as a percent of revenue of 25% and a non-GAAP EPS of $2 per share. We've now demonstrated achievement of that target model. So our most recent quarterly results exceeded that target model performance. And if you include the latest guidance that we provided for Q2 2026, you can see that actually on a trailing 12-month basis, we've also demonstrated this model in a durable way. As we look forward, and as you heard in the prior presentations, we see significant growth in our markets, and we're expecting the market to grow to $4.5 billion. In that environment, FormFactor expects to double its revenue to $1.6 billion. You've heard the leverage that we want to drive in our operations from Missy, and we believe that we can achieve 55% gross margins at these revenue levels. And we're going to continue to drive operational leverage and discipline through our organization, generating further leverage on our fixed costs and on operating expense as a percent of revenues of 23% and ultimately, a non-GAAP EPS of $5 per share over this time frame. So you've heard a lot about the market opportunities in front of us, and you heard about them kind of by segment or business unit specific applications. So let's pull that together for you here a little bit and talk about our total addressable market. So today, our total addressable market is around $3.1 billion. We expect that's going to grow to $4.5 billion. And you heard what's driving that, right? It's this increased intensity, this increased test complexity that we're seeing driven by high-performance compute, driven by advanced packages, things like HBM, things like co-packaged optics. That's driving the expansion in our market, if you will. In addition, we expect to take market share. That's another element of that growth, and that multiplies the market growth percentage here. So what you can see here is the market is expected to grow or we expect it to grow. And those expectations for us are based on third-party research. We also take into account our knowledge of the market. Based on those inputs, we believe the market is going to grow at about 8% CAGR over this time frame. If we look at what we're planning for FormFactor, we're planning to do double that growth rate in the same time frame. And we're going to do that by the leverage that I mentioned on market growth, amplifying that with market share gains. And you heard from Sudhakar and Jens in particular, about some of the competitive positioning that we believe is going to enable that. You also heard from Missy about how we're going to drive operational excellence that's really important for our customers. So if we get into the different components from a market perspective, again, you heard this kind of in bits and pieces earlier, but this will give you a sense of scale. So if you look at the growth trajectory from $3.1 billion today to $4.5 billion in 2030, you can see the major -- what we view as being the major elements of that from a market perspective, co-packaged optics, high-bandwidth memory, GPUs and custom ASICs. In addition, we have growth in our base business indicated here. The thing I want you to take away from this is how broad-based this is, right? We've got some buzzwords in here. There's some very popular topics. There's things that are very exciting, very fast moving, but it's more than just that. right? We're growing fundamentally. We're changing how we do things. We're changing how we approach the market, and we're so well positioned as a company. So we have multiple horses in this race, and I think we're uniquely positioned in that respect. So market growth, market share working together to drive a multiplier effect on our revenues, allowing us to grow from the 2025 base level of around $800 million per year to double that, $1.6 billion. And as we do that, we expect to generate leverage on that volume and also, again, leveraging the value of what we provide our customers to generate even higher gross margins, generating a 1,400 basis point increase in gross margins from our 2025 baseline. And we're going to do that on what we think is relatively similar mix. And the important element of that is that we aren't relying on luck. We aren't relying on mix to get this done. We're going to drive this out of fundamental, again, market, business value drivers. So we have good line of sight to this growth rate, I believe. We have good line of sight for how we can drive value for our customers. Let me dive into gross margin road map here a little bit. So as I mentioned, 1,400 basis point increase. That's a big number. I would divide that progression into 3 main pillars, and those are volume, operational excellence or you could also call this execution and then innovation. And you heard all of these elements. The team makes it really easy for me. You heard all of these elements in the prior discussions from the team. We expect the relative weighting of these components to be like you see here on the screen. So about 600 basis points from volume as we double revenues, about 500 basis points from operational excellence and about 400 basis points from innovation. Farmers Branch is a major enabler of volume and also innovation and operational excellence. So the contribution -- we expect Farmers Branch to ultimately be accretive to our growth, and it's a big part of this road map. And you see it, it's a piece of both of the 2 middle and last pillars here that you see. Recent results demonstrate the credibility of this plan. So again, a very significant change in the trajectory of our gross margins. We believe that this is a balanced but achievable target. Our most recent quarterly results, we did 49% gross margins. In our most recent guide, we guided 50 basis points up from that level. Some elements of those things were temporary in nature today. We've driven very substantial improvement over the past 3 quarters. We believe that we can make those things durable and long-lasting as we move forward. And you can see the sort of path that we have been able to generate. Now it's going to get harder as we move forward, right? We've been able to pick some low-hanging fruit and make rapid improvements to date. As we continue to move forward and focus on these areas of excellence and innovation, those things just naturally get harder. But we believe that we have a good potential to move that needle forward and a good line of sight to the drivers for that value. As we move further down the income statement, you can see -- so we've got the growth. We're going to generate significant dollars from gross profit by improving gross margins. And then we're going to make sure that we generate leverage all the way down the P&L, including operating expenses. And we're going to do that by ensuring that we maintain discipline around our spending across OpEx lines. And we're going to do that while we still continue to invest dollars where we should, where we need to. R&D is very important for us as a company to maintain our competitive advantage. You heard about the product life cycle and about how our engagement with those customers from lab to fab is very important for our positioning, for our learnings and for our customers as well and driving their learnings. It's very important for us to continue to spend money in R&D. And by generating higher profit levels, we're able to really fund that sort of investment that's required for us to continue to be the #1 supplier in our served markets. That leverage continues down the P&L to EPS moving us to -- from $1.27 in the baseline year of 2025 to $5 a share. That's about a 30% annual growth rate in EPS. So you can see the sort of leverage that we're getting across the P&L here. So the earnings power that we're generating, we're going to invest that in driving the company forward. And one of the primary ways that we're going to do that is by focusing in the short term on the expansion of Farmers Branch. You heard how that's fundamentally driving these pillars of gross margin expansion. You heard how our customers are really pushing us to move faster, and there's a lot of demand that we see today out there. In order to serve that, Farmers Branch is probably the single most important short-term priority for us to really generate value and accretion in the business as we look to the next 1.5 years. It provides capacity we need today. It also provides a platform on which we can build capacity in the future as needed. And as Missy said, making sure that we match the capacity that we have to the demand that's out there. In addition, Farmers Branch helps us on our gross margin road map. It makes us more efficient, drives down our unit costs. As you might imagine, in Texas, a little bit cheaper to manufacture there than in our existing footprint today in California. And so as we expand into that site, that lowers our average cost to produce. We'll continue to invest in M&A to the extent that it makes sense. And that's always been our strategy. You saw recently, we just did an acquisition of Keystone Photonics, very strategic type of acquisition, enabling an important technology for us on our road map for co-packaged optics. That's the sort of acquisitions that you can expect from us as we move forward. We'll continue to engage in a share repurchase program. The main purpose of that program is to buy back shares and offset the dilution from our stock compensation programs. And as you can see by the graphic on the right-hand side of the slide, we've been successful in doing that from the time of our last event, Investor Day that we had back in 2020 to today, we've driven down diluted share count over that same time period through this program. Long term, we expect to spend around 4% to 5% of revenues in sustaining capital, just maintenance type activities. So our target model is ambitious. I think it's achievable. And I think importantly, it's self-funding. There's a lot of self-help elements in here. We're driving significant leverage across the business, and that's enabling us to do in things like Farmers Branch to invest in R&D to really sustain and move the business forward. I think it's structural, what we see in the markets. I think that we're driving organic growth that's really meaningful here and driving leverage across the business. So thank you for joining me today as we share what I think is a very compelling vision of the future for FormFactor and the future for our customers. And with that, I'll hand it off to Stan.

