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FormFactor, Inc. Reports 2021 Third Quarter Results

Company Delivers Strong Results, Benefiting from Accelerating Demand and Output as Additional Capacity Comes Online

LIVERMORE, Calif., Oct. 27, 2021 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the third quarter of fiscal 2021 ended September 25, 2021. Quarterly revenues were $190.0 million, an increase of 1.0% compared to $188.1 million in the second quarter of fiscal 2021, and an increase of 6.7% from $178.0 million in the third quarter of fiscal 2020.

  • Strong demand in all our businesses produced revenue at the high-end of the outlook range
  • Gross margin improvement of 160 basis points, driven primarily by more-favorable product mix within specific markets
  • New Livermore Manufacturing Center on-track to deliver initial customer shipments in the fourth quarter

“FormFactor delivered solid results in the third quarter, again recording the second-highest revenue in company history, with gross margins at the high end of our outlook range,” said Mike Slessor, CEO of FormFactor, Inc. “Together with sustained operating expense control, these factors resulted in non-GAAP earnings per share above the high end of our outlook range.”

Third Quarter Highlights

On a GAAP basis, net income for the third quarter of fiscal 2021 was $20.5 million, or $0.26 per fully-diluted share, compared to net income for the second quarter of fiscal 2021 of $17.9 million, or $0.23 per fully-diluted share, and net income for the third quarter of fiscal 2020 of $22.9 million, or $0.29 per fully-diluted share. Gross margin for the third quarter of 2021 was 42.2%, compared with 40.6% in the second quarter of 2021, and 43.1% in the third quarter of 2020.

On a non-GAAP basis, net income for the third quarter of fiscal 2021 was $31.6 million, or $0.40 per fully-diluted share, compared to net income for the second quarter of fiscal 2021 of $28.4 million, or $0.36 per fully-diluted share, and net income for the third quarter of fiscal 2020 of $30.7 million, or $0.39 per fully-diluted share. On a non-GAAP basis, gross margin for the third quarter of 2021 was 46.0%, compared with 44.4% in the second quarter of 2021, and 46.7% in the third quarter of 2020.

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

Free cash flow for the third quarter of fiscal 2021 was $14.4 million, compared to free cash flow for the second quarter of fiscal 2021 of $16.2 million, and free cash flow for the third quarter of 2020 of $37.2 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, “We continue to benefit from strong demand for FormFactor’s diversified set of market-leading semiconductor test and measurement products, and with our added production capacity now coming online, we are well-positioned in the current quarter to deliver sequential growth.”

For the fourth quarter ending December 25, 2021, FormFactor is providing the following outlook*:

    GAAP   Reconciling Items**   Non-GAAP
Revenue   $192 million to $204 million       $192 million to $204 million
Gross Margin   42% to 45%   $3.3 million   44% to 47%
Net income per diluted share   $0.25 to $0.33   $0.12   $0.37 to $0.45
*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 October 29, 2021, 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 5775795. 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 net income per basic and diluted share, non-GAAP revenue, Non-GAAP gross profit, 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 nine months ended September 25, 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   Nine Months Ended
  September 25,
2021
  June 26,
2021
  September 26,
2020
  September 25,
2021
  September 26,
2020
Revenues $ 189,964       $ 188,076       $ 177,996       $ 564,676       $ 496,573    
Cost of revenues 109,745       111,793       101,247       331,468       286,267    
Gross profit 80,219       76,283       76,749       233,208       210,306    
Operating expenses:                  
Research and development 26,026       25,454       22,878       75,526       65,064    
Selling, general and administrative 30,940       30,479       31,834       91,434       82,282    
Total operating expenses 56,966       55,933       54,712       166,960       147,346    
Operating income 23,253       20,350       22,037       66,248       62,960    
Interest income 121       148       249       463       1,310    
Interest expense (151 )     (116 )     (193 )     (447 )     (682 )  
Other income (expense), net 58       (194 )     299       36       141    
Income before income taxes 23,281       20,188       22,392       66,300       63,729    
Provision (benefit) for income taxes 2,784       2,283       (499 )     8,273       4,479    
Net income $ 20,497       $ 17,905       $ 22,891       $ 58,027       $ 59,250    
Net income per share:                  
Basic $ 0.26       $ 0.23       $ 0.30       $ 0.75       $ 0.78    
Diluted $ 0.26       $ 0.23       $ 0.29       $ 0.73       $ 0.75    
Weighted-average number of shares used in per share calculations:                
Basic 77,869       77,463       77,029       77,643       76,436    
Diluted 79,029       79,466       78,809       79,190       78,534    



FORMFACTOR, INC.
 
