Thank you and welcome everyone to FormFactor's third quarter, 2026 earnings conference call. On today's call, our chief executive officer, Mike Slessor, and chief financial officer, Eric McKinnis. 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 GetPNL 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 in the investor relations section of our website. Today's discussion contains forward-looking statements within the meaning of the federal securities laws. Examples of such forward-looking statements include those with respect to the projections of financial and business performance, future macroeconomic and geopolitical conditions, the benefits of acquisitions and investments, including the ramp up of manufacturing facilities, anticipated industry trends, potential disruptions in our supply chain, the impacts of regulatory changes, including tariffs and changes in export controls, The anticipated volatility in demand for products, our ability to develop, produce, and sell products, and the assumptions upon which such statements are based. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed during this call. Information on risk factors and uncertainties is contained in our most recent filing on Form 10-K with the SEC for the physical year ended December 27, 2025, 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, October 28, 2026, and we assume no obligation to update them. With that, we will now turn the call over to FormFactor CEO, Mike Slessor.

Thanks for joining us today. During the third quarter, FormFactor again grew revenue, gross margin, and earnings per share, with each metric exceeding the high end of our outlook range. These results continue a theme you've seen from us for the past year. namely broad-based growth in demand from our diversified leadership position at the intersection of high performance compute and advanced packaging and our ability to serve this demand by producing more output from our existing manufacturing footprint. On a year over year basis, we grew quarterly revenue close to 40% within essentially the same manufacturing footprint. Our fourth quarter outlook extends this trend. Although we are now reaching the limits of our ability to extract more output from our existing manufacturing footprint, we're also bringing our new farmers branch factory online. We recently qualified the assembly and test portion of this new facility, and only a few days ago shipped the first production unit to a leading customer. We celebrated these milestones last week together with almost 200 customers, suppliers, partners, employees, and government officials, at a ribbon cutting event that formally launched our nearly 300,000 square foot facility. Over the course of 2027, our top priority is the ramp up of Farmer's Branch. We'll ramp as quickly as we can while ensuring we both sustain the efficiency improvements we've demonstrated in the last year and maintain the market leading product quality that is one of FormFactor's foundational competitive advantages. Eric will provide more details on the status and plans for Farmer's Branch later in the call. Earlier this month, we announced the expansion of our long-standing partnership with Teradyne, one of the world's leading automated test equipment, or ATE suppliers. Together with our multi-year partnership with Advantest, this announcement formalizes the collaboration and partnership between FormFactor and both market-leading ATE suppliers. The goal of these collaborations is to speed up the development, validation, and high-volume production of next-generation semiconductor applications enabling high-performance compute, like high-bandwidth memory and co-package optics. These partnerships also reinforce and solidify the open ecosystem market structure that provides our mutual customers with full probe card ATE interoperability. enabling customers to select the optimum probe card and ATE combination for their specific chip architectures and designs. Turning now to segment and market details, Foundry and Logic was one of the key drivers of our third quarter growth, increasing 10% sequentially on the expected broad-based strength across multiple applications. We expect continued demand growth and breadth in the current fourth quarter. In this market, we're building on our established positions in PCs, mobile, data center CPUs, and networking, while adding new growth vectors like GPUs and hyperscaler custom ASICs. Specifically, during the third quarter, we shipped probe carts to the world's leading foundry for a single GPU design in multi-million dollar volumes. Building on this successful qualification and initial ramp, were well positioned to meaningfully grow share in this important part of the Foundry and Logic market in 2027, with Farmer's Branch providing the required capacity. Looking ahead in Foundry and Logic, accelerating trends of higher speed interfaces, greater power density, and increasingly complex advanced packaging chiplet architectures for next generation GPUs and custom ASICs are increasing probe card performance requirements. These higher performance requirements make