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FormFactor, Inc. Reports 2021 Second Quarter Results

Company Delivers Q2 Revenue at High End of Outlook Range, Expects Similar Levels in Q3

LIVERMORE, Calif., July 28, 2021 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the second quarter of fiscal 2021 ended June 26, 2021. Quarterly revenues were $188.1 million, an increase of 0.8% compared to $186.6 million in the first quarter of fiscal 2021, and an increase of 19.2% from $157.8 million in the second quarter of fiscal 2020.

  • Strong DRAM demand and record Systems segment sales produced second-highest revenue in company history
  • Favorable product mix, better yields on a new DRAM design, increased precious metals recovery and improved utilization and absorption led to gross margins exceeding outlook range
  • New manufacturing center in Livermore on-track to produce initial customer shipments in Q4

“FormFactor performed well during Q2, with revenue surpassing Q1 to reach levels second only to Q4‘20,” said Mike Slessor, CEO of FormFactor, Inc. “Non-GAAP gross margin, while down 60 basis points sequentially, exceeded our outlook range and we benefited from solid demand for FormFactor’s diversified set of market-leading semiconductor test and measurement products.”

Second Quarter Highlights

On a GAAP basis, net income for the second quarter of fiscal 2021 was $17.9 million, or $0.23 per fully-diluted share, compared to net income for the first quarter of fiscal 2021 of $19.6 million, or $0.25 per fully-diluted share, and net income for the second quarter of fiscal 2020 of $20.5 million, or $0.26 per fully-diluted share. Gross margin for the second quarter of 2021 was 40.6%, compared with 41.1% in the first quarter of 2021, and 41.9% in the second quarter of 2020.

On a non-GAAP basis, net income for the second quarter of fiscal 2021 was $28.4 million, or $0.36 per fully-diluted share, compared to net income for the first quarter of fiscal 2021 of $30.8 million, or $0.38 per fully-diluted share, and net income for the second quarter of fiscal 2020 of $25.8 million, or $0.33 per fully-diluted share. On a non-GAAP basis, gross margin for the second quarter of 2021 was 44.4%, compared with 45.0% in the first quarter of 2021, and 45.8% in the second quarter of 2020.

A reconciliation of GAAP to non-GAAP measures is provided in the schedules included below.

Free cash flow for the second quarter of fiscal 2021 was $16.2 million, compared to free cash flow for the first quarter of fiscal 2021 of $19.2 million, and free cash flow for the second quarter of 2020 of $18.6 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, “Solid demand for FormFactor’s diversified set of market-leading semiconductor test and measurement products is continuing in the current quarter, and we are executing our planned investments to increase capacity for our products.”

For the third quarter ending September 25, 2021, FormFactor is providing the following outlook*:

    GAAP   Reconciling
Items**
  Non-GAAP
Revenue   $182 million to $194 million     $182 million to $194 million
Gross Margin   42% to 45%   $2.0 million   43% to 46%
Net income per diluted share   $0.21 to $0.29   $0.10   $0.31 to $0.39

*This outlook assumes consistent foreign currency rates.
**Reconciling items are stock-based compensation, restructuring charges, and amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions.

We posted our revenue breakdown by geographic region, by market segment and with customers with greater than 10% of total revenue on the Investor Relations section of our website at www.formfactor.com. We will conduct a conference call at 1:25 p.m. PDT, or 4:25 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 July 30, 4:25 p.m. Pacific Time, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering confirmation code 7497439. 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, non-GAAP gross margin, non-GAAP operating expenses and non-GAAP operating income, 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 and six months ended June 26, 2021 and for outlook provided before, as well as for the comparable periods of fiscal 2020, 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 metrology and inspection, 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 realization of benefits from acquisitions, investments in capacity and investments in new electronic data systems and information technology; changes in macro-economic environments; events affecting global and regional economic conditions and stability such as Brexit, infectious diseases and pandemics (such as the ongoing COVID-19 pandemic), military conflicts, political volatility and similar factors, operating separately or in combination; 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. We are operating in an environment with especially substantial uncertainties arising from the COVID-19 pandemic, including with respect to its current and future impact on our operations, workforce, manufacturing capacity, customer demand, supply chain, macroeconomic environment and other important aspects of our business. In addition, export regulations and other trade barriers and preferences in the U.S. and elsewhere may substantially impact our future sales such as in China, and there remains considerable uncertainty regarding the ultimate interpretation of existing regulations by relevant government agencies. No assurances can be given that any of the events anticipated by the forward-looking statements within this press release 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   Six Months Ended
  June 26,
2021
  March 27,
2021
  June 27,
2020
  June 26,
2021
  June 27,
2020
Revenues $ 188,076     $ 186,636     $ 157,824     $ 374,712     $ 318,577  
Cost of revenues 111,793     109,930     91,657     221,723     185,020  
Gross profit 76,283     76,706     66,167     152,989     133,557  
Operating expenses:                  
Research and development 25,454     24,046     20,919     49,500     42,186  
Selling, general and administrative 30,479     30,015     22,755     60,494     50,448  
Total operating expenses 55,933     54,061     43,674     109,994     92,634  
Operating income 20,350     22,645     22,493     42,995     40,923  
Interest income 148     194     376     342     1,061  
Interest expense (116 )   (180 )   (171 )   (296 )   (489 )
Other income (expense), net (194 )   172     (67 )   (22 )   (158 )
Income before income taxes 20,188     22,831     22,631     43,019     41,337  
Provision for income taxes 2,283     3,206     2,162     5,489     4,978  
Net income $ 17,905     $ 19,625     $ 20,469     $ 37,530     $ 36,359  
Net income per share:                  
Basic $ 0.23     $ 0.25     $ 0.27     $ 0.48     $ 0.48  
Diluted $ 0.23     $ 0.25     $ 0.26     $ 0.47     $ 0.46  
Weighted-average number of shares used in per share calculations:                  
Basic 77,463     77,598     76,275     77,530     76,140  
Diluted 79,466     79,988     78,861     79,621     78,710  
                             