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)

  Three Months Ended   Nine Months Ended
  September 25,
2021
  June 26,
2021
  September 26,
2020
  September 25,
2021
  September 26,
2020
GAAP Revenue $ 189,964       $ 188,076       $ 177,996       $ 564,676       $ 496,573    
Adjustments:                  
Amortization of deferred revenue fair value adjustments due to acquisitions 57       78             260          
Non-GAAP Revenue $ 190,021       $ 188,154       $ 177,996       $ 564,936       $ 496,573    
                   
GAAP Gross Profit $ 80,219       $ 76,283       $ 76,749       $ 233,208       $ 210,306    
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 1,545       6,055       5,495       13,598       16,419    
Stock-based compensation 1,392       1,079       962       3,806       2,800    
Restructuring charges 4,322       168             4,490          
Non-GAAP Gross Profit $ 87,478       $ 83,585       $ 83,206       $ 255,102       $ 229,525    
                   
GAAP Gross Margin 42.2   %   40.6   %   43.1   %   41.3   %   42.4   %
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 0.8   %   3.1   %   3.1   %   2.4   %   3.3   %
Stock-based compensation 0.7   %   0.6   %   0.5   %   0.7   %   0.5   %
Restructuring charges 2.3   %   0.1   %     %   0.8   %     %
Non-GAAP Gross Margin 46.0   %   44.4   %   46.7   %   45.2   %   46.2   %
                   
GAAP operating expenses $ 56,966       $ 55,933       $ 54,712       $ 166,960       $ 147,346    
Adjustments:                  
Amortization of intangibles (1,604 )     (1,590 )     (1,547 )     (4,909 )     (4,588 )  
Stock-based compensation (6,528 )     (5,509 )     (4,547 )     (17,779 )     (13,974 )  
Restructuring charges (311 )     (466 )           (777 )        
Gain on contingent consideration       95       71       95       3,771    
Acquisition related expenses       (43 )     (334 )     (209 )     (369 )  
Non-GAAP operating expenses $ 48,523       $ 48,420       $ 48,355       $ 143,381       $ 132,186    
                   
GAAP operating income $ 23,253       $ 20,350       $ 22,037       $ 66,248       $ 62,960    
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 3,149       7,645       7,042       18,507       21,007    
Stock-based compensation 7,920       6,588       5,509       21,585       16,774    
Restructuring charges 4,633       634             5,267          
Gain on contingent consideration       (95 )     (71 )     (95 )     (3,771 )  
Acquisition related expenses       43       334       209       369    
Non-GAAP operating income $ 38,955       $ 35,165       $ 34,851       $ 111,721       $ 97,339    



FORMFACTOR, INC.
 
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)

  Three Months Ended   Nine Months Ended
  September 25,
2021
  June 26,
2021
  September 26,
2020
  September 25,
2021
  September 26,
2020
GAAP net income $ 20,497       $ 17,905       $ 22,891       $ 58,027       $ 59,250    
Adjustments:                  
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions 3,149       7,645       7,042       18,507       21,007    
Stock-based compensation 7,920       6,588       5,509       21,585       16,774    
Restructuring charges 4,633       634             5,267          
Gain on contingent consideration       (95 )     (71 )     (95 )     (3,771 )  
Acquisition related expenses       43       334       209       369    
Income tax effect of non-GAAP adjustments (4,571 )     (4,273 )     (4,970 )     (12,650 )     (10,994 )  
Non-GAAP net income $ 31,628       $ 28,447       $ 30,735       $ 90,850       $ 82,635    
                   
GAAP net income per share:                  
Basic $ 0.26       $ 0.23       $ 0.30       $ 0.75       $ 0.78    
Diluted $ 0.26       $ 0.23       $ 0.29       $ 0.73       $ 0.75    
                   
Non-GAAP net income per share:                  
Basic $ 0.41       $ 0.37       $ 0.40       $ 1.17       $ 1.08    
Diluted $ 0.40       $ 0.36       $ 0.39       $ 1.15       $ 1.05    