FormFactor's advanced MEMS probe technology a requirement for cost-effective production tests, and we're building the foundation to achieve share gains in 2027 across a diverse set of GPU and custom ASIC designs. Our exposure to multiple customers and applications provides us with several ways to participate in the growth of high-performance compute and shows the benefits of our diversification strategy. reducing reliance on any single customer, program, or architecture to drive our revenue and growth. Turning to DRAM probe cards, third quarter revenue was, as expected, essentially unchanged from the record levels of the second quarter, but the mix shifted significantly. This mix shift was also expected, with HBM revenue declining and DDR5 revenue increasing. As our customers moved their wafer start mix to more DDR designs, to capture the profit opportunity provided by significant DDR market price increases. Since probe cards are specific to each customer chip design, our DRAM probe card mix tracks these dynamic customer product shifts. And we expect these quarter to quarter shifts between DDR and HBM to continue so long as the current bit constrained DRAM market conditions persist. Another important point related to this mix shift is that at the same time we achieved record DRAM probe card revenues with a DDR5 heavy and HBM light product mix, we delivered record gross margin performance. Compared to the form factor of years past, this is evidence of a very different profitability profile, demonstrating the impact of the successful execution of several DRAM probe card manufacturing cost production programs. The net result is improved DRAM probe card gross margins, which in turn lessen the dependence of our company-level gross margins on product mix. Turning now to our system segment, systems delivered a record quarter, growing 20% sequentially on accelerating demand for our Triton system for co-package optics for CPO applications. This accelerating demand has been evident in the steady increase in our expectations for this business in 2026. We started the year expecting between $10 and $20 million of Triton revenue and now expect upwards of $30 million in 2026. In tandem with this growing CPO business, we're also serving demand for additional photonics applications, such as CPO's close cousin Near Package Optics, or NPO, as well as pluggable devices. This beyond CPO application coverage is the result of our intentional focus on developing the world's leading optical probing technologies applicable across a wide range of photonics applications. In this case, we've prioritized building leadership in test insertion one, which ensures known good dye, or KGD, of the photonic integrated circuit, or PIC. Both CPO and NPO architectures require KGD PICs before they are combined with the electronic ICs to form the optical module and scale up and scale out network switches. As a result, form factor benefits from broader photonics adoption, whether it be CPO or NPO. Part of our leadership position in photonics probing stems from the acquisition of Keystone Photonics a year ago. As we've discussed, Keystone's innovative and differentiated optical probe technology enables high-efficiency optical coupling to our customers' photonic devices in much the same way our advanced MEMS probes provide best-in-class electrical connectivity to our customers' chips. To maximize our competitive advantage from this acquisition, we've made the decision to more tightly integrate the Keystone team and technologies into FormFactor with an exclusive focus on enhancing FormFactor's development and delivery of the world's leading photonics probing solutions. We believe the exciting growth in CPO, NPO, and pluggables represents the very early stages of widespread adoption of photonics in the broader semiconductor industry. Traditional copper interconnect is reaching physical limits in speed, heat, and energy consumption, and photonics provides a fundamentally more efficient way to transmit data within and between data centers using light instead of electricity. FormFactor is ideally positioned to help lead tests for this new area, as our lab-to-fab strategy has produced a decade-long first-mover advantage paired with key customer and partner relationships. Before turning the call over to Eric, I want to once again thank the global FormFactor team for continuing to demonstrate remarkable agility and perseverance in navigating the current challenging supply environment, quickly resolving internal and external constraints to again grow in the third quarter. With our recent qualifications and farmers branch coming online, we're well positioned to accelerate our growth as test intensity and complexity continue to rise at the intersection of high performance compute and advanced packaging. The midpoint of our fourth quarter outlook puts us on track to exceed $1 billion of revenue in 2026. And we're excited to cross this important milestone perform factor on the way to the $1.6 billion revenue level and $5 of non-GAAP earnings per share of our target model. Eric, you're up.

Thank you, Mike, and good afternoon.

