FormFactor, Inc.
FORMFACTOR INC (Form: 8-K, Received: 06/28/2017 16:18:20)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported):   June 28, 2017
 
FORMFACTOR, INC.
(Exact Name of Registrant as Specified in Charter)
 
 
Delaware 000-50307 13-3711155
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
 

7005 Southfront Road

Livermore, CA

  94551
(Address of Principal Executive Offices)   (Zip Code)
     
Registrant’s telephone number, including area code:   (925) 290-4000
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 7.01. Regulation FD Disclosure.

 

On June 28, 2017, FormFactor, Inc. (the “Company”) is hosting an analyst call to provide an update to its long-term strategy and financial model. A copy of the presentation used by management in conjunction with the call is furnished as Exhibit 99.01 to this report and is incorporated herein by reference.

 

The presentation furnished as Exhibit 99.01 contains forward-looking statements that are based on the Company’s current expectations, forecasts and assumptions, and that involve risks and uncertainties. These statements include, but are not limited to, statements regarding the Company’s future performance (such as the Company’s projected operating results, financial results, financial condition and targets, including those presented in the Target Model), business strategy and plans, and anticipated developments in the Company’s business and industry. Forward-looking statements may contain words such as “target,” “might,” “will,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” and “continue,” and the negative or plural of these words, and similar expressions. the Company’s actual results may differ materially from those described in the presentation and related discussions for a variety of reasons. Factors that could cause or contribute to such differences include, but are not limited to: macro-economic conditions; business cycles; changes in the competitive environment; changes in the technologies or test strategies used by customers and other factors affecting the demand for the Company’s products; challenges to the efficient development and manufacturing of the Company’s existing and new products; disruptions or price increases in the Company’s supply chain; risks associated with selling products internationally; and risks to the Company’s ability to further diversify or realize benefits from past or future acquisitions. More information about factors that could affect the Company’s operating results is included under the caption “Risk Factors” and elsewhere in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q with the U.S. Securities and Exchange Commission, copies of which may be obtained by visiting the Investor Relations section of the Company’s website at http://investors.formfactor.com or the SEC's website at www.sec.gov. All information in the presentation and the related discussions are as of June 28, 2017. Undue reliance should not be placed on these forward-looking statements, which are based on information available to the Company on the date hereof. No assurances are, or can be, given that any of the circumstances or events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on the Company’s results of operations or financial condition. Unless required by law, the Company is under no obligation, and disclaim any obligation, to update or revise forward-looking statements whether as a result of new information, future events, or otherwise.

 

The Target Model information included in the presentation are forward-looking statements and are based on a long-term model that makes certain assumptions regarding available markets for the Company’s products in 2019/2020 and other factors, and does not represent guidance for fiscal year 2017 or any other period.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

The following items are filed as an exhibit to this Current Report on Form 8-K:

 

Exhibit No.   Description
99.01   Analyst Call Presentation: Company Strategy & Target Model Update, dated June 28, 2017

 

The information in this report and the accompanying exhibit shall not be incorporated by reference into any filing of the Company with the Securities and Exchange Commission, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing. The information in this report, including the accompanying exhibit, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    FORMFACTOR, INC.
     
     
Date: June 28, 2017   By: /s/ Jason Cohen
        Name: Jason Cohen
        Title: General Counsel

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
99.01   Analyst Call Presentation: Company Strategy & Target Model Update, dated June 28, 2017

 

 

 

 

 

Exhibit 99.1

 

Analyst Call: Company Strategy & Target Model Update June 28, 2017

 

 