So as always, we have some supplemental materials. I'm not going to spend any time on this slide, but I want you to know we have it. And we're going to take about 5 minutes quick break, so we can set all of the chairs on the stage, and then we will move to Q&A. So take 5 and let's reconvene at -- we'll do it at 12:00. So noon, I'll see you guys back. [Break]

All right. Why don't we all get seated, we'll have our executive management team here on the stage, getting ready for Q&A. And we have -- so we have an hour. We will have Crystal and Kelly handling mic. So please raise your hand when you have a question. We can see you, Craig, you'll get your mic in a second. Well, a lot of you. Okay. Please keep your questions to 2 or so, so we can have broader participation. And I will hand it off to Craig Ellis. Kelly, give him the mic.

And just logistically, I'll serve as MC and traffic cost. Some of the questions I assume will be directed at me, but I can also disposition them to our team.

Okay. Yes. Craig Ellis, B. Riley Securities team. Thanks for the very informative session and impressive target model. I had a near-term question and a long-term question. The near-term question is we can see the demand is very, very strong. And it seems that we've been able to push up effective capacity recently with ops improvements. How confident are we, we can continue to do that in the next year before Farmers Branch ramps up? And does it mean that some of those ops gains that you showed us are really kind of pulling in the near term versus more back-end loaded?

Yes. Well, I'll hand this one to Missy, but I think it's important to note, remember on that time line, we're ramping Farmers Branch in less than a year, right? And we're making excellent progress on that. So Missy, do you want to talk a little bit about the sustainable improvements we're making in our existing footprint?

Yes. So everything I showed today, the charts on the second slide really stem from our Livermore operations, which is where our MEMS factory is. We continue to drive improvements there. And so Mike alluded to it in our last earnings call, squeezing more out of the juice. Today, we have several activities. So we're still focused on yield, cycle time reduction. And as we're able to improve in those spaces, we can pull in more demand, right? So as you improve your yield, you can start less wafers to satisfy one customer, which frees up wafers for another. So I'm really confident in the projects that we have lined out and the continuous improvement activities that we have.