Q3 was another strong quarter for FarmFactor. We delivered non-GAAP gross margin of 56.5% and non-GAAP earnings per fully diluted share of $1.04. on our fourth consecutive quarter of record revenues, revenue levels close to 40% higher than the same quarter a year ago. These results continue the operating story we discussed last quarter, addressing broad-based demand by driving higher output from our existing manufacturing footprint through improved cycle times, yields, and operating efficiency. Revenue increased 9% sequentially, while non-GAAP operating expenses fell by approximately 250 basis points as a percentage of revenue. Combined with record revenue, these improvements produce strong operating leverage across the P&L. Non-GAAP gross margin increased 320 basis points sequentially to 56.5%. Approximately $10.5 million, or about 380 basis points, of benefit resulted primarily from tariff refunds and favorable subcomponent costs in our quantum business that are not expected to recur. Excluding these items, Non-GAAP gross margins would have been between 52.5 and 53%, about 150 basis points above the baseline described last quarter. This durable improvement in baseline non-GAAP gross margins is the result of continued improvements in labor performance, manufacturing spending, yields, and other production costs. We now view around 53% as the gross margin baseline at Q3 volumes. Over the course of the Farmers Branch ramp in 2027, we expect leverage from higher volumes and increased operational efficiency to effectively offset the temporary inefficiencies typically associated with new factory ramps. Accordingly, we expect 2027 gross margins to continue at levels similar to the current baseline. Stepping through our results in a bit more detail, Q3 revenues of $280.5 million came in $10.5 million above the midpoint of our Q3 outlook range of $260 to $280 million, and we're up $22.3 million, or 9% from Q2. System segment revenues grew on higher Triton photonic system revenues, reaching a new record of $59.5 million in Q3, up $11 million, or 23% from Q2. Gap gross margin for the third quarter was 54.7%, up from 50.7% in Q2. Cost of revenues included $5.1 million of GAAP to non-GAAP reconciling items, primarily related to stock-based compensation, amortization of intangibles, and restructuring charges. Details of the GAAP to non-GAAP reconciling items are outlined in our press release issued today and in the reconciliation table available on the investor relations section of our website. On a non-GAAP basis, Third quarter gross margin was 56.5%, 320 basis points higher than Q2, and 100 basis points above the high end of our outlook range. The favorable impact of tariff refunds on gross margins in the third quarter was about 300 basis points, or $8.6 million. In Q4, we expect to receive back the remaining roughly $2 million of tariffs paid under IEPA, or around 70 basis points at the midpoint of the outlook range. Once these refunds are received, We do not expect any ongoing benefit to baseline gross margins from tariff refunds. Probe card gross margin increased by about 90 basis points to 55.3% as higher utilization, improved yields, manufacturing spending discipline, and tariff benefits more than offset the less favorable mix in DRAM. System gross margin increased by more than 10 percentage points to 61%. About half of the system gross margin improvement from Q2 was driven by record revenue volumes that created significant operating leverage on fixed costs, primarily due to increased sales of our Triton photonic systems. The remaining improvement came from items we don't expect to recur, as described earlier. Our gap operating expenses were $71.8 million for the third quarter, down from Q2 and down as a percentage of revenue. On a non-GAAP basis, operating expenses were $64.4 million, or 23% of revenue, and also down from the second quarter at $65.7 million, or 25.4% of revenue. This approximately 250 basis point sequential improvement in non-GAAP operating expenses demonstrates continued operating leverage, despite including increased farmers' branch ramp costs. Included in Q3 operating expenses were $6.4 million of pre-production ramp costs. We expect these expenses to transition to the cost of revenues as capacity expansion phases are released to production. Gap net income for the third quarter was $73.8 million, or $0.93 per fully diluted share, up from gap net income of $56.2 million, or $0.71 per fully diluted share in the previous quarter. The increase was driven primarily by a higher revenue, higher gross margin, and lower restructuring-related costs. Third quarter non-GAAP net income was $82.3 million, or $1.04 per fully-duited share, up from $65 million, or $0.82 per fully-duited share, in Q2. About $0.09 of EPS was attributable to tariff refunds in the third quarter. The GAAP effective tax rate for the third quarter was 15.5%. and the non-GAAP effective tax rate for the