Thank you, and welcome, everyone, to FormFactor's Fourth Quarter 2021 Earnings Conference Call. On today's call are Chief Executive Officer, Mike Slessor, and Chief Financial Officer, Shai Shahar. Before we begin, Stan Finkelstein, the company's VP of Investor Relations will remind you of some important information.

Thank you. Today the Company will be discussing GAAP, P&L results and some important non-GAAP results intended to supplement your understanding of the Company's financials. Reconciliations of GAAP to non-GAAP measures and other financial information are available in the press release issued today by the company and on the Investor Relations section of our website. Today's discussion contains forward-looking statements within the meaning of the federal securities laws. Examples of such forward-looking statements includes those with respect to the projections of financial and business performance, future macroeconomic conditions, the benefits of acquisitions and investments in capacity and in new technologies, the impacts of the COVID-19 pandemic, anticipated industry trends, the disruption in our supply chain, the impacts of regulatory changes, the anticipated demand for products, our ability to develop, produce, and sell products, and the assumptions upon which such statements are based. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed during this call. Information on risk factors and uncertainties is contained in our most recent filing on Form 10-K with the SEC for fiscal year ended 2020, and in our other SEC filings which are available on the SEC’s website at www.sec.gov, and in our press release issued today. Forward-looking statements are made as of today, February 2, 2022, and we assume no obligation to update them. With that, we will now turn the call over to FormFactor's CEO, Mike Slessor. Mike?

Thanks everybody for joining us today. FormFactor posted record results in the fourth quarter, delivering revenue of over $200 million for the first time in company history, with non-GAAP earnings per share at the high-end of our outlook range. This caps a record 2021 that produced over three quarters of a billion dollars in revenue, and over a $150 million of non-GAAP operating income. And I'd like to take this opportunity to thank the worldwide FormFactor team for their perseverance and dedication to produce these outstanding results. As we start 2022 and the Year of the Tiger, we continue to benefit from solid demand across all our served markets in probe cards and engineering systems and we're excited about the important role we're playing in enabling innovation and growth in the semiconductor industry. In addition to our record financial results, we were recently recognized by Newsweek for our ESG leadership as one of America's most responsible companies. In addition to an environmental and social focus, FormFactor's overall ranking was supported by a high score in corporate governance. Driving FormFactor's ESG performance to a world-class level has become a major focus for our leadership team and Board of Directors in recent years, and we're very proud to have been recognized for these efforts. Like many manufacturing companies, we continue to face a variety of supply chain and labor challenges. Our long-term investments in automation and vertical integration helped us mitigate the effect of these headwinds, enabling us to deliver strong results throughout 2021. However, the recent spread of the Omicron variant has caused labor shortages in our U.S. factories in the early weeks of 2022 and is partially responsible for the sequential reduction in revenues in our first quarter outlook. We are also experiencing extended lead times for some of our…

Thank you, Mike and good afternoon. As you saw in our press release and as Mike mentioned, Q4 represented a strong finish to a great year. We concluded the year with record quarterly and annual revenues and record quarterly non-GAAP operating profit and pretax income achieved while opening our new manufacturing center during the quarter. Fourth quarter revenues were above our outlook range and non-GAAP EPS was at the high end of the range while non-GAAP gross margin was at the low end of that. FormFactor's fourth quarter revenues were $205 million, an 8% sequential increase from Q3 and an increase of 4% year-over-year and contributed to a total fiscal 2021 revenues of $770 million, and 11% increase compared to 2020. Probe cards segment revenues were $166 million in the fourth quarter, an increase of $11 million or 7% from Q3. The increase was driven by higher revenues in older markets we serve, with the biggest increase in Foundry and Logic revenues. System segment revenues were a record $39 million in Q4, an increase of $4 million or 11% from the third quarter mainly as a result of higher sales of 300 millimeter systems and cryogenic probers for quantum applications partially offset by lower thermal systems revenue. With the probe cards segment -- sorry, within the probe cards segment, foundry and logic revenues increased by $9 million from Q3 to $114 million in the fourth quarter, comprising 56% of total company revenues, slightly higher than the 55% in the third quarter. DRAM revenues were $40.3 million in Q4, $0.4 million or 1% higher than in the third quarter and were 20% of total quarterly revenues as compared to 21% of revenues in the third quarter. Flash revenues of $11.6 million in Q4 were $1.2 million higher than in the third…

[Operator Instructions]. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brian Chin of Stifel. Your line is open.