Great. And then the follow-up question is a long-term extension of that. As we look at the target models 2030 time frame, Mike, how do we think about the linearity of getting there with the contribution from probes versus systems? And then how below the top line do the COGS gains and the gross margin benefits pace on the way to 2030?

I'll take the question around the top line linearity, if you will, and some of the mix pieces and then hand off to Aric for -- as we work our way down the income statement. We expect continued growth in these segments. I don't expect it to be linear, right, on the way to 2030 over that time frame. It's always been a cyclical industry. We operate with the principle that always will be a cyclical industry. Now the overall demand drivers and where the industry is with a set of capacity constraints would seem to indicate we're going to be in an undersupply condition for a while. But there'll be a few ups and downs on the way to 2030. That's why this idea of modular capacity is so important so that we can preserve the gross margin and not have a whole bunch of underutilization and large fixed costs flowing through the P&L.

Yes. I think Mike covered the majority. The only thing I'll add is that if you kind of reflect back on the slide, I have some pie charts over on the slide, and I mentioned that mix is relatively -- expected to be relatively consistent as we go through the next several years. And so what that implies that they're effectively growing over this time frame at similar rates, right? Same proportion of business for our Systems segment as well as our Probe segment. And another element that I think I glossed over a little bit was the gross margin profile. We're starting to see convergence in gross margin profiles between our probe segment and our Systems segment. And in fact, if you look back at this last quarter, we exceeded 50% gross margin in the probe card business. And so we expect that trajectory to continue in that direction as we drive these fundamental underlying cost improvements and drive scale, and we expect to see further convergence between the 2 segments.

Krish?

It's Krish Sankar from TD Cowen. And thanks for doing a very informative presentation. I have 2 of them. First one on the custom ASICs moving to advanced MEMS. Would that still be a kind of how it is in GPU probe cards 2% rate? Or do you think the pseudo MEMS competitor can actually also do custom ASIC advanced MEMS? And then I have a follow-up.

Yes. Sudhakar, do you want to take that?

Yes. Thanks, Krish, for the question. As I mentioned, what we are starting to see in the custom ASIC is it's starting to adopt more of the leading edge transistor nodes that are coming down to 3 nanometers and 2 nanometers, which is essentially with higher density and cores, it's driving test complexity first, which is translating to thermal. So we strongly believe that in the long term, this is going to be an advanced MEMS play with a 2-supplier market in the long term for the custom ASIC as well.

Got it. Got it. And then a quick follow-up on the silicon photonics. So the Triton platform, it seems very interesting. Do you think eventually like CPO would eventually go kind of the semis route where they unbundle probe cards away from testers? Or do you think this is the path forward in CPO testing where it's an integrated solution?

Why don't I take that one because I think it's an industry supplier ecosystem question. Why are we partnered so closely with Advantest and Tokyo Electron, it's because of speed, right? We've had some major customers over the past couple of years tell us they need systems, they need them to ramp in high volume. It's difficult to work with everybody in an open ecosystem now. So you focus, right? Longer term, I expect CPO and we expect CPO as a team to broaden out and have a very similar disaggregated model where all APE systems work with all interfaces, whether they're probe cards or something slightly different, work with all handlers. But the time to market is so critical right now to meet this initial CPO ramp that it demands some focus.

David?

I guess the first question is, you showed us lots of great charts today. And one thing I noticed is that you plan to double your revenue, but your SAM is only going to grow by 50% between now and 2030. And then you showed us another chart where it had like 5 or 6 little vectors up. I'd like to know or if you could help us, which one of those vectors are going to provide the share gains that you're talking about to grow twice as fast as the market?

Yes. I think I'll ask Aric to consolidate this one because there's different pieces right, across the revenue scape for us.

Yes. I think the share gains where we're going to principally see share gains and where there's existing markets today where we don't play as big as we think we should and we're entitled to places like CPU, some of the major CPU manufacturers out there where we have low to nonexistent share, we expect to penetrate there. GPUs, we didn't participate historically in GPU tests. We expect that to change. We've indicated in the second half of this year. We expect to see demand ramping for GPUs for us with the major GPU producers in the world. And so those are the main vectors that are going to drive market share. Then we've got new growing markets like CPU. And that's really something that doesn't exist today that's going to drive growth as well.

Okay. And as my follow-up, I think you said the CAGR of semiconductors or your market is like 8%. And I'm kind of curious, that's kind of like the long-term growth rate of semiconductor unit volumes. But at least semi revenue grew like 25% last year. I think it's growing like over 60% this year. I'm guessing it's going to grow by more than 20% next year. And I know there's a lot of increase in pricing in memory and GPUs, but units are definitely growing faster than 8%. So I'm kind of wondering what the disconnect is.

Yes. So the market figures that I share, we -- and great part are based on third-party analyst reports. And remember that they are focused on the advanced probe card market. So it's not entire semiconductor spend. It's not capital spending. It's specific to the markets that we serve. And the growth rates on average in that market in those industry reports is at an 8%. Now we expect to be participating in the elements of that, that are growing much faster, right? And so at a rate that's double that.