third quarter was 17.6%. Moving to the balance sheet and cash flows. We delivered free cash flow in the third quarter of $64.8 million compared to $52.6 million in Q2. This increase in free cash flow was driven primarily by higher cash flows from operations, partially offset by higher cash spent on CapEx for Farmer's Branch. Cash flows from operations were $104.3 million in Q3, up $42.5 million from Q2, driven primarily by higher net income, partially offset by working capital investments to support the higher operating levels. At quarter end, total cash and investments were up $50 million to $399 million. Our capital allocation framework remains unchanged. Cash will be used to reinvest in the business, pursued targeted acquisitions to expand our served markets and to execute share repurchases with the objective of offsetting dilution from stock-based compensation. During the third quarter, we did not repurchase any shares, and at quarter end, $70.9 million remained available in the $75 million repurchase program authorized in April 2025. As Mike mentioned, at the beginning of the current fourth quarter, we announced a collaboration with Teradyne. This included a $300 million investment in FormFactor in order to formalize our partnership and reinforce the open ecosystem for probe card and ATE solutions. The areas of partnership closely align with the growth areas in our target model and are intended to accelerate development of solutions for our mutual customers. This investment strengthens our balance sheet, but does not change our capital allocation priorities. With respect to investing in the business, The Farmers Branch ramp to initial target capacity remains on track, if not slightly ahead of our original schedule. Due primarily to optimization of timing of capital spending and favorable payment terms, we now expect 2026 cash capital expenditures for Farmers Branch to be between $100 and $110 million, below our prior estimate of $140 to $170 million. Importantly, this simply reflects changes in timing of cash rather than a change in scope or velocity of the ramp as project commitments and total project costs associated with the initial target capacity remained aligned with our original plans. We expect the associated cash spending to shift into 2027 as we continue executing the ramp and the expansion of the site. And we expect capital investment in farmers' grants to remain at similar levels in the next year. Exiting 2027, We expect Farmers Branch will have the capability to produce about $400 million in annual probe card revenue, and we expect that capability to ramp over the course of 2027. Pre-production ramp costs are currently recorded as a component of GNA, and we continue to expect $25 to $30 million of Farmers Branch pre-production expense in 2026. As we begin production, costs will move from operating expenses into cost of revenues. We expect to see this begin in Q4, with about $5 million of startup costs planned to move from OPEX to cost of revenues in the quarter and another $5 million remaining in OPEX, the latter related to capacity expansion phases not yet released to production. Turning to the fourth quarter non-GAAP outlook, we expect revenue of approximately $285 million, plus or minus $10 million. At the midpoint, We expect non-GAAP gross margin of 54%, plus or minus 150 basis points. The expected Q4 non-GAAP gross margins are better than the baseline gross margin of 53% described earlier, primarily on tariff-free funds, better mix, and higher volumes. At the midpoint, we expect Q4 non-GAAP operating expenses of approximately $69 million, plus or minus $2 million, including farmers' branch ramp costs. Our Q4 non-GAAP effective tax rate is expected to be within the range of 15 to 19 percent. Non-GAAP earnings per fully diluted share for Q4 are expected to be 95 cents plus or minus 9 cents. A reconciliation of our GAAP to non-GAAP Q4 outlook is available on the investor relations section of the website and in our press release issued today. Q3's results in our Q4 outlook demonstrate the operating leverage available When strong demand is combined with an efficient cost structure and disciplined spending, we are continuing to produce more from our existing footprint through better cycle times, higher yields, and improved resource efficiency, even while investing in farmers' branch to create the capacity and structural economics required for the next phase of growth. Our position at the intersection of high-performance compute and advanced packaging provides broad exposure across the AI compute architecture. from HBM paired with advanced GPUs, CPUs, and custom ASICs to emerging co-packaged optics and other photonics applications. As we have demonstrated, the underlying operating model is substantially stronger than it was a year and a half ago and positions us well to deliver against our target model of $1.6 billion in revenues at 55% gross margins and $5 of VPS.