FORMFACTOR, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

  Nine Months Ended
  September 25,
2021
  September 26,
2020
Cash flows from operating activities:      
Net income $ 58,027       $ 59,250    
Selected adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 19,256       14,491    
Amortization 16,362       20,249    
Stock-based compensation expense 21,585       16,774    
Provision for excess and obsolete inventories 11,621       9,763    
Non-cash restructuring charges 1,592          
Gain on contingent consideration (95 )     (3,771 )  
Other activity impacting operating cash flows (27,911 )     7,453    
Net cash provided by operating activities 100,437       124,209    
Cash flows from investing activities:      
Acquisition of property, plant and equipment (51,353 )     (41,887 )  
Proceeds (purchases) of marketable securities, net (43,623 )     20,609    
Other activity impacting investing cash flows       (34,917 )  
Net cash used in investing activities (94,976 )     (56,195 )  
Cash flows from financing activities:      
Purchase of common stock through stock repurchase program (23,951 )        
Proceeds from issuances of common stock 10,647       9,588    
Tax withholdings related to net share settlements of equity awards (12,643 )     (15,382 )  
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 (7,049 )     (41,098 )  
Net cash used in financing activities (36,869 )     (28,970 )  
Effect of exchange rate changes on cash, cash equivalents and restricted cash (2,216 )     1,262    
Net increase (decrease) in cash, cash equivalents and restricted cash (33,624 )     40,306    
Cash, cash equivalents and restricted cash, beginning of period 191,098       147,937    
Cash, cash equivalents and restricted cash, end of period $ 157,474       $ 188,243    



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

  Three Months Ended   Nine Months Ended
  September 25,
2021
  June 26,
2021
  September 26,
2020
  September 25,
2021
  September 26,
2020
Net cash provided by operating activities $ 34,282       $ 33,799       $ 41,762       $ 100,437       $ 124,209    
Adjustments:                  
Cash paid for interest 157       166       210       496       683    
Acquisition related payments in working capital       43       334       209       369    
Capital expenditures (20,031 )     (17,852 )     (5,144 )     (51,353 )     (41,887 )  
Free cash flow $ 14,408       $ 16,156       $ 37,162       $ 49,789       $ 83,374    



FORMFACTOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 

  September 25,
2021
  June 26,
2021
  December 26,
2020
ASSETS          
Current assets:          
Cash and cash equivalents $ 153,781       $ 160,273       $ 187,225    
Marketable securities 110,898       95,962       67,810    
Accounts receivable, net of allowance for doubtful accounts 105,807       108,265       107,603    
Inventories, net 115,104       111,890       99,229    
Restricted cash 2,019       1,857       1,904    
Prepaid expenses and other current assets 18,892       19,244       23,303    
Total current assets 506,501       497,491       487,074    
Restricted cash 1,674       1,836       1,969    
Operating lease, right-of-use-assets 36,669       38,485       30,756    
Property, plant and equipment, net of accumulated depreciation 140,098       125,348       104,103    
Goodwill 213,293       214,548       212,761    
Intangibles, net 39,195       41,913       59,147    
Deferred tax assets 67,231       66,945       66,242    
Other assets 1,930       1,980       1,165    
Total assets $ 1,006,591       $ 988,546       $ 963,217    
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable $ 64,925       $ 62,445       $ 62,045    
Accrued liabilities 54,625       51,487       55,342    
Current portion of term loans, net of unamortized issuance costs 9,213       9,356       9,516    
Deferred revenue 23,275       22,655       20,964    
Operating lease liabilities 7,962       7,908       6,704    
Total current liabilities 160,000       153,851       154,571    
Term loans, less current portion, net of unamortized issuance costs 17,742       20,123       24,978    
Deferred tax liabilities 4,264       4,613       5,346    
Long-term operating lease liabilities 32,401       34,211       27,996    
Other liabilities 5,794       6,201       6,242    
Total liabilities 220,201       218,999       219,133    
           
Stockholders’ equity:          
Common stock 78       77       78    
Additional paid-in capital 892,303       894,062       903,838    
Accumulated other comprehensive income 1,700       3,596       5,886    
Accumulated deficit (107,691 )     (128,188 )     (165,718 )  
Total stockholders’ equity 786,390       769,547       744,084    
Total liabilities and stockholders’ equity $ 1,006,591       $ 988,546       $ 963,217    

About our Non-GAAP Financial Measures:

We believe that the presentation of non-GAAP net income, non-GAAP net income per basic and diluted share, non-GAAP revenue, non-GAAP gross profit, 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 net income per basic and diluted share, non-GAAP revenue, non-GAAP gross profit, 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 net income per basic and diluted share, non-GAAP revenue, non-GAAP gross profit, 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 net income per basic and diluted share, non-GAAP revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, by adjusting GAAP net income, GAAP net income per basic and diluted share, GAAP revenue, GAAP gross profit, 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, net income per basic and diluted share, revenue, gross profit, 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 net income per basic and diluted share, non-GAAP revenue, non-GAAP gross profit, 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.