FormFactor, Inc. Reports 2021 Third Quarter Results

Wednesday, 27. October 2021 22:02

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 revenues109,745   111,793   101,247   331,468   286,267  
Gross profit80,219   76,283   76,749   233,208   210,306  
Operating expenses:         
Research and development26,026   25,454   22,878   75,526   65,064  
Selling, general and administrative30,940   30,479   31,834   91,434   82,282  
Total operating expenses56,966   55,933   54,712   166,960   147,346  
Operating income23,253   20,350   22,037   66,248   62,960  
Interest income121   148   249   463   1,310  
Interest expense(151)  (116)  (193)  (447)  (682) 
Other income (expense), net58   (194)  299   36   141  
Income before income taxes23,281   20,188   22,392   66,300   63,729  
Provision (benefit) for income taxes2,784   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:        
Basic77,869   77,463   77,029   77,643   76,436  
Diluted79,029   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 acquisitions57   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 acquisitions1,545   6,055   5,495   13,598   16,419  
Stock-based compensation1,392   1,079   962   3,806   2,800  
Restructuring charges4,322   168      4,490     
Non-GAAP Gross Profit$87,478   $83,585   $83,206   $255,102   $229,525  
          
GAAP Gross Margin42.2 % 40.6 % 43.1 % 41.3 % 42.4 %
Adjustments:         
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions0.8 % 3.1 % 3.1 % 2.4 % 3.3 %
Stock-based compensation0.7 % 0.6 % 0.5 % 0.7 % 0.5 %
Restructuring charges2.3 % 0.1 %  % 0.8 %  %
Non-GAAP Gross Margin46.0 % 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 acquisitions3,149   7,645   7,042   18,507   21,007  
Stock-based compensation7,920   6,588   5,509   21,585   16,774  
Restructuring charges4,633   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 acquisitions3,149   7,645   7,042   18,507   21,007  
Stock-based compensation7,920   6,588   5,509   21,585   16,774  
Restructuring charges4,633   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:   
Depreciation19,256   14,491  
Amortization16,362   20,249  
Stock-based compensation expense21,585   16,774  
Provision for excess and obsolete inventories11,621   9,763  
Non-cash restructuring charges1,592     
Gain on contingent consideration(95)  (3,771) 
Other activity impacting operating cash flows(27,911)  7,453  
Net cash provided by operating activities100,437   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 stock10,647   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 period191,098   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 interest157   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 securities110,898   95,962   67,810  
Accounts receivable, net of allowance for doubtful accounts105,807   108,265   107,603  
Inventories, net115,104   111,890   99,229  
Restricted cash2,019   1,857   1,904  
Prepaid expenses and other current assets18,892   19,244   23,303  
Total current assets506,501   497,491   487,074  
Restricted cash1,674   1,836   1,969  
Operating lease, right-of-use-assets36,669   38,485   30,756  
Property, plant and equipment, net of accumulated depreciation140,098   125,348   104,103  
Goodwill213,293   214,548   212,761  
Intangibles, net39,195   41,913   59,147  
Deferred tax assets67,231   66,945   66,242  
Other assets1,930   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 liabilities54,625   51,487   55,342  
Current portion of term loans, net of unamortized issuance costs9,213   9,356   9,516  
Deferred revenue23,275   22,655   20,964  
Operating lease liabilities7,962   7,908   6,704  
Total current liabilities160,000   153,851   154,571  
Term loans, less current portion, net of unamortized issuance costs17,742   20,123   24,978  
Deferred tax liabilities4,264   4,613   5,346  
Long-term operating lease liabilities32,401   34,211   27,996  
Other liabilities5,794   6,201   6,242  
Total liabilities220,201   218,999   219,133  
      
Stockholders’ equity:     
Common stock78   77   78  
Additional paid-in capital892,303   894,062   903,838  
Accumulated other comprehensive income1,700   3,596   5,886  
Accumulated deficit(107,691)  (128,188)  (165,718) 
Total stockholders’ equity786,390   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


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