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CST: 21/11/2019 17:18:18   

FormFactor, Inc. Reports 2019 Third Quarter Results

22 Days ago

Company Delivers Sequential and Year-on-Year Revenue Growth, Expects Continued Growth in Q4

LIVERMORE, Calif., Oct. 30, 2019 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the third quarter of fiscal 2019 ended September 28, 2019. Quarterly revenues were $140.6 million, up 1.9% from $138.0 million in the second quarter of fiscal 2019, and up 4.2% from $135.0 million in the third quarter of fiscal 2018.

  • Sequential and year-over-year revenue growth, with non-GAAP EPS exceeding midpoint of outlook range
  • Highest DRAM probe card revenue in a decade, in contrast to generally weak memory spending
  • Completed the acquisition of FRT GmbH, adding $150 million of addressable market

“Our third quarter results continue to validate FormFactor’s diversified position in attractive consumables and R&D-driven semiconductor test and measurement markets,” said Mike Slessor, CEO of FormFactor, Inc. “We again benefited from our leadership positions in advanced probe cards, with strong demand in both DRAM and Flash applications more than offsetting a moderate sequential reduction in Foundry & Logic.”

Third Quarter Highlights

On a GAAP basis, net income for the third quarter of fiscal 2019 was $8.3 million, or $0.11 per fully-diluted share, compared to net income for the second quarter of fiscal 2019 of $6.9 million, or $0.09 per fully-diluted share, and net income for the third quarter of fiscal 2018 of $7.7 million, or $0.10 per fully-diluted share. Gross margin for the third quarter of 2019 was 39.3%, compared with 40.1% in the second quarter of 2019, and 39.2% in the third quarter of 2018.

On a non-GAAP basis, net income for the third quarter of fiscal 2019 was $17.3 million, or $0.22 per fully-diluted share, compared to net income for the second quarter of fiscal 2019 of $16.1 million, or $0.21 per fully-diluted share, and net income for the third quarter of fiscal 2018 of $19.6 million, or $0.26 per fully-diluted share. On a non-GAAP basis, gross margin for the third quarter of 2019 was 43.5%, compared with 44.3% in the second quarter of 2019, and 43.7% in the third quarter of 2018.

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

Free cash flow for the third quarter of fiscal 2019 was $25.6 million, compared to free cash flow for the second quarter of fiscal 2019 of $29.8 million, and free cash flow for the third quarter of 2018 of $13.0 million. A reconciliation of net cash provided by operating activities to free cash flow is provided in the schedules included below.

Outlook

Dr. Slessor added, “In the fourth quarter we are capitalizing on particularly strong year-end demand for Foundry & Logic probe cards on top of continued solid demand for our other products.”

For the fourth quarter ending on December 28, 2019, FormFactor is providing the following outlook*:

  GAAP   Reconciling
Items**
  Non-GAAP
Revenue $145 million to $155 million     $145 million to $155 million
Gross Margin 38% to 42%   $6 million   42% to 46%
Net income per diluted share $0.09 to $0.17   $0.13   $0.22 to $0.30

*This outlook assumes consistent foreign currency rates.
**Reconciling items are amortization of intangibles, stock-based compensation, restructuring charges, and acquisition related expenses.

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 1:30 p.m. PDT, or 4:30 p.m. EDT, today.

The public is invited to listen to a live webcast of FormFactor’s conference call on the Investor Relations section of our web site at www.formfactor.com. A telephone replay of the conference call will be available approximately two hours after the conclusion of the call. The telephone replay will be available through November 1, 7:30 p.m. Pacific Time, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering confirmation code 6127926. Additionally, the replay will be available on the Investor Relations section of our website, www.formfactor.com.

Use of Non-GAAP Financial Information:

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we disclose certain non-GAAP measures of non-GAAP net income, non-GAAP earnings per fully-diluted share, and non-GAAP gross margin, that are adjusted from the nearest GAAP financial measure to exclude certain costs, expenses, gains and losses. Reconciliations of the adjustments to GAAP results for the three and nine months ended September 28, 2019 and for outlook provided before, as well as for the comparable periods of fiscal 2018, are provided below, and on the Investor Relations section of our website at www.formfactor.com. Information regarding the ways in which management uses non-GAAP financial information to evaluate its business, management's reasons for using this non-GAAP financial information, and limitations associated with the use of non-GAAP financial information, is included under “About our Non-GAAP Financial Measures” following the tables below.