This presentation contains forward - looking statements that are based on our current expectations, forecasts and assumptions, and that involve risks and uncertainties. These statements include, but are not limited to, statements regarding our future performance (such as our projected operating results, financial results, financial condition and targets), business strategy and plans, and anticipated developm ent s in our business and industry. Forward - looking statements may contain words such as “target,” “might,” “will,” “could,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” and “continue,” and the negative or plural of these words, and similar expressions. Our actu al results may differ materially from those described in this presentation and related discussions for a variety of reasons. Factors that could cau se or contribute to such differences include, but are not limited to: macro - economic conditions; business cycles; changes in the competitive environment; changes in the technologies or test strategies used by customers and other factors affecting the demand for our products; challenges to the eff icient development and manufacturing of our existing and new products; disruptions or price increases in our supply chain; risks associated with se lling products internationally; and risks to our ability to further diversify or realize benefits from past or future acquisitions. More inf orm ation about factors that could affect our operating results is included under the caption “Risk Factors” and elsewhere in our annual report on Form 10 - K and quarterly reports on Form 10 - Q with the U.S. Securities and Exchange Commission, copies of which may be obtained by visiting the Investor Relations section of our website at http://investors.formfactor.com or the SEC's website at www.sec.gov . All information in this presentation and the related discussions are as of June 28, 2017. Undue reliance should not be placed on these forward - looking statements, which are based on information available to us on the date hereof. No assurances are, or can be, given that any of the circumstances or events anticipated b y t he forward - looking statements will transpire or occur, or if any of them do occur, what impact they will have on our results of operations or fi nan cial condition. Unless required by law, we are under no obligation, and disclaim any obligation, to update or revise forward - looking statements whether as a result of new information, future events, or otherwise. This presentation and related discussions contain non - GAAP measures relating to our financial performance. These measures may be different from non - GAAP financial measures used by other companies. The presentation of this financial information is not intended to be c onsidered in isolation of, or as a substitute for, financial information prepared and presented in accordance with generally accepted acco unt ing principles. You can find the reconciliation of non - GAAP financial measures to the most directly comparable U.S. GAAP measures in the Supplementa l Information at the end of this presentation. Forward - Looking Statements; Non - GAAP Financial Measures 2

 

 

3 Mike Slessor, Chief Executive Officer

 

 

Largest supplier of semiconductor probe cards and engineering systems from R&D to production - serving a $1.3 billion growing market Investment Themes 4 Aligned with technology trends in data centers, mobile, and automotive end markets Technology leadership enables customers’ most critical roadmap advancements Structurally profitable financial model delivering earnings growth and strong cash flow ` Successful acquisition strategy has provided scale & diversification

 

 

$- $5 $10 $15 2012 2013 2014 2015 2016 2017 Proven Track Record 5 * Source: VLSI Research 2016 Probe Card Report VLSI Customer Satisfaction Award: 4 Consecutive Years # 1 June 2016 : Cascade Microtech Acquisition October 2012 : Microprobe Acquisition Advanced Probe Card Supplier # 1 LARGEST R&D Investments in Probe Card Market SERVING THE TOP 10 Semiconductor Companies FORMFACTOR’S HISTORICAL STOCK PRICE PERFORMANCE

 

 

Delivering Strong Financial Results 6 Growing and diversifying revenue Expanding earnings per share * Please see the Supplemental Information for reconciliations of non - GAAP financial measures to the most directly comparable GAA P financial measures, and for other information relating to non - GAAP financial measures. Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimates) Growth: +69% Growth: >3x

 

 

DATA CENTER • High Performance Micro - processor • Server DRAM • NAND Flash 8% End Market Growth MOBILE • Application Processors • Mobile DRAM • NAND Flash • Filters (BAW & SAW) 6% End Market Growth AUTOMOTIVE • Stringent test requirements • Infotainment • Sensors • Micro - controllers (drive trains) 14% End Market Growth Aligned with High Growth Semiconductor Technology Trends 7 Source: Gartner Semiconductor and Electronics Market Outlook 2017, IC Market Drivers 2017 Update, IC Insights, company estima tes

 

 

