FormFactor, Inc.
May 2, 2018
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FormFactor, Inc. Reports 2018 First Quarter Results

Company Delivers Results at the Top End of Financial Outlook

LIVERMORE, Calif., May 02, 2018 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq:FORM) today announced its financial results for the first quarter of fiscal 2018 ended March 31, 2018. Quarterly revenues were $118.3 million, down 10.3% from $131.9 million reported in the fourth quarter of fiscal 2017, and down 8.2% from $128.8 million reported in the first quarter of fiscal 2017.

Mike Slessor, CEO of FormFactor, Inc. said, "Despite an anticipated reduction in revenues from delays in the 10-nanometer node at our largest customer, we realized the benefits of our opportunity set as a diversified leader in electrical test and measurement and delivered revenue and non-GAAP earnings-per-share at the top end of our outlook range."

First Quarter Highlights

On a GAAP basis, net income for the first quarter of fiscal 2018 was $2.1 million, or $0.03 per fully-diluted share, compared to net income for the fourth quarter of fiscal 2017 of $5.6 million, or $0.07 per fully-diluted share, and net income for the first quarter of fiscal 2017 of $5.2 million, or $0.07 per fully-diluted share.  The company reported first quarter gross margin of 38.2%, compared with 36.9% in the fourth quarter of 2017, and 36.9% in the first quarter of 2017.

On a non-GAAP basis, net income for the first quarter of fiscal 2018 was $12.7 million, or $0.17 per fully-diluted share, compared to net income for the fourth quarter of fiscal 2017 of $18.0 million, or $0.24 per fully-diluted share, and net income for the first quarter of fiscal 2017 of $17.3 million, or $0.24 per fully-diluted share. The company reported first quarter non-GAAP gross margin of 43.3%, compared with 41.8% in the fourth quarter of 2017, and 42.6% in the first quarter of 2017.

A reconciliation of GAAP to non-GAAP net income and net income per fully-diluted share, and GAAP to non-GAAP gross margin, is provided in the schedules included below.

Free cash flow for the first quarter of fiscal 2018 was $6.3 million, compared to free cash flow for the fourth quarter of 2017 of $23.5 million, and free cash flow for the first quarter of 2017 of $15.4 million.  A reconciliation of net cash provided by operating activities to free cash flow is provided in the schedules included below.

Outlook

Dr. Slessor added, "In the second quarter, we expect strength across our businesses including a sequential increase in demand from our largest customer, resulting in improved results."

For the second quarter ending on June 30, 2018, FormFactor is providing the following outlook*:

 GAAP Reconciling Items** Non-GAAP
Revenue$130 million to $138 million  $130 million to $138 million
Gross margin37% to 40% $6 million 42% to 45%
Net income per diluted share$0.08 to $0.14 $0.12 $0.20 to $0.26

*This outlook assumes consistent foreign currency rates.
**Reconciling items are stock-based compensation and amortization of intangibles.

We posted our revenue breakdown by region and market segment on the Investor Relations section of our website at www.formfactor.com. We will conduct a conference call at 1:30 p.m. PDT, or 4:30 p.m. EDT, today.

The public is invited to listen to a live webcast of FormFactor's conference call on the Investor Relations section of our web site at www.formfactor.com. A telephone replay of the conference call will be available approximately two hours after the conclusion of the call. The telephone replay will be available through May 4, 2018, 7:30 p.m. Pacific Time, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering confirmation code 6187246. Additionally, the replay will be available on the Investor Relations section of our website, www.formfactor.com.

Use of Non-GAAP Financial Information:

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we disclose certain non-GAAP measures of non-GAAP net income, non-GAAP earnings per fully-diluted share, and non-GAAP gross margin, that are adjusted from the nearest GAAP financial measure to exclude certain costs, expenses, gains and losses. Reconciliations of the adjustments to GAAP results for the three months ended March 31, 2018 and for outlook provided before, as well as for the comparable periods of fiscal 2017, are provided below, and on the Investor Relations section of our website at www.formfactor.com.  Information regarding the ways in which management uses non-GAAP financial information to evaluate its business, management's reasons for using this non-GAAP financial information, and limitations associated with the use of non-GAAP financial information, is included under "About our Non-GAAP Financial Measures" following the tables below.