Okay. Charles?

Charles Shi, Needham. Mike, wondering if you can address what's the expected TAM for CPO testing insertion 1, 2, 3, 4 insertions. And tell us a little bit more -- expand a little bit more because I think you said one sentence, why you want to focus on insertion 1? And a related question, what's the expected ramp timing? I think on the earnings call, you were talking more like 2028. I know it's hard to get an update like just 2 weeks later, but can you -- what do you think about the ramp timing?

Let me connect those dots and then I hand it over to Jens for some of the details on the insertions and the relative size and how we expect that to potentially evolve. So what we updated you on the call a couple of weeks ago, we'd initially set expectations for our CPO revenue in this year 2026 to be between $10 million and $20 million. On the last call, we updated that to the high end of that range. And that's indicative of the momentum we're seeing and depending on how you want to classify production, the beginning of that production ramp. We've also updated you that we've now installed multiple Triton systems, right, in one advanced foundry. And that, for me, is always the indication that things are starting to tip towards production. The narrative from our customers continue to be very strong and even accelerating.

Yes. We are expecting a SAM by 2030, around about $300 million to $400 million from our view today for co-packaged optics. While we are on insertion 1, I think there are 2 things. First, I explained how the known good die strategy favors very early testing. And we are very early in co-packaged optics, especially going in high-volume manufacturing. So yes, there are other insertions, but insertion 1 is the most important one today to make this ramp happen. And we are involved in this insertion since over 9 years. So we developed the right strategy and technology there. And as I said, this deployed technology, which we have in insertion 1 have the capability then later on to address also other insertions when high-volume manufacturing for co-packaged optics gets more mature.

So the $300 million, $400 million, that is all insertions, including equipment and test consumables. I just want to clarify what's in that.

That's the wafer level test, SAM, we are addressing.

Okay, which means insertion 1 and 2?

Right.

Okay. Maybe a second question on gross margin. I know this is a question probably for Aric, maybe for Missy as well. So going back to the history, gross margin in the 50s for form factor. We've never seen this kind of gross margin. This is a very aspirational target. I know you laid out how you want to get there. And we noticed that part of the gross margin gain actually comes from productivity improvement, cost discipline, efficiency. But historically, this is a semiconductor industry. Very often suppliers getting those efficiency improvement, very often those value got given away to the customers. How do you make sure you don't give away the value created by those activities to customers so you can keep the margin to yourself and maybe get to the 55% gross margin by the end of this decade?

I think that it's a really good question, and it boils down to discipline and really delivering value to our customers, where we deliver value to our customers and solve important problems for them, like how are they going to yield in these fast ramps, getting the production slots that they need. That's where we have the ability to really demonstrate value and differentiate ourselves. That's what's going to drive our ability to really protect our gross margins, if you will. It's why it's so important why you see us talking here about what are we doing from a technology perspective? Why are we continuing to invest in R&D? Because over the long term, if you don't do those things, it's going to be very difficult to preserve your gross margins. Matt?

Matt Prisco from Cantor. First off, I just want to hit kind of the target model again, that 2030 number that you put out there. Is that anchored in any type of semiconductor revenue or anything like that? Because I know in the past, you guys have talked about having that intensity. You talked today about intensity going higher. And I asked about that anchor because every week, it seems like forecasts are going higher and higher with AI and everything. So as we start to think about that number shifting higher, how does that translate to revenues?

So I'll hand this one to you in a second, but it came up in an earlier question, I think, maybe from David. One of the reasons the overall industry is growing so rapidly from a dollar basis is ASP growth, right? And if you looked at 2 of our major DRAM customers' recent earnings, they had in DRAM 0% bit growth and north of 50% ASP growth. Our business is really unit-driven, units on new designs. And there are opportunities for us to get some compensation for pulling things in, in this environment, securing capacity slots. But I'm sure you're going to see a decoupling between the classic probe card intensity on a dollar basis just because of these inflated ASPs.

Yes. And maybe what I'll add to this. I think it's fair to -- for us to characterize ourselves as a management team as being pragmatic. There's a lot of bubbliness out there in the market right now, a lot of excitement around some of these trends. I think we're much more focused on what's actually happening and making sure that we bring up capacity when we need it, that's aligned to the demand that's really out there and really keen in on what are those drivers, what are those indicators and making sure that we've got a flexible operating model that enables that. And I think Farmers Branch is a really good example of how we're doing that. It serves as a platform that not only addresses the immediate capacity needs that we have today, but actually serves as an ability to drive additional capacity in the future.

That's actually a perfect segue. The next question is on Farmers Branch. Just love to know how you guys are thinking about that modular build-out today. Is that going to be kind of taking deposits from customers getting capacity corridors? At what point do you guys feel comfortable building out that capacity? Maybe how long does it take you to build this capacity once you see the demand? And when do you think it's fully up and running?