Sources: IC Insights, VLSI Research 2016, Gartner Semiconductor and Electronics Market Outlook 2017, company estimates For mFactor Customers’ End Markets Data Center Mobile Automotive Market CAGR (2016 - 2020) 8% 6% 14% FormFactor Products Engineering Systems 3% Probe Cards Foundry & Logic 7% DRAM Flash Selected Line of Sight Growth Opportunities 8 Automotive ICs +$30M Total Cumulative Opportunity = +$130M Advanced Packaging +$60M Mobile Data +$40M

 

 

Advanced Packaging: Higher Wafer Test Intensity Requires More High - Performance Probe Cards 9 * Advanced Packaging Trends, TechSearch Int’l 2016 ** Teradyne Q1’17 Earnings Call, May 2017 *** Quality/Reliability Requirements for Bare Die, Micron TN0014 THE MARKET OPPORTUNITY • Heterogeneous die integration (2.5D/3D, InFO, etc.) taking over from Moore’s law • Fanout adoption at 87% CAGR 2015 - 2020* • >20% test - time increase moving to 10nm fanout wafer - level packaging flow** THE CUSTOMER NEED • Pitch moves to <100 μ m with exploding density • High - fidelity electrical performance for known - good - die (KGD) test • KGD required for cost: a 4 - die assembly of 90% - yielding die has <66% net yield*** WHY FORMFACTOR WINS • Proprietary MEMS probe & assembly technology gives best performance and cost • Demonstrated adoption at all 10nm Foundry & Logic customers/fabs +$60M INCREMENTAL REVENUE

 

 

Mobile Data: Explosion of Data Traffic Packed into Narrow Spectrum Drives RF Semi Content and Technology 10 * Cisco VNI Forecast, February 2017 ** RF FE modules and components for cellphones, Yole 2017 THE MARKET OPPORTUNITY • Mobile data traffic growing 7x 2016 - 2021* over increasingly crowded spectrum • RF filter and front - end IC at 14% CAGR 2016 - 2022** • 5G adoption and infrastructure buildout provides significant long - term RF growth THE CUSTOMER NEED • Uncompromised RF fidelity to ensure high test yields for ultra narrow - band devices • Scale and breadth to keep pace with dynamic capacity and design cycles WHY FORMFACTOR WINS • Best - in - class RF performance from engineering through high - volume production • Integration of RF and digital test technologies to mirror customers’ roadmaps +$40M INCREMENTAL REVENUE

 

 

Automotive ICs: Rapidly - Growing Semiconductor End Market with Stringent Quality and Test Requirements 11 * IC Market Drivers 2017 Update, IC Insights ** Spotlight on Automotive, PwC Semiconductor Report 2013 THE MARKET OPPORTUNITY • ICs & sensors improve both performance & safety on the path to autonomous vehicles • Highest major end market growth in semiconductors at 14% CAGR 2016 - 2020* • Proliferation and integration of digital ICs, RF (mmWave radar) and MEMS sensors THE CUSTOMER NEED • Required defect levels is at least 10x more stringent than mobile and consumer applications** • Extreme test conditions — high power/ current, high + low temperatures, etc. • Supplier scale and sustainability important WHY FORMFACTOR WINS • Best - in - class electrical performance over broad range of test conditions • Long history as key supplier to top companies in automotive supply chain +$30M INCREMENTAL REVENUE 2015 ASSIST • Sensor • Driver Active • Fail Safe 2020 AUTOMATE • Sensor Fusion • Co - pilot • Dependable 2030 AUTONOMOUS • High Accuracy Maps • Driverless • Safety Cocoon

 

 

MicroLED Testing: An Emerging Example of Our Next - Generation Opportunities 12 * MicroLED Displays 2017 Report, Yole 2017 THE MARKET OPPORTUNITY • Projected growth to 330 million display units in 2025 from near - zero today* • GaN technology offers improved brightness and energy efficiency over OLED in small - format displays THE CUSTOMER NEED • System - level integration of electro - optics, substrate - handling, and electrical tests • Customization and flexibility to meet rapidly - changing requirements • Scale to support production ramps WHY FORMFACTOR WINS • Engagement in engineering through high - volume production • Application expertise in material handling/positioning, electronics, and optics SIGNIFICANT GROWTH POTENTIAL

