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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 Form 10-Q
 
(Mark one)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 2022
Or 
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
 
Commission file number: 000-50307
 
FormFactor, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3711155
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
 
7005 Southfront Road, Livermore, California 94551
(Address of principal executive offices, including zip code)
 
(925) 290-4000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
Common stock, $0.001 par valueFORM Nasdaq Global Market
 ______________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No 
 
Indicate by check mark whether the registrant submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerAccelerated FilerNon-accelerated Filer
Smaller Reporting CompanyEmerging 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.     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No  

As of July 27, 2022, 77,132,681 shares of the registrant’s common stock, par value $0.001 per share, were outstanding.





FORMFACTOR, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 25, 2022
INDEX
 
   
 
   
 
   
  
 
  
 
  
  
  
  
  
  
 

2


PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 June 25,
2022
December 25,
2021
ASSETS 
Current assets:  
Cash and cash equivalents$136,395 $151,010 
Marketable securities129,919 125,055 
Accounts receivable, net of allowance for credit losses of $193 and $195
107,726 115,541 
Inventories, net143,475 111,548 
Restricted cash2,102 2,233 
Prepaid expenses and other current assets17,447 18,652 
Total current assets537,064 524,039 
Restricted cash1,802 2,099 
Operating lease, right-of-use-assets33,499 35,210 
Property, plant and equipment, net of accumulated depreciation157,814 146,555 
Goodwill212,357 212,299 
Intangibles, net30,872 36,342 
Deferred tax assets65,059 61,995 
Other assets3,980 1,981 
Total assets$1,042,447 $1,020,520 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable$60,927 $57,862 
Accrued liabilities54,835 50,836 
Current portion of term loans, net of unamortized issuance costs4,725 8,931 
Deferred revenue31,255 23,224 
Operating lease liabilities7,843 7,901 
Total current liabilities159,585 148,754 
Term loans, less current portion, net of unamortized issuance costs14,915 15,434 
Deferred tax liabilities2,909 3,623 
Long-term operating lease liabilities29,511 31,009 
Other liabilities5,542 5,920 
Total liabilities212,462 204,740 
 
Stockholders’ equity: 
Common stock, $0.001 par value:
 
250,000,000 shares authorized; 77,194,733 and 78,240,506 shares issued and outstanding
77 78 
Additional paid-in capital860,584 898,945 
Accumulated other comprehensive loss(8,996)(1,449)
Accumulated deficit(21,680)(81,794)
Total stockholders’ equity829,985 815,780 
Total liabilities and stockholders’ equity$1,042,447 $1,020,520 
 
The accompanying notes are an integral part of these condensed consolidated financial statements. 
3