 
FORMFACTOR, INC. 
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)
       
  Three Months Ended   Six Months Ended
  June 26,
2021
  March 27,
2021
  June 27,
2020
  June 26,
2021
  June 27,
2020
GAAP Revenue $ 188,076     $ 186,636     $ 157,824     $ 374,712     $ 318,577  
Adjustments:                  
Amortization of deferred revenue fair value adjustments due to acquisitions 78     125         203      
Non-GAAP Revenue $ 188,154     $ 186,761     $ 157,824     $ 374,915     $ 318,577  
                   
GAAP Gross Profit $ 76,283     $ 76,706     $ 66,167     $ 152,989     $ 133,557  
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions and other 6,223     5,998     5,174     12,221     10,924  
Stock-based compensation 1,079     1,335     901     2,414     1,838  
Non-GAAP Gross Profit $ 83,585     $ 84,039     $ 72,242     $ 167,624     $ 146,319  
                   
GAAP Gross Margin 40.6 %   41.1 %   41.9 %   40.8 %   41.9 %
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions and other 3.2 %   3.2 %   3.3 %   3.3 %   3.4 %
Stock-based compensation 0.6 %   0.7 %   0.6 %   0.6 %   0.6 %
Non-GAAP Gross Margin 44.4 %   45.0 %   45.8 %   44.7 %   45.9 %
                   
GAAP operating expenses $ 55,933     $ 54,061     $ 43,674     $ 109,994     $ 92,634  
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions and other (2,056 )   (1,715 )   (1,528 )   (3,771 )   (3,041 )
Stock-based compensation (5,509 )   (5,742 )   (4,741 )   (11,251 )   (9,427 )
Gain on contingent consideration 95         3,700     95     3,700  
Acquisition related expenses (43 )   (166 )       (209 )   (35 )
Non-GAAP operating expenses $ 48,420     $ 46,438     $ 41,105     $ 94,858     $ 83,831  
                   
GAAP operating income $ 20,350     $ 22,645     $ 22,493     $ 42,995     $ 40,923  
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions and other 8,279     7,713     6,702     15,992     13,965  
Stock-based compensation 6,588     7,077     5,642     13,665     11,265  
Gain on contingent consideration (95 )       (3,700 )   (95 )   (3,700 )
Acquisition related expenses 43     166         209     35  
Non-GAAP operating income $ 35,165     $ 37,601     $ 31,137     $ 72,766     $ 62,488  
                                       


 
FORMFACTOR, INC. 
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)
       
  Three Months Ended   Six Months Ended
  June 26,
2021
  March 27,
2021
  June 27,
2020
  June 26,
2021
  June 27,
2020
GAAP net income $ 17,905     $ 19,625     $ 20,469     $ 37,530     $ 36,359  
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions and other 8,279     7,713     6,702     15,992     13,965  
Stock-based compensation 6,588     7,077     5,642     13,665     11,265  
Gain on contingent consideration (95 )       (3,700 )   (95 )   (3,700 )
Acquisition related expenses 43     166         209     35  
Income tax effect of non-GAAP adjustments (4,273 )   (3,806 )   (3,265 )   (8,079 )   (6,024 )
Non-GAAP net income $ 28,447     $ 30,775     $ 25,848     $ 59,222     $ 51,900  
                   
GAAP net income per share:                  
Basic $ 0.23     $ 0.25     $ 0.27     $ 0.48     $ 0.48  
Diluted $ 0.23     $ 0.25     $ 0.26     $ 0.47     $ 0.46  
                   
Non-GAAP net income per share:                  
Basic $ 0.37     $ 0.40     $ 0.34     $ 0.76     $ 0.68  
Diluted $ 0.36     $ 0.38     $ 0.33     $ 0.74     $ 0.66  
                                       