 

 

Gaining Share in Growing Markets 13 13 $0.9B SERVED AVAILABLE MARKET ADVANCED PROBE CARDS $1.7B SERVED AVAILABLE MARKET ADVANCED PROBE CARDS & ENGINEERING SYSTEMS 20% ~40% $1.3B SERVED AVAILABLE MARKET ADVANCED PROBE CARDS & ENGINEERING SYSTEMS 29% Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimates) 2012 2016

 

 

14 Mike Ludwig, Chief Financial Officer

 

 

Driving Profitability through Strategic Use of Balance Sheet 15 Increased Profitability & Free Cash Flow Increased Diversification & Leverage of Increased Scale Strategic M&A: 2012 & 2016 Strong Cash Balance * Please see the Supplemental Information for reconciliations of non - GAAP financial measures to the most directly comparable GAA P financial measures, and for other information relating to non - GAAP financial measures. Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimates)

 

 

Diversification Improves Mix and Drives Profitability 16 16 Source: Company filings and reports Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimates) Probe Cards

 

 

Continuing to Leverage Our Operating Structure 17 • Leverage factory utilization and product mix to drive gross margin expansion • Capitalize on scale to leverage our operating expense infrastructure • Continue significant R&D investment to execute on organic growth opportunities SG&A Target Model * Please see the Supplemental Information for reconciliations of non - GAAP financial measures to the most directly comparable GAA P financial measures, and for other information relating to non - GAAP financial measures. Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimates)

 

 

Target Model Represents Significant Increase in Profitability and Free Cash Flow 18 18 2016 Actuals Target Model Revenue $385M $650M* No n - GAAP Gross Margin 38% 46% Non - GAAP Operating Income 10% 19% Non - GAAP Effective Tax Rate 6.7% 6.0% Non - GAAP Diluted Earnings Per Share $0.49 $1.50 Free Cash Flow $24M $110M Please see the Supplemental Information for reconciliations of non - GAAP financial measures to the most directly comparable GAAP financial measures, and for other information relating to non - GAAP financial measures. * Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimates)

 

 

Strategic Capital Allocation: Strengthen Balance Sheet & Drive Future Growth 19 Capital Allocation Purpose De - levering • Strengthen balance sheet • Net cash positive by Q2 2017 Growth through acquisitions • Greater scale • Increased diversification • Revenue & EPS growth Target model assumptions: Advanced probe cards served available market of $1.4B in 2019/2020 (Source – VLSI Research 2016) Engineering systems served available market of $0.3B (Company’s internal estimates)

 

 

20 Mike Slessor, CEO: Summary

 

 

LEADERSHIP IN CORE MARKERS • Continue share gains in advanced probe card market segment & engineering systems • Leverage existing key roadmap technologies and investments across all markets ENTER ADJACENT MARKETS • Continued long term diversification of revenue stream and customer mix through M&A in electrical test and measurement DRIVE PROFITABILITY • Drive greater operating efficiency by gaining economies of scale Strategic Focus Areas 21

 

 

22 Q&A Session

 

 

23 Appendix

 

 