Hi, good afternoon. Nice 4Q results and thanks for letting us ask a few questions. Maybe the first question, just housekeeping wise, how large is the 1Q revenue impact from the labor and component constraints you referenced?

Brian, it's Mike. If you look at the midpoint, it's down roughly $10 million. I'd split that basically in half between supply chain and labor constraints that we've experienced early in the quarter. And the other half being the seasonality we typically see in Q4 to Q1 in foundry and logic. And we see it -- directionally we have seen larger seasonality downticks the net Q4 to Q1. There is some element of it, but as I said, the foundry piece of the business is quite strong. So again, $10 million down at the midpoint, I'd split it about half between constraints and demand seasonality.

Okay, that's really helpful. And maybe an observation that ties into maybe the Foundry and Logic part of the business. But in 4Q, the company is bringing a record quarterly revenue even as revenue to your largest customer, it looks like it's down 30 -- 35%, 40% from its run rate maybe in 2020, that seems like a positive. I guess from a timing perspective, when would you anticipate that logic devices built with seven nanometer process technology that rely on significant heterogeneous die integration, when do you think that could become a more of a surging part of your revenue stream?

Yeah. So it's a great observation, Brian, and one that I do want to emphasize for people. We talked about some of the 2020 run rates for the customer probably not being at sustainable levels at least for the 10-nanometer manufacturing model. And indeed, you see in the second half of 2021, we did come back to some more normalized levels. But if you look out a little bit further to heterogeneous integration, chiplet strategies, or tile strategies, those definitely are raising test intensity, which is going to require more probe cards to wafer out. That for us right now is a very significant R&D activity, but I wouldn't expect it to significantly help with revenue until maybe late in this year or early into 2023. If you look at the usual delay or lag between customer, product releases, and the probe card demand, you can see there's a couple of quarters in there. And so although, again, a very active part of our R&D engagement with that customer and all leading customers in the foundry and logic space, I do expect it to be a late in the year or early '23 impact to the revenue.

Got it. And then maybe just one step back question, Mike, before I hop off. If you were to carve out the advanced foundry logic part of the probe card market, TAM, what do you think the market CAGR might be for that over the next two-year horizon?

So it's an interesting question because there's components of some real structural tailwinds there, but some also unpredictable headwinds that we've obviously dealt with over the last couple of years. The most recent being the Omicron issues to start 2022. You look at the overall probe card market it's probably a high single-digit grower. That piece, the high end foundry and logic, I think that's where the biggest tailwinds are. And although they're difficult to quantify with the different puts and takes associated with high-end WFE, spend some of the advanced packaging adoption, heterogeneous integration adoption that we just touched on, I do think there's the potential for that sub-segment to outgrow the single-digit growth for the Probe Card market, and we've seen that in a couple of recent years. Fortunately, it's our biggest market and one which we [Indiscernible].

Okay, great. That's helpful. Thanks so much.

Thank you. [Operator Instructions]. Our next question comes from the line of Krish Sankar of Cowen & Company. Your question, please.

Hi. Thanks for taking my question. I actually have three of them. To Mike, in your prepared comments you mentioned that the supply constraints impacted the systems business but not the probe card. I just want to make sure I heard that right. And if that is the case, I understand probe card is a consumable, but it some of the front-end equipment folks are having issues with constraints and in shipping it to your customers, how does that, if at all, impact probe card demand?

Yeah. It may impact part of the demand and the seasonal downtick we're seeing here in Q1. It's obviously hard to tell in the moment. But if the customers don't have the front-end capacity in place to produce wafers, qualifies them, and ramp new designs, they're not going to need probe cards. And as we've discussed in the past, we typically lag the WFE spending in installed by somewhere between two and four quarters, depending on customer, yield ramp and the details of that. So any delays in WFE are going to result in delays in the overall probe cards [Indiscernible]. Having said that, there was enough WFE stand and capacity added across the industry in 2021 that led to some strong demand in the back half of the year, that led to the record results and continued pretty good momentum here into 2022.