About FormFactor:

FormFactor, Inc. (NASDAQ:FORM), is a leading provider of essential test and measurement technologies along the full IC life cycle - from characterization, modeling, reliability, and design de-bug, to qualification and production test. Semiconductor companies rely upon FormFactor's products and services to accelerate profitability by optimizing device performance and advancing yield knowledge. The Company serves customers through its network of facilities in Asia, Europe, and North America. For more information, visit the Company's website at www.formfactor.com.

Forward-looking Statements:

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the federal securities laws, including with respect to the Company's future financial and operating results, the Company's plans, strategies and objectives for future operations. These statements are based on management's current expectations and beliefs as of the date hereof, and are subject to a number of risks and uncertainties, many of which are beyond the Company's control, that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements include, but are not limited to statements regarding future financial and operating results, customer demand, conditions in the semiconductor industry, and growth opportunities, and other statements regarding the Company's business. Forward-looking statements may contain words such as "may," "might," "will," "expect," "plan," "anticipate," and "continue," the negative or plural of these words and similar expressions, and include the assumptions that underlie such statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: changes in demand for the Company's products; customer-specific demand; the speed of customer implementation of new technologies; industry seasonality; risks to the Company's ability to realize operational efficiencies; changes macro-economic environments; and other factors, including those set forth in the Company's most current annual report on Form 10-K, quarterly reports on Form 10-Q and other filings by the Company with the U.S. Securities and Exchange Commission. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of the Company. Unless required by law, the Company is under no obligation (and expressly disclaims any such obligation) to update or revise its forward-looking statements whether as a result of new information, future events, or otherwise.


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts) 
(Unaudited)

 Three Months Ended
 March 31, 2018 April 1, 2017
Revenues$118,290  $128,829 
Cost of revenues73,161  81,258 
Gross profit45,129  47,571 
Operating expenses:   
Research and development18,046  17,414 
Selling, general and administrative23,449  22,829 
Restructuring and impairment charges  269 
Total operating expenses41,495  40,512 
Operating income3,634  7,059 
Interest income257  67 
Interest expense(967) (1,174)
Other expense, net(512) (400)
Income before income taxes2,412  5,552 
Provision for income taxes287  367 
Net income$2,125  $5,185 
Net income per share:   
Basic$0.03  $0.07 
Diluted$0.03  $0.07  
Weighted-average number of shares used in per share calculations:   
Basic72,826  71,423 
  Diluted74,342  72,922 
      


FORMFACTOR, INC.
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(In thousands, except per share amounts)
(Unaudited)

 Three Months Ended
 March 31, 2018 December 30, 2017 April 1, 2017
GAAP net income$2,125  $5,588  $5,185 
Adjustments:     
Stock-based compensation3,756  4,952  3,302 
Restructuring and impairment charges, net  481  269 
Acquisition and integration related expenses  782  588 
Amortization of intangibles7,194  7,515  8,540 
Contingencies    (206)
Benefit from U.S. tax reform  (2,053)  
Income tax effect of non-GAAP adjustments(425) 715  (427)
Non-GAAP net income$12,650  $17,980  $17,251 
      
Non-GAAP net income per share:     
Basic$0.17  $0.25  $0.24 
Diluted$0.17  $0.24  $0.24 
      
Weighted-average number of shares used in per share calculations:     
Basic72,826  72,846  71,423 
Diluted74,342  74,756  72,922 
         


FORMFACTOR, INC.
RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Dollars in thousands)
(Unaudited)

 Three Months Ended
March 31, 2018
 Three Months Ended
December 30, 2017
 Three Months Ended
April 1, 2017
 Gross Profit Gross Margin Gross Profit Gross Margin Gross Profit Gross Margin
GAAP Gross Profit/Margin$45,129  38.2% $48,629  36.9% $47,571   36.9%
Adjustments:           
Amortization of intangibles5,157  4.3% 5,473  4.1% 6,515  5.0%
Stock-based compensation920  0.8% 1,000  0.7% 854  0.7%
Acquisition and integration related expenses  —% 68  0.1%   —%
Contingencies  —%   —% (30) —%
Non-GAAP Gross Profit/Margin$51,206  43.3% $55,170  41.8% $54,940  42.6%
                  


