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FormFactor, Inc. Reports 2021 First Quarter Results

LIVERMORE, Calif., April 28, 2021 (GLOBE NEWSWIRE) -- FormFactor, Inc. (Nasdaq: FORM) today announced its financial results for the first quarter of fiscal 2021 ended March 27, 2021. Quarterly revenues were $186.6 million, a decrease of 5.3% compared to $197.0 million in the fourth quarter of fiscal 2020, and an increase of 16.1% from $160.8 million in the first quarter of fiscal 2020.

  • Robust Foundry & Logic and consistent DRAM results led to the second-highest quarterly revenue in Company’s history
  • Differentiated strengths in 5G and advanced packaging drove share gains exceeding Foundry & Logic market growth
  • Gross margins recovered after successfully addressing two discrete fourth-quarter issues

“Our revenue and gross margin performance, paired with good operating expense control, produced solid quarterly results as we continued to invest in capacity expansion to meet anticipated long-term, broad-based demand,” said Mike Slessor, CEO of FormFactor, Inc. “The underlying components of first quarter demand were similar to Q4’20, driven mostly by strong Foundry and Logic demand coupled with DRAM levels comparable to the previous quarter.”

First Quarter Highlights

On a GAAP basis, net income for the first quarter of fiscal 2021 was $19.6 million, or $0.25 per fully-diluted share, compared to net income for the fourth quarter of fiscal 2020 of $19.3 million, or $0.24 per fully-diluted share, and net income for the first quarter of fiscal 2020 of $15.9 million, or $0.20 per fully-diluted share. Gross margin for the first quarter of 2021 was 41.1%, compared with 39.4% in the fourth quarter of 2020, and 41.9% in the first quarter of 2020.

On a non-GAAP basis, net income for the first quarter of fiscal 2021 was $30.8 million, or $0.38 per fully-diluted share, compared to net income for the fourth quarter of fiscal 2020 of $35.3 million, or $0.44 per fully-diluted share, and net income for the first quarter of fiscal 2020 of $26.1 million, or $0.33 per fully-diluted share. On a non-GAAP basis, gross margin for the first quarter of 2021 was 45.0%, compared with 43.4% in the fourth quarter of 2020, and 46.1% in the first quarter of 2020.

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

Free cash flow for the first quarter of fiscal 2021 was $19.2 million, compared to free cash flow for the fourth quarter of fiscal 2020 of $31.4 million, and free cash flow for the first quarter of 2020 of $27.6 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, “In the second quarter we expect that a reduction in Foundry and Logic demand from the timing of certain customer design releases, following especially high first quarter levels, will be offset by increased DRAM probe card shipments.”

For the second quarter ending June 26, 2021, FormFactor is providing the following outlook*:

 GAAP Reconciling
Items**
 Non-GAAP
Revenue$180 million to $192 million  $180 million to $192 million
Gross Margin37% to 40% $7 million 41% to 44%
Net income per diluted share$0.12 to $0.20 $0.16 $0.28 to $0.36

*This outlook assumes consistent foreign currency rates.
**Reconciling items are stock-based compensation, restructuring charges, acquisition related expenses 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 April 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 1583924. 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 months ended March 27, 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 current 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, there are increasingly restrictive export regulations being adopted in the U.S., including recently published amendments to export regulations that may substantially restrict or condition our sales in China with considerable uncertainty regarding the ultimate interpretation and implementation of these rules. 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
 March 27, 
2021
 March 28, 
2020
Revenues$186,636   $160,753  
Cost of revenues109,930   93,363  
Gross profit76,706   67,390  
Operating expenses:   
Research and development24,046   21,267  
Selling, general and administrative30,015   27,693  
Total operating expenses54,061   48,960  
Operating income22,645   18,430  
Interest income194   685  
Interest expense(180)  (318) 
Other income (expense), net172   (91) 
Income before income taxes22,831   18,706  
Provision for income taxes3,206   2,816  
Net income$19,625   $15,890  
Net income per share:   
Basic$0.25   $0.21  
Diluted$0.25   $0.20  
Weighted-average number of shares used in per share calculations:   
Basic77,598   76,005  
Diluted79,988   78,510  

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

 Three Months Ended
 March 27, 
2021
 March 28, 
2020
 December 26, 
2020
GAAP Revenue$186,636   $160,753   $197,043  
Adjustments:     
Amortization of deferred revenue fair value adjustments due to acquisitions125      109  
Non-GAAP Revenue$186,761   $160,753   $197,152  
      
GAAP Gross Profit$76,706   $67,390   $77,614  
Adjustments:     
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions5,998   5,750   6,869  
Stock-based compensation1,335   937   1,151  
Non-GAAP Gross Profit$84,039   $74,077   $85,634  
      
GAAP Gross Margin41.1 % 41.9 % 39.4 %
Adjustments:     
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions3.2 % 3.6 % 3.4 %
Stock-based compensation0.7 % 0.6 % 0.6 %
Non-GAAP Gross Margin45.0 % 46.1 % 43.4 %
      