Got it, super helpful. And then I do understand like most of your probe cards are in leading edge. Is there a way -- if you say lagging edge, it's like, say a 14 or 16 nanometer and above and I know I think one of your foundry customers probably does in-house probe cards for lagging-edge, what did you say your probe card revenue split is between leading and lagging edge or leading and mature nodes?

Gosh, that's a tough one that we'd probably have to get back to you on, I don't want to guess on my feet but you're right. The majority of our revenues are driven by leading-edge nodes and new designs ramping on those leading-edge nodes. The one significant exception is things like the automotive industry. We do a reasonable business from microcontrollers and special [C] (ph) chips in automotive that are obviously fab-ed on trailing edge nodes. But as a probe card manufacturer sort of in between the front end and the back-end, often we don't have a ton of visibility on to the specifics of the node unless it's a very significant design where there's a lot of visibility from the customer.

Got it. Fair enough. And then a final question for Shai. I mean, the target model you laid out in 2020 $850 million, $2 in earnings. Clearly, it looks like you are almost there. And between then and now, obviously the Foundry Logic WFE, or demand has meaningfully moved higher. So I'm just kind of curious, $850 million, $2 in EPS is still the target, or do you feel good about exceeding that?

So we feel very comfortable with the target model we put in place and the progress we made so far. And we are not there yet, making great progress with $205 million in Q4. And as we get closer to the model, if we run a couple of quarters in a run rate which is close to this run rate, we'll provide an update on the model similar to what we did a year ago when we got closer to achieving the previous model.

Got it. Fair enough. Thanks, Shai. Thanks, Mike.

Thank you, Krish.

Thank you. Our next question comes from Charles Shi of Needham & Company. Your line is open.

Good afternoon, and thank you for taking my question. Mike and Shai, maybe my first question a little bit about your indirect customer Apple in terms of your seasonality pattern here. I think over the last couple of weeks we did hear that some people got hurt because of the node migration of Apple being delayed by one year, but we also heard that there are some other semiconductor device companies seeing pull ins as Apple filled early inventory. I did hear you that the foundry seems to be strong, and you did highlight the HPPC strength. I don't know if that's really coming from your indirect customer, this indirect customer or not but on the mobile side, are you seeing some of the pooling effect as well or do you see a slightly different seasonality pattern here? Thank you.

Yeah. I think it's an important piece to our business to understand, and that's why I took the time to make the point in the prepared remarks. Probe card demand is driven by new designs. If they're on existing nodes that drives probe card demand, they're still on new nodes that obviously drives probe card demand. So you can often see these local dislocations between our consumables business and capital equipment businesses that are very closely related. For example, [Indiscernible]. If I look at the foundry strength at present, as I said, it's primarily associated with HPC, high performance compute. There are mobile elements to it, no question about it but I think if I were to draw a single dominant theme to it, it is high performance compute in the foundry segment which is not too surprisingly given the rapid innovation and some of the very interesting chip designs you see ramping through that ecosystem.

Got it. Maybe the next question on your supply chain, I think you did provide some quantitative color, thank you for that. I want to ask if you can provide some direction or color. In terms of the supply chain impact of what you're seeing right now, is it more impacting the Probe card side of the business or the System side of the business?

Yes, it's definitely more impacting the system segment. And it’s pretty targeted things, pretty targeted sub-components from a handful of suppliers. And when you get to the fundamental root cause of what's causing those suppliers to push out their deliveries to us, somewhat ironically, it comes back to the semiconductor shortage or at least electronic component shortages. Our team's done a very good job of working with existing suppliers and qualifying new suppliers. But as with many other semiconductor supply chain companies, we're constrained in a couple of places that is having an impact on the lead time at present. Again, very focused in the system segment. We've managed to avoid any impact in the probe card segments and continue to be very focused on doing that. But it's such an active part of managing the business and managing any semiconductor supply chain business right now. That is a big part of management's attention.

Got it. Maybe my last question a little bit switching to longer-term view. I want to ask you about the DRAM. Obviously, DDR5 is a big driver for your Probe card business. But assuming you have some visibility into what probe cards really supporting DDR4 and what are really supporting DDR5. Are you seeing the crossover in terms of either the volume or dollar value of the transition from DDR4 to DDR5 in terms of the probe card demand? Yet, if you haven't seen that, do you expect you'll see that this year? That's my last question. Thank you.