Yes. So I'll take that one. We plan to have the site qualified later this year with initial production ramp starting in January. This industry is slightly different than typical device makers. So we get from the planning process, a real look at what our customers want. Sudhakar spent some time today talking about custom, right? So each of our probe cards are custom to what the customers' ramp is. We have about a 6-month window where we can really understand exactly which products are going to want us to run. That also happens to coincide with around our longest lead times. So through our SIOP and planning process, we pay close attention. We also get early indicators from the close partnerships that we have with our customers. And as we get past the initial qualification and ramp, we're already looking forward to the next version, and we'll just do it in modular phases.

Yes. I think one of the interesting things about the current situation is although our lead times lead times, the POs customers place for a specific design are still well within a quarter. We've got much more engaged conversations on what their 6-month forecast is, right? They understand there's a capacity pitch all through their supply chains, not just in probe cards, right? And so whether you talked about potentially capacity agreements, paying for capacity, all of those different things are under discussion. But I would argue that we're getting much better engagement, if not visibility, on what customers think they need from us more than a quarter out now in terms of raw capacity, probes per week kind of thing. They still don't know what they want us to build, but they know they're going to need some of it.

And maybe just to layer on one component, the ability to add capacity now is no longer bringing up a full site. It's bringing on just additional equipment, additional tools. So our ability to do that with much shorter lead times in the future, if necessary, is what I'm referring to when I refer to it as a platform.

Elizabeth?

Elizabeth from Citi. So I guess my first question is you talk about there's a lot of growth opportunities and sharing opportunities across GPU, ASIC CPO, all these things. So I was wondering when you think about your R&D budget, how do you think about like priorities and like how do you allocate your R&D resources across all these areas?

I'll let Aric take that one.

Okay. We'll go back to the discipline part of the equation. And I mentioned driving efficiency in OpEx, but continuing to invest in R&D. We recognize that R&D is one of the ways that we can drive significant sustained value with our customers and in our products, it's important that we make that investment, but it needs to be made in the right places. And so making sure that we have the business processes, the decision-making upfront as we are looking at those decisions and probably more importantly, in some cases, really narrowing the aperture a little bit and focusing. You try to do too many things at once, you're not going to get anything done. So we need to make sure that we maintain discipline and how many things we try to do at once. And then we've got the feelers out there with our customers to understand what really matters, and that's how we determine what we focus on.

Got it. And then on the CPO test part, I'm wondering if you could share your thoughts on the evolvement of the 4 insertions, the mix between the 4 going forward as things like from initial like ramp to more mature stage of the CPO testing market and also like the shape of the SAM growth into the next few years because like one of your test peers talk about there's a fast ramp at the beginning of the SAM and then maybe slows down because things get more mature. So I want to hear your thoughts on that as well.

I'll hand it off to Jens in a minute, but I think it's really important. We know this is going to change the dollars spent between the different insertions. Right now, for very good reasons that Jens shared, there's a lot of the overall test spending being spent on insertion 1. And we feel like that's a good place to focus because the foundational technology of optical probing is going to need to be used in any of the other insertions, right? This is going to change. It's going to involve. It's why this customer intimacy that Aasutosh and I talked about is so important, right? We're in there at the beginning. Customers are depending on us. They don't want to surprise us, right? And so there's very active engagement on not just with customers, but other co-suppliers on making sure that we're going to be ready, whichever way this thing shifts and it gets to HBM.

Yes, there's not really much to add. So one of the things...

We're aligned with our...

No, no. I think as I explained, I think the insertion One is already pretty complex, but it's getting even more complex if you're getting to the COO technology, for example, as TSMC is providing it when you have double siding tests. So these systems are getting so complex that they are just not economically today. So we will see in the future, as Mike said, how this will develop over the different insertions, which insertions will be really necessary in the end for high-volume manufacturing. And right now, we're right at the beginning and right in place for insertion 1.

Before we let Craig go again, So V, you've got one?

Yes. So the first question I had -- this is V from Evercore. The first question I had is in your SAM growth opportunities, I didn't see CPUs. So maybe some thoughts on what you're thinking for the CPU process probe card intensity.

Yes. It's a really good question. And I -- it's in that base business bucket. But I think what you're probably referring to is some of the news cycle out there around Agentic AI driving additional CPU intensity. And we are seeing some acceleration there, some interest there. To the extent that, that occurs, we have relationships in that space that I think you're aware have been traditionally quite strong, and I think we're well positioned to serve that market to the extent that we see that grow as a result.

So would that be further upside to your kind of revenue growth?

I think it remains to be seen. I would say that overall, as we've discussed, growing at double the market rates. I think we've got a balanced plan. We've got multiple growth vectors. I think what you're going to see is that reality is going to be different. Some of those vectors will be different as we move forward in time. This may be one of those areas. But I think overall, where we're targeting in terms of total growth and that rate is right where we really should be in terms of balance.

And if I may, one, on gross margins, so you've laid out a clear path for cost discipline and the levers you can pull, but probe cards are getting more and more advanced. Does that imply an ASP increase with kind of a cadence for?