FORMFACTOR, INC.
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(In thousands)
(Unaudited)

 Three Months Ended
 March 31, 2018 December 30, 2017 April 1, 2017
Net cash provided by operating activities$9,322  $26,455  $17,803 
Adjustments:     
Cash paid for interest826  863  1,016 
Capital expenditures(3,831) (3,838) (3,465)
Free cash flow$6,317  $23,480  $15,354 
            


FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

(Unaudited)

 March 31
2018
 December 30,
2017
ASSETS   
Current assets:   
Cash and cash equivalents$93,699  $91,184 
Marketable securities 48,370  48,988 
Accounts receivable, net of allowance for doubtful accounts of $200 and $20078,524  81,515 
Inventories, net 73,780  67,848 
Restricted cash663  372 
Refundable income taxes2,307  2,242 
Prepaid expenses and other current assets14,452  13,705 
Total current assets311,795  305,854 
Restricted cash1,020  1,170 
Property, plant and equipment, net of accumulated depreciation and amortization of $259,608 and $255,75547,851  46,754 
Goodwill190,367  189,920 
Intangibles, net90,649  97,484 
Deferred tax assets3,145  3,133 
Other assets1,361  2,259 
Total assets$646,188  $646,574 
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Accounts payable$38,889  $35,046  
Accrued liabilities23,496  33,694 
Current portion of term loan, net of unamortized issuance cost of $270 and $30729,730  18,443 
Deferred revenue4,515  4,978 
Total current liabilities96,630  92,161 
Term loan, less current portion, net of unamortized issuance cost of $185 and $27267,315  87,228 
Deferred tax liabilities3,487  3,379 
Deferred rent and other liabilities7,746  5,169 
Total liabilities175,178   187,937 
    
Stockholders' equity:   
Common stock and capital in excess of par value851,323  843,189 
Accumulated other comprehensive income5,185  3,021 
Accumulated deficit(385,498) (387,573)
Total stockholders' equity471,010  458,637 
Total liabilities and stockholders' equity$646,188  $646,574 
        


About our Non-GAAP Financial Measures:
We believe that the presentation of non-GAAP net income, non-GAAP earnings per fully-diluted share, non-GAAP gross margin, and free cash flow provides supplemental information that is important to understanding financial and business trends and other factors relating to our financial condition and results of operations. Non-GAAP net income, non-GAAP earnings per fully-diluted share, and non-GAAP gross margin are among the primary indicators used by management as a basis for planning and forecasting future periods, and by management and our board of directors to determine whether our operating performance has met certain targets and thresholds. Management uses non-GAAP net income, non-GAAP earnings per fully-diluted share, and non-GAAP gross margin when evaluating operating performance because it believes that the exclusion of the items indicated herein, for which the amounts or timing may vary significantly depending upon our activities and other factors, facilitates comparability of our operating performance from period to period. We use free cash flow to conduct and evaluate our business as an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. Many investors also prefer to track free cash flow, as opposed to only GAAP earnings. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures, and therefore it is important to view free cash flow as a complement to our entire consolidated statements of cash flows. We have chosen to provide this non-GAAP information to investors so they can analyze our operating results closer to the way that management does, and use this information in their assessment of our business and the valuation of our company. We compute non-GAAP net income, non-GAAP fully-diluted earnings per share, and non-GAAP gross margin, by adjusting GAAP net income, GAAP earnings per fully-diluted share, and GAAP gross margin to remove the impact of certain items and the tax effect, if applicable, of those adjustments. These non-GAAP measures are not in accordance with, or an alternative to, GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income, earnings per fully-diluted share, or gross margin prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We may expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income, non-GAAP earnings per fully-diluted share, and non-GAAP gross margin should not be construed as an inference that these costs are unusual, infrequent or non-recurring. For more information on the non-GAAP adjustments, please see the table captioned "Reconciliation of GAAP Net Income to Non-GAAP Net Income", "Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin", and "Reconciliation of Cash Provided By Operating Activities to Free Cash Flow" included in this press release.

Source: FormFactor, Inc.
FORM-F

Investor Contact:
Stan Finkelstein
Investor Relations
(925) 290-4321
ir@formfactor.com

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Source: FormFactor, Inc.

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