With that, let's open the call for questions. Operator?

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, press star 11 again. Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Our first question comes from the line of Krish Sankar. of TD Cohen. Your line is open, Krish.

Yeah, hi, thanks for taking my question. I told them, Mike or Eric, first one, I think, Mike, you mentioned that palliative production growth margin is similar to the current baseline, which is 53%. So I'm just wondering, I understand you have farmers' grants ramping up. Are there any other headwinds to think about, or why wouldn't margins get better as volumes ramp next year?

Yeah, thanks for your question, Chris. I'll take this one. This is Eric. So we stated that we expect at current operating levels that our baseline gross margins are now at 53%, and that's up from the 51% to 51.5% we discussed last quarter. Of course, with any ramp of a production facility, you're going to have some inefficiencies, and that's associated with headcount additions and other spending that's required to support the ramp as you're ramping up capacity. What we expect to be able to do and one of the planned potential successes of our strategy is that we expect to be able to effectively offset that investment with associated increase in volume as well as efficiencies, similar to the ones that we've been driving over the last year and a half. So while you would typically see a degradation in gross margins as a result of a ramp We think we can largely offset those potential inefficiencies that are temporary in nature and sustain the current operating levels.

Got it. Thanks a lot, Eric. And then a quick follow-up for Mike. Mike, you know, I think you had, like, pretty good tracks in the past on HBM. Just kind of a two-part question on that. One is, how do you think about, like, all this, you know, chatter about HBM despecking? How would that impact you? And the part two version of that is, you know, if we do more, you know, lower the signal requirements or the pin speed requirements for HBM, how would it impact pro-car intensity? Thank you.

Yeah. So, as you said, Chris, two parts to that. At HBM, it continues to be a major driver for our business, both here through 2026 and into 2027. On the D-spec, we're really not seeing any significant impact. To orient everybody, we do see third quarter HBM revenue down, but that's primarily a result of customers shifting mix. And with the HBM4E and HBM5 design funnel we have and the forecast we have from customers, we expect continued strong growth in HBM. I'll remind people that one of the places where we're really strongly differentiated is in the final stack test. And of course, this HBM despec involves more completed stacks with fewer die at each stack. We're moving from, for example, 12 high to 8 high. And so this potentially hard to account for all the moving parts, but we don't see any significant headwinds associated with HBM growth associated with the despec. On the speed question, if you look at the roadmap, the move from HBM4 to, as I said, we're working right now on initial designs for 4E and 5, that continues to be an advancing roadmap with higher speeds. And that's also been a place where FormFactor provides strong differentiation for our customers. High-speed test performance, so they're guaranteeing to their customers they're meeting their test specs. with high productivity and high parallelism from our smart matrix DRAM architecture.

Thank you. Our next question comes from the line of Craig Ellis of B. Reilly. Your line is open, Craig.

Yeah, thanks for taking the question. Mike, I wanted to follow up on some of the comments around Foundry Logic given The strength we saw in the business. First, can you go into a little bit more detail on some of the things that were driving the sequential growth in the quarter? And I think you indicated that you expected the business to grow again in the fourth quarter. Is it similar drivers? Is it new drivers? And as you comment, can you help us understand the degree to which traditional x86 Server strength is benefiting the business in light of the fact that Micron was out there less than a month ago talking about high team growth this year and next.

Yeah. So Foundry and Logic, as you know, up in Q3, right around 10%. And as I said in my prepared remarks, we expect Foundry and Logic to grow again in Q4. One of the key features of this growth, key drivers of this growth, is CPUs for presumably agentic AI use cases. This has been an interesting development in 2026, and it's an example where we have really strong exposure, both through historical long-term customer relationship where we have high native share, That customer, almost a 10% customer in Q3 based on this data center CPU strength. And we would expect them probably to appear as a 10% customer in Q4. But also exposure with x86 Fabless and ARM CPU features. So as that business continues to grow, nice exposure. It is one of the key drivers for Foundry and Logic right now.

That's really helpful. Thanks, Mike. And then the follow-up. is on the systems business. You've been real clear this year we should expect strength in Triton. It seems like it's coming in even stronger than we expected six months ago, maybe even three months ago. As you talk to customers, what are they signaling about the durability of the strength we're seeing today as we look through the fourth quarter of this year and into 2027? Thank you.

Yeah, Triton and Photonics has been one of the real highlights for us in 2026. It's been a set of investments we've been making for the better part of a decade. And as you noted, we've accelerated our expectations now to north of 30 million in Triton revenue for 2026 after starting the year at between 10 and 20 million. Customers continue to be very bullish. It's still really dominated by one ecosystem, at least on the CPO side. But as I mentioned in the prepared remarks, one of the other things we're seeing is some diversification where we're seeing adoption in NPO applications and some plugables applications as well. In plugables, not necessarily the Triton system, but a derivative technology. There's a focus area where we expect continued growth, right? Photonics is such a compelling solution for the power and energy challenges that the industry face. It's really a question of when and not if, and we're seeing the early innings of that when really take place here in 26 into 27.

Very helpful.

Thank you.

Thank you. Our next question comes from the line of George Brown of Deutsche Bank. Your line is open, George.

Hi guys, thanks for taking my questions. Just two from my side. So just firstly, on the GPUs and maybe the ASIC side, I think you said in your statements that you ship products for the GPU in this quarter, but I think you're most of the step up in your sales to TSMC. which is again a sort of over 10% customer. It sounds like it's mainly from Triton or the CPO stuff rather than maybe less so the GPU. So how should we think about the GPU sort of contribution in Q3 and into Q4 and also as we go into 2027 with more capacity coming online? And I guess in a similar vein on the ASIC side, Are there any updates here in terms of qualifications? I know last quarter you talked about the Google TPU likely requiring advanced MEMS at some point. So any update there as well? And then I have a second.