I kind of answered this a little bit earlier, but to reiterate, I think where we see ASP -- ASP is kind of tricky, right? What I really care about is value and profitability. And that for us is driven by the same things that drive value for our customers. The extent that we deliver value to them, we help them solve problems that avoid the yield. So you heard Mike talk about the yield losses that happen just because of packaging these things into advanced complex packages, those have significant dollars tied to them. To the extent that we can solve those problems at a more efficient -- in a more efficient way for our customers, that's going to drive value in our products and will drive the associated margins and ASPs.

Yes. David, did you have a question? Before we go back to Craig.

Dave Silver, Freedom Capital Markets. I had a question maybe about the target model and the breakdown between logic and foundry and memory. So when the 2020 model was created, you probably had a certain breakdown of where the revenues are going to come from. My guess is it changed a little bit over time with major customers, et cetera. Just could you just kind of single point us, but in 2030 from 2025, what is the share of growth from the memory side versus foundry and logic? And I don't know, is that even the right way to look at it since there's going to be hybrid products that incorporate both sides. So we're going to have multiple sources, I guess. But just some comments on how much you -- however you look at it, revenue or operating income, how much from the memory side, how much from foundry and logic?

Yes. So from a top line perspective, we expect the mix to be pretty similar today. I think I showed a couple of pie charts on the slide. It's a little bit better growth in foundry and logic than, say, in DRAM. But you're hitting on a bit of a sore point with our last target model that I just want to spend a little bit of time on. And when we set our target model in 2020, it was premised on a certain mix of foundry and logic and memory products. And at that time, there was a pretty significant difference in the margin profile between those 2 sub businesses, if you will. We saw this mix shift, and it was not favorable to our gross margins. And that's really been a pain point in us really achieving that target model. It's one of the reasons why we're so focused on driving fundamental underlying cost and efficiency improvements because if we do that right, if we drive the cycle time and yields and things that Missy was alluding to, it's going to benefit all of our products, right? It doesn't matter if we're talking about DRAM. So we don't want to be the victims of mix. We don't want to be the victims of volume. We want to be a company that produces competitive margins, competitive fall through, if you will, from an operating income perspective, whatever the outside circumstances are. We'll control what we can control, and we're going to do that as best as we can by exercising discipline and making sure we get the appropriate leverage.

And then maybe just a question or maybe an observation you can comment on, but this would be regarding talent acquisition, okay? So I always think where your major customers are located, your customers are national champions and they probably have first -- may have an advantage in acquiring the intellectual talent that they want. And you need to service them, you need to maintain a certain standard. Just maybe some comments about your confidence in kind of keeping up with the technical demands and the talent demands that your major customers are going to require if you're going to hit your next target model.

Yes. I think I'm going to ask Missy to comment on how recruiting is going in Farmers Brands because it's basically a new area for us. But broadening out globally, are there challenges with talent? Sure, right? Not a lot of people going into hardware engineering, material science, physics, the kind of things that underpin this business. But so far, we've been reasonably successful in recruiting the kind of people we need because they like the idea of -- if you look at the core constituents of the products we make, they're a really unique blend of mechanical engineering, electrical engineering, material science, physics. You don't get that in a lot of different places in the industry. It's one of the reasons I love working here, right? You learn something new technically every day. And I think the people we've been able to recruit have that same passion for continued learning and learning in areas that are maybe a little bit different than mainstream semiconductor while also having the impact on a fast-growing smaller company. They can see their daily impact on what we do.

Yes. So with regards to Farmers Branch, it's located in North Texas with access to multiple universities right there in the area as well as several different community colleges. We're working with the North Texas Semiconductor Institute as well, along with some of the other major semiconductor companies within the ecosystem. To date, we have -- we're on track with our hiring plans. We've had no issues recruiting great talent. We are expanding that out. There are some high schools that we're considering working with. And North Texas has really spent a lot of time over the last 3 years focusing on how do we bring in technicians. We all know that, that's an area in our industry where there's gaps right now, is getting 2-year degrees. There's a real push there in North Texas to go drive it. So I'm really excited. That was one of the reasons why we selected the site specifically because we felt confident we could get the talent.

Other questions before we let Craig have a second swing.

Jason Ursaner at Bumbershoot Holdings. I thought you guys did an amazing job of kind of explaining your position with your customers in memory, DRAM, why everything is, I guess, just set to have a great outlook for a long time. Could you maybe explain the memory customers in the LLMs, what's happening with some of the compression algorithms and relational database? It's beyond my understanding, but it is their focus to kind of use fewer DRAM over time, use less memory and kind of the whole cash system of AI? And how does that kind of impact some of this? Is it real? Is it not?