FORMFACTOR, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedSix Months Ended
 June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Revenues$203,907 $188,076 $401,081 $374,712 
Cost of revenues109,538 111,793 212,488 221,723 
Gross profit94,369 76,283 188,593 152,989 
Operating expenses:    
Research and development28,317 25,454 55,451 49,500 
Selling, general and administrative33,406 30,479 66,312 60,494 
Total operating expenses61,723 55,933 121,763 109,994 
Operating income32,646 20,350 66,830 42,995 
Interest income300 148 438 342 
Interest expense(119)(116)(311)(296)
Other income (expense), net551 (194)743 (22)
Income before income taxes33,378 20,188 67,700 43,019 
Provision for income taxes3,136 2,283 7,586 5,489 
Net income$30,242 $17,905 $60,114 $37,530 
Net income per share: 
Basic $0.39 $0.23 $0.77 $0.48 
Diluted$0.38 $0.23 $0.76 $0.47 
Weighted-average number of shares used in per share calculations:   
Basic 77,897 77,463 78,071 77,530 
Diluted79,210 79,466 79,423 79,621 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Net income $30,242 $17,905 $60,114 $37,530 
Other comprehensive income (loss), net of tax:
Translation adjustments and other(3,856)632 (6,554)(1,747)
Unrealized losses on available-for-sale marketable securities(547)(97)(1,751)(228)
Unrealized gains (losses) on derivative instruments(116)(89)758 (315)
Other comprehensive income (loss), net of tax(4,519)446 (7,547)(2,290)
Comprehensive income$25,723 $18,351 $52,567 $35,240 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
 Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Six Months Ended June 25, 2022
Balances, December 25, 202178,240,506 $78 $898,945 $(1,449)$(81,794)$815,780 
Issuance of common stock under the Employee Stock Purchase Plan157,642 — 5,645 — — 5,645 
Issuance of common stock pursuant to exercise of options6,000 — 42 — — 42 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax234,076  (4,243)— — (4,243)
Purchase and retirement of common stock through repurchase program(1,443,491)(1)(54,327)— — (54,328)
Stock-based compensation— — 14,522 — — 14,522 
Other comprehensive loss— — — (7,547)— (7,547)
Net income— — — — 60,114 60,114 
Balances, June 25, 202277,194,733 $77 $860,584 $(8,996)$(21,680)$829,985 
Three Months Ended June 25, 2022
Balances, March 26, 202278,166,212 $78 $902,994 $(4,477)$(51,922)$846,673 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax231,464  (4,171)— — (4,171)
Purchase and retirement of common stock through repurchase program(1,202,943)(1)(44,930)— — (44,931)
Stock-based compensation— — 6,691 — — 6,691 
Other comprehensive loss— — — (4,519)— (4,519)
Net income— — — — 30,242 30,242 
Balances, June 25, 202277,194,733 $77 $860,584 $(8,996)$(21,680)$829,985 

The accompanying notes are an integral part of these condensed consolidated financial statements.



6



FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares)
(Unaudited)
Shares of
Common
Stock
Common
Stock
Shares of
Treasury
Stock
Treasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Income (Loss)
Accumulated
Deficit
Total
Six Months Ended June 26, 2021
Balances, December 26, 202077,437,997 $78  $ $903,838 $5,886 $(165,718)$744,084 
Issuance of common stock under the Employee Stock Purchase Plan228,784 — — — 5,065 — — 5,065 
Issuance of common stock pursuant to exercise of options100,000  — — 844 — — 844 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax308,219  — — (5,261)— — (5,261)
Purchase and retirement of common stock through repurchase program(620,200)(1)— — (23,950)— — (23,951)
Stock-based compensation— — — — 13,526 — — 13,526 
Other comprehensive loss— — — — — (2,290)— (2,290)
Net income— — — — — — 37,530 37,530 
Balances, June 26, 202177,454,800 $77  $ $894,062 $3,596 $(128,188)$769,547 
Three Months Ended June 26, 2021
Balances, March 27, 202177,758,530 $78 (136,402)$(5,738)$915,136 $3,150 $(146,093)$766,533 
Issuance of common stock pursuant to exercise of options50,000 — — — 422 — — 422 
Issuance of common stock pursuant to vesting of restricted stock units, net of stock withheld for tax266,470  — — (4,120)— — (4,120)
Purchase and retirement of common stock through repurchase program(620,200)(1)136,402 5,738 (23,950)— — (18,213)
Stock-based compensation— — — — 6,574 — — 6,574 
Other comprehensive income— — — — — 446 — 446 
Net income— — — — — — 17,905 17,905 
Balances, June 26, 202177,454,800 $77  $ $894,062 $3,596 $(128,188)$769,547 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended
 June 25,
2022
June 26,
2021
Cash flows from operating activities:  
Net income $60,114 $37,530 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation14,146 12,678 
Amortization4,702 13,900 
Reduction in the carrying amount of right-of-use assets4,414 3,652 
Stock-based compensation expense13,878 13,665 
Provision for excess and obsolete inventories4,726 6,898 
Non-cash restructuring charges710  
Gain on contingent consideration (95)
Other adjustments to reconcile net income to net cash provided by operating activities(567)1,211 
Changes in assets and liabilities:
Accounts receivable5,530 (1,194)
Inventories(32,268)(20,388)
Prepaid expenses and other current assets1,295 3,179 
Other assets(40)(344)
Accounts payable7,521 (2,028)
Accrued liabilities4,102 (235)
Other liabilities73 184 
Deferred revenues2,727 1,522 
Operating lease liabilities(4,262)(3,980)
Net cash provided by operating activities86,801 66,155 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(30,116)(31,322)
Acquisition of business(3,121) 
Purchases of marketable securities(52,344)(71,186)
Purchase of promissory note receivable(1,000) 
Proceeds from maturities and sales of marketable securities45,470 42,695 
Net cash used in investing activities(41,111)(59,813)
Cash flows from financing activities:  
Proceeds from issuances of common stock5,687 5,909 
Purchase of common stock through stock repurchase program(54,328)(23,951)
Tax withholdings related to net share settlements of equity awards(4,243)(5,261)
Payment of contingent consideration (3,873)
Principal repayments on term loans(4,379)(4,740)
Net cash used in financing activities(57,263)(31,916)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3,470)(1,558)
Net decrease in cash, cash equivalents and restricted cash(15,043)(27,132)
Cash, cash equivalents and restricted cash, beginning of period155,342 191,098 
Cash, cash equivalents and restricted cash, end of period$140,299 $163,966 