Okay, let me see if I can parse. There was a lot in that question. Let's start with the GPU. We did say in the prepared remarks that we shipped probe cards for a single GPU design to the world's leading foundry in multi-million dollar quantities. And this is The very early part of us becoming a key part of those projects annually. We're well positioned to grow that business and start to take significant share in 2027. And that's a key feature of our growth. Similar for Custom Asics, right? Where we've qualified, shipped multiple units, but we're really constrained essentially by our ability to produce in volume. And that's why Farmer's Branch Getting that ramped up, as Eric described, is the number one priority for the company. Get ourselves very well positioned, whether it be GPUs, x86 Fabless CPUs, custom ASICs. Customers need our technology. This advanced MEMS technology is a key enabler for high-performance compute. Getting the capacity online to go deliver that, top priority for the company. And we're executing really well on that as fast as we can.

Perfect, thank you. And just following on from what you said in terms of capacity, we're hearing more from your peers about accelerating capacity additions, really sort of doubling down here to ramp as fast as possible. I think Advantis said this morning they're accelerating their plans to double their capacity on the logic test equipment side and hinted at doubling again over the midterm. So just wondering how much flexibility here You guys have, in terms of accelerating the ramp at Farmers Branch into 27, maybe into 28, because I think there's multiple phases you have, I think phase one to phase three. And obviously the injection from cash from Teradyne, I wonder if that helps, I guess, is my question.

Yeah, I think, as Mike shared, this is our number one priority as a company right now, is making sure that we bring up The capacity at Farmers Branch as fast as possible, but within the context of making sure we preserve our quality and we do it the right way. I provided an expectation of where we think we'd be able to exit 2027 at about $400 million of capability. That's framed on a variety of potential scenarios, and that's one that we think balances the risks with our execution ability. We feel really good about the team that we have working on this. It's a team that has done this before. They've demonstrated their ability to deliver over the past year and a half on the cost improvements that we've been working on. So we feel really good about where we're at. Maybe the additional point I'll add here is that Farmers Branch is really a platform for us to build on going forward. And so by definition, it is flexible. That's one of the basic tenets around that site is we want to make sure that we can Add capacity in a modular fashion as we move forward and as the demand environment dictates. In the ramp phase, we've got plenty to do over the next 12 months. So I think it's a good balanced view what we put out there in terms of our potential exit in the year and then moving beyond that into coming years.

Perfect. Thank you so much, guys.

Thank you. Our next question comes from the line of Matt Prisco of Cantor. Your line is open, Matt.

Yeah, thanks for taking the question, guys. I guess to start off, just to follow up on Farmer's Branch there, how should we think about the linearity of that ramp throughout 2027? And do you expect to have the demand to fill that fab completely as it kind of ramps to that 400 million annual run rate capability exiting 2027?

Yeah, I think, so I'll just reiterate, we expect to be able to exit the year at this $400 million annual run rate capability. That's a capability at exit, not necessarily the revenue. The revenue is going to be dictated by the timing of demand as you state. Now, the current demand environment is clearly very strong. So I think our thinking right now is that capacity is the limiting factor, and that is why it's the number one company priority that we're focused on.

And then that linearity through the years, we expect that to be even.

Yeah, sorry.

And then, yeah, I think linearity is, it's a fair assumption to assume it roughly linear. Now, there could be puts and takes as things kind of shift around in the schedule, but I think as a mental model, that's a fair way to think about it, starting at something close to zero and ramping up over the course of 2027 to the $400 million worth of annual capacity.

Gotcha. And then as my follow-up, just going back to gross margins, can you give a little more color in what's driving that two-point increase in the baseline? And then maybe the headwind that farmers branched at that early ramp you expect, can you quantify that headwind at all through 27 so we can start thinking through once we're at that full run rate, what kind of tailwind we can expect from that facility? Thanks.