 
FORMFACTOR, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
   
  Six Months Ended
  June 26,
2021
  June 27,
2020
Cash flows from operating activities:      
Net income $ 37,530     $ 36,359  
Selected adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 12,678     9,240  
Amortization 13,900     13,717  
Stock-based compensation expense 13,665     11,265  
Provision for excess and obsolete inventories 6,898     6,407  
Gain on contingent consideration (95 )   (3,700 )
Other activity impacting operating cash flows (18,421 )   9,159  
Net cash provided by operating activities 66,155     82,447  
Cash flows from investing activities:      
Acquisition of property, plant and equipment (31,322 )   (36,743 )
Proceeds (purchases) of marketable securities, net (28,491 )   15,684  
Other activity impacting investing cash flows     82  
Net cash used in investing activities (59,813 )   (20,977 )
Cash flows from financing activities:      
Purchase of common stock through stock repurchase program (23,951 )    
Proceeds from issuances of common stock 5,909     4,935  
Tax withholdings related to net share settlements of equity awards (5,261 )   (3,800 )
Payment of contingent consideration (3,873 )    
Proceeds from term loan debt     18,000  
Payment of term loan debt issuance costs     (78 )
Principal repayments on term loans (4,740 )   (26,322 )
Net cash used in financing activities (31,916 )   (7,265 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,558 )   583  
Net increase (decrease) in cash, cash equivalents and restricted cash (27,132 )   54,788  
Cash, cash equivalents and restricted cash, beginning of period 191,098     147,937  
Cash, cash equivalents and restricted cash, end of period $ 163,966     $ 202,725  
               


 
FORMFACTOR, INC. 
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(In thousands)
(Unaudited)
       
  Three Months Ended   Six Months Ended
  June 26,
2021
  March 27,
2021
  June 27,
2020
  June 26,
2021
  June 27,
2020
Net cash provided by operating activities $ 33,799     $ 32,356     $ 43,108     $ 66,155     $ 82,447  
Adjustments:                  
Cash paid for interest 166     166     182     339     473  
Acquisition related payments in working capital 43     173         209     35  
Capital expenditures (17,852 )   (13,470 )   (24,693 )   (31,322 )   (36,743 )
Free cash flow $ 16,156     $ 19,225     $ 18,597     $ 35,381     $ 46,212  
                                       


 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
           
  June 26,
2021
  March 27,
2021
  December 26,
2020
ASSETS          
Current assets:          
Cash and cash equivalents $ 160,273     $ 173,616     $ 187,225  
Marketable securities 95,962     94,093     67,810  
Accounts receivable, net of allowance for doubtful accounts 108,265     103,500     107,603  
Inventories, net 111,890     104,727     99,229  
Restricted cash 1,857     2,798     1,904  
Prepaid expenses and other current assets 19,244     19,371     23,303  
Total current assets 497,491     498,105     487,074  
Restricted cash 1,836     1,894     1,969  
Operating lease, right-of-use-assets 38,485     37,208     30,756  
Property, plant and equipment, net of accumulated depreciation 125,348     112,312     104,103  
Goodwill 214,548     214,218     212,761  
Intangibles, net 41,913     48,786     59,147  
Deferred tax assets 66,945     65,821     66,242  
Other assets 1,980     1,867     1,165  
Total assets $ 988,546     $ 980,211     $ 963,217  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable $ 62,445     $ 67,720     $ 62,045  
Accrued liabilities 51,487     43,468     55,342  
Current portion of term loans, net of unamortized issuance costs 9,356     9,260     9,516  
Deferred revenue 22,655     18,644     20,964  
Operating lease liabilities 7,908     7,557     6,704  
Total current liabilities 153,851     146,649     154,571  
Term loans, less current portion, net of unamortized issuance costs 20,123     22,390     24,978  
Deferred tax liabilities 4,613     4,965     5,346  
Long-term operating lease liabilities 34,211     33,485     27,996  
Other liabilities 6,201     6,189     6,242  
Total liabilities 218,999     213,678     219,133  
           
Stockholders’ equity:          
Common stock 77     78     78  
Treasury stock     (5,738 )    
Additional paid-in capital 894,062     915,136     903,838  
Accumulated other comprehensive income 3,596     3,150     5,886  
Accumulated deficit (128,188 )   (146,093 )   (165,718 )
Total stockholders’ equity 769,547     766,533     744,084  
Total liabilities and stockholders’ equity $ 988,546     $ 980,211     $ 963,217  
                       

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, non-GAAP operating expenses, non-GAAP operating income 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, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating income 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, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating income 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, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, by adjusting GAAP net income, GAAP earnings per fully-diluted share, GAAP gross margin, GAAP operating expenses, and GAAP operating income 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, gross margin, operating expenses, or operating income 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, non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP operating income 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 “Non-GAAP Financial Measure Reconciliations" 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


Primary Logo

Source: FormFactor, Inc.