Yeah, I think we're pretty close to -- whether you want to call it a crossover or parity between DDR4 and DDR5. I've been quite surprised at the longevity of DDR4. Some of these previous architecture transitions our DRAM customers have gone through have been pretty discontinuous. Almost like a node transition, where we went from DDR3 to DDR4, that there was a big shift in design activity, and most new designs all of a sudden became DDR4. That's not the case here at present with the DDR5 transition, there's still a lot of designs on DDR4. I don't know whether that's associated with some of their related ecosystem pieces, processors, different other peripheral chips and that sort of thing. But it is an interesting observation that we're hovering right around parity from a new design perspective between DDR4 and DDR5.

Thank you, Mike. That's all for me. Thank you.

All right. Thanks, Charles.

Thank you. Our next question comes from Craig Ellis of B. Riley Securities. Your line is open.

Yes. Thanks for taking the questions. The first one is just a clarification and understanding some of the issues that are play in the first quarter s outlook around supply chain and labor issues. Mike, I heard you say that if we look at the change in revenue, about half of that is supply chain related things. And I think I'm hearing from this call that supply chain is some issues on the system side and then some labor issues. The question is this, do you feel like you have good visibility to getting better supply dynamics with some of the things that are impacting systems and with respect to some of the things that are more labor-related? When do you think you'd have staffing back where you want it to be? Is this something that persists through the first quarter or should you have it largely behind you by the time you get into the second quarter?

Yeah. Let me address a couple of aspects to that question and let's parse it into supply chain and labor separately. On the supply chain side, yes, approximately -- well, half of half of the impact, a quarter of the impact is associated with sub-components supply in the systems business. These are things that, as I said, our supply chain team continues to work to find alternatives, to work with existing suppliers, to make sure that we mitigate the overall impact of those shortages, and keep our commitments to customers and keep the lead times down as best we can. The other component, and this is primarily in the Probe card side, is labor shortages in the early part of the quarter primarily due to the quarantine requirements associated with Omicron. Obviously, a lot of people -- we have primarily a U.S. manufacturing West Coast footprint. A lot of people were either infected or had a close contact, and our safety policies require even if you don't test positive, if you live with somebody or you have been in close contact with somebody who tested positive, you are not allowed in the factory. And so that took a significant chunk of labor capacity out in the month of January. It does seem too consistent with the communities around us improve rather dramatically over the past week or so. But if I'm trying to play forecaster for COVID infection rates, I don't have a very good record, and I'm not sure I'd want to lean to that one too far, we're trying to keep our workforce as safe as we can. Assuming there's no new variants among us that takes out a significant fraction of the workforce, it feels like most of that's behind us. But if the last two years have taught us anything, it's that predictions for the end of the pandemic tend to be a bit difficult to make.

Yep, absolutely, that's the case. The second question was just on the DRAM business. The Company was opportunistic picking up share in the third quarter and clearly the business is strong and you talked about the strength you're seeing in DDR3 -- excuse me, DDR4 and DDR5 with each manufacturer. The question is this, how do you feel about share at present and if you look out over the course of 2022, are there opportunities for further share gain in the DRAM market?

I think it's like the high-end foundry and logic market. It's essentially a market where there's two primary suppliers, us and in DRAM, Japanese company. We did manage to gain some share over the past year on our key competitors. And I think there's the opportunity, at least a hold that share if not gain some more. Some of those share gains are specific to the kind of devices and the test strategies that our customers are releasing and ramping. We've talked a lot in the past about dips in DRAM and two touchdowns versus one touchdown configurations. There's a lot of subtleties in where FormFactor has competitive advantage. But I think the share gains we've been able to achieve and execute on in 2021, I am optimistic with over the long term. We're going to be able to hold those and hopefully can pushed them forward a little.

Yeah. Makes sense. And then lastly for me before I hop back in the queue. This is at least the second call that you've mentioned quantum computing and some opportunities in the systems business. Can you just talk about how material that opportunity is now and what you think might be possible over the next couple of years?