Yeah, so the increase in the baseline gross margins is driven really by the same things that we've been seeing over the past, you know, the past year and a half. It's cycle times, it's yields, it's improving our efficiency and our existing footprint. We're getting more out with the same amount of resources, and that's driving up our gross margins because it's driving down our unit costs. That's really what's driving that once we exclude those non-recurring items. As it relates to 2027, we haven't quantified the pluses and minuses over that timeframe, mainly because it's a false sense of precision. But we are committed to when we exit the year after we have completed that initial ramp, that it will be accretive to the gross margin levels we see today once we're at that initial capacity.

Thank you. Our next question comes from the line of Elizabeth Sun of Citi. Please go ahead, Elizabeth.

Thank you. Thanks for taking my question. I guess my first question is also on the farmers branch. I understand you are trying to run as fast as possible throughout next year. I'm just curious, for the near term, it seems like capacity is becoming more of a constraint on the growth. It seems like Q4 is kind of constrained on that as well. So I'm just curious, as we go into Q1 next year, how much longer does the capacity continue to be a headwind or a constraint? And it's just how fast you can wrap in Q1 so that it doesn't become a constraint.

I agree that we're starting to see more and more tightness in our ability to produce. We're operating kind of at the limits of what our current footprint can do. And as you correctly noted, and maybe just, you know, we've managed to squeeze out significantly more production over the course of this year, from the beginning of this year to the end of this year. And that's driven through these process improvements, these efficiencies that we've driven, really the same footprint. We've squeezed that orange multiple times now, and it's getting harder and harder to get more out of that. You can see that in our outlook for Q4, where our incremental guide up a little bit less than maybe the prior quarter, what we were able to achieve. So you're correct in your statement that we are starting to see those limits. Farmer's branch is, of course, the relief valve for that. And I'll just go back to kind of what I said previously, is that we expect that capacity to come online effectively, linearly. over the year to that $400 million ending exiting capability.

Okay, got it. And then on the growth margin side, I think Eric talked about or Mike talked about like there is structurally increasing growth margin in DRAM side. There is like cost programs you are executing. So I'm just curious right now, is there any pricing element in that? growth margin improvement for DRAM overall, and also how far is DRAM growth margin away from FoundryLogic right now?

Yeah, Elizabeth, it's Mike. I'll take that. What we did note, and just to orient everyone, you know, we delivered again record DRAM revenue and at the same time delivered record were near record company gross margins. That's something you would have not seen from the form factor of the past. And it goes to these DRAM cost reductions. If I look at the DRAM gross margins and parse them, there's very little contribution for price increases. As we've shared with people in the past, our business model is really about delivering value to our customers and then getting compensated for that value. So we're not running a commodity business here. There are situations where an expedited delivery or a capacity reservation is valuable for our customers and they are compensating for that, but it's not the prominent theme associated with DRAM gross margin improvement.

Thanks, Mike. Thanks, Eric.

Once again, to ask a question, please press star 1-1 on your telephone. Again, that's star 1-1 to ask a question. Our next question comes from the line of Charles Shi of Needham. Your line is open, Charles.

Hi. Good afternoon, Mike and Aric. Maybe want to push you guys a little bit more on the farmers branch growth margin. Understand that during the ramp, there's always offsetting factors. But in a steady state, let's say one farmer's branch is fully ramped, you're in a steady state, there's no ramp cost related headwinds left. I'm sure you know the cost structure of that new facility and what would be the steady state gross margin accretion to the overall form factor. If you can shed some light into that, that would be great. Thank you.

Yeah, I think over the longer term, What we're seeing in terms of what we've been able to achieve so far this year as an example and as we head into the ramp of Farmers Branch is very close alignment to the target model that we communicated earlier this year in terms of operating leverage and the sort of gains that we're able to drive as volumes increase. I think that continues to hold as we exit the Farmers Branch ramp. And the target model did include the investments required to and many more. So I think the target model profitability is a good guide for you beyond next year.

Okay, thanks. Maybe a question for Mike. Mike, the Triton system revenue, if I understand correctly, from last year to this year, based on what you just said, north of $30 million, is approximately 4x of last year's level. Obviously, this is probably still a small part of the form factor business, 3% or 4% of the total, but let's say you've had franchises in the past that you can grow multiple times in a short amount of time, like HBM franchise, right? So do you Do you have the capacity in place, let's say, that the Triton system demand can do another 3 or 4X or even higher going into next year? And with all the attention on farmers branch, that seems like a pro-card facility, anything you're doing on the system side? Thank you.