The accompanying notes are an integral part of these condensed consolidated financial statements.
8



FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 25,
2022
June 26,
2021
Non-cash investing and financing activities:
Increase (decrease) in accounts payable and accrued liabilities related to property, plant and equipment purchases$(4,165)$2,906 
Operating lease, right-of-use assets obtained in exchange for lease obligations3,438 11,629 
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net$6,473 $4,559 
Cash paid for interest294 339 
Operating cash outflows from operating leases4,379 4,352 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$136,395 $160,273 
Restricted cash, current2,102 1,857 
Restricted cash, non-current1,802 1,836 
Total cash, cash equivalents and restricted cash$140,299 $163,966 

The accompanying notes are an integral part of these condensed consolidated financial statements.
9


FORMFACTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 — Basis of Presentation and New Accounting Pronouncements
 
Basis of Presentation
The accompanying condensed consolidated financial information of FormFactor, Inc. is unaudited and has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). However, such information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2021 Annual Report on Form 10-K filed with the SEC on February 18, 2022. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
 
Fiscal Year 
We operate on a 52/53 week fiscal year, whereby the fiscal year ends on the last Saturday of December. Fiscal 2022 and 2021 contain 53 weeks and 52 weeks, respectively, and the six months ended June 25, 2022 and June 26, 2021 each contained 26 weeks. Fiscal 2022 will end on December 31, 2022.

Significant Accounting Policies
Our significant accounting policies have not changed during the six months ended June 25, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 25, 2021.

Reclassifications
Certain immaterial reclassifications were made to the prior year financial statements to conform to the current year presentation.

New Accounting Pronouncements
ASU 2020-04
In March 2020, the FASB issued ASU 2020-04, “Referenced Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. ASU 2020-04 became effective upon issuance and may be applied prospectively to contract modifications made on or before December 31, 2022. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company has not yet applied the relief afforded by these standard amendments and is currently assessing contracts that will require modification due to reference rate reform to which these standard amendments may be applied.

ASU 2021-08
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, “Revenue from Contracts with Customers,” as if it had originated the contracts. The Company elected to early adopt on a prospective basis during the second quarter of fiscal 2022. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

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Note 2 — Concentration of Credit and Other Risks

Each of the following customers accounted for 10% or more of our revenues for the periods indicated:
Three Months EndedSix Months Ended
June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Intel Corporation20.9 %16.2 %20.9 %22.1 %
Samsung Electronics., LTD.*14.7 %**
Taiwan Semiconductor Manufacturing Co., LTD.*11.0 %*11.2 %
20.9 %41.9 %20.9 %33.3 %

At June 25, 2022, one customer accounted for 20.0% of gross accounts receivable. At December 25, 2021, one customer accounted for 13.8% of gross accounts receivable.