Yes. So it's also an area that I don't and I don't think any of us know much about. What I will say is it's quite clear given the dynamics, and I'm going to restrict things down to DRAM. Most of you know that we're not a relevant player in Flash, and we can get into that if you want. But it's really focusing on the opportunities where we can drive real value and differentiation. They're available in DRAM and HBM, of course, not in Flash. So I'm going to restrict the comments to that. When you look at even with some of these compression algorithms and different things, the growth rates for compute and different elements of memory, whether they're HBM or the explosion we've seen in DDR5 for these applications, it's hard to invent a scenario where some sort of compression algorithm or compute innovation takes that off the trajectory of us being essentially undersupplying the market, us as an industry, right, undersupplying market. That's consistent with the narratives we hear from our customers. All the different pieces of that high-performance compute module we used as a consistent thread through the story. It's more memory, more memory, more memory. And I think over the years, the insatiable demand for compute, it's tough to figure out how some sort of algorithm development is going to flip that spread. Okay, Craig?

All right. I wanted to go back to the point we made about the ambition to capture 50% incremental SAM share and the points we made about future-proofing our DRAM and foundry logic probe card products. But the question is, what do we need to do between now and 2030 with each of those products to ensure that we've got product leadership and are in a position to capture that 50% incremental share?

So as I alluded to in both segments, both foundry and logic as well as DRAM, HBM, the major vectors are driving this is test intensity and complexity. But I'll stay on the complexity side for now to really answer your question, with the increasing thermal demand that's happening, we're starting to see that the current set of products are not able to keep up with the next generation of GPU that's coming out next. So we've already closely working, as Aasutosh talked about, co-development. We're already working closely with our customers, leading-edge foundries and IDMs and how do we enable them to thermally manage and dissipate the heat that is getting generated because of the power. That's already underway, so to speak. So that's part of the things that is baked into the overall target model of getting those kind of design wins into the future and how that is growing is already baked in, particularly on the foundry and logic. On the HBM and DRAM side, a similar set of trend is going on, on the power side, but also this custom HBM-based die that I talked about. is starting to drive new architecture development that may be coming to fruition more in the 2028 and beyond time frame. So that's already baked into it, and we're starting to work with all major customers in that space as well.

Got it. And then, Mike, because in talking about capital allocation, the company left the door open to M&A. And my sense was that was more tuck-in than something big. But can you help us understand where that type of thing might make sense for the form that you see between here and 2030?

Yes. M&A, as you saw, right, has been a fundamental tool we've used to build the current form factor. And we remain very active in prospecting for different things. It is more tilted towards the tuck-in. Keystone is a pretty good example of where we're putting our focus on priority. A key enabling subcomponent that drives the themes you saw today around high-performance compute and advanced packaging forward. So over this time frame, that's where we expect to focus. I still -- I'll give you my standard. I still believe this part of the overall semiconductor equipment and consumables space needs to consolidate in the supply chain, right? If you look at what we're taking on as a leader in a small sub-piece of the industry, there are challenges, right, funding that. If you look at what happened at the front end 2 decades ago, right, there was consolidation. And now you have arguably 5 very capable large suppliers that drive the front-end wafer fab forward. I really think, right, the same thing needs to happen longer term in the back end in test and assembly because of the technical requirements associated with advanced packaging and the customers we're engaged with and the speed they want to move.

Matt Prisco, again. Just thinking about the share side, again, you talked about the opportunity in CPU, GPU and kind of that end driving the share gains. But as we think about memory and DRAM, HBM in particular, I guess what gets you most excited across the 3 insertions, whether you're talking that core die, the base die or the final test? As we think about mix of that market changing as more suppliers come to the market and maybe your primary customers dominance, it's more spread out over time. Is your -- are your gain opportunities in the other areas enough to kind of maybe offset that mix dynamic so you can gain share in the memory market?

Yes. So when it comes to the HBM and DRAM, again, going back, I feel like I'm going to repeat myself a little bit to answer your question as well. Going back to the test complexity and intensity piece of it. But it's really in the longer term, what's exciting about this space is it's the evolution of not only the stack height as we described about increasing number of probe cards needed to measure the increasing number of stack heights. But kind of HBM5 onwards where we think that the hybrid bonding is also starting to happen, and we're starting to watch. We don't know exactly how that's going to create new test insertions for us. But what we do know is with the customer logic that's coming in from the right and shifting into the base die, we are starting to see we need to develop new architectures, which is kind of exciting because that's another new test insertion that's evolving that we are seeing that, hey, we will start to gain share and with new differentiated offerings at the same time. Because we -- as I mentioned, we're the only probe card supplier with production proven foundry and logic probe architecture as well as the DRAM, HBM probe architecture. So we will be able to kind of fuse those things together as we understand the requirements quite well.

Thanks for taking my second question. The first one is in Q1 of next year, what do you think the gross margin impact will be from bringing on Texas? And what I mean by that is you're going to obviously hit the depreciation button at one point or another. I imagine Q1 would be the quarter where you see the most increase in depreciation, but maybe I'm wrong. So that's one -- the first part of the question -- first question. Second question is being somewhat capacity constrained in the second half of 2026, do you think you've lost market share? Or are the competitors in the same situation that you are?