Yes. Quantum for us really a long-term play. And by long-term, I mean outside the $850 million target model, an achievement to that. But it was fundamental to the acquisition we made of HPD Colorado a little over a year ago. The reason we did that is because we had major customers coming to us really asking us to help them figure out strategies, build tools, build capability to test these quantum computing devices. Now, the subtlety here, the difficulty here is that most of these quantum computing devices have to operate at very low temperatures in very well controlled environment, so close to absolute zero and things like essentially no magnetic field. That drives some very specialized test requirement. A pretty natural fit to our engineering systems business and an exciting long-term opportunity for us to enable this nascent industry. But it's a few years off. No question about it. I would not expect to see significant impact on our financials over the next couple of years. But again, it's one of the longer-term that we're making to continue to drive growth and SAM expansion for FormFactor. And just to finish the point, as part of the reason why we introduced this test as a service that we announced earlier this week, we're really helping this nascent industry get their characterization and test done quickly while learning side-by-side with them, and monetizing both the acquisition that we made and the capabilities that we have internally.

Yes. And then if I could just ask a follow-up to that, that's systems related $39 million in the quarter is the best number that I can see going back six to eight quarters, and I think the best-ever -- I didn't catch from the prepared comments what contributed to such a high level when -- and I think we're seeing things ease off a little bit in the first quarter from guidance. But what's the potential for us to be moving maybe to a new higher level of system sales that's closer to the $40 million range per quarter versus a low-to-mid thirties?

Yeah, I touched on it a little bit in the prepared remarks but it's worth expanding on. That level of the system segment being up around $40 million really has three primary factors. One is a lot of strength in the core engineering of our business augmented by some strength in the thermal piece of that business. Our foundry and logic customers are dealing with trying to test devices with very high powered entities, hundreds of watts and dissipates the power out of that and so there's some real technical need there that we're solving a problem. But the other piece on top of that is the benefit of the acquisitions we've made, HPD to a lesser extent as I just told you, but there is a positive impact there. We've seen some nice growth out of the FRT optical metrology business as their tools get adopted for advanced packaging applications. So the systems business operating upper end the $40 million level is a consequence of the legacy systems being nice and strong because of the industry innovation and yield improvement, along with good benefit from the acquisitions that we've made over the past couple of years.

Got it. Thanks, Mike.

Thanks, Craig.

Thank you. Our next question comes from Christian Schwab of Craig-Hallum Capital. Your question please.

Guys. Just a quick follow-up on DRAM. When should we think about DRAM growth in calendar '22, given we will have new designs on DDR5 and probably continuation of new designs on existing nodes. But DRAM was especially strong this year. Can you give us a framework of growth expectations there?

Yeah, I would go back and think about, we talked about potential growth in those -- at the high-end foundry and logic probe card market. If you look at the overall probe card market and kind of a mid-to-high single-digit CAGR, we don't expect DRAM to outgrow that significantly and there's several reasons for that. One is our customers tend to do a pretty good job of constraining their overall spend and driving their cost of test using things like FormFactor's ability to test the whole wafer at ones to drive test costs down. So we don't expect to see a lot of market growth there. Really, the place -- as we talked about both on this call and on previous calls in associated with our model, the real growth is coming from foundry and logic probe cards. A lot of investment there, and a lot of complexity and intensity increases that are driving up our customers then as they try and make sure that they're yielding good parts, especially as they go into these chiplet -style products.

That's great. That's a great segue way into your --historically, at least this year your third largest customer. Do we have a path or a visibility for them to be a more consistent 10% customer throughout calendar '22? Could give us some direction of how we should be thinking about that. I know we've talked about that customer, in the past previously, maybe being able to scale materially higher. Can you just give us an update on that?

Sure. Yeah. And I think reiterating our expectations for that customer, we do believe we can get them up to something like a $100 million a year end really. One of the challenges with them appearing as a 10% customer is we continue to grow the business quite substantially, and so is the bar to get on our 10% list continues to grow. Their business continues to be pretty seasonal. We do expect a first quarter strength, as I mentioned in the prepared remarks, and I think it's indicative of higher test intensity on some of these advanced high-performance compute designs that really drive a higher probe card spend. But I would also expect seasonality to continue as they prepare for second half [Indiscernible] for some of these things by buying both guards in the first half and qualifying everything and making sure they [Indiscernible]

Okay. So difficult seasonality kind of to last year, as a customer [Indiscernible] the first half and not quite as strong in the second half, is that right?

Yeah. And sort of within striking distance of being 10% in most quarters, sometimes on the list, sometimes not.

Okay. Perfect. Thanks, guys. No other questions.

Thanks, Christian.

Thank you. Our next question comes from Amanda Scarnati of Citi. Please go ahead.