Note 3 — Inventories, net

Inventories are stated at the lower of cost (principally standard cost, which approximates actual cost on a first in, first out basis) or net realizable value.
 
Inventories, net, consisted of the following (in thousands):
June 25,
2022
December 25,
2021
Raw materials$68,247 $57,673 
Work-in-progress52,619 35,935 
Finished goods22,609 17,940 
$143,475 $111,548 

Note 4 Acquisition

Woburn Acquisition
On June 9, 2022, we acquired the assets of the dilution refrigerator product line of American ULT Cryogenics, formerly d/b/a JanisULT (“Woburn”), for total consideration of $3.1 million. This acquisition adds cryogen-free dilution refrigerators capable of cooling to sub-10 millikelvin to our product portfolio, which is required for operation of superconducting quantum computers.

As of the reporting date, we have not completed the valuation of assets acquired and liabilities assumed. Upon the completion of purchase accounting, we expect certain amounts provisionally recorded as goodwill will be ultimately allocated to developed technologies, but at this time we do not have an estimate of the allocation of value between amortizing and non-amortizing intangible assets. We do expect that some amount of intangible assets provisionally recorded as goodwill will ultimately be allocated to an amortizing intangible asset. At the time such amount is estimable, we will record any amortization required between the acquisition date and the date at which the amounts become estimable. While we do not yet have a reasonable basis on which to record any such amortization, the impact to the financial statements as a whole is not expected to be material assuming typical lives of these assets and ranges of potential allocation of value.

The amounts presented below represent provisional amounts of assets acquired and liabilities assumed, which are recorded based on the best information available, and are subject to revision as the fair value of the associated assets acquired and
11


liabilities assumed are finalized. The total estimated purchase price has been provisionally allocated to the underlying assets acquired and liabilities assumed, as follows (in thousands):
Amount
Accounts receivable$178 
Inventories6,064 
Property, plant and equipment479 
Prepaid expenses and other current assets117 
Other assets28 
Tangible assets acquired6,866 
Deferred revenue(5,513)
Accounts payable and accrued liabilities(30)
Total tangible assets acquired and liabilities assumed1,323 
Goodwill1,798 
Net Assets Acquired$3,121 

Note 5 Goodwill and Intangible Assets

Goodwill by reportable segment was as follows (in thousands):
Probe CardsSystemsTotal
Goodwill, as of December 26, 2020$178,072 $34,689 $212,761 
Addition - Baldwin Park Acquisition352  352 
Addition - HPD Acquisition 1,254 1,254 
Foreign currency translation (2,068)(2,068)
Goodwill, as of December 25, 2021178,424 33,875 212,299 
Addition - Woburn Acquisition 1,798 1,798 
Foreign currency translation (1,740)(1,740)
Goodwill, as of June 25, 2022$178,424 $33,933 $212,357 

We have not recorded goodwill impairments for the six months ended June 25, 2022.

Intangible assets were as follows (in thousands):
June 25, 2022December 25, 2021
Intangible Assets GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Existing developed technologies $170,627 $149,338 $21,289 $172,259 $148,784 $23,475 
Customer relationships50,827 41,966 8,861 51,270 39,254 12,016 
Trade name7,952 7,630 322 8,054 7,603 451 
Backlog   1,896 1,896  
In-process research and development400  400 400  400 
$229,806 $198,934 $30,872 $233,879 $197,537 $36,342 

Amortization expense was included in our Condensed Consolidated Statements of Income as follows (in thousands):
 Three Months EndedSix Months Ended
 June 25,
2022
June 26,
2021
June 25,
2022
June 26,
2021
Cost of revenues$788 $5,505 $1,596 $10,595 
Selling, general and administrative1,545 1,590 3,106 3,305 
$2,333 $7,095 $4,702 $13,900 

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The estimated future amortization of definite-lived intangible assets, excluding in-process research and development, is as follows (in thousands):
Fiscal YearAmount
Remainder of 2022$4,650 
20236,968 
20244,390 
2025