Yeah, so Triton really has been a great grocery for us in 2026, but as I mentioned earlier, Really the result of many, many years of investment and partnership with some of the driver customers. In 2025, it was zero revenue. So it's gone from zero to 30 plus million here in 2026. And when you look at how we manufacture the Triton system, it's a little less internally focused and more externally focused on different subcomponents. We're basically... integrating and assembling some subcomponents. And so it's not quite the capacity constraints that we have in what's a pretty vertically integrated business in Chrome Cards. All of our growth forecasts, even at the high end, remember we talked about this being a $400 million served market in 2030, showing good progress this year to start to move on the way there. We expect the same in 2027. and we do not expect capacity to be a constraint on the growth of that business.

Thank you.

Our next question comes from the line of Brian Chen of Stifel. Please go ahead, Brian.

Hi there. Good afternoon. Thanks for letting us ask a few questions. Hey, Mike. In the past, when TSMC has bobbed its head over 10%, now that's, I think, two quarters in a row, maybe the business was $100 million below the run rate you're at now, so I call it a $190 or $180 versus a $280 now. Historically, the composition of that business, there's been certainly a bias towards things like mobile processors, etc. Is that historic, larger part of the TSMC foundry business? Is that kind of a similar size and kind of all the incremental growth from, you know, 10% at 180 versus 10% at 280? Is that all coming mainly from like custom ASICs or how would you describe how the composition of that TSMC business has evolved?

Yeah, it's actually a microcosm of how we've driven our larger growth strategy at the company. You know, there is multiple components to it. As you know, historically, that business was anchored in essentially mobile application processor ramps, broadened out a little bit as high performance compute started, brought it out a lot this year with some more high performance compute and different projects. And we've also got the Triton system there now as well. So a broader based set of opportunities with that customer, again, An almost perfect parallel to the way we're driving growth and diversification for the overall company, where we've got exposure to multiple different opportunities, making sure that when those opportunities hit, we've got exposure to them. I think the business with that customer, again, a perfect microcosm of how we approach driving the overall growth strategy for Horn Factor.

Okay, that's helpful. And then... In terms of the initial waves or batches of products that you start to bring up in Texas and the new probe card facility, is there a bias towards just new customer design straight into Texas or is there some sort of balance there between products that maybe you're transferring out of Livermore? and moving there. What's kind of the thought process on what kind of, you know, what bats lead off?

So that gets pretty in the weeds, but let me try and give you some of the themes for it. We are initially ramping assembly and test for our Foundry and Logic products, and we'll be adding the MEMS front end for Foundry and Logic products in 2027. That frees up DRAM capacity a little more. And so, you know, that The set of customers served out of Farmer's Branch, primarily, well, not primarily, exclusively Founder and Logic customers. Within that set, we're obviously optimizing things for speed to ramp. If customers want a lengthy, detailed qualification process, well, maybe they're going to be closer to the end. We want to make sure we're utilizing that capacity as aggressively as we possibly can. One of the earlier questions about us being capacity-constrained, we don't want that capacity sitting idle while customers decide whether they're going to qual or not. So there's very much a bias, whether it be new customers or existing customers who have a practical but aggressive qual plan to get them into farmer's branch first.

That's pretty helpful. And then maybe In terms of the comment that things are going a little bit ahead of plan, is that in terms of your initial view of how that engagement's going with your customers, is that kind of the learning curve on training new employees and hiring them? Is that the availability of the equipment sets?

Yeah, it's really a reflection on the expected revenue shipment timing. So we initially expected the first revenue outs to be at the very, very end of this year to beginning of 2027. And as Mike mentioned in his prepared remarks, we shipped our first card in the last couple of weeks. So that's the acceleration that we're seeing. That said, the other areas that you mentioned, such as workforce, et cetera, also seem to be going well. Again, we've got a really good team working on this. I think we're continuing to tick through the milestones at a good pace.

All right. Sounds good. Just be careful lifting those cards in the factory. That's it for me. Thanks.

Thank you. I would now like to turn the conference back to Mike Slessor for closing remarks. All right.

Thanks, everybody, for joining us today. An exciting time for FormFactor. As I said in the prepared remarks, our guidance applies going through a billion dollars of revenue this year for the first time in company history. We've got a bright future in front of us with Farmer's Branch coming online. Thanks for joining.

This concludes today's conference call. Thank you for participating. You may now disconnect