Thanks. Can you talk a little bit about the competitive environment that you're seeing in Logic and Foundry, and have there been any shift over the last 12 months, either Intel or TSMC as the dynamics change a little bit in those businesses?

Yes, I think -- so we talked about the competitive dynamics. I think was Craig's question in DRAM. Foundry and logic, a similar market. You've got two very strong lead suppliers and a privately-held Italian company. And they've shown some good growth. I think they've done a good job in continuing to execute and achieve a strong second supplier position that a lot of these key customers, but I wouldn't characterize it as a fundamental change in the competitive dynamics. I think there are going to be ebbs and flows in market share as things go through different transitions. But fundamentally the probe card market is no different than some of the other markets like etch and depth, probably not lithography, where two credible suppliers are going to be competing design to design and node to node for different opportunities, different share gains. And I think it's a relatively healthy, competitive environment, not just in DRAM, but in foundry and logic as well.

Can you talk a little bit about the M&A strategy going forward? It seems like you have quite a nice portfolio built out along growth happenings and recent acquisitions and sheet-propelled growth through between 2020 -- starting 2023 really. Is there additional appetite for M&A near-term, or do you think that portfolio is pretty well suited right now?

So there's definitely an appetite for more M&A. It's a key component of our strategy, primarily focused in extending our reserve markets. Do you think we can in our existing serve markets, continue to execute, drive leadership position and drive share gains? We don't think we want to spend M&A dollars there, partially because of the dual supplier dynamic I talked about previously. But if you look in at the system segment and some of the related consumable segment, I think there's some attractive pieces of served market where we do want to be taking the dollars that we're generating from operations in things like the Probe card business, and deploying them in buying leadership positions in new pieces of certain markets. I think the recent acquisitions we've done -- I talked about FRT's growth for optical metrology and advanced packaging applications, a great example of us taking some of that capital, deploying it to buying some strong technologies and good products, and then driving them through the FormFactor customer relationships and overall industry stands to get good growth out of those acquisitions. That's a theme that we're going to continue to execute.

Perfect. Thank you.

Thanks, Amanda.

[Operator Instructions] Our next question comes from the line of Tom Diffely of D.A. Davidson. Your line is open.

Yeah. Good afternoon, and thanks for the question. Mike, one more question on the DRAM market. When you look at potential growth going forward, is it more impacted by capacity as new wafer starts, or by node transitions, or the changing from the model safety of DDR4 to DDR5? What's the biggest driver of gains going forward?

I think it's wafer starts. If you look at the way DRAM networks, the node transitions are shrinks, don't offer our customers very much bit growth and so the way they are driving bit growth is essentially through new wafer starts. You put more wafers through a DRAM fab, you're going to need more probe cards. And so I think that's the fundamental driver of demand. Having said that, as we talked about a little bit earlier in this session, we don't see a lot of growth in the DRAM probe card market. Our customers are pretty good at using costs that are DRAM test on a per wafer per bit basis so that we've some growth there mostly driven by wafer starts but we don't expect it to be anything like the growth associated with foundry and logic and the move to chiplet style architectures.

Okay. That makes sense. So looking at the foundry logic market, seems like every week we hear about several more $10 billion fabs going up all over the world. Is there a role on that, a $10 billion fab or a 20,000 wafer start fab would drive x amount of probe card business on an annual basis?

Not really, because it is different -- customers have different test strategies. And you see this in our revenue makeup obviously. But if there were a simple rule of thumb, you wouldn't see such a large variance between customers that are driving large amounts of wafer start demand through things. I think depends on that customers’ test strategy. But to your point, all of this foundry and logic -- high-end foundry and logic fab capacity coming online, they're going to have to test those wafers irrespective of what your test strategy is, whether it's a high wafer test intensity or moderate wafer test intensity strategy. And so I think as these fabs continued to build out, this is a long-term positive for the overall industry and for us certainly.

All right, thanks. That's helpful. And then, Shai, when I look at the -- it looks to be something like $50 million to a $100 million of incremental spending CapEx going on over the next year 2021-2022 for the new facility. What's the impact on COGS or on OPEX from the increased spending?

Yes. So you might recall that we actually purchased the building, the new manufacturing serving in Livermore. This really helps with amortizing most of the expense on over a longer period of time. So we don't expect the amortization and going the line was going to be a significant impact. And it is built into the 47% target model. So somewhere to be big and we take that into consideration, or took it already.