Yes, I'll answer the second one first. Everybody is in the same constrained situation. That's one of the reasons why, one, as I mentioned, we're getting better, I'll call it, forecasting guidance from our customers is the overall probe card supply market is constrained, like many other places in the industry are. It's one of the reasons why we're executing with urgency as you -- I'm sure felt from Missy's presentation on getting Farmers Branch up and running so that we're not in a share loss situation, but even arguably could be on our front foot here and able to gain share based on availability...

Yes. And maybe, yes, just to tag on to that a little bit. The levers that we're using today to drive really output up are the same levers that we're using to drive gross margin improvement in the short term and also over the long term, cycle times and yields, our ability to produce more good products with the same amount of inputs and do it faster means that we're generating more revenue intensity and more profit intensity in the same unit time, if you will. And that's going to -- that's what's going to enable us to -- and we're going to continue to push on those levers for the back half of the year. As it relates to gross margins for Farmers Branch ramp, we believe that during the ramp, there are some headwinds that will -- but we're doing a fast ramp. And ultimately, that site is going to be accretive to gross margins. It's part of our gross margin road map, as I articulated. So as you look at those operational excellence and the innovation column, Farmers Branch is a key enabler of those 2 things. In that short period of ramp, about a year that we're talking about, we expect any headwinds associated with gross margins to be offset by the efficiencies that we're driving over the next several quarters.

Any more? Elizabeth again?

The one I had -- so on gross margin improvement, historically, you had a huge variation in gross margin, and you've kind of talked about it. It was product mix and volumes kind of both driving it hand in hand. But as you kind of stress test this 2030 model, like what kind of variation do you see now by product volume? Like will it be 5 percentage points? Or can it be like 2 percentage points down up.

Yes. I think in the normal -- so we do stress test our models. And we -- I think as Mike mentioned, we're under no illusion that we continue to operate in a market and an industry that remains cyclical despite all the optimism that we see. So we test our models. I think the way you -- so mix and volume will always impact gross margin. To the extent that we drive convergence between the gross margin profiles between our different products in different segments, which we see occurring, the importance of mix is going to be less important, exactly what our mix is. Now we do expect some variation from period to period around mix. And you -- plus or minus a couple of hundred basis points would be normal, right? To the extent we end up with a more extreme scenario, we take appropriate measures as required.

Elizabeth?

Sorry, I also have a gross margin question. So you laid out from 41% last year to 55% target model. It's a mix of like 40% volume, 35% execution and 25% innovation. But now we are sitting close to 50%. So I'm just wondering from now to 55% in 2030. What -- is there any difference between the mix of these 3? And what other things have been done? What are the things you can do more?

Yes. Good question. I think that you can think of it -- so those 3 pillars that I described in the road map from 41%, which, as a reminder for everyone, was 2025 baseline average gross margins for the full year, right? Obviously, we've generated a very different trajectory to date, but elements of that are temporary in nature. We need to make those things permanent. So that's one element. But if you think about the distribution of the continued improvement from where we are today, if you will, to the 55%, you can -- it's similar to what I showed on that table, just scale is a little bit different. And what we've generated, the 1,100 basis point improvement that we've generated from Q2 of last year to today, if you look at our most recent guide, is also across all 3 of those pillars.

This is [ Danielle ], I'm from Stifel. I wanted to focus on Texas and Farmers Branch. So when you begin production there, what is the determining factor for if it'll be more focused on logic or more focused on DRAM, HBM?

Sure. I'll take that one. So as I mentioned in my presentation earlier, we now have fully fungible manufacturing lines, which really just means that I can run 2 different technologies through the same tool set. So as we see, again, kind of going back to the previous question around the shift in mix and demand, part of this reasoning was so that as we see that mix move, we don't have as much variation into our margins in turn. And so for us, we're starting with the foundry and logic, and that's what we'll be ramping first. And that frees up some additional capacity in Livermore to also still have foundry and logic as well as the DRAM.

Great. And to follow up, if you could give sort of a number or a guide for that maximum incremental revenue that you could see from Farmers Branch if we look at it from a 12-month window?

I'll let you take that one, Aric.

Yes. So I think what's key to understand here, our target model doubling revenues between now and 2030. The investments that are included in these financials that we've shared, is they're all inclusive, right? So what you see and what we presented, it includes the required investment. And what we're doing in Farmers Branch will enable that revenue level. It also enables, like I've said, a platform for additional capacity to the extent it's required in the future. And it allows us shorter time to get to that because it's really about equipment sets.

Anyone else? All right. With that, I'll wrap it up then. Stan, do you want to. I talked a lot. We'll let Stan.

All right. Well, thank you all for joining us today and for people online, thank you again. I want to thank our executive management team and our CEO for putting this presentation together and hopefully found it informational and educational. And we will see you in the upcoming weeks, months, and please follow our story. Thank you all.

Thank you.