GAAP operating expenses$54,061   $48,960   $56,786  
Adjustments:     
Amortization of intangibles(1,715)  (1,513)  (1,794) 
Stock-based compensation(5,742)  (4,686)  (5,905) 
Loss on contingent consideration      (892) 
Acquisition related expenses(166)  (35)  (140) 
Non-GAAP operating expenses$46,438   $42,726   $48,055  
      
GAAP operating income$22,645   $18,430   $20,828  
Adjustments:     
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions7,713   7,263   8,663  
Stock-based compensation7,077   5,623   7,056  
Loss on contingent consideration      892  
Acquisition related expenses166   35   140  
Non-GAAP operating income$37,601   $31,351   $37,579  

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

 Three Months Ended
 March 27, 
2021
 March 28, 
2020
 December 26, 
2020
GAAP net income $19,625   $15,890   $19,273  
Adjustments:     
Amortization of intangibles, inventory and fixed asset fair value adjustments due to acquisitions7,713   7,263   8,663  
Stock-based compensation7,077   5,623   7,056  
Loss on contingent consideration      892  
Acquisition related expenses166   35   140  
Income tax effect of non-GAAP adjustments(3,806)  (2,759)  (675) 
Non-GAAP net income $30,775   $26,052   $35,349  
      
GAAP net income per share:     
Basic$0.25   $0.21   $0.25  
Diluted$0.25   $0.20   $0.24  
      
Non-GAAP net income per share:     
Basic$0.40   $0.34   $0.46  
Diluted$0.38   $0.33   $0.44  

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

 Three Months Ended
 March 27, 
2021
 March 28, 
2020
Cash flows from operating activities:   
Net income$19,625   $15,890  
Selected adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation6,130   4,561  
Amortization6,805   7,263  
Stock-based compensation expense7,077   5,623  
Provision for excess and obsolete inventories3,394   3,287  
Other activity impacting operating cash flows(10,675)  2,715  
Net cash provided by operating activities32,356   39,339  
Cash flows from investing activities:   
Acquisition of property, plant and equipment(13,470)  (12,050) 
Proceeds (purchases) of marketable securities, net(26,452)  6,568  
Other activity impacting investing cash flows   40  
Net cash used in investing activities(39,922)  (5,442) 
Cash flows from financing activities:   
Proceeds from issuances of common stock5,487   4,513  
Purchase of common stock through stock repurchase program(5,738)    
Tax withholdings related to net share settlements of equity awards(1,141)  (385) 
Principal repayments on term loans(2,376)  (13,199) 
Net cash used in financing activities(3,768)  (9,071) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,456)  312  
Net increase (decrease) in cash, cash equivalents and restricted cash(12,790)  25,138  
Cash, cash equivalents and restricted cash, beginning of period191,098   147,937  
Cash, cash equivalents and restricted cash, end of period$178,308   $173,075  

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

 Three Months Ended
 March 27, 
2021
 March 28, 
2020
 December 26, 
2020
Net cash provided by operating activities$32,356   $39,339   $45,047  
Adjustments:     
Cash paid for interest173   291   184  
Acquisition related payments in working capital166   35   140  
Capital expenditures(13,470)  (12,050)  (13,978) 
Free cash flow$19,225   $27,615   $31,393  

FORMFACTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited) 

 March 27,
2021
 December 26,
2020
ASSETS   
Current assets:   
Cash and cash equivalents$173,616   $187,225  
Marketable securities94,093   67,810  
Accounts receivable, net of allowance for doubtful accounts103,500   107,603  
Inventories, net104,727   99,229  
Restricted cash2,798   1,904  
Prepaid expenses and other current assets19,371   23,303  
Total current assets498,105   487,074  
Restricted cash1,894   1,969  
Operating lease, right-of-use-assets37,208   30,756  
Property, plant and equipment, net of accumulated depreciation112,312   104,103  
Goodwill214,218   212,761  
Intangibles, net48,786   59,147  
Deferred tax assets65,821   66,242  
Other assets1,867   1,165  
Total assets$980,211   $963,217  
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$67,720   $62,045  
Accrued liabilities43,468   55,342  
Current portion of term loans, net of unamortized issuance costs9,260   9,516  
Deferred revenue18,644   20,964  
Operating lease liabilities7,557   6,704  
Total current liabilities146,649   154,571  
Term loans, less current portion, net of unamortized issuance costs22,390   24,978  
Deferred tax liabilities4,965   5,346  
Long-term operating lease liabilities33,485   27,996  
Other liabilities6,189   6,242  
Total liabilities213,678   219,133  
    
Stockholders’ equity:   
Common stock, $0.001 par value:   
250,000,000 shares authorized; 77,758,530 and 77,437,997 shares issued and outstanding78   78  
Treasury stock, at cost, 136,402 and — shares(5,738)    
Additional paid-in capital915,136   903,838  
Accumulated other comprehensive income3,150   5,886  
Accumulated deficit(146,093)  (165,718) 
Total stockholders’ equity766,533   744,084  
Total liabilities and stockholders’ equity$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


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