About FormFactor:

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

Forward-looking Statements:

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

 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts) 
(Unaudited)
       
  Three Months Ended   Nine Months Ended
  September 28,
2019
  September 29,
2018
  September 28,
2019
  September 29,
2018
Revenues $ 140,604     $ 134,989     $ 410,835     $ 388,788  
Cost of revenues 85,286     82,019     247,644     234,471  
Gross profit 55,318     52,970     163,191     154,317  
Operating expenses:              
Research and development 20,096     18,857     59,893     56,578  
Selling, general and administrative 25,887     24,745     77,354     73,426  
Total operating expenses 45,983     43,602     137,247     130,004  
Operating income 9,335     9,368     25,944     24,313  
Interest income 724     369     1,988     952  
Interest expense (422 )   (777 )   (1,539 )   (2,654 )
Other income (expense), net 226     121     223     (341 )
Income before income taxes 9,863     9,081     26,616     22,270  
Provision for income taxes 1,584     1,393     5,906     3,334  
Net income $ 8,279     $ 7,688     $ 20,710     $ 18,936  
Net income per share:              
Basic $ 0.11     $ 0.10     $ 0.28     $ 0.26  
Diluted $ 0.11     $ 0.10     $ 0.27     $ 0.25  
Weighted-average number of shares used in per share calculations:              
Basic 75,280     73,837     74,749     73,273  
Diluted 77,291     74,962     76,763     74,628  
                       


 
FORMFACTOR, INC.
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
(In thousands, except per share amounts)
(Unaudited)
       
  Three Months Ended   Nine Months Ended
  September 28,
2019
  September 29,
2018
  September 28,
2019
  September 29,
2018
GAAP Gross Profit $ 55,318     $ 52,970     $ 163,191     $ 154,317  
Adjustments:              
Amortization of intangibles 4,707     5,123     14,137     15,418  
Stock-based compensation 1,117     832     3,031     2,565  
Restructuring charges         258      
Non-GAAP Gross Profit $ 61,142     $ 58,925     $ 180,617     $ 172,300  
               
GAAP Gross Margin 39.3 %   39.2 %   39.7 %   39.7 %
Adjustments:              
Amortization of intangibles 3.3 %   3.9 %   3.4 %   4.0 %
Stock-based compensation 0.9 %   0.6 %   0.7 %   0.6 %
Restructuring charges %   %   0.1 %   %
Non-GAAP Gross Margin 43.5 %   43.7 %   43.9 %   44.3 %
               
GAAP operating expenses $ 45,983     $ 43,602     $ 137,247     $ 130,004  
Adjustments:              
Amortization of intangibles (1,372 )   (2,389 )   (6,111 )   (6,458 )
Stock-based compensation (5,387 )   (3,705 )   (14,057 )   (9,856 )
Restructuring charges (22 )       (199 )    
Acquisition related expenses (247 )       (247 )    
Non-GAAP operating expenses $ 38,955     $ 37,508     $ 116,633     $ 113,690  
               
GAAP operating income $ 9,335     $ 9,368     $ 25,944     $ 24,313  
Adjustments:              
Amortization of intangibles 6,079     7,512     20,248     21,876  
Stock-based compensation 6,504     4,537     17,088     12,421  
Restructuring charges 22         457      
Acquisition related expenses 247         247      
Non-GAAP operating income $ 22,187     $ 21,417     $ 63,984     $ 58,610  
               
GAAP net income $ 8,279     $ 7,688     $ 20,710     $ 18,936  
Adjustments:              
Amortization of intangibles 6,079     7,512     20,248     21,876  
Stock-based compensation 6,504     4,537     17,088     12,421  
Restructuring charges 22         457      
Acquisition related expenses 247         247      
Income tax effect of non-GAAP adjustments (3,812 )   (111 )   (10,137 )   (533 )
Non-GAAP net income $ 17,319     $ 19,626     $ 48,613     $ 52,700  
               