All right. And you said it's on schedule, can you give us a sense for what percentage field it is or how much more capacity there is to expand out over the next several years?

I think the way to look at it, so we purchased the entire building. It's about 100,000 square foot. For now, we build the clean room and some offices around it, et cetera, for only half of the building. And in Q4, we had tools in the building, we started manufacturing and producing revenue started in December, so some contributions to Q4 revenue but not a lot. This building, what we have now, will help us get to achieve the $850 million and beyond, as Mike mentioned in the prepared remarks. And we are in the process of formalizing our plans for the next level. The second half of the building, additional capacity extension which we need in other parts of the world, they're still in process of formalizing.

Great. Well, thank you both for your time today.

Thank you.

Thanks Tom.

Thank you. Our next question comes from David Dooley of Steelhead Securities. Your line is open.

Thanks for taking my questions, a couple. As far as if the wafer fab equipment business, let's say, grows around 15% in 2022, what do you think the growth rate of your probe card business will be or what do you think your FormFactor's growth rate will be with that kind of WFE number?

Again, it can be -- as we talked about in the past, it's difficult to tie specific WFE spends to probe card spends, because customers do have different test strategies. But you've seen over the years that WFE increases, do result directionally, and increases in probe card spend, not too surprisingly. As we talked about with Tom's question, more wafers out and more probe cards, and so more extend there. There's different correlations you can look at over time and it's different for different segments. Very different for DRAM as it is for high-end foundry and logic. But I do think that the market growing and this overall high single-digit growth rate is not a bad blended growth rate for the probe card market. It tends to be less volatile than the capital equipment, both on the upside, which is obviously the situation we're in now, and the downside as we've seen in the past.

So what I was really trying to get at is what do you think your growth rate is going to and your [Indiscernible] answer is, "high -single-digits is the best guess at this point?"

Yeah, I think so. For those of you that have followed us for a long time, you know that visibility is a challenging part of this business. We continue to drive lead times and cycle times down so that we're able to meet customer demand essentially racing wafers through the fab. And so beyond even the current quarter visibility can be a challenging thing but you look at all of the spending and investment that's going on and increasing leading edge capacity and obviously directionally whether it's 2022 or 2023 for our business, more probe cards are going to be required.

You've touched on this earlier but I'm just curious, with delay of three nanometers at TSMC from 2022 to 2023, I would imagine that would have been a nice bump in revenue for you guys, that it happened this year. Is there some way we can quantify the impact of that delay? I realize that there's going to be a lot more designs on five nanometers or four nanometers. But maybe just when you look at the overall impact, how do you look at it for FormFactor?

Yes. I don't think it has that big an impact for us. If you look at these well-orchestrated, well-planned node transitions, customers are still releasing new designs on the existing nodes, as you say five or four. And that's a good part of the strength here in Q1. One of the things that does happen when you go to a new node, especially a new node with substantially lower yields, is the probe card intensity does go up, the test intensity does go up at least initially, because customers, one, if they're operating at lower yields that you to start more wafers to get more good die and then test those die and spread them out. But also they're testing a lot of different aspects of the chip to try and improve their yield. And so a new node, it's not a huge difference. Maybe call it 10% to 20% in overall test intensity. But there is a slight uplift there. I think the far more interesting thing to look at for us is the fact that designs continue to release on nodes like five nanometer or four nanometers, continuing to drive a pretty healthy business, at least in the first part of it.

One final clarification for me is if you think about high single-digits as the overall growth rate for FormFactor, I'm assuming, is it a good assumption to think that the foundry logic business would be low double-digits and the DRAM business and the other stuff would be below that high single-digit rate?

You can easily go back and read between the lines of some of the questions we’ve talked through in this session. It is clear that we had higher expectations [Indiscernible] whole bunch of different ways but I think at its core that segment or that market as we reported is very likely to grow faster than the overall prepared market.

Thank you

Thank you

Thank you, this time I’d like to turn the call back to Mike Slessor for closing remarks.

Thanks everyone for joining us today, we’re looking forward to a strong 2022 and hopefully seeing you again in person at some point during the year, take care.

This concludes today’s conference call, thank you for participating you may now disconnect.