FY 2016 GAAP to Non - GAAP Reconciliation 24 in thousands GAAP Non-GAAP Twelve months ended Dec. 31, 2016 Stock-based Compensation Restructuring & Impairment Amortization of Intangibles Acquisition & Integration Recovery Loss Contingency Deferred Revenue Valuation Allowance Twelve months ended Dec. 31, 2016 Revenues $ 383,881 $ - $ - $ - $ - $ - $ - $ 903 $ - $ 384,784 Cost of revenues 281,199 (2,518) - (40,131) 22 - - - - 238,572 Gross profit 102,682 2,518 - 40,131 (22) - - 903 - 146,212 Operating expenses: Research and development 57,453 (3,329) - (7) (7) - - - - 54,110 Sales and marketing 40,250 (1,997) - (5,389) (200) - - - - 32,664 General and administrative 33,194 (2,878) - - (7,274) - (781) - - 22,261 Restructuring and impairment charges, net 19,692 - (19,692) - - - - - - - Loss on the sale of Subsidiary - - Total operating expenses 150,589 (8,204) (19,692) (5,396) (7,481) - (781) - - 109,035 Operating profit (loss) (47,907) 10,722 19,692 45,527 7,459 - 781 903 - 37,177 Other income (expense), net (2,288) - - - - (545) - - - (2,833) Profit (loss) before income taxes (50,195) 10,722 19,692 45,527 7,459 (545) 781 903 - 34,344 (Benefit from) provision for income taxes (43,638) 242 444 1,027 168 (12) 18 20 44,048 2,317 Net profit (loss) $ (6,557) $ 10,480 $ 19,248 $ 44,500 $ 7,291 $ (533) $ 763 $ 883 $ (44,048) $ 32,027 Net profit (loss) per share: Basic $ (0.10) $ 0.16 $ 0.30 $ 0.69 $ 0.11 $ (0.01) $ 0.01 $ 0.01 $ (0.68) $ 0.49 Dilute $ (0.10) $ 0.16 $ 0.29 $ 0.67 $ 0.11 $ (0.01) $ 0.01 $ 0.01 $ (0.67) $ 0.49 Weighted-average number of shares Basic 64,941 64,941 64,941 64,941 64,941 64,941 64,941 64,941 64,941 64,941 Dilute 65,948 65,948 65,948 65,948 65,948 65,948 65,948 65,948 65,948 65,948 Adjustments

 

 

Free Cash Flow Reconciliation 25 in thousands 2011 2012 2013 2014 2015 2016 Net cash provided by (used in) operating activities: (29,343)$ (26,228)$ (5,802)$ 17,659$ 36,122$ $ 17,423 Add: cash paid for interest - - - - - 2,110 Add: cash paid for acquisition related expenses - - - - - 15,446 Less: capital expenditures (7,700) (7,952) (8,530) (5,670) (8,640) (11,521) Free cash flow (37,043)$ (34,180)$ (14,332)$ 11,989$ 27,482$ $ 23,458

 

 

We believe that the presentation of non - GAAP earnings per fully - diluted share, free cash flow and other non - GAAP measures in thi s presentation provides supplemental information that is important to understanding financial and business trends and other factors relating to our financial condition and results of operations. These non - GAAP measures 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 m et certain targets and thresholds. Management uses non - GAAP operating income (loss), non - GAAP earnings per fully - diluted share and other no n - GAAP measures when evaluating operating performance because it believes that the exclusion of the items indicated herein, for whic h t he amounts or timing may vary significantly depending upon our activities and other factors, facilitates comparability of our operating per for mance 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 v iew ed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. Many investors also prefer to tr ack 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 fl ow available for discretionary expenditures, and therefore it is important to view free cash flow as a complement to our entire consolidated s tat ements of cash flows. We have chosen to provide non - GAAP information to investors so they can analyze our operating results closer to the way t hat management does, and use this information in their assessment of our business and the valuation of our company. We compute non - GAAP operati ng income (loss) and non - GAAP fully - diluted earnings per share by adjusting GAAP operating income (loss) and GAAP earnings per fully - dilut ed share to remove the impact of certain items and the tax effect of those adjustments. These and other non - GAAP measures are not in accorda nce 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, o r s uperior to, operating income (loss) or earnings per fully - diluted share and other measures prepared in accordance with GAAP. Non - GAAP financial measur es have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We ma y expect to continue to incur expenses of a nature similar to these non - GAAP adjustments, and exclusion of these items should not be constru ed as an inference that these costs are unusual, infrequent or non - recurring. For more information on non - GAAP measures and adjustments, please see the reconciliations of non - GAAP measures included in this presentation and available at http://investors.formfactor.com . About Non - GAAP Financial Measures 26