Non-GAAP net income per share:              
Basic $ 0.23     $ 0.27     $ 0.65     $ 0.72  
Diluted $ 0.22     $ 0.26     $ 0.63     $ 0.71  
                               


 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
   
  Nine Months Ended
  September 28,
2019
  September 29,
2018
Cash flows from operating activities:      
Net income $ 20,710     $ 18,936  
Selected adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 12,644     10,494  
Amortization 20,248     21,876  
Stock-based compensation expense 17,088     12,421  
Provision for excess and obsolete inventories 8,046     7,414  
Other activity impacting operating cash flows 4,642     (25,003 )
Net cash provided by operating activities 83,378     46,138  
Cash flows from investing activities:      
Acquisition of property, plant and equipment (14,242 )   (12,326 )
Purchases of marketable securities, net (25,898 )   (1,227 )
Other activity impacting investing cash flows 93     90  
Net cash used in investing activities (40,047 )   (13,463 )
Cash flows from financing activities:      
Proceeds from issuances of common stock 7,672     7,712  
Tax withholdings related to net share settlements of equity awards (7,898 )   (5,694 )
Principal repayments on term loan (18,750 )   (33,750 )
Net cash used in financing activities (18,976 )   (31,732 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash (161 )   (516 )
Net increase in cash, cash equivalents and restricted cash 24,194     427  
Cash, cash equivalents and restricted cash, beginning of period 100,546     92,726  
Cash, cash equivalents and restricted cash, end of period $ 124,740     $ 93,153  
               


 
FORMFACTOR, INC.
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(In thousands)
(Unaudited)
       
  Three Months Ended   Nine Months Ended
  September 28,
2019
  September 29,
2018
  September 28,
2019
  September 29,
2018
Net cash provided by operating activities $ 28,002     $ 16,080     $ 83,378     $ 46,138  
Adjustments:              
Cash paid for interest 350     682     1,128     2,299  
Capital expenditures (2,782 )   (3,781 )   (14,242 )   (12,326 )
Free cash flow $ 25,570     $ 12,981     $ 70,264     $ 36,111  
                               


 
FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
       
  September 28,
 2019
  December 29,
2018
ASSETS      
Current assets:      
Cash and cash equivalents $ 122,946     $ 98,472  
Marketable securities 77,025     50,531  
Accounts receivable, net of allowance for doubtful accounts of $194 and $185 84,750     95,333  
Inventories, net 85,989     77,706  
Restricted cash 765     849  
Refundable income taxes 478     1,260  
Prepaid expenses and other current assets 17,834     13,669  
Total current assets 389,787     337,820  
Restricted cash 1,029     1,225  
Operating lease, right-of-use-assets 32,300      
Property, plant and equipment, net of accumulated depreciation of $268,486 and $263,102 56,240     54,054  
Goodwill 188,559     189,214  
Intangibles, net 47,054     67,640  
Deferred tax assets 77,274     77,301  
Other assets 1,362     968  
Total assets $ 793,605     $ 728,222  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 50,968     $ 40,006  
Accrued liabilities 30,015     27,731  
Current portion of term loan, net of unamortized issuance cost of $57 and $160 46,193     29,840  
Deferred revenue 8,315     4,941  
Operating lease liabilities 6,416      
Total current liabilities 141,907     102,518  
Term loan, less current portion, net of unamortized issuance cost of $0 and $29     34,971  
Deferred tax liabilities 2,244     2,355  
Long-term operating lease liabilities 30,074      
Other liabilities 4,834     8,214  
Total liabilities 179,059     148,058  
       
Stockholders’ equity:      
Preferred stock, $0.001 par value:      
10,000,000 shares authorized; no shares issued and outstanding      
Common stock, $0.001 par value:      
250,000,000 shares authorized; 75,696,234 and 74,139,712 shares issued and outstanding 76     74  
Additional paid-in capital 879,527     862,897  
Accumulated other comprehensive income (loss) (2,180 )   780  
Accumulated deficit (262,877 )   (283,587 )
Total stockholders’ equity 614,546     580,164  
Total liabilities and stockholders’ equity $ 793,605     $ 728,222  
               

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

Source: FormFactor, Inc.
FORM-F

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

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